A detailed quantitative analysis by Air Products and Chemicals Inc. (APD) is linked here. Below are some highlights from the analysis linked above:
Company description: Air Products and Chemicals Inc. is a major manufacturer of industrial gases and electronics. Specialty chemicals are also interested in environmental and energy related companies.
Fair value: When calculating the fair value, I take into account the differential fair value of the present value MMA along with these four fair value calculations. A detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham Number
APD trades at a premium to all four of the above ratings. Including the NPV MMA differential, the stock is trading at a premium of 44.8% on the calculated fair value of $ 188.76. APD does not deserve any stars in this area.
Dividend analytical data: There are three possible stars and three key metrics in this section. A detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key Metrics
4. Dividend Growth Rate
5th years Div. growth
6. Rolling 4 year old Div. > 15%
APD received two stars in this section for 2.) and 3.) above. The stock earned a star because its recent debt to total capital was less than 45%. APD received a star for an acceptable score on at least two of the four key metrics measured. The company has paid a cash dividend to shareholders every year since 1954 and has increased its dividend payments for 39 consecutive years.
Dividend Income vs. MMA: Why would you take the equity risk and invest in a dividend stock when you could get a better return on a much less risky money market account (MMA) or a government bond? This section compares that stock’s earning power to a High performance MMA. There are two points covered in this section. A detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. years to> MMA
The NPV MMA Diff. of the $ 121 that’s below the $ 500 target I’m looking for for a stock that has been increasing dividends as long as APD has done so. The stock’s current return of 3.12% exceeds the estimated average MMA rate of 2.74% for 20 years.
Peers: The company’s peer group includes: The company’s peer group includes: L’Air Liquide SA (AiQUY) with a return of 2.1% and BHP Group (BHP) with a return of 4.4%.
Conclusion: APD did not deserve any stars in the Fair Value category, earned two stars in the Dividend Analytical Data category and did not deserve any stars for a total of two stars in the Dividend Income vs. MMA category. This ranks APD quantitatively as 2 star weak Camp.
With my D4L-PreScreen.xls Model, I found that the stock price would have to drop to $ 195.53 before APD’s NPV-MMA differential climbs to the minimum of $ 500 that I’m looking for on a stock with 39 years of consecutive dividend increases. At that price, the stock would generate a return of 4.4%.
Resetting the D4L-PreScreen.xls The dividend growth rate model and solution required to generate the targeted MMA differential of $ 500. The calculated rate is 3.9%. This dividend growth rate is above the 0.4% used in this analysis, so there is no margin of safety. APD has one Risk assessment of 1.75, which it classifies as a medium risk stock.
The company’s free cash flow payout is 293% (vs.79%), well above my acceptable level of 60%, and debt to total capital is 38% (vs.26%) well below the maximum I was looking for of 45 %. APD trades at a premium on my calculated fair value of $ 188.76. Given the dividend fundamentals and valuations, I’ll wait before taking a position with the company.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including the star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. In general, this is never true. Before buying or selling stocks they should do your own research and arrive at your own conclusion. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I had no position in APD (0.0% of my dividend growth portfolio).
On the subject of matching items:
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– Analysis of General Dynamics (GD) dividend stocks
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– Analysis of dividend stocks of WW Grainger, Inc. (GWW)