Touchstone Friday
...plus our 3 stocks and research, too
by Jeff Fischer ([email protected])
JUPITER, FL (August 14, 1998) --Much of the past week was spent discussing the new Campbell Soup dividend reinvestment plan and deciding what to do about it. We began on Monday by outlining the new plan and then we offered different options for how to address it. The best discussion of what an investor could do, however, came in the next few days on the Drip message board in the form of well over two hundred posts.
On Tuesday, we addressed the sharply lower stock market (what a volatile week it's been!) and we then stoked the fire under Campbell, summarizing Fools' thoughts on the issue. On Wednesday, after harkening back to the Boston Tea Party, our decision on Campbell was made. We're keeping our shares but we aren't buying more stock once the new plan kicks into effect. We'll decide how much money to send this last free month (if any) next week, and we'll decide what to do about dividend reinvestments (they'll have fees) in the near future, too. We also need to decide upon another food and beverage company in which to DRP invest regularly. So, that's where the Drip Port stands on the issues. Hopefully individual investors are reaching workable solutions to Campbell's DRP, for the time being at least, as well.
Next, on Thursday we looked at the business of Intel (Nasdaq: INTC) and shared reasons why the stock has risen over the past six weeks. We presented where the upside for Intel might come from in 1999. The stock has gained over 20% this year (as of Thursday), easily topping the S&P 500. For the record, Intel has compounded 37% annually over the past three years (here's a 3-year Web graph of Intel vs. the S&P), though the stock first reached its current price in early 1997 and has actually been flat over the past 18 months. (This isn't necessarily bad for DRP investors.) The company has grown earnings per share 26% annualized since 1992, and Intel now trades at 22 to 24 times different 1999 earnings estimates.
Johnson & Johnson (NYSE: JNJ) held up in the weak market. The stock has compounded 31% annually the past three years and 36% annualized the past five. Earnings per share have grown 14% annualized since 1993. J&J trades at 24.9 times 1999 earnings estimates of $3.03 per share. If currency comparisons weren't so poor around the world due to the strong dollar, J&J would be achieving some really great numbers each quarter. As it is, the company is still managing impressive 13% to 14% growth in earnings per share, though sales growth is generally slow. However, pharmaceuticals were incredibly strong last quarter, with U.S. sales in the division rising 26% year-over-year.
Campbell Soup (NYSE: CPB) continues to reconfigure its business though now many of the large changes are complete. It's unfortunate that the company also reconfigured its dividend reinvestment plan. Campbell might care to take a cue from Coca-Cola (NYSE: KO), a company with 230,000 DRP investors (that's 69% of all shareholders of record at the end of 1997!). These shareholders are loyal buyers and holders of the stock, and most likely of the company's products, too. The fees that Coca-Cola pays for its DRP shareholders are probably returned many-fold to the company through several avenues.
Anyway, Campbell trades at 23.3 times its fiscal 1999 earnings estimate of $2.18 per share. Campbell has grown earnings per share 19% annualized for the past five years, and 15% growth is anticipated in fiscal '99. Campbell's fiscal year ends in July, so it's already into fiscal 1999 now. The company's 1998 and fourth quarter results will be announced in September.
If you ever wonder where I get these earnings estimates (and many other numbers and information), it's no great secret. The Motley Fool's quote feature on the Web has easily become my favorite place for one-stop research and useful links for any company. On the Fool's homepage (http://www.fool.com), look to the top left for the little window where you can enter a ticker symbol. That retrieves the stock's quote as well as easy, tabbed links to earnings estimates, financials, a helpful company snapshot, SEC filings, charts, and -- of course -- a convenient link to the company's message board on the Fool. Here's a J&J quote with all of the links just mentioned to get you started if you'd like to explore the features.
Below the J&J quote, enter a new ticker symbol to get the same information on any other company. And below that, notice the links to each real-money Fool Portfolio, including the Drip Port. In the Drip Port's case, this link provides a quick update on all three of our stocks.
Next week we will continue reviewing Dale's top five banking considerations, which were listed last Friday with contact information. Have a great and Foolish weekend! Keep Dripping!
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