Asset Management & Market Research

Making cents of it all ....

The market moved big last week (largest weekly move in over a year) on news that Congress and the President struck a last-minute deal and averted the fiscal cliff for the time being.

One group that had a big bounce were dividend paying stocks.  In the bill signed last week, the dividend tax rate went up from 15% to 20%, a much lower increase than most expected.  Barron’s featured a piece this weekend titled “Income Winners,” in which Andrew Bary talks about ways to earn 6% or more on your money without taking on a lot of risk – even in today’s low interest rate world.

Our managed accounts have been involved with a few names that fall within this dividend theme.  One of our holdings is Cedar Fair (FUN). Cedar Fair is a Sandusky, Ohio based company that owns and operates 11 family-oriented amusement parks located in the United States.  The company has an enterprise value of $3.4 billion, and has 55.5 million shares outstanding.  The current CEO came from Disney.

In 2010, FUN had $.25 dividend payout, which increased to $1.00 in 2011 and $1.60 last year. The company recently raised the payout for 2013 to $2.50 a share.  The 2013 payout offers an investor a 6.94 percent dividend yield.

We believe the company, as well as the industry, is focused on maximizing EBITDA margin – not just getting people in the parks.   This has given the company and industry great cash flow growth, and given shareholders terrific returns. The company failed to achieve year-over-year EBITDA growth only 3 times over the last 18 years. FUN is a great story, with new management focused on growing the company.  FUN believes that they can achieve Adjusted EBITDA of $450 million in 2016, up from 2012 guidance of $385/395 million.

In terms of rankings from FusionIQ (www.fusioniqrank.com), FUN receives with a Master score of 85, a Technical score of 98 and a fundamental score of 57.  So if you are looking for a dividend ride, maybe FUN might be a stock for you to consider.

Revisiting a recent post about opportunities in the PC supply chain, I saw this yesterday in Investors Business Daily, addressing their IBD 50:

The top two disk drive makers made the list. The PC storage sector has seen brutal consolidation in recent years. Seagate Technology (STX) and close rival Western Digital (WDC) are among the last drive makers standing, putting them in a sweet spot for growth. 

Seagate, No. 11 on the IBD 50, has an IBD Composite Rating of 96, meaning it’s outperformed 96% of all stocks on key metrics such as sales and profit growth. Its stock price took off on Nov. 30 in sync with a sector rally, and it’s surged 26% since Dec. 4 to a 31.45 close Friday.

Western Digital, No. 27, likewise was sitting at 33.20 on Dec. 4 and climbed 29% to a 42.88 close Friday. Over the last three quarters, the drive maker’s EPS has surged an amazing 115%, 314% and 282% last quarter — rebounding from massive flooding in Thailand that affect the disk drive supply chain.

Both Seagate and Western Digital are working on the right side of consolidations that began in mid-October.

Be well.

Michael Needleman



Author: Michael Needleman

See all posts by Michael Needleman (154)

Comments are disabled in this entry.