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+--- Thread: A quick look at RollsRoyce (RR:LSE)/RYCEF (/showthread.php?tid=709)
A quick look at RollsRoyce (RR:LSE)/RYCEF - DividendDragon - 10-19-2014
Hey guys
Shares in rolls royce tumbled by 11% on Friday and I've been looking at them ever since.
The shares now sit 22% down on last year on the LSE.
The company is currently struggling due to pressed oil prices, sanctions on the Russian Federation and slowing emerging economies, namely China.
It's profit is set to decrease by 3% (Company estimates)
Dividends have increased since 2004 and are currently forecast to rise by 12%.
The Yiled at current price is 2.6% with a 9% growth rate (avarage over 5years)
It's payout ratio currently stands at 18.6% leaving plenty of room to crank up the dividends further in years to come.
It's dividend cover stood at 3 last year but there are fears that it could struggle to fully cover it's dividend payment this year.
The current downturn in the companies fortune represents a -2% EPS growth.
The company has little debt with a 0.42 debt/equity ratio.
It's current P/E stands at 13 compared to 19 a year ago and 14 a year before that.
I feel that a future rise in oil prices, increased defense spending (NATO members have pledged to spend 2% of GDP on defense), increased demand for commercial flights and a growing hunger for energy worldwide will help RollsRoyce return to good health.
This was a quick look at the company's fundamentals on the LSE
Again, I'm new to this so please let me know what I should have looked at but haven't in this quick look.
Lewys
RE: A quick look at RollsRoyce (RR:LSE)/RYCEF - rapidacid - 10-19-2014
Lewys,
I think you're looking at a lot of the right metrics and answering a lot of your own questions, which is a great way to learn.
I won't speak much to how RR stacks up because I think if I was in your position, just starting out-ish, minimal capital, ie. a small snowball, I'd be looking primarily at two things:
1) Proven track record of increasing dividend payments
2) Higher yields
I'd look for a proven track record of increasing dividends payments so statements like "there are fears that it could struggle to fully cover it's dividend payment this year" would not be in my vernacular. I don't want to worry / guess if a company I give my money to will be able to pay me the dividends I'm expecting
And I'd look for higher yields so you can start growing your snowball faster. 2.6% yield with an estimated growth rate of 9% is great, we've all got multiple companies with that profile in our portfolios. But there's better out there. Quality companies with proven track records that can pay you back faster.
Fortunately you can find the answer to both in one spot: US Dividend Champions
This is a spreadsheet of US companies that have paid a dividend that has increased from year to year for 25+ straight years ( Champions ), 10-24 straight years ( Contenders ), and 5-9 straight years ( Challengers ).. You'll see this list mentioned a lot. Daily even. This spreadsheet is pretty much the bible of current companies most Dividend Growth Investors are researching.
I'd start with the Champions tab and then sort by yield.
MO
T
CVX
CLX
KMB
MCD
PG
Those all yield over 3% and have paid an increasing dividend for 25+ years. If I was in your shoes I'd look at that spreadsheet, familiarize yourself with the companies and then pick something that gets you excited to own.
Good luck
RE: A quick look at RollsRoyce (RR:LSE)/RYCEF - earthtodan - 10-19-2014
Someone just posted about Rolls Royce on Seeking Alpha: http://seekingalpha.com/article/2573505-update-rolls-royce-issues-updated-guidance-for-2014-and-2015
I looked at them briefly when I was researching manufacturers of jet engines. They issue dividends in the form of equity, which you can choose to redeem as cash instead. It looks to me like they're paying "dividends" that don't come off the balance sheet, but are paid for through dilution, which is not normally part of the dividend growth thesis. I don't know if there is some meaning to the payout ratio, or if that's just a number automatically generated by financial databases. Ultimately I didn't find a compelling reason to add them to my short list.
RE: A quick look at RollsRoyce (RR:LSE)/RYCEF - ChadR - 10-22-2014
Also why I don't have them on my watch list. Not opposed to stock dividends like I receive from SBSI, but don't want to have to chose between getting stock or a dividend.
RE: A quick look at RollsRoyce (RR:LSE)/RYCEF - earthtodan - 10-22-2014
An interesting alternative in my opinion is Safran (SAFRY), a French company that is totally exposed to aerospace. They have a longstanding joint venture with GE to build jet engines, so more of a pure play on GE Aviation. Not sure if you're interested in the aviation or power generation side of RR though. Confero on Seeking Alpha has written some good articles on this industry.