New Buy: Ford (F) and Williams-Sonoma (WSM)

My July watchlist featured two companies: Ford Motor Company (F) and Williams-Sonoma (WSM).

Last week I pulled the trigger on both of them.

On July 13 I bought 150 shares of Ford Motor Company for a total of $1,721.

And on July 14 I bought 30 shares of Williams-Sonoma for a total of $1,371.

In this post I explain the reasons why I made these additions to my portfolio and what this means for my forward dividend income. 

Ford Motor Company, together with its subsidiaries, designs, manufactures, markets, and services automobiles in North America, South America, Europe, the Middle East and Africa, and the Asia Pacific.

The company’s Automotive segment develops, manufactures, distributes, and services cars, trucks, SUVs, and electrified vehicles under the Ford name; and luxury vehicles under the Lincoln name, as well as service parts and accessories.

Its Financial Services segment offers various automotive financing products to and through automotive dealers. Its financing products comprise retail installment sale contracts for new and used vehicles; and direct financing leases for new vehicles to retail and commercial customers, such as leasing companies, government entities, daily rental car companies, and fleet customers.

The company was founded in 1903 and is based in Dearborn, Michigan.

Ford’s current dividend yield is 5.14% – much higher than the average 3.5% yield I strive for in building my portfolio.

The company is not featured on David Fish’s list of Dividends Champions, Contenders and Challengers as it only began paying dividends again after the financial crisis of 2008-2009. However, since 2011 Ford is rewarding shareholders again – both through regular as well as occasional extra dividends.

The payout ratio is quite high at 65%. The 5 year dividend growth is an impressive 24.57% – but has not grown since last year.

Comparing Ford’s Earnings per Share (EPS) in the last quarter versus the same quarter in the prior year shows a -57% decrease. Current year EPS versus last year equals a –13% decrease.

Long term investors like myself need to take a long term view and see how Ford’s strategic bets on electric vehicles, autonomous vehicles and partnerships with Argo AI and Chariot will work out.

For now the 5.14% dividend yield seems well covered and is a great booster to my forward dividend income.

The Price/Earnings (P/E) ratio is 12.56, which is low compared to the broader market but above the 5 year average of 9.79. It is also slightly higher than the industry’s 5 year average of 11.69.

In their July 15 report CFRA marks Ford as a 4 star buy with a 12 month target price of $14 – about 22% above my buying price.

Given Ford’s annual dividend of $0.60 per share this purchase increased my forward annual dividend income by $90.

Williams-Sonoma operates as a multi-channel specialty retailer of various products for home. It operates through two segments, E-commerce and Retail. The company offers cooking, dining, and entertaining products, including cookware, tools, electrics, cutlery, tabletop and bar, outdoor, furniture, and a library of cookbooks under the Williams-Sonoma brand, as well as home furnishings and decorative accessories under the Williams-Sonoma Home brand; and furniture, bedding, bathroom accessories, rugs, curtains, lighting, tabletop, outdoor, and decorative accessories under the Pottery Barn brand.

It also provides products designed for creating spaces where children could play, laugh, learn, and grow under the Pottery Barn Kids brand; line of furniture, bedding, lighting, decorative accents, and others for teen bedrooms, dorm rooms, study spaces, and lounges under the PBteen brand; and mixed clean lines, natural materials, and handcrafted collections under West Elm brand.

In addition, the company offers a range of assortments of lighting, hardware, furniture, and home decor inspired by history under the Rejuvenation brand; and women’s and men’s accessories, small leather goods, jewelry, key item apparel, paper, entertaining and bar, home decor, and seasonal items under the Mark and Graham brand.

It markets its products through e-commerce Websites, direct mail catalogs, and specialty retail stores. As of January 29, 2017, the company operated 629 stores comprising 583 stores in 43 states, Washington, D.C., and Puerto Rico; 26 stores in Canada; 19 stores in Australia; and 1 store in the United Kingdom, as well as 66 franchised stores and/or e-commerce Websites in various countries in the Middle East, the Philippines, and Mexico.

Williams-Sonoma, Inc. was founded in 1956 and is headquartered in San Francisco, California.

WSM’s current dividend yield is 3.44% – close to the average 3.5% yield I strive for in building my portfolio. The company is a Dividend Contender, boasting 12 years of increasing dividends.

The payout ratio is relatively low at 45%. The 5 year dividend growth is a decent 12.13%.

Comparing WSM’s (EPS) in the last quarter versus the same quarter in the prior year shows a 2.27% increase. Current year EPS versus last year equals a 3.85% increase.

These days no retailer can be bought without at least thinking about Amazon. I believe WSM will be able to avoid ‘Death by Amazon’ by continuing to leverage their strong brands through a multi-channel sales approach.

However, an ‘affluent costumer focused’ combination of online and brick-and-mortar  is a coveted space that Amazon is also after, signalling potential risk.

The current Price/Earnings (P/E) ratio is 13.7, which is low compared to the 5 year average of 19.19. 

In their July 15 report CFRA marks Williams-Sonoma as a 3 star hold with a 12 month target price of $55- about 20% above my buying price.

What do you think about Ford and Williams-Sonoma? Are you buying other dividend growth stocks? Leave a comment/reply to share your thoughts!

New Buy: AT&T (T)

It’s no coincidence that GEICO is one of the key pillars of Buffet’s dividend empire. Due to the nature of their business model, insurers tend to be boring yet predictable dividend payers. Which is one of the reasons I bought shares of The Travelers Companies last month.

Telecom companies are also sometimes characterized as being boring like bonds. Similarly, their large, monthly recurring subscriber revenues make for predictable dividend payouts.

Case in point: this month I bought shares in a company that has paid out rising dividends for 33 years. Now that’s the kind of boring yet predictable I can get behind!

On June 19 I bought 43 shares of AT&T (T) for a total of $1,668. 

In this post I explain the reasons why I made this addition to my portfolio and what this means for my forward dividend income. 

AT&T Inc. provides telecommunications and digital entertainment services. The company operates through four segments: Business Solutions, Entertainment Group, Consumer Mobility, and International.

The Business Solutions segment offers wireless, fixed strategic, legacy voice and data, wireless equipment, and other services to business, governmental, and wholesale customers, as well as individual subscribers.

The Entertainment Group segment provides video entertainment and audio programming channels to approximately 25.3 million subscribers and broadband and Internet services to 12.9 million residential subscribers.

The Consumer Mobility segment offers wireless services to consumers, and wireless wholesale and resale subscribers, such as long-distance and roaming services.

The International segment offers digital television services, including local and international digital-quality video entertainment and audio programming under the DIRECTV and SKY brands throughout Latin America.

Breaking down AT&T’s four segments shows how the company is rapidly becoming less boring. It’s certainly no longer the copper wired lines company – with its origins back to Alexander Graham Bell’s Bell Telephone Company.

The 2015 takeover of DirecTV made AT&T the biggest pay TV company in the US. And with the pending acquisition of Time Warner AT&T is bolstering its original content – for instance with the recent Wonder Woman hit franchise.

The company is also expanding into areas such as the Connected Car, an Internet of Things play which is part of the Industries of the Future.

So while the prospects of AT&T look bright – what are its current dividend features ?

AT&T is a dividend champion with a very impressive 33 year streak of dividend increases. The current yield is 5.03% – much higher than the average 3.5% yield I strive for in building my portfolio.

The flip side of that high yield is that the payout ratio is at 96%, leaving not much room for (near) future dividend growth. The 5 year dividend growth is an almost negligible 2.18%.

Comparing AT&T’s Earnings per Share (EPS) in the last quarter versus the same quarter in the prior year shows a -8.20% decrease. Current year EPS versus last year equals a 2.22% increase.

Long term investors would need to wait for the strategic bets on DirecTV, Time Warner, the Connected Car etc. to pay off before increase earnings and dividend can get growing again. But for now the 5.04% dividend yield is a great booster to my forward dividend income.

The Price/Earnings (P/E) ratio is 19.07, below the 5 year average of 23.72, and well below the Insurance industry’s 5 year average of 28.36.

In their May 13 report CFRA marks AT&T as a 4 star buy with a 12 month target price of $45 – about 16% above my buying price.

Given the annual dividend of $1.96 per share this purchase increased my forward annual dividend income by $84.28.

What do you think about AT&T? Are you buying other dividend growth stocks? Leave a comment/reply to share your thoughts!