Thursday, November 6, 2014

Can United Technologies Corporation Move Your Portfolio?

As part of building a diversified dividend growth portfolio, it's important to own not only a number of companies but also companies that operate in a variety of industries. Previously I've looked at some restaurants, beverages, and consumer staples companies but today I wanted to examine an industrial powerhouse and dividend contender with 20 consecutive years of dividend growth: United Technologies (NYSE:UTX). Shares closed trading on Friday, October 31st at $107.00, giving a current yield of 2.21%.

Discounted Earnings:

Analysts followed by Yahoo!Finance expect United Technologies to grow earnings 11.08% per year over the next 5 years and I've assumed they can grow at 8.31% (75% of 11.08%) for the next three years and at 5.00% in perpetuity. Running these numbers through a discounted earnings analysis with a 10% discount rate and summing over 30 years yields a fair value price of $153.54. This means the shares are trading at a 30.3% discount to the discounted earnings analysis.

Click here to read the full analysis of United Technologies Corporation at Seeking Alpha.

6 comments:

  1. Do u have a minimum % number u need for you to consider certain dividend stocks?

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    Replies
    1. A-G,

      I don't have a minimum yield level for any one position but I prefer to look at the portfolio as a whole. I own DIS and V which both yield less than 1% but I think their future growth and dividend growth will be fantastic. Ideally I want to keep at current yield around 3% at a minimum. Right now I'm at 3.09%. I try to focus more on getting the company right rather than necessarily focusing on the yield. I know others play by different rules but I think the company is more important to focus on for the long term.

      Thanks for stopping by!

      Delete
    2. You also are buying stocks that have no yield. If you are looking for a decent yield and a good dividend growth you need to add some defense.

      Delete
    3. Anon,

      I'm assuming the companies that don't have a yield that you're referring to are BRK.B and GOOGL. Personally I think their track records speak for themselves and whenever WB/CM are no longer at the helm of BRK.B I expect a big change to come either a massive spinoff or we'll start to see dividends get paid. The majority of my holdings life in the 2.5-3.5% yield with 5-10% growth, so I'm fine sprinkling in a few low yield high growth companies to the mix.

      Thanks for stopping by!

      Delete
  2. Nice work on the analysis. I like that you consider many factors and points of view for the analysis.

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    Replies
    1. Greg,

      I'm glad you enjoyed the analysis. In my view I think it's important to look at a variety of metrics to get an overall feel for the valuation of the company.

      Thanks for stopping by!

      Delete