It has been awhile since I have posted as I have been quite busy with work and Thanksgiving. So I have some catching up to do on recent purchases, so be on the lookout for other recent purchase reports including VZ, and KMB.  Once of my most recent purchases was Newell Brands (NWL).  I already owned a small portion in my portfolio as I like the company and the products they make. The shares have taken two hits recently.  One was due to the impacts of Hurricane Harvey which hit Newell Brand’s resin supplies in the gulf coast. That had been my original entry point a couple of months ago.  Now, most recently, they announced a lowered guidance which made the stock price crater by over 25%. Since the company was already on my radar to buy more I took that opportunity.

 

Background

Newell Brands is an American conglomerate started in 1907 that makes a wide portfolio of products which millions of Americans use in their everyday lives. Their brands can be found in most households and are many well-know names.  Some examples of their products include

  • Rubbermaid
  • Calphalon
  • Mr Coffee
  • Yankee Candle
  • Greco Baby Strollers
  • Oster
  • FoodSaver
  • Yankee Candle
  • Crockpot
  • Sharpie
  • Papermate
  • Elmer’s Glue
  • Contigo
  • Marmot
  • Coleman
  • Rawlings

 

As you can see Newell Brands makes numerous products that numerous American’s use on an everyday basis.

 

Metrics

Newell Brands first caught my eye when it had a pretty low P/E ratio.  After the earnings drop, the P/E ratio was 12, and as of November 24th, the P/E ratio was 10.97.  As I mentioned, the reason for the massive stock price drop was due to Newell Brands lowering their guidance for the year.  Their guidance was originally $3.05-$3.20. However due to the effects of Hurricane Harvey, and most recently, the impending bankruptcy of ToysR’Us and BabiesR’US where they sell baby strollers, they lowered their FY17 earnings guidance to $2.95-$3.05.  Even if you use the highest end of the original guidance and compare it to the low end of the new guidance, that is a drop of less than 10%!  However, the shares dropped more than 25%.  I thought the market overreacted, which was the reason why I purchased additional shares of stock to bring my total holding to 116 shares.

 

The stock currently has a quarterly dividend of $0.23; up 21% from $0.19 last year. Unfortunately the track record of dividend growth is poor. The stock had a $0.19 dividend for many years before it was raised this year.  Luckily, management has been pushing a new growth strategy, so let’s hope they will continuously grow their dividend.

The current dividend yield is 3.25% as of November 24th.  I love seeing anything above 2%, unless it has a very strong record of growth.  As the stock yields above 3% now I think it is a strong buy.  Additionally, NWL has a payout ratio of 32%, which means there is plenty of potential and room to grow, even with the lowered guidance in earnings for FY17.

 

Final Thoughts

 

As I mentioned, I already owned a small portion of this stock and I kept it on my radar to buy additional shares. Luckily for me, the share price cratered after management announced reduced earnings guidance for FY17. I jumped on that opportunity to purchase 91 additional shares to increase my position to 116 shares. The 91 shares adds $83.72 to my PADI (projected annual dividend income).  PADI is a term from Ferdi at DivGro, so I have to give credit to him. One of the reasons I purchased additional stocks is that I love the company because I know and use many of their products. Name brand recognition is very important, and Newell Brands has that going from them.  Additionally the very low PE ratio and dividend yield caught my eye.  It isn’t often anymore that we can buy such a great company at a huge discount because of the market overreacting.

 

Do you like the company? Do you use their products? Have you purchased shares recently? Let me know your thoughts!