Company Description: John Wiley & Sons produces print and electronic products, providing content and solutions to customers worldwide.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
JW-A is trading at a discount to 1.) and 3.) above. Since JW-A's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 29.0% discount to its calculated fair value of $55. JW-A earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
JW-A earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. JW-A earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1982 and has increased its dividend payments for 19 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
JW-A earned a Star in this section for its NPV MMA Diff. of the $5,856. This amount is in excess of the $1,600 target I look for in a stock that has increased dividends as long as JW-A has. If JW-A grows its dividend at 15.4% per year, it will take 1 years to equal a MMA yielding an estimated 20-year average rate of 2.71%. JW-A earned a check for the Key Metric 'Years to >MMA' since its 1 years is less than the 5 year target.
Memberships and Peers: JW-A is and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: Pearson plc (PSO) with a 5.0% yield, Thomson Reuters Corporation (TRI) with a 3.8% yield and Meredith Corporation (MDP) with a 3.8% yield.
Conclusion: JW-A earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks JW-A as a 5-Star Very Strong stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $67.05 before JW-A's NPV MMA Differential decreased to the $1,600 minimum that I look for in a stock with 19 years of consecutive dividend increases. At that price the stock would yield 1.4%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,600 NPV MMA Differential, the calculated rate is 10.6%. This dividend growth rate is lower than the 15.4% used in this analysis, thus providing a significant margin of safety. JW-A has a risk rating of 1.75 which classifies it as a Medium risk stock.
The publishing industry has faced hard times over the last couple decades as consumer consumption has steadily moved to electronic mediums. JW-A has built an economic moat with its science, technology, medical and scholarly publishing units.
Its low free cash flow payout, low debt to total capital have always been a plus. However, its low current yield historically kept it from serious consideration. JW-A will likely increase its dividend in June. Trading at a 29% discount to its calculated fair value price of $55.00, it is a stock I am currently watching very closely.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I held no position in JW-A (0.0% of my Dividend Growth Portfolio) and was long MDP in my High-Yield portfolio. See a list of all my dividend growth holdings here.
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Tags: [JW-A] [PSO] [TRI] [MDP]
