Thursday, December 3, 2015

Westwood Holding Group 2015 Dividend Machine

I used to manage other people's money and I find more and more folks needing help with their investments.   Many amateur investors do very well, but I cannot tell you how many very well educated, wise, disciplined  and successful people cannot successfully management their portfolios.

Companies like Westwood Holding Group, symbol WHG, fill that void.  Moreover, I like WHG because for the second time in five years, WHG qualifies as a Dividend Machine and I will add it to the 2015 Dividend Machine Model portfolio.  WHG is the 19th stock added to this portfolio.

WHG Dividends

To remind you, I am looking for stocks that provide a minimum yield of 3.5%.   Today, WHG is trading around $57.15.  It has declared the next dividend to be $.57 for those who own the stock on 12/11/2015.  This most recent dividend is a 14% increase over the previous quarter's dividend of $.50.  Forward yield on today's price is 3.99%.  

The 14% increase is consistent with WHG's history of increasing the dividend.  Over the past five years their dividend increases have averaged 14.5%.     On occasion, WHG sweetens the dividend pot.   In November of 2010, they paid a double dividend (which is not included in the dividend increase calculation; I used the basis dividend in 2010 compared with 2015 to determine average annual increases.)

WHG Earnings

Dividend are nice but they must be less than EPS (earnings per share) or I consider the dividend in jeopardy.   One can make the argument for a stock that is turning around, or going through acquisitions and mergers to have less EPS than dividends, but those are not the kind of stocks I like to include in my Dividend Machine Portfolios.   Without a doubt, I have selected stocks whose EPS drop below the dividend.  I don't like it but it happens to the best stock pickers.

WHG has ample earnings to fund the dividend.   Their past four quarters of dividend payout was $.50 for 3 quarter and $.57 for the most recent quarter.   Their most recent four quarters of EPS equals $3.52, well above their future annual dividend payout of $.57 * 4 or $2.28.   You have to go back to 2009 and 2010 to find evidence of EPS being less than dividend.  

The poor earnings during the 2009/2010 period is not surprising for a financial services company as the country, in fact, the entire world suffered during the disruptions in the credit markets and equity markets in the U.S.    This could happen again, but it is comforting to know that WHG had the reserves necessary to continue to pay and increase the dividend. 

WHG Debt/Equity Ratio

WHG carries no debt.  This is a fundamentally sound enterprise.

WHG Dividend Fundamentals

The table below presents the Dividend Machine Fundamentals of Westwood Holding Group.  Consider WHG for the income producing portion of your investment portfolio.


Disclosure:  no position in WHG