Sunday, May 17

Week 202 - Dividend Achievers with Growing Brand Recognition

Situation: Brand recognition is the secret sauce of a company's competitive advantage. It doesn't show up in core earnings or tangible book value, but does contribute powerfully to the markup in price (above market) that an acquiring company must offer before it can hope to succeed in a completing a merger or acquisition. The acquiring company books the markup (what it paid for the brand) as "goodwill" and recognizes it as an intangible asset.

Several organizations attempt to assign a dollar value to brands, and issue annual rankings. Brand Finance is one such organization, and just came out with its 2015 rankings for the “Global 500”. Their #1 Brand for both 2014 and 2015 is Apple, a brand they currently value at $128 Billion. We have looked through their list, finding that 20 Dividend Achievers improved their rank in 2015 vs. 2014 (see Columns K-M in the Table). You’ll remember that "Dividend Achievers" is what S&P calls companies that have increased their dividend annually for at least the past 10yrs. Some of the companies listed in the Table have more than one ranked brand, in which case we’ve presented metrics for the brand that improved the most. 

The Table also contains data from the BMW Method website for the past 16yrs (see Columns P-R). By scanning across the spreadsheet, you’ll see that Wal-Mart Stores (WMT), Nike (NKE) and PepsiCo (PEP) look like good choices for investment. We suggest that you dollar-cost average your investments and do it online. Direct Stock Purchase Plans that incorporate a Dividend ReInvestment Plan (DRIP) are available for each of those stocks.

Bottom Line: It is difficult to measure brand recognition but much depends on it. For example, a stock’s price will often change 5-10% over a short period of time because of a change in how its brand is being perceived (i.e., Monsanto). That is why Peter Lynch encouraged people to “invest in what you know” and liked to talk about the stock tips he’d gleaned from listening to comments his wife Carolyn made after shopping. Peter Lynch ran Magellan Fund at Fidelity Investments from 1977 to 1990, achieving a Total Return of 29.2%/yr. I only became successful at investing after reading his book “One Up on Wall Street” in 1990. 

Risk Rating: 5

Full Disclosure: I dollar-average into WMT, NKE, and MSFT, and also own shares of QCOM, KO, XOM, PEP, and PG.

NOTE: Metrics that underperform our key benchmark (VBINX) are highlighted in red; metrics are brought current for the Sunday of publication.

Post questions and comments in the box below or send email to:

1 comment:

  1. Your post is really providing good information.. I liked it and enjoyed reading it. Keep sharing such important posts

    Hyderabad Properties


Thanks for visiting our blog! Leave comments and feedback here: