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To: bruwin who wrote (1743)4/21/2012 11:08:54 PM
From: Sergio H
1 Recommendation   of 3795
 
In researching MMM, I stumbled into a group of stocks that have increased dividends for each year for 50 consecutive years:

Diebold Incorporated DBD 1954 2% (February 2012)
American States Water Company AWR 1955 8% (April 2011)
Dover Corporation DOV 1956 15% (August 2011)
Northwest Natural Gas NWN 1956 2% (October 2011)
Emerson Electric Co. EMR 1957 16% (November 2011)
Genuine Parts Company GPC 1957 10% (February 2012)
The Procter & Gamble Company PG 1957 9% (April 2011)
3M Company MMM 1959 7% (February 2012)
Vectren Corporation VVC 1960 3% (November 2011)
Cincinnati Financial Corporation CINF 1961
Diebold Incorporated DBD 1954 2% (February 2012)
American States Water Company AWR 1955 8% (April 2011)
Dover Corporation DOV 1956 15% (August 2011)
Northwest Natural Gas NWN 1956 2% (October 2011)
Emerson Electric Co. EMR 1957 16% (November 2011)
Genuine Parts Company GPC 1957 10% (February 2012)
The Procter & Gamble Company PG 1957 9% (April 2011)
3M Company MMM 1959 7% (February 2012)
Vectren Corporation VVC 1960 3% (November 2011)
Cincinnati Financial Corporation CINF 1961
Diebold Incorporated DBD 1954 2% (February 2012)
American States Water Company AWR 1955 8% (April 2011)
Dover Corporation DOV 1956 15% (August 2011)
Northwest Natural Gas NWN 1956 2% (October 2011)
Emerson Electric Co. EMR 1957 16% (November 2011)
Genuine Parts Company GPC 1957 10% (February 2012)
The Procter & Gamble Company PG 1957 9% (April 2011)
3M Company MMM 1959 7% (February 2012)
Vectren Corporation VVC 1960 3% (November 2011)
Cincinnati Financial Corporation CINF 1961
DBD, AWR, EMR, PH, DOV, NWN, PG, GPC, MMM, VVC, CINF

finance.yahoo.com 

These are stocks that have held up regardless of market conditions and have withstood the test of time.

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To: Sergio H who wrote (1749)4/24/2012 9:23:15 PM
From: Sergio H
   of 3795
 
Bruwin, so sorry about how sloppy my last post turned out. Did not mean for my copy and paste to be in triplicate.

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To: Sergio H who wrote (1750)4/25/2012 3:15:13 PM
From: bruwin
   of 3795
 
Absolutely no need to apologise Sergio H. Far more important and appreciated was the research that you did, and your sharing it with others.

With regard to payment of increased dividends, over the years I’ve come across several company analysis commentators who have regarded the payment of an ongoing and increasing dividend as an important criteria for stock selection.
A local stock investment advisor, Richard Cluver ( rcis.co.za  ), grades local stocks in terms of those that have paid an increasing dividend, every year, for the last 10 years, followed by those that have paid an increasing dividend for the last 5 years.

Seeing as those 10 companies you listed have been around for many years, surviving the ups and downs in the market place, I thought I’d see how nine of them stacked up in terms of Warren Buffett’s target percentage requirements for a company’s Income Statement performance, as shown in the following link and table. The numbers come from the company's latest Annual results ….

Message 27443100




More than half the stocks satisfy the "GROSS PROFIT", "DEPRECIATION" and "INTEREST EXPENSE" requirements (See the bold numbers). However, none of them can meet NET EARNINGS to be greater than 20% of REVENUE, although MMM comes closest.

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To: bruwin who wrote (1751)4/25/2012 6:23:55 PM
From: Sergio H
1 Recommendation   of 3795
 
Thanks for the doing the work on Buffett selection criteria. Some of the stocks on that list
are utilities, that's why they carry low earnings as percent of revenue. I passed on 3M
because of its high price to book value which is another Buffett criteria. Too bad I passed
as they reported better than expected earnings.

The following is a list of stocks that have increased dividends for at least 40 consecutive
years but less than 50. At lease one is a current Buffett holding. Only one is near 52 week
low while several hit a new 52 week high today. I have not done any homework on any stocks
on this list, but will be and I'll post if I find anything worth sharing.

dynamicdividend.com 

Company Symbol Since Last Raise
The Coca-Cola Company KO 1963 9% (February 2012)
Johnson & Johnson JNJ 1963 5.6% (April 2011)
Lancaster Colony Corp. LANC 1963 9.1% (November 2011)
Lowe's Companies LOW 1963 27.3% (May 2011)
Colgate-Palmolive Company CL 1964 7% (March 2012)
Illinois Tool Works ITW 1964 5.9% (August 2011)
Nordson Corporation NDSN 1964 19.0% (August 2011)
CLARCOR Inc. CLC 1965 14.3% (September 2011)
The Chubb Corporation CB 1966 5% (February 2012)
Tootsie Roll Industries** TR 1966 3%** (February 2011)
Hormel Foods Corporation HRL 1967 17.7% (November 2011)
ABM Industries ABM 1968 3.6% (December 2011)
California Water Service Group CWT 1968 2% (January 2012)
Federal Realty Inv. Trust FRT 1968 3.0% (August 2011)
SJW Corp. SJW 1968 3% (January 2012)
Stanley Black & Decker SWK 1968 20.6% (February 2011)
Stepan Company SCL 1968 7.7% (October 2011)
Target Corporation TGT 1968 20.0% (June 2011)
Commerce Bancshares** CBSH 1969 5%** (November 2011)
Black Hills Corporation BKH 1970 1% (January 2012)
Connecticut Water Service CTWS 1970 2.2% (August 2011)
H.B. Fuller Company FUL 1970 13% (April 2012)
National Fuel Gas Co. NFG 1971 2.9% (June 2011)
SYSCO Corporation SYY 1971 3.8% (November 2011)
Becton, Dickinson and Co. BDX 1972 9.8% (November 2011)
C.R. Bard, Inc. BCR 1972 5.6% (June 2011)
Leggett & Platt, Inc. LEG 1972 3.7% (August 2011)
Mine Safety Appliances MSA 1972 4.0% (May 2011)
Tennant Company TNC 1972 21.4% (November 2010)
Universal Corporation UVV 1972 2.1% (November 2011)
W.W. Grainger, Inc. GWW 1972 22.2% (April 2011)
http://finance.yahoo.com/quotes/KO,JNJ,LANC,LOW,CL,ITW,NDSN,CLC,CB,TR,HRL,ABM,CWT,FRT,SJW,SWK,SCL,TGT,CBSH,BKH,CTWS,FUL,NFG,BDX,SYY,BCR,LEG,MSA,TNC,UVV,GWW/view/dv;_ylt=Aj3XGTmsHcFLTJjZvYRGoqwLv7gF;_ylu=X3oDMTExYzFvNTI2BHBvcwM0BHNlYwN5ZmlUYWJsaXN0BHNsawNkZXRhaWxlZA--

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To: Sergio H who wrote (1752)4/26/2012 12:44:35 AM
From: Sergio H
   of 3795
 
Doing my dd I found MSA as best buy from that list and will start a position pending further study to add . I like two other stocks for watching but MSA only one for a buy.

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To: bruwin who wrote (1746)4/26/2012 4:50:40 PM
From: The Ox
1 Recommendation   of 3795
 
MOD is like a lot of companies here in the US. They were a bit too slow to react to the downturn that started in 2008 and they have paid the price. By 2010 their top line was down over 30%.

I have them on a watch list and I think that at some point (and we may be near that now) it will be a solid investment going forward. I'm in the camp that feels its a bit too early to buy into companies like MOD. I want to see better forward guidance. I wouldn't mind seeing other investors step into the stock first and a clean reversal in the stock chart.

I agree with your assessment, bruwin and I think you are right on target with your analysis. Having said this, its important to be open to the fact that those are trailing numbers and the future may hold better things for them. Their industries have been hard hit over the past few years, trucking/auto, AC/heating, construction, etc... They have done a very decent job of adjusting to the current environment and for them to be profitable at this stage, shows me their commitment to the future.

I will assume your main concern is similar to the market's, how well can they translate their future income to the bottom line. As you pointed out very nicely, they aren't doing it just yet.

My 2 cents, fwiw.

TO

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To: The Ox who wrote (1754)4/27/2012 3:36:05 AM
From: bruwin
1 Recommendation   of 3795
 
Always good to hear from you, TO. It’s been a while.

Yes, as you say, studying a company’s financials is, to a large extent, looking at past performance, but it does show us what’s currently happening in several critical areas of the business, especially with regard to debt and return on capital and how much Revenue is left over at the Bottom Line.

Of course, a more in depth interrogation of the company’s position in its market and other related aspects, is also needed to try and determine its future prospects. No doubt you’ve spent a lot of time and effort doing just that, which is probably why MOD is on your watch list. As you said, ” They have done a very decent job of adjusting to the current environment and for them to be profitable at this stage, shows me their commitment to the future.”

That could tie in with my observation that several financial ratios, such as those related to debt expense and return on capital, have shown improvement in the last 12 months.

….. and your contributions are always worth a lot more than “2 cents” !!

Best wishes, and keep enjoying your “semi-retirement” as you get “younger every day”!! {:-)

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To: bruwin who wrote (1751)4/29/2012 7:39:08 PM
From: Spekulatius
   of 3795
 
Bruwin, are you sure about the net earnings > 20% of revenues? That seems like an extremely high hurdle to take, no industrial or consumer good company will be able to make that. The only business that comes close to 20% post tax profitability in some cases, are pharmaceuticals and ironically that is one business that WEB rarely invested in (with the exception of Sanofi).

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To: Spekulatius who wrote (1756)4/29/2012 9:51:45 PM
From: Sergio H
1 Recommendation   of 3795
 
I'm sure he meant Net Income to Total Revenue must be greater than 20% and not Net Earnings.

BTW , WEB reduced the ratio to 10% for undiscovered companies.

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To: Spekulatius who wrote (1756)4/30/2012 2:43:39 PM
From: bruwin
2 Recommendations   of 3795
 
Hi there Clownbuck.

I just want to make sure I’m following your question, ”are you sure about the net earnings > 20% of revenues”, correctly, because Sergio H appears to think that your reference to “net earnings” may not be the same as “Net Income”.
If that’s the case then below is a copy of a scan of one of the pages of Mary Buffett and David Clark’s book, “Warren Buffett and the Interpretation of Financial Statements” ...



... on page 25 the authors refer to the Bottom Line of the Income Statement as “Net Earnings” and I used their reference in my summary.

On the other hand, if your question referred to the most unlikely event that an industrial type company could ever achieve a Net Income (or Bottom Line) > 20% of Revenue, then I’d go along with the contention that it’s certainly not an easy target to achieve, but there again, it does happen.

Below are two of Buffett’s favoured companies, Coca Cola and Johnson and Johnson.
Over the last 5 year’s worth of Annual Results, KO exceeded the 20% ratio on 3 occasions, while JNJ beat it on 2 occasions.

KO. 2010 :- 11809/35119 = 33.6%. 2009 :- 6824/30990 = 22.0%. 2007 :- 5981/28857 = 20.7%

JNJ. 2010 :- 13334/61587 = 21.6%. 2008 :- 12949/63747 = 20.3%.

According to the research of the above authors, Buffett (and Munger) are primarily interested in finding companies that have Durable Competitive Advantage, and it is generally these category of companies that show “a net earnings (or Net Income) history of more than 20% on total revenues”, as referred to on page 61 of their book.

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