Generating Dividend Ideas from Snow Portoflio
Snow's philosophy involves looking for financially strong companies with depressed stock prices owed to temporary distress. He finds them through a deep research work he carries out to determine the probability of a solution, gain confidence in the company’s ability to survive the difficulty, and estimate the value of the stock once the difficulty has passed.
Snow considers that the downside is protected by the depressed price. But he knows that this does not prevent him from achieving significant returns.
I try to generate ideas from the top dividend stocks that select hedge fund managers pick. In this case I got a snapshot of four companies in Snow portfolio.
Personally, I like COP, PFE and DD. Snow seems to like IP, the only stock in his top yield portfolio I found he kept buying.
ConocoPhillips (COP): 3.6% yield. Snow reduced considerably the position last quarter.
ConocoPhillips is an international integrated energy company. In 2010, it produced thousands of barrels per day of oil and natural gas liquids and 4.6 billion cubic feet a day of natural gas. These results were primarily obtained from the United States, Canada, Norway, and the United Kingdom. It's the second-largest refinery operator in the U.S.
ConocoPhillips surpasses its peers in terms of production and should benefit from environmental concerns that favor natural gas. Moreover, it owns pipeline and other transportation assets, which bring income that is not subject to variations in commodity prices. Finally, the integration of refineries with Canadian heavy oil production should lead to improved margins and higher returns.
Pfizer Inc (PFE): 3.7% yield. Snow has been reducing his PFE position since 2007
Pfizer is the world's largest pharmaceutical firm. With the acquisition of Wyeth, 90% of the sales are represented by prescription drugs. Furthermore it has strong cash flows with little debt. Following the acquisition, Pfizer held more than $25 billion in cash.
PFE is considered a very sound company thanks to its strong cash flows arising from the diversity of drugs it offers. In addition, the company has the resources and research power to develop and launch new ones. Its strength is evidenced by the 100-plus drugs in its pipeline and more than 100 discovery projects.
Pfizer returns on capital have outperformed cost of capital. Quarterly dividend is at $0.20 per share, and the dividend yield is close to 4%. Most importantly, the dividend payout ratio will increase over the next few years.
International Paper (IP): 3.4% yield. Snow kept adding to IP position.
It operates as a paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia, and the north of Africa and sells paper, packaging products, and other products directly to end users and through agents, resellers, and paper distributors. Through its joint venture with Ilim Holding S.A., operates a pulp and paper business in Russia.
Quarter results let the company stand in a good position. Indeed, EPS were of $0.92 versus $0.80 in the second quarter and $0.91 in the year-ago period. IP is made up of four segments: Industrial Packaging, Printing Papers, Consumer Packaging and Distribution. Each of them has brought improved operating profits during the quarter.
IP is permanently looking for changes. Now it has agreed to purchase Temple-Inland TIN, to enter the Indian paper market, and has changed several of its highest-ranking executives.
IP's acquisition of Weyerhaeuser's containerboard assets is a step in the right direction toward consolidation and more sustainable margins.
E.I. du Pont de Nemours & Company (DD): 3.4% yield. Snow sold his DD position since 2007 and now it hold just 16k shares.
DuPont is a diversified chemical company operating in more than 80 countries. Its massive portfolio includes agriculture, coatings, electronics and communication, construction and transportation, and safety and protection.
DuPont has widened its research into genetically modified seed technologies over the years. This expansion has turned it into one of the most prominent global seed providers. DuPont’s applied research into advanced polymers such as smart fibers, biofuels, among other technologies, can open up brand new markets. DuPont is one of the most well-known blue-chip chemical companies, whose dividend yield currently exceeds 3%.