5-Bullet Sunday

5-Bullet Sunday #64

Another week passed by and I didn’t buy something yet this month! Time is ticking, so I’ll have to pull the trigger any time soon to stay consistent with my approach of dollar cost averaging. I’m not sure yet in what I will invest from my March Watchlist, but I’m leaning towards initiating a position into Consolidated Edison.

Have you bought already something this month? If so, feel free to let me know in the comment section below 👇

Enjoy today’s 5-Bullet Sunday!


Content created this week:


🌟 Starbucks CEO bonus plan rejected – why it matters

This week we learnt that Kevin Johnson was hoping for a 50 Million bonus at Starbucks under 2 conditions:

  • if he stays with the company until 2022
  • if he outperforms 80% of their peers

Unfortunately for Kevin, because the bonus proposal is proposed to be rejected by two large institutional shareholders. It doesn’t mean the board can still go ahead and approve it, but that would set a rather bad precedence.

But as I always say, we’re intelligent investors so we look a little bit deeper than the headlines.

So I went into the proxy statements that were released with the latest annual reports and this is the section which they are talking about:

Page 48 – 2021 Proxy Statement

So the question then is what they mean with TSR? TSR in this regards means Total Shareholder Return and in the case of Starbucks it means Share Price appreciation and Dividends.

So this generally means good news when you are a owner of Starbucks and mainly interested in their dividends.

There is a catch though, because Starbucks is mainly communicating their earnings in a non-Gaap format. This allows them to financially engineer the stock price to such an extend that they are already heaving negative equity on the balance sheet due to share buybacks. The debt figures just start to look worst every year.

Liabilities side of the 2020 Starbucks balance sheet

Hence, my suggestion to the board of directors would be to keep an excellent balance sheet and therefore aim for an A+ rating as a minimum to grant such a 50 USD million cash bonus.

You need to know that Starbucks currently holds a BBB rating from Fitch with a negative outlook. This is just two notches above Junk status.

BBB credit rating Starbucks
Credit rating table

Having said that, I am agreeing with the institutional shareholders but mainly because the balance sheet component is missing. I’m afraid that it incentivizes short term gain for long term pain.

Please invest with care into this company.

🌟 A very “handy” dividend hike

WD-40 is a must-have product in everyone’s household. It’s useful for so many things and I couldn’t imagine doing some of the weekly household jobs without their product.

But it’s not just their product that I love, because did you know that this is also a dividend paying company?

They just announced to hike their dividend again with a healthy 7,5% and it’s the 11th consecutive year that they are hiking the dividend. The stock currently pays you a 0.91% dividend yield (which is too low for me).

But what I like about this company is the turn around behind it. The last time it had to cut their dividend was back in 2002 and what followed was several years with no-dividend growth at all.

WD40 dividend history since 1988
WD40 dividend history since 1988

Despite the low dividend yield, if you’re also investing in the stock market from a Total Return perspective then have a look at the chart below. Not such a boring company after all, don’t you think?

WD40 share price performance last 5 year
Picture from their annual report 2020

Having said this, I will have to look a bit deeper into this company. It intrigues me that such a boring company is showing such strong performance over the last decade. If you are aware of any stock analysis by one of our fellow bloggers, then feel free to share it with me.

🌟 Covid-19 – 3rd Wave

Context switch now, but it’s really keeping my head busy.

I’m not sure about how it’s going in your countries, but in Poland it is really bad right now. The third way has started and somehow this is the time that I hear about really many people being at home with the corona virus.

I just checked a bit the WHO dashboard again and it confirms that we’re in the middle of a third wave.

You don’t see a first wave in here, because testing was hardly happening back then

The country went back into restrictions, but this is no way similar to last year during the first wave. It’s not a full lockdown and I guess the country is balancing the health impact versus the economic impact.

It’s a tough decision, but I personally wished that we would just go back into a full lock down for 3 weeks and show solidarity by paying the people that can’t work from home a fair compensation.

How’s it going there?

I saw that the UK is doing relatively well compared to last Christmas.

Stay save please…

🌟 Recommended Reads

I always like it when new bloggers enter the field. Today I wanted to share with an article from Tiago Dias. He just published part 1 and part 2 about Aflac as a dividend stock to consider. I can’t agree more with his analysis. Personally I didn’t got into it yet and it makes me reflect why this is the case.

My buddy Engineer my Freedom did an analysis on Nike. The company just published their quarterly results and the share price dropped as a result of it. It’s still hovering it’s all-time-high though. That’s why it’s interesting to read what EMF thinks about the company.

I hope you enjoy these two references to articles. Also don’t forget to give them a follow if you like their content 👍

🌟 Recommended Video

Sometimes it’s good to get a reminder on how wealth is being created. The below video helped me to reflect a bit on it this weekend. I believe that I’m all good and that it’s rather about when I will achieve my goal of financial independence instead of if I will achieve it.


That’s it for today’s 5-Bullet Sunday. I hope you enjoyed it and feel free to leave your thoughts behind in the comment section.

Wishing you a great and successful week ahead!

Yours Truly,

European Dividend Growth Investor


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Disclaimer

I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.

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It's my desire to retire early via Dividend Growth Investing as a passive income stream. This is not easy and especially when living in Europe. That's why I started this blog and share my journey: to give you a European perspective.

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Joris
Joris
1 month ago

I would recommend a thorough analysis of ED before acquiring a position. Not because of any specific details regarding the company (I am not familiar with it), but because of the market dynamics in general. The growth of renewable energy (wind and solar) and the growing demand of electricity in general (EV and electric heating) will result in more volatility (supply and demand) and will require significant investments to expand the current capacity of the electrical grid. Current and future grid investments might impact the (future) dividend payments of the company.

David
David
1 month ago

Interesting articles which I have got into the habit of reading. But why do you want to dollar-cost average when markets are high? Does the logic of DCA not hold if you you just do it when an index is say below the mid point of its 52-week high/low? Put another way, there are probably not many quality companies now with good dividend yields. Why not just wait?

Álvaro
Álvaro
Reply to  David
1 month ago

I think that there are cheap stocks valid for a DGI strategy. LMT is trading at per 14, when usually does it at per 18

Sunil Dut Kapur
Sunil Dut Kapur
1 month ago

I love your weekly posts. I learn a lot. This week’s “algebra of wealth” is an example of real value from your post.

Andrea Kirkby
Andrea Kirkby
1 month ago

I took advantage of some lows to get more Sanofi. Right now, that’s about it. I will also probably increase my position in Iron Mountain, an interesting REIT that is involved in storage of data in both paper and digital form.

Here in France I am fortunately not in one of the departments most affected, but the 16 worst have gone back into lockdown and we are being very careful. I just got my letter telling me I can now be vaccinated so that’s good news!

Ruindog
Ruindog
1 month ago

I just heard one of your podcasts with EMF in which you were not sure about where to find a reliable dividends/earnings calendar. You may find this one really useful, it´s from a very popular spanish DGI blog. Cheers.

https://www.cazadividendos.com/recursos/calendario/

Last edited 1 month ago by Ruindog
Álvaro
Álvaro
Reply to  European DGI
30 days ago

Ask ruindog to pass you the CQSS, pure gold

Ruindog
Ruindog
Reply to  European DGI
29 days ago

My pleasure. Hats off to the blog´s administrator (Mr. Luis aka @jefedelforo) who created this wonderful tool. Please help yourself to the rest of the treats in the link below 😉

https://www.cazadividendos.com/recursos/

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