Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Three Smart Money Dividend Companies: Johnson & Johnson (JNJ), Archer Daniels Midland Company (ADM), Chesapeake Energy Corporation (CHK)

Page 1 of 2

I’ve been developing my own Perfect Dividend Portfolio over the past 4 months, and I actually am quite pleased with how it has been going.

I still have two more companies to select, however, and I have been having a difficult time finding ones that meet my admittedly overly-strict criteria. Today I am looking at three companies that are being accumulated by the so-called smart money, to see if I agree with any of them.

In my examination, I review the companies on seven different criteria: yield, number of years paying and raising dividends, 5-year Dividend Growth Rate (DGR), 5-year projected Earnings Growth Rate (EGR), total return for the past twelve months, PE and payout ratio. I feel that this selection covers the past dividend-paying history, the potential future earnings growth, and the valuation of the company.

I constructed a rating system that awards points for each of the previous named criteria. A “perfect” score would be 28 points, with 4 points awarded in all seven categories.

The first company, which is a new addition to Warren Buffett’s portfolio, is Archer Daniels Midland Company (NYSE:ADM), a food processing company. Buffett reportedly bought into the company in December, and Jim Cramer recently called the stock a Buy.

The company is currently trading at approximately $32 and yields 2.3%. It has raised dividends every year for 38 years, its 5-year DGR is 8.5%, and it has returned 6.6% over the past twelve months.

Other metrics that I use when calculating a rating for a dividend company include the analysts’ 5-year annual growth estimate (10.0%), the company’s PE (15.6) and its dividend-payout ratio (50%).

Archer Daniels Midland Company (NYSE:ADM) scores a 15 on my ratings system, which is too low to make it into my portfolio. I like the company’s DGR and EGR, its payout ratio and PE are both reasonable, but its yield is too low for me.

The second company is Chesapeake Energy Corporation (NYSE:CHK), a natural gas company. I have several energy companies in my portfolio, but they are pipeline MLPs. Natural gas has been a good market, but Chesapeake has been a bad company to invest in.

It has a terribly scandalous recent history, but Mohnish Pabrai has now put 17% of his portfolio into Chesapeake, so obviously he thinks it’s a good investment.

The company is currently trading at approximately $21 and yields 1.6%. It has raised dividends every year for only 2 years, its 5-year DGR is 6.0%, and it has lost 11.6% over the past twelve months.

The analysts’ 5-year annual growth estimate is a staggering 45%, the company’s forward PE is 17.4 and its dividend-payout ratio is 23%.

I don’t even consider Chesapeake Energy Corporation (NYSE:CHK) a dividend company, but its forward growth estimate is intriguing. Maybe Mr. Pabrai will be proved right.

Page 1 of 2

Biotech Insider Alert - $5 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!