Sunday, May 31, 2015

Analysis of TESSCO Technologies Inc.


Using the DFG stock screen, TESS ranked number one for the month of May.  What was it the screen found as I haven't heard much on this company before?  Let's take a closer look at my four categories to find out.

Haven't done one of these analysis posts in some time so I am a bit rusty.  Not having any capital to deploy I still screen and look at the top ten to see if any are worth watching and that is about it.  Taking a deeper dive into one of those companies takes a little bit more time but I have some time now so why not.

According to their site they are the one stop shop for setting up or fixing wireless technologies for carriers or companies.  They not only want to design cell phone towers but also act as the supply chain for any and all parts needed to construct that tower and get it functional.  Wireless is big business but is also capital intensive.  So TESS aims to capture most of that capital by providing the most efficient and high quality service to the carriers.

Value
When I performed the screen the P/E was high at 18.05.  Looking on Morningstar the forward P/E is looking more favorable at 9.2.  As with most dividend investors to get the most bang (yield) for your buck you want to buy stock when value presents itself (< 20 P/E).  This stock is looking more favorable in the near future but the drop needs further looking at.  Earnings for the year and the big miss in the beginning of May are most likely the cause of the drop.  However future earnings growth YOY for next year are back in the positive range around 12%.

The other ratio I like to look at when determining value is the price-to-sales, P/S, ratio.  Are you getting the value for each share you purchase compared to how much revenue they are generating from sales?  When this dips below 1 this is a good sign and presents an opportunity to get in (if future sales continue to grow).  TESS is sitting at a nice ratio of 0.3 when the screen was done.  They just wrapped up FY2015 and are forecasting a slightly better earnings for 2016.

Growth
After the 4th quarter earnings of $0.01 per share it is no wonder the price has gone down.  What does long term growth look like?  I like to look at the past to help in predicting the future and this year I switched over to looking at the Forward PEG.  It is important to make sure the earnings are in line with the price you're paying.

Over the past five years the average growth is 18.8%  Double digit growth rates are always good but this year was a big slow down.  YOY EPS for the past twelve months has gone in the negatives with a -62.26%.  Looking over the past 5 years it has been swinging around.  At least when you look at the earnings per share it seems a bit more stable and was growing nicely until 2014.


1.20 was the PEG at the beginning of the month before the price dropped after the earnings miss.  The forward PEG will most likely be more attractive if the stock price remains low and earnings grow for the rest of the year.  1.20 is not bad but we want to make sure earnings are going the right direction before pulling the trigger.

Quality
Quality factors like how is the company managing debt and how it is spending its money are signs of how management is running the business.  Again we like to see low numbers on this part of the screen.  Under one is best for Price-to-book ratio but 1.8 for the last quarter is not bad either.  The next quarter for TESS should look even better if the price remains where it is at.  Looking at the chart above you can see the steady climb of the value of a share with regards to the book value of the company.

The debt-to-equity ratio has been so small (way under 1) since 2005 that I didn't bother adding it to the graph this time around.  The highest was in 2005 when it was only 0.08.  This is great management of your debt if you ask me.   The only downside is being a one stop shop they tend to carry allow of inventory  and other assets.  You have to generate enough cash to keep the capital flowing to be a supply chain so the recent down year might affect the quality  if cash runs out.  With that said do they even have enough cash to increase the dividend?

Yield
When the screen was done in the beginning of May the yield was at a respectable 3.17.  It has since climbed to around 4.43% because of the earnings miss for their last fiscal quarter for 2015.  In the 4's isn't bad if it represents an opportunity to buy a good company during a rough patch.  That entry point coupled with some kinda of dividend growth every year is good for any portfolio.
Even the past 5 years of dividend growth are remarkable.  The screen shows me 43.1 percent with the payout ratio all within reason.  This is about where I wish I could go on about how this is continuing and you better watch this guy closely.  Unfortunately the payout ratio is sitting around 77.7% (based on EPS of $1.03) and isn't likely to get better.  To manage the debt and cash flows it looks like the dividend has stopped growing. 
With that said it will most likely fall off of the U.S Dividend Champions list.  There was no increase in calandar year 2014 and the companies latest news for the fiscal year end just says it is reaffiming the $0.20 dividend.  I read that as no more increases for this year and be happy were not cutting it.

News
TESS gave this highlight which tells me they had to many eggs in one basket and are now paying for it;
"Continued our transition and restructuring initiatives to renew growth and profitability and reduce concentration on any one key customer or market"

Conclusion
Everything looked good  until we got to the yield section.  At this point it is looking too risky to initiate a position in this stock if you’re a dividend growth investor.  That plus it's short history of paying a dividend should be a warning sign.  Even though it came up as number one in my screen for May I will not be watching TESSCO unless they start raising the dividend again.

Your thoughts?

Thank you for reading,
The Dividend Family Guy


Full Disclosure: I do not own TESS

Saturday, May 16, 2015

April 2015 Budget

Staying on budget is easy I am finding when nothing breaks down with your house or your body.  All house systems kept on going and the family resisted all sorts of bacteria and viruses remaining healthy for the month.  I am very pleased to say we came under budget for the month.  How much did we save?  Let's take a look.

Income
There was nothing out of the ordinary in the income department.  2 paychecks and I did get a small tax refund from the state.  That money went into my house repair fund as we are using that and our federal tax refund to replace our 20 year old HVAC (furnace/AC unit).  We found this great guy who does scratch and dent new units so the price he gave us was half the estimates of other companies.  The warranty is still good for 10 years.  He just said there may be a scratch in the paint job or a small dent on the sheet metal.

Other income was from my lovely friend the dividend.  I wrote about that earlier this month.  The only change in that department was changing my taxed dividends to not reinvest automatically.  There are too many bad stocks in that account and I don't want any more of them purchased.  Instead I will build up and purchase stocks with little likelihood of a dividend cut.  These stocks will also grow there dividend at a rate that makes it worthwhile to be a dividend growth investor.


Needs
Category
Comments
Under K or Over J
Auto
No repairs and fuel was slightly over budget.  Money to the car fund!
K
Home/Personal Expenses
$383 under budget!
Only categories over budget were childcare and personal care.  We are still working on potty training the youngest with the goal of having her out of training pants before the baby is born.  Wish us luck as she is stubborn like her parents.  Also I am learning that haircuts for a family my size gets expensive.  When they were smaller we would just shave the boys heads with our home kit.  Now they want style and my wife and daughters won't let me shave their heads :-)
K
Utilities
I dropped Time Warner like a bad habit and am getting a better picture with Direct TV.  We will give this a go for 2 years and rethink getting rid of TV altogether.  For now I am saving $75/mo.  That combined with no water/sewer this month let me save $271.
K
Loans
2 Mortgage loans and 1 kid in braces.  Other than that debt free.
Fixed
Food
Saved $204 vs. my budget.  The food costs seem to have stabilized around $700/month for a family of 6 (for now).  I will most likely adjust the budget to reflect this mid-year.
K

Wants
We spent the whole budget here.  Hey what is life without a little chocolate and rocks.  I did not eat any rocks but we did buy several bags of them.  In an effort to reduce a reoccurring gardening expense I am slowly replacing mulch with rocks around my house.  First rocks last forever.  Second having rocks around your house deters ants from invading it every spring.  The other plus side is when it rains your house doesn't get splashed with mud.  All in all they look really nice and I will be adding more in the future.

Category
Percent
Comments
Dining Out
30%
Yearly visit to the Olive Garden.  We had some gift cards to use from my mom which helped.  Still expensive though when you add in dessert.
Gardening
22%
Fertilizer and Rocks
Misc.
34%
My wife still prints out photos for the kids photo albums.  When the apocalypse happens and there is no more electricity we will be able to look at our memories (that is what I tell myself to justify the cost.)
Candy
14%
My wife's monthly fix (yes I do eat some of it as well!)

Savings & Summary
February was my best month ever in my life.  I am proud to say it isn't anymore.  The DFG savings rate climbed to 20% this month.  That money was all socked away into the emergency fund and a new fund for the birth of the baby.  My healthcare kind of stinks and is a high deductible plan.  With that said the birth of a kid will max out the deductible so we are saving now to cover it all.  I am estimating at least $4000 to bring this child into the world.  Boy that would be sweet if healthcare was free and I could instead buy some dividend aristocrats instead to fund the baby's college.



I love pictures so above is a graph of my savings rates for each month since I started tracking things back in 2013.  It is not a pretty sight but I am definitely please so far this year.  The creation of a budget in Quicken has been a godsend to me.  Seeing how I am tracking against the month whenever I want has helped me make some good purchase decisions.  I hope your budget is doing the same for you.

Happy saving,

DFG

Friday, May 8, 2015

April 2015 Dividends

Doing better this month as it is only May 8th and I already know how much life I gained back last month.  Even without additional capital I am still working towards my end goal of financial independence.

Company
Held In
Dividend Paid (Qtr.)
Amount Received
Shares of Life
Note
CRWS
IRA
0.08
1.45
0.1786
Not sure why I bought this, no div increase since 2013
UBSI
IRA
0.32
32.93
0.8763

GPC
IRA
0.615
6.89
0.0739
%7 div increase
WIN
Taxable
0.392
30.3
N/A
Stopped automatic reinvestment
RSO
Taxable
0.16
18.58
4.1381
Div cut, time to sell
GE
Taxable
0.23
6.08
0.2269

WIN
Taxable
1.5
111.4
14.173
Div cut from reverse split
HRZN
Taxable
0.115
6.93
0.4964

VNR
Taxable
0.1175
0.26
0.0178

AGNC
Taxable
0.22
6.17
0.2853
Div cut for the June payout

I liked Dividend Life's view of the big picture so I updated my dividends page.  Most likely I will not retire until I can draw from my IRA so I am back to including that in my running total.  With that said my total for the month was $221 which isn't bad.  Almost could pay more quarterly water bill with that.   

The biggest change this month was the reverse split by WIN.  It was a 6-1 and the dividend was also cut.  I did get some shares of the REIT spinoff but we will see if that compares to the $.25 I was getting before the reverse split.

There is also some cleanup work I need to do with the dividend cutters.  Some are worthless and I will hold them as they are still paying something.  There are a few though I could sell and recoup some of my original investment.  Sentimental value is tough as I have never sold a stock yet.  I have to weigh the commission fee in any sale to see if it is even worth the $7 I would spend to part ways.

Happy dividend collecting,

DFG