Unilever

Unilever is a global consumer products conglomerate, owning more than 400 brands world wide! 14 of these brands have sales of more than one billion USD. The brands vary from toothpaste, soap, tea and ice cream, to foods and house care products.

Unilever is listed in London (LON:ULVR) and Amsterdam (AMS:UNA), as well as two ADR’s in the US, one for the London one (NYSE:UL) and one for the Amsterdam listing (NYSE:UN)

Since this is just a quick look, I’ll only conclude a Pitroski F-Score and look at the dividend history.

Points:
Net Income > 0 (1p)
Cash Flow From Operations > 0 (1p)
Higher ROA Than Previous Period (0p)
Cash Flow From Operations > Income after tax (1p)
Decline in Long Term Debt (0p)
Higher Current Ratio Than Previous Period (0p)
No New Shares Issued (1p)
Higher Gross Margin Than Previous Year (1p)
Higher Asset Turnover Than Previous Year (0p)

Total (5p)
Max (9p)

Unilever got 5 out of 9 possible. I would have liked to see a decline in debt and improving current ratio. I like that they have not issued new shares (No of shared decreased 2013-2014).

Unilever (NYSE:UL) Quarterly Dividend History from Q4 2009, USD.

Dividends have been lowered, but the general trend is upward. However, the payout ratio 2014 was almost 70%. 2015 it was a bit below 60%, which is quite high in my opinion.

As of now (06-01-2016) P/E is 23 and the Yield is 3.14 %. Unilever is not cheap, and it is quite an average company according to the F-Score. also the payout ratio is high.

I will probably do a more in depth analysis at a later point, perhaps after the 2015 annual report is out. I currently own 15 shares of Unilever (NYSE:UL). But I want to see a lower price before increasing my amount of shares.

The price at which the yield is 4% is 33 USD and the price at P/E 15 is 27.60 USD

That concludes this quick look at Unilever. I liked doing this and it gives a little better understanding of how Unilever is doing, but it leads me to fell the requirement of an in depth analysis.

Cheers!
-Samuraimannen

Remember, I am no adviser, always do your own research and do not make any decisions based on what I write!

Realty Income

Realty Income brand themselves as “the Monthly Dividend Company”

Realty Income Corporation (NYSE:O) is a so called REIT, a Real Estate Investment Trust. REITs invest in properties and/or mortgages, and receive special tax considerations. REITs have to pay at least 90% of its taxable profit in dividends and 75% of their gross income must come from properties. This is what makes them quite attractive to income investors.

Realty Income has real estate assets for $12 billion (cost basis) diversified in more than 4000 properties, spanning 49 states and Puerto Rico. About 40% of Realty Incomes 236 tenants are of investment grade, and they go across 47 industries.

Realty Income Top 20 Tenant Diversification

Realty Incomes top 20 tenants (% of revenue)

Realty Income Portfolio Occupancy

Realty Incomes occupancy rate 1992 – Q3 2015The broad spectrum of tenants combined with their impressive occupancy rate is what fuels Realty Incomes steadily increasing monthly dividend.But for how long can they keep increasing the dividend?

Time for numbers, I look at the Q3 report for 2015 and the 2014 annual report.

First of all it needs to be noted that since we are looking at a REIT, normal earnings are quite useless in terms of evaluating the business. What we need to look at is AFFO, Adjusted Funds From Operations. Generally AFFO equals the REITs Funds From Operations (FFO), adjusted for the reoccurring capital expenditures used to maintain the the quality of the physical assets.

It is important to note that AFFO is a non-GAAP measure, but we’ll have to make do.

Total Assets less Goodwill equals $11,738,569

Total Liabilities equals $5,674,733

Total Debt / Total Assets = 0.483

Total equity = $6,063,836

Debt to Equity = 0.94

(Should be noted)

FFO available to common stockholders $ 562,889,000 (2014)

FFO per common share, basic and diluted  $ 2.58

(2014) increased each year from 2010

These have both been increasing from 2012 and 2013

Total AFFO available to common stockholders $ 561,661,000 (2014)

AFFO per common share $ 2.57

(2014) increased each year from 2010

These are very close to FFO which means only minor adjustments were made.

Interest Cost $216,366,000 (2014)

Interest coverage by AFFO

(affo/interest)

= 2.6

Total Dividends paid $517,556,000 (common+preferred 2014)

Dividend coverage by AFFO

(affo/total dividends)

 = 1.09


Realty Income Annualized Dividends


Realty Income AFFO per Common Share

Note that these two graphs are different in scale, but its clear that AFFO per share is increasing at at rate such that it keeps ahead of dividends per share.

Conclusions

The most difficult part to me in an analysis is drawing correct conclusions from the numbers, charts and figures. However, I’ll do my best.

The first thing you notice when you browse around Realty Incomes website is that they pay more attention to their dividend history, and how great it is to be a shareholder, than they pay to the properties they own.

First of all AFFO is close to FFO, which leaves out my worries that the adjustments would be incorrect or “shady”. (Remember Enron?) As far as the AFFO per share goes, it has been increasing since the IPO in 1994, except for the years 2007-2010. The occupancy rate is as impressive as the company’s dividend history. Occupancy has stayed between 96.6 %  and 99.5 % since 1992! Realty Income has paid dividends for 46 years, with a CAGR of 4.5 %. Since IPO they have gone through with 78 increases and they have never lowered their dividend. The AFFO / Dividends is very low according to me, I would have liked to see this be at least closer to 2 or above. The growth is based on purchasing properties. This requires capital, which requires loans. Dept to Assets is at good 0.48, which means approximately half the assets are funded with equity. Realty Income has Investment Grade Credit Rating which translates into cheap loans, but we can also remember that Lehman Brothers had AAA rating minutes before their collapse.

However most of  Realty Incomes leases are so called Triple-Net Leases. This means that besides rent, the tenant pays all taxes, maintenance and insurance related to the property. This provides a steady cash flow and reduces the amount of work they need to maintain their properties.

A downside to this may be the risk that the tenant poorly maintains the property, leading to a significant decrease in its value.

The rates are low now, but they will be higher. This is negative for Realty Income since higher rates means higher interest cost.To sum it up, I like Realty Income, as long as the debt does not spiral out of control, and as long as they can keep finding good properties to purchase, the dividends should be safe.

The biggest warning signs to look out for would be:

  • Debt increasing in order to fund dividends
  • Decreasing AFFO per share

To sum it up, I like Realty Income but currently Mr Market offers Realty Income at $ 51.18 (closing price 22-12-2015) which is close to the 52-week high $ 55.54. This gives a Price to AFFO – ratio of 20 and a Yield of 4.48%.

Prices to compare to is P/AFFO=15 gives a price per share of $ 38
Yield 5 % (at $ 2.28 annualized dividend) gives the price $ 45.6

I believe in transparency, and that’s why I also want to tell you that I currently own 20 shares of Realty Income, a number I am going to increase in the future.

Thank you for reading, please share your thoughts on my analysis with me. I would love to hear what you think!

Merry Christmas, and a Happy New Year!
-Samuraimannen

Remember, I am no advisor, always do your own research and do not make any decisions based on what I write!

Elon Musk, One of My Role Models

Elon Musk

Elon Musk was born 1971 in South Africa, he now lives in the US and is known for PayPal, Tesla, SolarCity, SpaceX, Hyperloop and OpenAI.

Why is Elon Musk one of my role models?

Talk about making a difference! First he revolutionizes the way people could make payments over the internet via PayPal. He continues to pave the future of electric cars and solar power, at the same time as he is making the future of private space exploration!

Elon Musk makes me think: wow, if I could amount to a fraction of what he has, I would be so proud! He really shows that it is possible to make the world a better place for everybody, it just takes some really hard work!

Career

It started with Zip2, a web software company he started with his brother Errol Musk, with his fathers money. This was 1995, four years later, 1999, Compaq buys the company for $307 Million! Elon gets 7% of that, $22 Million. At that time Elon was 28 years old.

He uses some of that money to found X.com, an online financial services and e-mail payment company. X.com merged with Confinity, which owned the payment service PayPal. The merged company was renamed to PayPal in 2001 and its main focus was the payment service PayPal. eBay acquired PayPal in August 2002 for $1.5 Billion in stock, Musk receives $165 Million of that!

Elon founded another company before the sale of PayPal, in June 2002, with the vision of a relatively inexpensive reusable rocket that would go into space multiple times. The company was named SpaceX.SpaceX have some major achievements under its belt, for example:

  • The first privately funded, liquid-fueled rocket (Falcon 1) to reach orbit (28 September 2008)
  • The first privately funded company to successfully launch (by Falcon 9) orbit and recover a spacecraft (Dragon) (9 December 2010)
  • The first private company to send a spacecraft (Dragon) to the International Space Station (25 May 2012)
  • The first private company to send a satellite into geosynchronous orbit (SES-8, 3 December 2013)

Elons long term vision with SpaceX is to enable human colonization on Mars! Talk about setting high goals!

Perhaps Elon Musk is most known for Tesla Motors, a company incorporated in 2003 by Martin Eberhard and Marc Tarpenning. Elon Musk led the first round of funding in 2004, in which he funds the majority of series A shares with US$7.5 Million. He also takes a position on the Board of Directors as Chairman, while overseeing the product design of the Tesla Roadster.

In 2008 Tesla had taken in four rounds of financing and Elon replaced the quite newly appointed CEO and President. Tesla also lays off about 10% of its workforce. Tesla needed a fifth financing round in December of 2008 to avoid bankruptcy. In June 2009 Tesla receives a US$465 Million loan from the US dep. of Energy as part of the Advanced Tech Vehicles Manufacturing Loan Program. Tesla became the first car company to have fully repaid the loan in 2013.

In 2010 Tesla Motors launched its Initial Public Offering on NASDAQ (TSLA), becoming the first US car manufacturing company to go public after Ford had its IPO in 1956.As I’m writing this (18-12-2015) Tesla Motors is valued US$30.56 Billion, which can be compared to Ford $55 B, Volkswagen EUR 65 B and General Motors $55 B.

Teslas vision is to bring compelling mass market electric cars to the market as soon as possible!

If you liked this post about one of my role models Elon Musk, I recommend that you check our this documentary from Bloomberg on Elon Musk, its really interesting!

Elon Musk: How I became the real ‘Iron Man’ – Bloomberg Business
https://www.youtube.com/watch?v=mh45igK4Esw

Thanks for reading, and thank you Elon Musk!-Samuraimannen

Twitter:
Elon Musk:https://twitter.com/elonmusk
SpaceX:https://twitter.com/SpaceX
Tesla Motors:https://twitter.com/TeslaMotors

Sources:https://en.wikipedia.org/wiki/Elon_Muskhttps://en.wikipedia.org/wiki/SpaceXhttps://en.wikipedia.org/wiki/Tesla_Motors

My Money / Cash Flow System

Check out my amazing Photoshop skills!

This is my cash-flow. The banks I use are Länsförsäkringar, Santander and Avanza and Nordnet. As you can see, money goes into Buffer 1 and it goes out from my debit card account. Money also comes into my Investments accounts, from the dividends I receive.

Now this whole scheme works like this, money comes in and I spend some. after the month, I transfer money so that buffer 1 is 10.000 SEK, all excess of that goes into buffer 2, until it is 50.000 SEK. All excess of that, goes into my investments!

At the end of each month, I move the money around to achieve the 10k and 50k buffers.

Even though I have only used this for one month I think this works great for me. Because I get motivated to not spend so much, the more I beat my budget, the more stocks I get to buy!

Do you have any kind of system for your money? What do you think of mine?

Happy savings!

-Samuraimannen

Skanska

Skanska was founded in 1887, when Aktiebolaget Skånska Cementgjuteriet (Skånska cement foundry Inc) was established. It diversified into a constructions company and with the listing on Nasdaq Stockholm in 1965 “Skanska” became the official name.

Skanska is one of the world’s leading project development and construction groups, concentrated on selected home markets in the Nordic countries, other European countries and in North America. With a focus on green construction, ethics, occupational health and safety, Skanska offers competitive solutions – not least for the most complex assignments.
http://group.skanska.com/about-us/skanska-in-brief/

What do they do? Skanska is a company active in Construction(62%) Residential property development (9%) Commercial property development (23%) and Infrastructure development (6%). (percent of operating profit)

Where do they do it? Skanska is active on the following markets: The Nordics (43%), North America (33%) and Europe (24%). (percent of revenue)
Why do they do it? People need homes to live in, offices to work in, and infrastructure to transport oneself between those two. People also need public properties, such as schools and hospitals.

Analysis
Sufficient size, Market cap > 1 Bn EURPass Skanska is listed on OMX S Large Cap. and has a market cap of 74 Bn SEK
Strong Financial Position? Current Ratio > 2 Fail Current Assets / Current Liabilities = 1.28
Current assets > Total Liabilities? Pass Current Assets / Total Liabilities = 1.04
EV/NOPAT > 17? Fail EV/NOPAT = 36.2The current assets are not double the current liabilities. They bind lots of capital and have large real estate assets. This is however similar to other building constructions companies. The assets are larger than the total liabilities, but the EV to NOPAT is too high. This is partly due to the nature of Skanskas business being highly capital-intensive.
How are the earnings?Positive Net Earnings the last 10 years? Pass
What is the 5 year average EPS growth? Fail 5 yr avg EPS growth is only 11.25%
EPS 5 year CAGR (3 year average)Fail 5 year CAGR(3yr avg) = -12.8%

The company has more than 10 years of profits, but the EPS growth is too low, only about 2% annual growth. The EPS 5 year compounded annual growth rate calculated using 3 year averages is negative. The growth in other words is very low.

Lets look at Skanskas Dividends
Do they pay stable dividends? Pass Skanska has paid dividends for more than 10 years
Payout Ratio Fail 73% 2014 5yr average 64%
EPS Growth compared to Dividend Growth Pass5 year average dividend growth is smaller than the 5 year average EPS growthSkanska has a nice dividend history, the payout ratio is very high, and it has been high for many years. The dividends are high compared to the earnings, the payout ratio should decrease since the dividend growth is lower than the EPS growth. However the earnings need to go up quite a bit for the payout ratio to reach a comfortable 50%.
How’s the market?
Is the company reliant on external factors? Fail It is reliant on the rates and the economic drive as a whole. But the need for housing and construction will probably remain high.
How is the market situation?Pass I think the need for building and construction is high, and I think its going to remain high in the future
Is the company reliant on innovation or high-tech? Pass It is not a tech-company or reliant on R&D.
Is the company ethical? Pass Yes, I think Skanskas values are sound and they fill my requirements of an ethical company
Is there a beneficial ownership structure? Pass Industrivärden holds 24% of the votes and Lundergs holds 12%. I see this as very positive

Well, this is positive. Very strong owners and a good market situation.

Comparison to competitors 3 year average revenue (Mn SEK) Pass Skanska (136,421) NCC (57,305) JM (13,099) PEAB (44,532)
How are the margins? Fail Skanska (2.5%). NCC (3%) PEAB (4%) but very volatile. (JM 9%) (!)
What is the ROE compared to competitors? Fail Skanska (18%) NCC (22%) PEAB (12.5%) JM (28%) Yield Pass Skanska (3.8%) NCC (4.5%) PEAB (3.6%) JM (3.4%)
Dividend growth Pass DPS 5yr CAGR, Skanska (23.48%) NCC (24%) PEAB (neg) JM (35.6%)
Debt/Equity Fail Skanska (3.334) NCC (3.397) JM (1.5) PEAB (2.55)

Skanska is the largest as far as revenue goes. But has low margins and ROE. Skanska is Yielding 3.8% and has a nice dividend growth. Building and construction is a capital-intensive business, but Skanskas debt to equity is pretty high compared to its competitors.

How is the current valuation?
Price per share as of 2015-10-13 is 174.9 SEK
EV/E Fail 39.69
P/E Fail 17
P/E (ttm) Fail 19
Dividend yield Pass 3.8%
P/(Book-Goodwill) Fail 5.8

The EV to E is high because of the high debt. The company is expensive in my opinion.

What price could be interesting? Well, At a P/E of 15, the price per share would be 138 SEK At a dividend yield of 4%, Price per share it 168 Sek At P/(Book-Goodwill) of 3, the price per share is 95 SEK

Conclusion Wow, This became a dense post, but I enjoyed analysing Skanska very much, but what conclusions can we draw? I ended up with 13 Pass and 13 Fail

The biggest turnoff is the lack of earnings growth and the relatively high debt to equity. However, I think the building and constructions demand is and will remain positive for Skanska. Also Lundbergs and Industrivärden is a great owner.

I am not going to buy Skanska at the current price. If the price reaches a yield of 4% I might consider buying and if the price reaches P/E 15, I will buy.

That’s it for this post! I hope you enjoyed it, I really learned a lot and it was very interesting!

Best regards
-Samuraimannen

Disclosure: I do not own any shares of Skanska (2015-10-14)

Please remember that I am a happy amateur, don’t make any investing decisions based upon my analysis. Always do your own analysis!

Three Pillars of Life, managing risk in life

The Three Pillars is kind of a system to help with managing risk in life, the pillars are: Financial, Career and Family.

The idea is that if you have security on two pillars, you can have a higher lever of risk in one pillar.
For example: If you have strong finance and a supportive partner, You have security in the financial and family pillars. This allow you to take risk in your career, for example starting your own company or changing job.

If you for example have a job you like that gives you a good inflow of cash, and you have security in the family pillar, you can take more risk in the financial pillar, for example having a higher percentage of your capital invested in stocks.

Finally, if you have security in your career and financial pillars, you can take risk in you family pillar, for example this could be getting a child,or a pet.

I think it can be difficult to asses the security of your pillars sometimes, but the main thing is, don’t go without a job, and then take big financial risks. Or it might be a bad time to quit your job when your financials for some reasons is down the drain! And it might be a bad idea to get children when you don’t have a job, or if your can’t afford it.

I like thinking in terms of these three pillars when i think about where I am today, and how I can get to where I want.

Hope this is of some use to someone!

Cheers
-Samuraimannen

PS Thanks to Günther Mårder, credit for this idea to him!

Summer 2015: Two months work in Oslo

Me and my girlfriend decided to go on a small adventure this summer. So we thought going to Norway and work for the summer would be a nice change of environment. So we began by booking the flight, then found an apartment to  rent. 2 days before takeoff my girlfriend gets booked for an interview. It was the same day we landed, and she got the job straight away. The first thing that happens for me when we land, is that my cell happens to get some wi-fi and I get booked for an interview for the same workplace!

It was very, very, very boring work. But that was good. First it was decent, the work was boring but everything was still new. After about 2 weeks it got pretty boring. The good thing was that I could let my mind wander, think about what I want to do in life. And I was puzzled by some of the people who have been doing that same job for more that 5 years, don’t they want to go further in life?

Having that really boring job, motivated me to do stuff and I feel re-energized! And I came up with so many things I want to do!

Continue reading Summer 2015: Two months work in Oslo

The future for my portfolio

As a first blog post I have decided to talk about where i want my portfolio to go and my investment strategy.
Currently I would say that my portfolio is kind of speculative, wich is not so good in the long run. Sure you can get lucky and strike gold (I recently sold Stockwik förvaltning at about 115% profit). Or you can some shiny dirt (My very first stock was Kinnevik, a stock I sold at roughly 20% loss).

I have decided to learn from my mistakes.

And I have decided to change the course of my portfolio.
Starting with my purchase of  ICA Gruppen yesterday for about 1/3 of the capital I have in the market. A turn towards high security, steady dividend paying companies. This is a turn i really like and a path i will keep going on. I plan to sell most of my speculative stocks which are about 2/3 of my portfolio and increase my holdings in ICA and similar stocks.

My plan is to get dividends each month of the year.

In the US its common for companies to pay dividends quarterly, Swedish companies usually pay dividends annually. My plan is to achieve a portfolio that pays dividends every month, dividends that allow me to buy stocks no matter the market. It would be nice to have a significant income from dividends.

Buy, Buy, Buy

I am going to reach this goal by finding quality stocks, with a history of paying and increasing their dividend payout. I am going to buy stocks regularly and long-term, in order to get a good average buying price and to ease out on the effects of market swings.

I hope you enjoyed my first post, there will be more to come!
-Samuraimannen