A First Look at Consolidated Edison. Hint: buy under $40

I read an article on Seeking Alpha the other day that touted 15 high dividend stocks for the next few years.  Of course, most of them weren’t high dividend stocks in my opinion.  I believe that a high dividend stock must outpace the government’s long term average of the consumer price index by about double.  That is why I use a 6% dividend yield as my cutoff for high dividend stocks.  Nevertheless, there are many stocks with dividend yields between 4-6% that will become high dividend stocks near market bottoms.  Consolidated Edison (ED) is one of those stocks.  This first look will give you some price levels where this stock will appear attractive to those seeking total return (high dividends plus price appreciation).

Consolidated Edison (ED)

Share price: $58.38 on 1/25/2012 when I compiled these stats; the current price is $58.64

Shares: 292.2 million

Market capitalization: $17.10 billion

Bonds outstanding: $475 million

Not much is coming due anytime soon.  This is good for dividend safety.

What the company does - Consolidated Edison is a holding company for two regulated utilities: Con Ed of New York and Orange & Rockland. These utilities provide steam, natural gas, and electricity to customers in southeastern New York--including New York City--and parts of New Jersey and Pennsylvania. The company's electric utility operations generate more than three fourths of Con Ed's operating revenue. The remainder comes from an energy marketing business and infrastructure investments.

Morningstar’s take - Consolidated Edison's 200-year-old wires-and-pipes business generates dependable earnings and dividends. Furthermore, New York's need for significant infrastructure should provide growth investment opportunities for Con Ed over time, supporting long-term earnings and dividend growth.

DIVIDEND RECORD – Consolidated Edison is a slow and steady dividend grower typical of century old utilities companies

Dividend: $0.60 quarterly

Dividend yield: 4.1% ($2.40 annual dividend/$58.38 share price)

Dividend payout ratio: 67% using Google Finance’s recent EPS of $3.56 or 72% using the company’s average adjusted EPS of $3.35.  ED is a dedicated dividend payer.

EARNING POWER – $3.35 average adjusted earnings per share @ 292.2 million shares

(Earnings adjusted for changes in capitalization)

	EPS	Net income	Shares	Adjusted EPS
2006	$2.95	$737 M	250 M	$2.52
2007	$3.47	$929 M	267 M	$3.17
2008	$4.37	$1,196 M	274 M	$4.08
2009	$3.14	$868 M	276 M	$2.96
2010	$3.47	$992 M	286 M	$3.39
2011 (est)	$3.95 (est)	$1,160.687 M	292.2 M	$3.95 (est)

	EPS	Net income	Shares	Adjusted EPS
2011 Q1	$1.06	$311 M	294 M	$1.06
2011 Q2	$0.56	$165 M	294 M	$0.56
2011 Q3	$1.30	$383 M	295 M	$1.30
2011 Q4 (est)	$1.03 (est)	$301.687 M	292.2 M	$1.03 (est)
2011 total (est)	$3.95 (est)	$1,160.687 M	292.2 M	$3.95 (est)

Six year average adjusted earnings per share is $3.35

Consider contrarian buying below $26.80 (8 times average adjusted EPS)

Consider value buying below $40.20 (12 times average adjusted EPS)

Consolidated Edison is currently trading at 17.42 times average adjusted EPS.  This is still priced for investment, but it is getting close to speculative pricing.

Consider speculative selling above $67.00 (20 times average adjusted EPS)

BALANCE SHEET – Consolidated Edison is a slow equity grower.  It doesn’t have a lot of current assets on hand to pay current liabilities (see current ratio and quick ratio below).  It high priced compared to book value.

Book value per share: $39.93

Price to book value ratio: 1.46 (under 1.0 is good)

Current ratio: 1.17 (over 2.0 is good)

Quick ratio: 0.79 (over 1.0 is good)

Debt to equity ratio: 0.89 (lower is better)

CONCLUSION – Consolidated Edison is a solid dividend payer and a slight grower.  It isn’t a high dividend stock now at over $58 dollars per share, but it is below $40 per share.  At $40 per share the stock would be yielding 6%.  ED has excellent and stable earning power of $3.35 per share @ 292.2 million shares.  Its earnings are not volatile compared to most other industries.  However, ED is almost speculatively priced at 17.42 times average adjusted EPS.  You can buy Consolidated Edison below $40 per share when the stock market tanks in the near future.  The double-dip recession in Europe and the coming recession in China and the US will push equity priced down to their March 2009 lows.  Edison’s balance sheet is unremarkable.  I’d like to see more current assets and cash to cover next year’s current liabilities.  The price to book value ratio would be attractive if the price fell back below $40.  You should consider buying Consolidated Edison below $40 per share.

DISCLOSURE – I don’t own Consolidate Edison (ED).

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Doug Casey on the Collapse of the Euro and the EU

Here are some of my recommended action steps to help you with
implementing Doug Casey's recommendations in his recent article for
LewRockwell.com (http://lewrockwell.com/casey/casey105.html)

1) Buy $10,000 worth of precious metals if you have none. Put 80%
into gold coins from your home country. I recommend tenth ounce gold
coins because they are more tradeable, but they have a higher premium
over the spot price of gold. Go to www.kitco.com or www.apmex.com to
learn the spot price of gold and silver and the associated premiums
for various coins.

http://www.apmex.com/Category/504/American_Gold_Eagles_2012__Prior.aspx

Put the remaining 20% into one ounce silver coins or junk silver
coins. Junk silver is not "junk". That is the name of US dimes and
quarters from before 1965. Their composition is 90% silver.

http://www.apmex.com/Product/27/90_Silver_Coins___100_Face_Value_Bag_.aspx

2) Have printed cash on hand to buy valuable tools of production for
your side business from desperate sellers locally (e.g. Craigslist) or

3) I disagree with Doug Casey that the gold mining stocks are cheap
right now. Visit some of the gold mining stock articles on my blog to
see why I don't think they are so cheap. Here is one to start wiith:
http://www.myhighdividendstocks.com/category/stocks-that-pay-small-dividends/...

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A First Look at Enbridge Energy Partners (EEP).

I keep looking for high dividend stocks with earning power and strong balance sheets in the energy sector.  But all I found today is another high dividend stock in the energy sector that offers more risk than reward.  Don’t be fooled by the high current dividend yield.  Danger lurks below the hood on this one.

Enbridge Energy Partners (EEP)

Share price: $33.55

Shares: 273.15 million

Market capitalization: $9.16 billion

Bonds outstanding: $4.8 billion

What the company does - Enbridge Energy Partners LP is one of the largest crude-oil transporters in America. The company operates the U.S. portion of the Lakehead pipeline system, the world's longest crude pipeline, which stretches 3,300 miles from the Canadian oil fields in Alberta to Chicago, points east, and is currently being expanded toward the Gulf Coast. The company has several other smaller crude pipelines in the U.S. as well as a sizable natural gas gathering and processing business.

Morningstar’s take - Enbridge Energy Partners, L.P. EEP is a master limited partnership operated by its general partner, Canadian pipeline giant Enbridge Inc. ENB. We're big fans of EEP's crude oil business. While its natural gas gathering and processing operations detract somewhat from an otherwise wide moat, they also bring attractive growth potential thanks to booming unconventional natural gas liquids (NGL) production.

DIVIDEND RECORD – EEP issues stock and debt to pay for its dividends not covered by earnings (see cash flow chart further below).  Dividend gaps in 2007 and 2009.

Dividend: $0.53 quarterly

Dividend yield: 6.3% ($2.12/$33.55)

Dividend payout ratio: 203% using the most recent EPS ($2.12 DIV/$1.04 EPS) or 252% using average adjusted EPS ($2.12 DIV/$0.84 avg adj. EPS)

EARNING POWER – $0.84 six year average adjusted earnings @ 273.15 million shares

(Earnings adjusted for changes in capitalization)

	EPS	Net income	Shares	Adjusted EPS
2006	$1.81	$285 M	140 M	$1.04
2007	$1.23	$250 M	173 M	$0.92
2008	$1.82	$403 M	194 M	$1.48
2009	$1.12	$261 M	233 M	$0.96
2010	($1.09)	($260 M)	239 M	($0.95)
2011 (est)	$1.64 (est)	$429.5 M (est)	273.15 M	$1.58 (est)

	EPS	Net income	Shares	Adjusted EPS
2011 Q1	$0.38	$97 M	253 M	$0.36
2011 Q2	$0.51	$130 M	255 M	$0.48
2011 Q3	$0.36	$96 M	265 M	$0.35
2011 Q4 (est)	$0.39 (est)	$106.5 M (est)	273.15 M	$0.39 (est)
2011 total (est)	$1.64 (est)	$429.5 M (est)	273.15 M	$1.58 (est)

Six year average adjusted earnings per share is $0.84

Consider contrarian buying below $6.72 (8 times average adjusted EPS)

Consider value buying below $10.08 (12 times average adjusted EPS)

Consider speculative selling above $16.80 (20 times average adjusted EPS)

Enbridge Energy Partners is currently trading at 40 times average adjusted EPS.  This is highly speculative pricing.

CASH FLOW – Capital expenditures and dividends are being funded from debt and stock issuance; not operating profits.

BALANCE SHEET – Poor book value to stock price ratio; stagnant increase in equity.

Book value per share: $14.03

Price to book value ratio: 2.39 (under 1.0 is good)

Current ratio: 1.05 latest quarter (over 2.0 is good)

Quick ratio: 0.91 (over 1.0 is good)

Debt to equity ratio: 1.39 (lower is better)

CONCLUSION – Enbridge Energy Partners (EEP) is a high dividend stock that lacks enough earning power to pay for that dividend out of operating profits.  It funds its dividend from periodic equity and debt issuances.  The stock is speculatively priced at 40 times average adjusted earnings.  The balance sheet is weak due to a high book value per share ratio.  EEP does not have a lot of current assets to pay for its current liabilities.  I would wait until the price drops below $10.08 per share (12 times average earnings).  The European double dip recession and sovereign debt crisis will spread to the USA.  This will tank the stock market.  Buy EEP on sale if you want to.

DISCLOSURE – I don’t own Enbridge Energy Partners (EEP).

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TIP OF THE WEEK - Register your stocks in your own name

Register your stocks in your own name

Jason Brizic

January 20^th, 2011

The MF Global bankruptcy proved one very important thing.  It proved that your assets are not your assets if you allow your broker to register them in their street name.  In fact, your brokerage can use your assets as their own to make risky derivative bets.  And when they go bust due to bad leveraged bets, then your assets can go to their creditors instead of to you.  This is what just happened in the MF Global bankruptcy.

Protect yourself by registering the stocks you own in your name.

Call your broker and tell them that you want all your stocks registered in your name.  Tell them you don’t want them in street name anymore.  There is a cost to this.  It will cost you time and some money each time you sell your stock certificates, but this is the price you must pay to secure your assets from brokerage theft.  If you are not willing to do this, then you probably should not own stocks.

This will make life very difficult for day traders, but much safer if you are a high dividend stock investor.  The high dividend stock investor buys when companies with earning power and strong balance sheets are priced at a deep discount.  He sells the stocks he owns when the company is not likely to deliver high dividend yields and when earning power and balance sheet strength diminishes.  This usually doesn’t happen overnight, so you can afford to register your stocks in your own name.

Here is an article by Gary North that summarizes the problem nicely.

* * * * * * * * * *

A lot of Americans do not know how ownership of stocks is handled. They think they personally own the stocks in their portfolios. They don’t.

There were investors in MF Global who thought they owned commodities. They didn’t.

Consider this.

Do you own gold and silver mining stocks? Or any stocks for that matter? Even if you say, “yes”, chances are you don’t really own them.

It is one of the dirtiest little secrets in the brokerage business. And 99.9% of people have no idea it is even being done to them. It’s called “street name registration” and it’s how the brokerage where you hold your stocks “registers” your shares. To save money and time, and to allow your shares to be included as assets that they can use to do what they want with, your brokerage never actually registers you as an owner of the shares.

Street name registration allows your broker to lend your shares to short sellers, thereby driving down the price of your own stocks. Additionally, this method allows your broker to “re-hypothecate” your assets–meaning it allows your broker to borrow money against your shares and speculate in the derivatives market.

These hidden risks are planting the seeds of tomorrow’s ultimate collapse – In which there may be a system-wide collapse of broker dealers, taking down millions of investors, and ensuring permanent non-recoverable losses to an entire generation!

Too extreme? Maybe. But consider this:

MF Global investors found out first hand just how secure their funds were. Most don’t realize it, but MF Global was a clearing house for both stocks and futures. Like many/most brokerages, they “invest” their own funds, often on a highly leveraged basis, to earn income. But, with the recent collapse of Greek government bonds and with MF Global’s highly leveraged position in them, MF Global was bankrupted in an instant.

The problem is, they tried to cover their losses with their customer’s own funds. You see, unless your shares are registered in your own name – a process that isn’t that difficult or costly – your brokerage considers it as assets they can use for their own needs.

Plus, once a brokerage goes bankrupt (which is something we expect to happen very often over the coming years) if you hadn’t personally registered your shares then your shares go down as assets of the brokerage and are used to pay off their creditors.

In normal times, this does not happen. We are heading into abnormal times.

Some believe their stocks will be protected by the Securities Investor Protection Corporation (SIPC), which insures stocks accounts from broker collapse up to $500k for securities, and account cash balances up to $250k. But what if you have more than $250k in cash and/or more than $500k of securities in your account? What if one of the largest broker dealers in the country went bust, bringing down thousands of accounts and depleting the entire reserves of the SIPC? What if the SIPC itself goes bankrupt? What few people are aware of, is that the SIPC only carries about $1 billion in funds to cover investors! This means only one or two high profile broker dealer bankruptcies will be enough to completely wipe out the SIPC.

Some may claim the US government will bail out the SIPC to whatever extent needed. But what if two major broker dealers went bust while at the same time the US government suffers a major Treasury bond auction failure? This is all but a certainty in the coming years.

And the same thing applies in Canada to Canadian brokerages and Canadian stocks. The Canadian economy is intricately tied to the US. In fact, not many people are aware, but all that backs the Canadian dollar is the US dollar. The Canadian Government sold all its gold decades ago.

There’s lots more to learn here. Read the full article.

Continue Reading on www.resourceinvestor.com

* * * * * * * * * *

For more tips, go here:

http://www.myhighdividendstocks.com/category/tip-of-the-week

First look at Energy Transfer Partners (ETP).

I believe that natural gas pipelines are generally a good investment.  I recent stock screen turned up Energy Transfer Partners (ETP) with a dividend yield of 7.2%

Energy Transfer Partners (ETP)

Share price: $47.98

Shares: 209.59 million

Market capitalization: $10.06 billion

Bonds outstanding: $7.7 billion.  There are there a bunch on bonds due in the next decade.

What the company does - Energy Transfer Partners is a master limited partnership primarily engaged in natural gas transportation and storage. The partnership operates more than 17,500 miles of natural gas gathering and intrastate transportation pipelines in Texas and Louisiana and the 2,500-mile Transwestern interstate pipeline. Energy Transfer Partners is also the third-largest retail marketer of propane in the United States, serving more than a million customers across the country.

Morningstar’s take - Energy Transfer has grown into one of the largest master limited partnerships through a steady buildout of large-diameter natural gas pipelines and a few transformative acquisitions. Energy Transfer's Texas intrastate pipeline system is a phenomenal machine for moving gas around and out of Texas, and its interstate pipelines only increase market access and fee-based cash flows. With the LDH acquisition, however, Energy Transfer has now entered the natural gas liquids business. We think this shift in strategy could lead to considerable growth opportunities for the partnership.

DIVIDEND RECORD – Energy Transfer Partners has been a dividend grower since 1997, but the payout ratio has grown to over 100%.  The dividend hasn’t grown since 2008 Q3.

Dividend: $0.89 quarterly

Dividend yield: 7.2%

Dividend payout ratio: 263% using the most recent EPS ($3.56 annual dividend / $1.35 TTM EPS) or 168% using the average adjusted EPS ($3.56 / $2.12 avg. adj EPS)

EARNING POWER – $2.12 six year average earnings per share

(Earnings adjusted for changes in capitalization)

	EPS	Net income	Shares	Adjusted EPS
8/2006	$3.15	$516 M	109 M	$2.46
8/2007	$3.31	$676 M	133 M	$3.23
8/2008	$3.74	$550 M	147 M	$2.62
8/2009	$2.53	$426 M	168 M	$2.03
8/2010	$1.19	$229 M	189 M	$1.09
8/2011	$1.37	$271 M	209.59 M	$1.30

	EPS	Net income	Shares	Adjusted EPS
2010 Q4	$0.66	$127 M	192 M	$0.61
2011 Q1	$0.71	$140 M	195 M	$0.67
2011 Q2	$0.19	$42 M	210 M	$0.20
2011 Q3	($0.19)	($38 M)	209.59 M	($0.18)
2011 total (est)	$1.37	$271 M	209.59 M	$1.30

Six year average adjusted earnings per share is $2.12

Consider contrarian buying below $16.96 (8 times average adjusted EPS)

Consider value buying below $25.44 (12 times average adjusted EPS)

Consider speculative selling above $42.40 (20 times average adjusted EPS)

Energy Transfer Partners is currently trading at 22.6 times average adjusted EPS.  This stock is speculatively priced.

BALANCE SHEET – ETP has a weak balance sheet

Book value per share: $24.59 ($5,153 M in equity / 209.59 M shares)

Price to book value ratio: 1.95 (under 1.0 is good)

Current ratio: 0.84 (over 2.0 is good)

Quick ratio: 0.53 (over 1.0 is good)

Debt to equity ratio: 1.49 (lower is better)

CONCLUSION – Energy Transfer Partners (ETP) is a high dividend stock, but it is not earning enough money to sustain the dividend at its current rate.  The company has an earning power of $2.12 per share @ 209.59 million shares.  At a current stock price of 47.98 is it speculatively priced at 22.6 times average adjusted earnings.  Lastly, it balance sheet is weak.  This stock shouldn’t be bought above $25.00 per share.  It will probably suffer a dividend cut and drop back to that price.  You can buy it then for much cheaper and less downside risk.

DISCLOSURE – I don’t own Energy Transfer Partners (ETP).

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An excellent video on SOPA and PIPA legislation

There are a lot of blackouts on major websites like Wikipedia.org against PIPA and SOPA.

This is the best video I’ve found on the issue:

http://video.ted.com/talk/podcast/2012S/None/ClayShirky_2012S.mp4

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Carnival Corp. (CCL) is listing to port. How low will it sink?

Most people have heard about the grounding of the cruise ship Costa Concordia.  If you haven’t, then follow this link: http://tinyurl.com/7b596qk.

Carnival Corp. (CCL) is the parent corporation of the Costa Concordia.  Putting aside the human tragedy of the grounding, Carnival estimates that it will lose at least $85 - $95 million or $0.11 - $0.12 per share.

http://www.sacbee.com/2012/01/15/4190934/carnival-corporation-plc-required.html

I wrote one article on Carnival that said the stock should not be bought above $21.68 (http://www.myhighdividendstocks.com/stocks-that-pay-small-dividends/first-look-at-carnival-corporation-ccl).  That price was before the grounding of the Costa Concordia.  I think that Carnival was already heading lower due to the oncoming double dip recession.  Look at the March 2009 lows.  The ship wreck and ensuing fallout will only make matters worse for Carnival.

DISCLOSURE – I don’t own Carnival Corp. (CCL)

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Some Financials on Monsanto (MON)

This short article on agriculture giant Monsanto (MON) appeared on www.TeaPartyEconomist.com.  It reminded me why I hate Monsanto so much, but I never looked at Monsanto as a dividend stock.  Let’s do that after the short article.

* * * * * * * * * *

4:46 AM

On Monsanto’s Payroll? U.S. Diplomates Push GM Seeds.

from The Tea Party Economist by Gary North

If you wanted to make the world dependent on your generically engineered seeds, what would you do? You would get a little help from your friends. We read: “. . .   leaked documents now reveal that Monsanto has also deeply infiltrated the United States government. With leaked reports revealing how U.S. diplomats are actually working for Monsanto to push their agenda along with other key government officials, Monsanto’s grasp on international politics has never been clearer.”

Genetically Modified (GM) seeds are basic to the marketing plan.

Amazingly, the information reveals that the massive corporation is also intensely involved in the passing and regulations concerning the very GM ingredients they are responsible for. In fact, the information released by WikiLeaks reveals just how much power Monsanto has thanks to key positions within the United States government and elsewhere. Not only was it exposed that the U.S. is threatening nations who oppose Monsanto with military-style trade wars, but that many U.S. diplomats actually work directly for Monsanto.

According to leaked documents, “In 2007 it was requested that specific nations inside the European Union be punished for not supporting the expansion of Monsanto’s GMO crops. The request for such measures to be taken was made by Craig Stapleton, the United States ambassador to France and partner to George W. Bush.”

“Country team Paris recommends that we calibrate a target retaliation list that causes some pain across the EU since this is a collective responsibility, but that also focuses in part on the worst culprits. The list should be measured rather than vicious and must be sustainable over the long term, since we should not expect an early victory. Moving to retaliation will make clear that the current path has real costs to EU interests and could help strengthen European pro-biotech voices.”

Monsanto also got cooperation from the Food and Drug Administration. For more information, read the full story.

Then buy some non-hybrid seeds for your garden. Plant them next spring. That’s what I will be doing.

* * * * * * * * * *

Monsanto (MON)

Share price: $79.20

Shares: 535.41 million

Market capitalization: $42.47 billion

Bonds outstanding: $3.8 billion

What the company does - Originally a chemical company, Monsanto has morphed into an agricultural giant, focusing on seeds and crop protection products. In a major breakthrough, Monsanto introduced the first genetically modified crop seeds in 1996 and has remained the industry leader. The St. Louis-based company generated $10.5 billion in sales during fiscal 2010, and is focused on bringing new biotechnology traits to market to improve farmer yields and productivity.

Morningstar’s take - Monsanto is still bouncing back from a series of missteps and misfortune that have plagued the company (and its stock price) during the last couple of years. An overly aggressive pricing strategy for the firm's latest technology, SmartStax corn seeds and Roundup Ready 2 Yield soybeans, led to weak uptake, price cuts, and lower than anticipated profitability from the firm's increasingly important seeds and genomics business. Seeds are more important for Monsanto today because profits from the firm's other business, crop chemicals, have fallen off a cliff after glyphosate overcapacity forced Monsanto to basically cut Roundup prices in half and reset expectations. Adding to the company's drama, the federal government has started poking around Monsanto's business, looking for antitrust violations. While this list of bad news sounds daunting, we still believe Monsanto is the premier player in agricultural biotechnology. The company possesses a promising pipeline of seed products and with a few tweaks to its strategy (in our opinion, the firm needs to become more "farmer friendly"), we think Monsanto will right itself and continue generating shareholder value for years to come.

DIVIDEND RECORD – Monsanto is a consistent dividend grower, but it has a low payout and a low yield.

Dividend: $0.30 per quarter

Dividend yield: 1.51 ($1.20 annually / $79.20 share price)

Dividend payout ratio: 41% ($1.20 annual dividend / $2.92 average adjusted earnings)

EARNING POWER – Monsanto earns an average of $2.92 per share @ 535.41 million shares

(Earnings adjusted for changes in capitalization)

	EPS	Net income	Shares	Adjusted EPS
2006	$1.79	$993 M	555 M	$1.85
2007	$3.62	$2,024 M	559 M	$3.78
2008	$3.77	$2,092 M	556 M	$3.91
2009	$1.99	$1,096 M	551 M	$2.05
2010	$2.96	$1,607 M	542 M	$3.00
Average	$2.83	$1,562 M	535.41 M	$2.92

Five year average adjusted earnings per share is $2.92

Consider contrarian buying below $23.36 (8 times average adjusted EPS)

Consider value buying below $35.04 (12 times average adjusted EPS)

Consider speculative selling above $58.40 (20 times average adjusted EPS)

Monsanto is currently trading at 27 times average adjusted EPS.  This is speculative pricing.

BALANCE SHEET – Stockholder equity is not growing much.  The price to book value ratio is way too high for my likings.

Book value per share: $20.62

Price to book value ratio: 3.84 (under 1.0 is good)

Current ratio: 1.66 latest qtr (over 2.0 is good)

Quick ratio: 1.02 latest qtr (over 1.0 is good)

Debt to equity ratio: 0.14 (lower is better)

CONCLUSION – Monsanto is an evil corporation that is creating franken-foods.  Their GM crops are spreading onto farms that don’t want them.  That is a massive violation of property rights.  Worse, Monsanto then sues the farmers for GM copyright infringement.  That is vile.  I would never buy this stock on moral principles.  http://bestmeal.info/monsanto/company-history.shtml or type evil monsanto into google.  You’ll be amazed what you’ll find.

The company has a measly dividend with a low payout ratio.  On the plus side it is a dividend grower.  It earns an average of $2.92 per share.  This makes the current price of the stock speculative at 27 times average earnings.  Never pay more than 20 times average adjusted earnings for a stock.  Monsanto’s balance sheet is nothing special.  Price to book value is too high at 3.84 times total equity.  This company is not a good deal.

The best time to buy Monsanto in recent years was at the end of June 2010 when the stock was trading at around 14 times average earnings.  Even then at the bottom the dividend yield would have been on 2.7% at today’s $0.30 quarterly dividend.  I don’t think there is much chance of Monsanto becoming a high dividend stock unless its management started paying out 80% of average net income in dividends ($2.33 annual dividend) and the stock dropped in price down to 12 times average earnings.  In that case Monsanto would yield 6.6% ($2.33 DIV / $35.04 share price), but that is not going to happen.  Bye-bye Monsanto.

DISCLOSURE – I don’t own Monsanto (MON) and I never will.

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