Exxon Mobil Corporation engages in the exploration, production, transportation, and sale of crude oil and natural gas. It also involves in the manufacture, transportation, and sale of petroleum products. The company manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and other specialty products. XOM pretty much operates in all parts of the world such as United States, Canada, Europe, Africa, the Asia Pacific, the Middle East, Russia/Caspian region, and South America. Exxon Mobil Corporation was founded in 1870 and is based in Irving, Texas.
XOM is a part of the dividend aristocrats, S&P500 index, and DJIA index. It has been raising its dividend for last 28 years. The latest increase in dividend was 4.8% in April 2010. My objective here is to analyze XOM to determine fair price range for buying and how will it rate on my scale of risk-to-dividends.
Here I am looking at trends for past 10 years of corporation’s revenue and profitability. These parameters should show consistently growth trends. The trend charts and data summary are shown in images below. continue reading rest of the article….
As dividend investors, while it is important to focus on dividends, it is also equally important to monitor the risk of capital erosion over a period of time. Dividend growth and intermediate sustainability is good, but it is less likely to be a substitute for significant loss of capital. Pfizer and GE are examples of capital erosion. These two companies were not only able to sustain their dividends but kept with their growth in last decade. However, the value of individual’s holding kept eroding over the last decade or so. For example:
- PFE was trading around $43 per share from 1999 to 2002. In last couple of years, it has been trading around $16. At the same time, it has paid cumulative dividends of only $8.22 per share.
- GE was trading around $40 per share from 1999 to 2002. In last couple of years, it has been trading around $18. At the same time, it has paid cumulative dividends on only $9.00 per share.
In recent days, four companies viz. BP, Johnson & Johnson, and Procter & Gamble, and Toyota Motors are (were) getting quite a bit of attention in news media. Rarely a day goes by when their woes, or management response to product issues, are not discussed in the financial media or general TV news channels. Three of these four corporations also happen to the good dividend paying companies. continue reading rest of the article….
One the benefit that dividend investors have is lower tax percentage (i.e. 15%) on qualified dividends. In case of lower tax brackets, the qualified dividends are not even subject to taxes. In 2003, President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act. One of provision in this law was to reduced the tax rates on certain dividends (known as qualified dividends) to 15% for the highest income earners. Furthermore, this provision are to expire at the end of 2010 if Congress fails to renew or modify. So far, it has not been extended.
Imagine that Berkshire had only $1, which we put in a security that doubled by year-end and was then sold.Image further that we used after-tax proceeds to repeat this process in each of the next 19 years, scoring double each time
At the end of the 20 years, the 34% capital gains tax that we would have paid on the profits from each sale would have delivered about $13,000 to the government. We would have left with about $25,250. Not bad.
If, however, we made a single fantastic investment that itself doubled 20 times during the 20- years, our dollar would grow to $1,048,576.
Were we then to cash out, we would pay 34% tax of roughly $356,500 and be left with about $692,000.
— Warren Buffett in Berkshire’s 1989 annual report.
continue reading rest of the article….
We all have read many times in investing literature about investing in companies that have wide moat. We all also know that this term was made famous by Warren Buffett. What is this wide moat? In simple terms, it is some type of competitive advantage in its business. Competitive advantage in business can come from many different types, viz., brand, high switching cost, patents/IP/rights, ease of scalability, low cost producers, etc.
There are many companies that have many years building moats around their businesses. This moat makes it difficult for competitors to encroach upon their market share. Suffice to say, business with moat have sustainable competitive advantage. In general, companies with moats in their business are very good dividend growth providers. However, the opposite may not be true. Following are few examples of companies with moat that are also dividend growers. continue reading rest of the article….
Graco Inc. (GGG) and its subsidiaries, provides fluid handling systems and components. Its products are used to move, measure, control, dispense, and spray a wide range of fluids in Industrial, Contractor and Lubrication applications. The company was founded in 1926 and has headquarters in Minneapolis, Minnesota.
GGG is part of S&P Mid-Cap 400 Index and has been increasing dividends for last 10 years (including the latest one). The most recent dividend increase of 2.7% was in December 2009. In last 10 years, the annual dividends have increased from $0.13 per share to $0.80 per share.
Here I am looking at trends for past 10 years of company’s revenue and profitability. These parameters should show consistently growth trends. The trend charts are shown in images below. continue reading rest of the article….