Tag: Targets


5 Dividend Growth Stocks With Upside To Analyst Targets


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To become a “Dividend Aristocrat,” a dividend paying company must accomplish an incredible feat: consistently increase shareholder dividends every year for at least 20 consecutive years. Companies with this kind of track record tend to attract a lot of investor attention — and furthermore, “tracking” funds that follow the Dividend Aristocrats Index must own them. With all of this demand for shares, dividend growth stocks can sometimes become “fully priced,” where there isn’t much upside to analyst targets.

But we here at ETF Channel have looked through the underlying holdings of the SPDR S&P Dividend ETF (which tracks the S&P High Yield Dividend Aristocrats Index), and found these five dividend growth stocks that actually still have fairly substantial upside to the average analyst target price 12 months out. Which means, if the analysts are correct, these are five dividend growth stocks that could produce capital gains in addition to their growing dividend payments.

In the first table below, we present the five stocks. The recent share price, average analyst 12-month target price, and percentage upside to reach the analyst target are presented.

Stock Recent Price Avg. Analyst 12-Mo. Target % Upside to Target
Becton, Dickinson $268.50 18.87%
Chevron $120.27 $140.62 16.92%
Abbott Laboratories $72.88 $79.93 9.68%
National Retail Properties $50.76 $54.55 7.46%
Lincoln Electric Holdings $89.70 $95.78 6.77%

The average 12-month analyst targets are only targets for the share price however, and each of these stocks are expected to pay dividends during that holding period — so the expected total return if these stocks reach their analyst targets is actually the share price upside seen by the analysts plus the dividend yield shareholders can expect. To ballpark that total return potential, we have added the current yield to the analyst target price upside, in order to arrive at the 12-month total return potential:

Stock Dividend Yield % Upside to Analyst Target Implied Total Return Potential
Becton, Dickinson 1.36% 18.87% 20.23%
Chevron 3.96% 16.92% 20.88%
Abbott Laboratories 1.76% 9.68% 11.44%
National Retail Properties 3.94% 7.46% 11.4%
Lincoln Electric Holdings 2.10% 6.77% 8.87%

Another consideration with dividend growth stocks is just how much the dividend is growing. We looked up the trailing twelve months worth of dividends shareholders of each of the above five companies have collected, and then also looked up the same number for the prior trailing twelve months. This gives us a rough yardstick to see how much the dividend has grown, from one trailing twelve month period to another.

Stock Prior TTM Dividend TTM Dividend % Growth
Becton, Dickinson $2.96 $3.04 2.70%
Chevron $4.36 $4.55 4.36%
Abbott Laboratories $1.09 $1.2 10.09%
National Retail Properties $1.88 $1.975 5.05%
Lincoln Electric Holdings $1.48 $1.72 16.22%

These five stocks are part of our full Dividend Aristocrats List. Click here to find out the Dividend Growth Stocks: 25 Aristocrats »

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5 Dividend Growth Stocks With Upside To Analyst Targets


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To become a “Dividend Aristocrat,” a dividend paying company must accomplish an incredible feat: consistently increase shareholder dividends every year for at least 20 consecutive years. Companies with this kind of track record tend to attract a lot of investor attention — and furthermore, “tracking” funds that follow the Dividend Aristocrats Index must own them. With all of this demand for shares, dividend growth stocks can sometimes become “fully priced,” where there isn’t much upside to analyst targets.

But we here at ETF Channel have looked through the underlying holdings of the SPDR S&P Dividend ETF (which tracks the S&P High Yield Dividend Aristocrats Index), and found these five dividend growth stocks that actually still have fairly substantial upside to the average analyst target price 12 months out. Which means, if the analysts are correct, these are five dividend growth stocks that could produce capital gains in addition to their growing dividend payments.

In the first table below, we present the five stocks. The recent share price, average analyst 12-month target price, and percentage upside to reach the analyst target are presented.

Stock Recent Price Avg. Analyst 12-Mo. Target % Upside to Target
Caterpillar $141.20 $153.43 8.66%
MDU Resources Group $25.79 $28.00 8.57%
United Technologies $135.30 $145.12 7.26%
RPM International $60.63 $64.83 6.93%
International Business Machines $144.35 $151.73 5.11%

The average 12-month analyst targets are only targets for the share price however, and each of these stocks are expected to pay dividends during that holding period — so the expected total return if these stocks reach their analyst targets is actually the share price upside seen by the analysts plus the dividend yield shareholders can expect. To ballpark that total return potential, we have added the current yield to the analyst target price upside, in order to arrive at the 12-month total return potential:

Stock Dividend Yield % Upside to Analyst Target Implied Total Return Potential
Caterpillar 2.44% 8.66% 11.1%
MDU Resources Group 3.14% 8.57% 11.71%
United Technologies 2.17% 7.26% 9.43%
RPM International 2.31% 6.93% 9.24%
International Business Machines 4.35% 5.11% 9.46%

Another consideration with dividend growth stocks is just how much the dividend is growing. We looked up the trailing twelve months worth of dividends shareholders of each of the above five companies have collected, and then also looked up the same number for the prior trailing twelve months. This gives us a rough yardstick to see how much the dividend has grown, from one trailing twelve month period to another.

Stock Prior TTM Dividend TTM Dividend % Growth
Caterpillar $3.11 $3.36 8.04%
MDU Resources Group $0.782 $0.802 2.56%
United Technologies $2.76 $2.87 3.99%
RPM International $0.94 $1.34 42.55%
International Business Machines $6 $6.28 4.67%

These five stocks are part of our full Dividend Aristocrats ListClick here to find out the Dividend Growth Stocks: 25 Aristocrats »

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The iShares S&P Mid-Cap 400 Value ETF Targets $177


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Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, we have compared the trading price of each holding against the average analyst 12-month forward target price, and computed the weighted average implied analyst target price for the ETF itself.  For the iShares S&P Mid-Cap 400 Value ETF, we found that the implied analyst target price for the ETF based upon its underlying holdings is $177.41 per unit.

With IJJ trading at a recent price near $160.20 per unit, that means that analysts see 10.74% upside for this ETF looking through to the average analyst targets of the underlying holdings. Three of IJJ’s underlying holdings with notable upside to their analyst target prices are Louisiana-Pacific, Pebblebrook Hotel Trust and Vishay Intertechnology. Although LPX has traded at a recent price of $25.08/share, the average analyst target is 18.95% higher at $29.83/share. Similarly, PEB has 17.66% upside from the recent share price of $30.84 if the average analyst target price of $36.28/share is reached, and analysts on average are expecting VSH to reach a target price of $23.25/share, which is 16.42% above the recent price of $19.97.

Below is a summary table of the current analyst target prices discussed above:

Name Symbol Recent Price Avg. Analyst 12-Mo. Target % Upside to Target
iShares S&P Mid-Cap 400 Value ETF IJJ $160.20 $177.41 10.74%
Louisiana-Pacific Corp LPX $25.08 $29.83 18.95%
Pebblebrook Hotel Trust PEB $30.84 $36.28 17.66%
Vishay Intertechnology, Inc. VSH $19.97 $23.25 16.42%

Are analysts justified in these targets, or overly optimistic about where these stocks will be trading 12 months from now? Do the analysts have a valid justification for their targets, or are they behind the curve on recent company and industry developments? A high price target relative to a stock’s trading price can reflect optimism about the future, but can also be a precursor to target price downgrades if the targets were a relic of the past. These are questions that require further investor research.

Click here to find out 10 ETFs With Most Upside To Analyst Targets »

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Profits Can Wait As Freshworks Targets A Cloud Market Dominated By SAP And Salesforce


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Cloud services giant Salesforce faced an unlikely gatecrasher at its annual Dreamforce convention last September: a blimp floating above its eponymous tower in downtown San Francisco emblazoned with the slogan #failsforce. In case anyone missed the message, a marching band and a “hit refresh” lounge were stationed at street level urging customers to look for affordable alternatives. The message was also beamed across billboards, banners as well as digital and radio ads.

Behind the stunt was nine-year-old Freshworks, an up-and-coming rival to Salesforce founded and run by 44-year-old Girish Mathrubootham. Last May, the company bombarded rival ServiceNow’s annual convention in Las Vegas with walking billboards and taxi banners around the city. It also served free coffee and breakfast to participants outside the venue. “We are on a mission to put easy-to-use business software in the hands of the people who need it,” says Mathrubootham. “It’s time for a change. You don’t need expensive and bloated cloud software.”

Already a hit among small and midsized enterprises, Freshworks is out to grab more of the large companies that now rely on bigger players such as SAP and Salesforce in a global market for cloud application services that market researcher Gartner says will top $117 billion by 2021. To do that, Freshworks raised an additional $100 million in July from existing investors Accel, Sequoia and CapitalG, a fund run by Google parent Alphabet, in a deal that valued Freshworks at $1.5 billion. Profitability can wait, says Mathrubootham: “I can be profitable if I want to. But if I am not growing enough it may be a lost opportunity when the competition grabs it.”

Headquartered in San Bruno, California, Freshworks already boasts annual recurring revenue of $100 million, almost 2,000 employees across nine offices worldwide, and 150,000 clients, including Cisco, Toshiba and Zomato—still small in comparison with Salesforce’s $13 billion revenue and 29,000 employees.

Mathrubootham got into the cloud after completing his engineering degree and getting an M.B.A. in 1998 from the University of Madras. He held a couple of software jobs and started a computer education company in 2001 before moving that year to network management firm AdventNet, which later went into cloud computing and was eventually renamed Zoho. Known to friends by his first initial “G,” Mathrubootham spent almost a decade at Zoho developing multiple products and learning the nuances of the business. “He’s always been a very positive and very high-impact guy,” says Kumar Vembu, Zoho’s former president, who recruited Mathrubootham. “He’s very expressive and articulate.”

Sensing an untapped opportunity in the customer support segment, Mathrubootham quit Zoho in 2010 to start Freshworks (originally named Freshdesk), along with five friends who had worked with him at Zoho at different points in time. Freshdesk started out in a 700 square-foot office in a Chennai suburb that cost the company $100 a month in rent. “We decided to give this a shot for two years,” says Mathrubootham. “This was like a rocket—either you hit escape velocity and take off or you fall into the Bay of Bengal.”

Besides Salesforce and ServiceNow, Freshworks competes with more than 600 other companies—including Zoho, eGain, SugarCrm and Zendesk—in the crowded market for cloud-based enterprise software. Freshworks is already well entrenched among small and midsized enterprises, and gets more than 65% of its revenue from companies with 500 or fewer employees.

“Freshworks is affordable, reliable and has a great set of features,” says Avnish Anand, cofounder of Indian jewelry retailer CaratLane, which has been using Freshworks’ customer support product for the last four years to track merchandise exchanges, repairs, returns and refunds. Indian billing and subscription platform Chargebee is another customer. “They offer an integrated suite of products for sales; customer support; recruitment management and compliance,” says Krish Subramanian, cofounder of Chargebee, which uses seven of Freshworks’ nine products.

But Freshworks hasn’t had the same traction with larger companies and their more complex business processes, Gartner says. To lure them, Freshworks says it plans this year to incorporate additional artificial intelligence, machine learning and workflow automation—features already offered by Salesforce—in its offerings. “This will strengthen their product portfolio,” says Brian Manusama, a senior director analyst at Gartner.

Freshworks is also growing through acquisitions. The company bought nine companies in India and the U.S. for undisclosed sums over the past three years. With two-thirds of its business coming from the U.S. and Europe, it’s now rapidly expanding across Africa and the Asia-Pacific region. Freshworks’ help desk software now has an average contract size of $300 per month—10 times more than what it was back in 2010—and offers more features to larger businesses. The average revenue from some customers could also be as high as $1,000 per month for an integrated customer engagement suite that offers sales, support and marketing services. Mathrubootham says his goal is to boost annual recurring revenue tenfold to $1 billion, though he declines to say how soon.

It’s that kind of scalability that excites Freshworks’ investors. “G has a very good product understanding from a user’s standpoint,” says Shekhar Kirani, a partner at U.S. VC firm Accel, which invested $1 million in 2011 for a 23% stake in Freshworks. “He has a lot of learning in his back pocket and a clear plan of how he’d win.”

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