About the Editor

David Harrell is the editor of Morningstar DividendInvestor, a monthly newsletter that focuses on dividend income investment strategy. For illustration purposes, issues highlight activities pertaining to a Morningstar, Inc. portfolio invested in accordance with a current income and income growth from stocks strategy.

David served in several senior research and product development roles and was part of the editorial team that created and launched Morningstar.com. He was the co-inventor of Morningstar's first investment advice software. David joined Morningstar in 1994. He holds a bachelor's degree in biology from Skidmore College and a master's degree in biology from the University of Illinois at Springfield.

Our Portfolio Manager

George Metrou is an equity portfolio manager for Mornigstar Investment Management. Metrou joined the team as a portfolio manager in August 2018. Before joining Morningstar Investment Management, he was an equity portfolio manager with Perritt Capital, and as a portoflio manager with Perritt Capital Management. Prior to that he served as Director of Research and as an equity analyst at Perritt Capital, and as a portfolio manager with Windgate Wealth Management. He holds a Bachelor's degree in finance form DePaul University, and he also holds the Chartered Financial Analyst® designation.

 
Investment Strategy

Dividends are for everyone regardless of age. The outcome of owning dividend-yielding stocks is the key variable-higher-yielding stocks with safe payouts being less risky while affording investors who don't need current income the ability to reinvest/reallocate the capital.

The goal of the Dividend Select Portfolios is to earn annual returns of 8% - 10% over any three-to-five year rolling time horizon. We further seek to minimize risk, as defined by the probability of a permanent loss of capital. For our portfolio as a whole, this goal is composed of:

3% - 5% current yield
4% - 6% annual income growth

 
About Josh Editor's Photo
David Harrell
Editor, Morningstar DividendInvestor
David Harrell is the editor of Morningstar DividendInvestor, a monthly newsletter that focuses on dividend income investment strategy. For illustration purposes, issues highlight activities pertaining to a Morningstar, Inc. portfolio invested in accordance with a current income and income growth from stocks strategy.
Featured Posts
A Modest Fair Value Bump for Hanesbrands
DividendInvestorâ„  focuses on the activities of portfolios of Morningstar, Inc. that are invested in accordance with the Dividend Select strategy. These portfolios are managed by Morningstar Investment Management LLC, a registered investment adviser, who manages other client portfolios using these strategies.

From the DividendInvestor news file this week:

Please see an analyst update below from Morningstar Research Services for Hanesbrands HBI.

Earlier today, George Metrou made several trades for the portfolios: In the Dividend Select portfolio, he exited his position in AmeriGas Partners APU. In the Dividend Select Deferred portfolio, he exited his position in PPL PPL. He also established 2% stakes in Plains GP Holdings LP PAPG in both portfolios -- please see his trade alert for complete details.

Best wishes,

David Harrell
Editor, Morningstar DividendInvestor




News and Research for Dividend Select Portfolio Holdings

A Fair Value Increase for Hanesbrands
by David Swartz | Morningstar Research Services LLC | 06-12-19

We're lifting our fair value estimate for Hanesbrands to $27.50 from $27 on the time value of money and the $0.01 earnings beat in the first quarter of 2019. This estimate implies the following 2019 valuation ratios: an adjusted P/E of 15.6, an EV/adjusted EBITDA of 12.2 and a free cash flow yield of 6.2%. Our fair value estimate assumes long-term annual organic innerwear growth of 1.5% and annual international growth of 2.5%. Long-term growth in innerwear is very low, not much more than population growth. However, outside of the U.S., we believe Hanesbrands will achieve modestly higher sales growth as it expands its points of distribution. Our fair value estimate also assumes annual activewear growth rates of 3% over the next decade. We do not forecast activewear (approximately 37% of global sales) will achieve this growth rate in 2020 due to the loss of the C9 business at Target. Despite this setback, we believe that Hanesbrands’ activewear business has good growth prospects, reflecting expansion plans for the Champion brand and recent acquisitions in the category.

Our fair value estimate assumes innerwear (approximately 63% of global sales) operating margins hold steady at about 24%. Further, we assume gradual increases in operating margins for both activewear and international (about 34% of sales) over the next five years, with both increasing to 18% in 2024 from 15% in 2018. Hanesbrands expects to improve production efficiency as it implements best practices at its newly acquired businesses. Moreover, it plans greater promotion of Champion in Europe and China. Our fair value estimate assumes low inflation in wage and cotton prices, resulting in a gross margin that stabilizes at 40%. We anticipate that Hanesbrands will reach $7 billion in sales and $1 billion in operating profit by 2021. Further, we estimate that Hanesbrands will generate approximately $3 billion in free cash flow to equity between 2019 and 2022. These estimates are slightly lower than those released by the company at its 2018 Investor Day. Our estimates do not include any contributions from acquisitions, given the uncertain timing, but it is likely that Hanesbrands will make a few. At the Investor Day, Hanesbrands estimated that it may add $700 million in annual revenues from acquisitions by 2022 (an increase of approximately 10% from 2018). Hanesbrands may be able to increase operating profit and free cash flow if it closes a few deals.

Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. Analyst ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst ratings are based on Morningstar’s analysts’ current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst ratings are not guarantees nor should they be viewed as an assessment of a stock's creditworthiness. Ratings, analysis, and other analyst thoughts are provided for informational purposes only; references to securities should not be considered an offer or solicitation to buy or sell the securities.

©2019 Morningstar, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. The information contained in this document is the proprietary material of Morningstar, Inc. Reproduction, transcription, or other use, by any means, in whole or in part, without the prior written consent of Morningstar, Inc., is prohibited. All data presented is based on the most recent information available to Morningstar, Inc. as of the release date and may or may not be an accurate reflection of current data.  There is no assurance that the data will remain the same.

Disclosure:
The commentary, analysis, references to, and performance information contained within Morningstar® DividendInvestorâ„ , except where explicitly noted, reflects that of portfolios owned by Morningstar, Inc. that are invested in accordance with the Dividend Select strategy managed by Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc. References to "Morningstar" refer to Morningstar, Inc.

Opinions expressed are as of the current date and are subject to change without notice. Morningstar, Inc. and Morningstar Investment Management LLC shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. This commentary is for informational purposes only and has not been tailored to suit any individual. 

The information, data, analyses, and opinions presented herein do not constitute investment advice, are provided as of the date written, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. Please note that references to specific securities or other investment options within this piece should not be considered an offer (as defined by the Securities and Exchange Act) to purchase or sell that specific investment.

This commentary contains certain forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason.

Investments in securities are subject to investment risk, including possible loss of principal. Prices of securities may fluctuate from time to time and may even become valueless. Securities in this report are not FDIC-insured, may lose value, and are not guaranteed by a bank or other financial institution. Before making any investment decision, investors should read and consider all the relevant investment product information. Investors should seriously consider if the investment is suitable for them by referencing their own financial position, investment objectives, and risk profile before making any investment decision. There can be no assurance that any financial strategy will be successful.

Common stocks are typically subject to greater fluctuations in market value than other asset classes as a result of factors such as a company's business performance, investor perceptions, stock market trends and general economic conditions.

All Morningstar Stock Analyst Notes were published by Morningstar, Inc. The Week in Dividends contains all Analyst Notes that relate to holdings in Morningstar, Inc.'s Dividend Select Portfolio. Morningstar’s analysts are employed by Morningstar, Inc. or its subsidiaries. In the United States, that subsidiary is Morningstar Research Services LLC, which is registered with and governed by the U.S. Securities and Exchange Commission.
 
Customer Support
Product Support
Inquiries regarding your subscription such as address changes, missing/damaged issues, etc.
Phone: 1-800-957-6021 | Mon-Fri 8:30AM-5:00PM
Inquiries regarding technical issues such as logging in or downloading
Phone: 1-312-424-4288 | Mon-Fri 8AM-6PM
E-mail: newslettersupport@morningstar.com
Product Sales
Inquiries regarding your subscription renewal, billing or to learn about other Morningstar investment publications and resources
Phone: 1-866-608-9570 | Mon-Tue 8AM-7PM CST | Wed-Fri 8AM-5PM CST
E-mail: ussales@morningstar.com
Contact Your Editor