BP Stock Dividends Since 2013

I covered BP stock publicly for the first in March 2013 when the price of the gigantic oil corporation was $40.33. The article was titled “The Role of BP’s Dividend In Preserving Your Wealth Over The Medium Term.”

My thesis statement was this: “One of my favorite things to do when researching investments is to conduct studies on realistic worst-case scenarios for blue-chip stocks. Almost every time, the result I have found has been this: if the dividend remains reasonably intact and the underlying business maintains solvency, the total returns for seemingly dreadful stocks is never quite as bad as you might think by looking at a stock chart alone.”

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The Decline Of A Buy-And-Hold Stock

Dig through a 1990s edition of Kiplinger’s Magazine, and you will find many lists of long-term investment suggestions that include Mattel (MAT). This is understandable. The net profits on each toy sold during this period was over 10%, and the best long-term performance range during this era came between 1982 and 1996 when the stock returned 16% annually.

If you could hop into the wayback machine, it’s easy to see why Mattel would earn a spot on the list of buy-and-hold investments when you were considering the question in, say, 1993. Barbie dolls, the signature Mattel product, used to earn over 30% net profits. Back then, it cost the United States Treasury 4.5 cents to coin a nickel, and you could be technically correct in arguing that ownership of the Barbie franchise was a better license to print money than that of the U.S. Treasury.

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Johnson & Johnson Dividends: The Spring Back Effect

In January 2003, Johnson & Johnson shareholders collected $0.92 per share in dividends while the stock traded at $57 per share. That was a yield of 1.61%. The P/E ratio of the stock was in the mid-20s, suggesting that Johnson & Johnson shareholders needed double-digit earnings growth otherwise there would be enough P/E compression to bring period of mediocre returns.

The latter happened. From 2003 through 2011, Johnson & Johnson had to work off the effects of high valuation, work through the 2008-2009 recession just like every other company, and deal with the effects of manufacturing recalls in the 2010-2011 years coming out of the recession.

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GlaxoSmithKline Stock: A Fifteen Year Review

I like GlaxoSmithKline (GSK) much more than the stock’s fifteen-year track record of earnings and stock price changes would suggest that I should. I scanned a page of my overview notes for GlaxoSmithKline and attached a page to the bottom of this post.

The quick metrics for GlaxoSmithKline aren’t pretty. From 2000 through the first quarter of 2016, the price of the stock has declined from $47 to $43 per share. That negligible change in share price makes sense, because the profits per share generated by a GlaxoSmithKline investment generally remained stagnant. Glaxo earned $2.08 per share in profits back in 2000, and it earns an estimated $2.04 per share now.

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The Triple Threat of Blue-Chip Investing

I watched through the entirety of that Warren Buffett video I posted the other day when he discussed that Procter & Gamble would be a great long term holding, but not the best long term holding, because of concerns of unit growth and pricing power in response to intense competition. Buffett made an offhand comment about how a lot of money got made in large-cap stocks during the 1990s up until that point because of the outperformance of growth rates for blue chips compared to then-existing expectations. Specifically, Buffett said, if something has a 12% coupon rate and you end up getting 20%, you’re going to going to make a lot of money.

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