This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
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One stock I have never looked at or even considered as a dividend candidate was The McGraw-Hill Companies. I only really knew them as the textbook publisher, however they are a much more diversified holding company than I ever thought. McGraw-Hill brings us such well know brands as Standard and Poor’s, BusinessWeek, and J.D. Power and Associates. It is also a part of the Dividend Aristocrats, meaning it has enjoyed at least 25 years of uninterrupted dividend increases. That is something I look for in a stock. However, that is not enough to buy the stock. It needs to pass the other criteria to make it to my buy list – lets see how that shakes out!
The Company: The McGraw-Hill Companies, Inc (MHP-N)
McGraw-Hill Companies Inc. serves business, professional and educational markets around the world with information products and services. Key markets include finance, business, education, construction, medical and health, aerospace and defense. As a multimedia publishing and information company, the company employs a broad range of media, including books, magazines, newsletters, software, on-line data services, CD-ROMs, facsimile and television broadcasting.
| Yes | |
| Yes |
THE FUNDAMENTALS
Revenue
Click to EnlargeRevenue Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My Revenue Score | 1.0 out of 1.0 |
Earnings Per Share
Click to EnlargeEarnings Per Share Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My EPS Score | 1.0 out of 1.0 |
TOTAL FUNDAMENTALS SCORE: 2.0 out of 2.0
THE RATIOS
Return on Equity
Click to EnlargeReturn on Equity Scoring
| Criteria | Scoring |
| Above 15% for Last 5 Years | 1.0 |
| At Least One Year Below 15% in Last 5 Years | 0.0 |
| My ROE Score | 1.0 out of 1.0 |
Other Ratios
| Ratio | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Debt to Equity | Less Than 0.50 | 1.05 | 0.0 |
| Payout Ratio | Less Than 60% | 30% | 1.0 |
| Credit Rating | BBB+ | AAA | 1.0 |
| Total Ratio Score | 2.0 out of 3.0 |
TOTAL RATIOS SCORE: 3.0 out of 4.0
DIVIDEND DATA
Annual Dividends
Click to EnlargeDividend Scoring
| Criteria | Scoring |
| 25+ Years of Dividend Growth | 1.0 |
| 10+ Years of Dividend Growth | 1.0 |
| Less Than 10 Years of Dividend Growth | 0.0 |
| My Dividend Growth Score | 2.0 out of 2.0 |
TOTAL DIVIDEND GROWTH SCORE: 2.0 out of 2.0
STOCK VALUATION
| Valuation Metric | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Dividend Yield | Cur Yld Greater Than 10 Yr Avg Yld | 1.6% | 1.0 |
| Div Yld Compared to SPY Div Yld | Cur Yld Greater Than SPY Yld | 2.0% | 1.0 |
| P/E Ratio | Cur P/E Less Than 10 Yr Avg P/E | 22.4 | 1.0 |
| Relative P/E | Relative P/E Less Than 1.0 | 0.58 | 1.0 |
| Price to Sales | Less Than 1.5 | 2.15 | 0.0 |
| Total Ratio Valuation Score | 4.0 out of 5.0 |
Canadian Shareowner’s Association Stock Selection Guide Software Buy Price
| Buy Zone |
Maybe Zone |
Sell Zone |
Current Price | Rating | Scoring (Buy=1.0, Other=0.0) |
| 1.0 |
TOTAL STOCK VALUATION SCORE: 5.0 out of 6.0
SUMMARY
Points Earned:
12 out of 14 – half points are rounded down to be conservative
The stock is rated HIGH with 12 points earned through my analysis of the stock. This stock has totally caught me by surprise as it has been a strong performer and the dividend growth rate has been very positive. The stock has recently been hit because of the subprime mess which has hurt the share price. I am going to watch this one closely over the next few months as I may put in a buy to initiate a holding in the company. I want to do some more research on the future prospects of the company, such as looking at the Value Line data sheet to ensure I fully understand the future prospects of the company.
| Rating | Points Required |
| High | 11+ points |
| Medium | 8-10 points |
| Low | < 8 points |
Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
The Dividend Guy does not own shares in HSE
I am a fan of MHP. It’s trading at P/E of 15 and with a yield of 2%. I don’t buy into the whole idea of the world falling apart due to the sub-prime crisis.
MHP is a great company and I think it’s trading at a reasonable although not great price. I’d love to see it spin off S&P and JD Power & Associates, though. Those are the real gems.
This is one that I have never looked at either. Great find!
Best Wishes,
D4L
I looked them up at http://www.aplussrc.com and they do offer a direct purchase plan.
Here are the details.
Min first time purchase $500 one time set up fee of $10
Dividend reinvestment fees (company paid)
Additional purchase fees (company paid)
Min additional purchase amounts $100
I believe the max purchase on these are $10,000 but I don’t pay much attention to that part I’m sorry to say because I don’t have that much at one time.
Well done, Dividend Guy. I thoroughly enjoy these analyses, especially ones that turn out like this one does.
Ummmm… though I may appear uninformed, what is SPY dividend yield? Also, what is relative P/E?
Thanks Dividend Guy, I didn’t realize McGraw-H was an achiever and an aristocrat. But I’ve been keeping an eye on them for a while now. Good for diversification, too.
Cash Canuck,
I am not TDG, but I believe that by SPY dividend yield is think he refers to the dividend yield on the Exchange Traded Fund with ticker SPY, which tracks the S&P 500 index in the USA.
http://finance.yahoo.com/q/bc?s=SPY&t=3m&l=on&z=m&q=c&c=
Hey Cash Canuck – DGI is correct – it is the yield on the SPY, which tracks the S&P 500. My thinking is that if I am going to buy a dividend stock, then perhaps it should have a yield greater than that of the market, otherwise I could just buy an index which has less risk.