"… one of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years. Graham emphasized countless times the importance of dividend records - for good reasons. Is the company large, prominent, and conservatively financed? The specific metrics to look for are stable financial strength, consistent capital structure, and a long record of continuous dividend payments.Įspecially the dividend record. As a brief recap, the key items on this checklist include: The checklist has been detailed in Benjamin Graham's classic, The Intelligent Investor, and also summarized in our earlier article. And it should be of general value for the analysis of dividend stocks beyond LUMN and VZ. It is a perfect tool for the quick screening of safe dividend stocks in our experiences. Despite its simplicity, it should be able to catch obvious problems like the dividend cut possibility LUMN is facing.Īnd in the remainder of this article, we will apply this checklist to both LUMN and VZ to best illustrate the effectiveness of the approach. The framework involved a checklist of a few simple things - a checklist that you can go through in about 10 minutes. So in this article, we will elucidate LUMN's risks by a much simpler framework developed by Benjamin Graham. The efforts and time involved may be beyond what many readers can spend. However, admittedly, the analysis is quite involved and requires an in-depth understanding of its financial statements. That kind of analysis has been proven to be effective in our own experiences as illustrated in the case of LUMN. The analysis looked beyond the simple payout ratios and included leverage, CAPEX investment, reinvestment rate rates, et al. In our last article, our warning for LUMN is based on a holistic analysis of its finances. Source: author based on Seeking Alpha data Considering investors also received $0.653 per share of dividend on Oct 6, its adjusted loss was -12.3% since then. Its price at the publication of our last article was $42.24 and it is now $36.38 as of this writing. VZ suffered a price correction of 13.8%, similar to the overall market. For example, a Wells Fargo's analysis pointed out its dividend risk, citing its free cash (in the $800M range) as insufficient to cover the dividends (more than $1B) in the coming years.Īll told, the stock lost more than 32% since our warning as you can see from the following chart, compared to an 11.9% price correction from the overall market. Indeed, shortly after that article, concerns regarding Lumen's dividend safety have been raised by leading institutions too. In that article, entitled "Is LUMN's 10% Yield Too Good To Be True?", we cautioned investors about the risk of LUMN's then ~10% dividend yield. That article was published on Sept 09, 2022. My last article comparing Verizon (VZ) and Lumen (LUMN) is co-produced with Sensor Unlimited. These principles include stable capital structure, a long record of continuous dividend payments, and the use of the Graham PE and Graham number for valuation. You will see that these simple, yet timeless principles, would identify such risks in about 10 minutes. Here we will elucidate these risks following a much simpler framework developed by Benjamin Graham. Our warning is based on a holistic analysis of its finances, which illustrated its dividend risks, especially when contrasted against Verizon. In an earlier article published about 1 month ago, we cautioned investors about the risk of Lumen’s then ~10% dividend yield. Verizon Or Lumen? Graham Would Have Figured It Out In 10 Minutes
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |