Last post I listed my current Top 5 ideas because a friend asked me for them. I listed UNH, NKE, ROL, AOS and JKHY. I don’t know how I missed my absolute favorite, but I did, so, I will add a 6th issue here besides, and include ROST, Ross Stores.
One reader responded, “NKE, ROL, JKHY are all top choices, except that ROL’s valuation is always unattractive.
I acknowledge I am not familiar with UNH’s competitive advantage, need to study it more to feel comfortable.
AOS, I doubt continuation of its high div growth, probably I am wrong.
I responded, “Thank you, I’ll be making my case for each one shortly. Please feel free to make your own comments or observations. Harold”
I love hearing from readers, as I am challenged to work harder, and to give serious consideration to any comment or criticism. I don’t feel threatened or my ego bruised any… I want to be the best, and do this right. So, now, I want to dig right in and to make a case for each one… one at a time.
To do this right, one must have a ‘bogey’, a target. In the industry, that bogey is almost always the S&P 500. Charting everything with 10 years of data, I first look at the average analysts’ consensus of forward-looking earnings estimates for all 500 companies in the index. That EPS number from 10 years ago was $3.16 a share. Today, it is $4.49 a share for growth of 42%. That $3.36 starting number plunged during the Global Financial Crisis (GFC) to a low of $1.21 a share on March 23, 2009… a cut of 64%, before rising 271% to today’s $4.49. The dividend payout for all 500 averaged $.73 a share 10 years ago. Today, it is $1.39 a share, for a growth of 90.4%. That doesn’t take into account the actual dividend cut among the 500 stocks, from an August ’08 peak of $.80 a share, down to a February ’10 low of $.62 a share… a pay cut of 22.5%! It has since risen from there by 124% to date. The average share price for all those companies begins at $50.67, to be $94.89 today; an increase of 87.3%. But, it also plunged from that starting $50.67 figure to a Monday, 3/9 close of $22.03. That was a 56.5% haircut. The rise since then has been 330.7%! So, this is our goal, our bogey, our target.
So, let’s start with Ross Stores, ROST. It’s 10-year history of EPS estimates begins at $.48 a share, but has very steadily, and most smoothly grown to a current $2.94 a share, for an EPS increase of 512.5% (42% for the 500) with no GFC plunge, as with the 500. The dividend 10 years ago was $.06 a share, but is now $.54 a share, for a “pay raise” of 800%, or a 9-fold multiplication (90.4% for the 500)! And, price? 10 years ago it was $8.53 a share, and today it closed at $67.64, for an appreciation of 693% (87.3% for the 500)! It’s beat the 500 all to pieces in the past, but by the looks of the EPS line, and the projected growth estimates looking forward even 3 years out, it shows little sign of slowing down. The current dividend payout ratio of earnings is only 21%. I love Ross Stores… they’re still opening new stores, and I can see ROST creating more wealth for me for the foreseeable future, and hopefully beyond.
I’ve owned shares of Ross for some years now, and I can anticipate that my current investment will be paying me a lovely, rapidly-growing dividend well into my twilight years.
What do others think?
Here’s to your successful investing!
Harold F Crowell