FedEx Warns of Economic Slump but Dividend Profile Remains Strong ...
Listed below is a brief review of an updated analysis on FDX from Simply Safe Dividends.
2.simplysafedividends.com
To combat a slowing economy, FedEx is accelerating cost-cutting measures, including closing certain FedEx Office locations, moderating capital spending, consolidating some package sorting operations, reducing Sunday operations, and instituting a hiring freeze.
These actions, plus FedEx's conservative payout ratio heading into the slowdown, should help protect the company's liquidity and dividend.
Given that FedEx generated positive free cash flow each year during the 2007-09 financial crisis and expects lower capital intensity going forward, the company should be in a decent financial position to continue supporting its dividend.
Considering FedEx's conservative payout and sturdy balance sheet, we are reaffirming the company's Safe Dividend Safety Score and expect the firm to continue its track record of paying uninterrupted dividends since 2002.
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Since the dividend is considered safe, next up is valuation. Here is the latest video on FDX's valuation from Chuck Carnevale:
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In looking at the company's intrinsic value:
Intrinsic Value is a fundamental, objective value that is based on the company's financials (such as revenue, net income, cash, debt, etc.). Where market price tells you the price other people are willing to pay, intrinsic value shows you the stock's value based on an analysis of its actual financial performance.
The discrepancy between the stock market price and estimated stock intrinsic value is a measure for investing opportunity.
In determining a company's value, analysts come up with 3 scenarios -- Bull, Base and Worst (Bear) Case Scenarios.
The intrinsic value using the Base or neutral rate is $335.60 a 52% discount to the company's intrinsic value.
The intrinsic value using the Worst Case Scenario is $257.20 a 37% discount to the company's intrinsic value.
Yesterday I made the following purchases, 6 shares at $160.00 and 7 shares at $160.90 for a total just above $2,000.
The closing price was $161.02.
Under the current condition of the market, most of my purchases are in $2k sized lots. I plan on adding more shares of FDX in the coming week once I see how price settles in.
I am setting this holding up for a long term hold and it will take patience for it to play out in my opinion, but with this steep sell-off, I'll be getting a yield close to 3% for my patience and potential long term gains to boot. |
