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
Raises for Duke and Enterprise -- The Week in Dividends 2019-07-12
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:

Duke Energy DUK declared a $0.945 quarterly dividend this week, a 1.9% increase from its previous quarterly rate. And Enterprise Products Partners EPD continued its practice of regular quarterly raises by increasing its quarterly distribution to $0.44, a 0.57% hike. Procter & Gamble PG declared a quarterly dividend that was unchanged from its previous payout.

Morningstar increased its fair value estimate for Coca-Cola KO today -- an update from Morningstar Research Services is below. Otherwise, it was another quiet week for the holdings of the Dividend Select portfolios. However, earnings season kicks into high gear next week and we expect to see quarterly results for a number of holdings, including Wells Fargo WFC, Philip Morris International PM, Johnson & Johnson JNJ, BB&T BBT, Genuine Parts GPC, BlackRock BLK, and Omnicom OMC.

Best wishes,

David Harrell
Editor, Morningstar DividendInvestor




News and Research for Dividend Select Portfolio Holdings

Raising Coca-Cola's Fair Value Estimate
by Sonia Vora, CFA | Morningstar Research Services LLC | 07-12-19

We're lifting our fair value estimate for Coca-Cola to $49 per share from $47.50 after incorporating the time value of money since our last update. Our valuation incorporates around 4% organic sales growth on average over our 10-year explicit forecast, with even contributions from volume and price/mix. We expect sustained growth of high-margin smaller packaging sizes, modest net pricing increases, and the bottler refranchising to result in mid-single digit operating income growth longer term. Our fair value estimate implies a price/earnings ratio of 23 times.

We expect Coca-Cola to offset pressure from declining carbonated soft drink consumption in North America (36% of sales) with product and packaging innovation, as well as an expanding portfolio of noncarbonated beverages, allowing for modest top-line gains (with low-single-digit improvements in price/mix annually). We expect steady growth in emerging markets, where per capita consumption remains lower than in developed regions. More specifically, we forecast mid-single-digit organic growth on average in the Latin American (13% of sales, excluding company-owned bottling operations) and Asia-Pacific (15%) segments on average over our forecast. In 2019, we expect above 9% sales growth, supported by the Costa acquisition as well as mid-single-digit organic sales growth.

Our outlook for the next decade also incorporates steady margin improvement, as Coca-Cola benefits from its more asset-light structure (with concentrate operations accounting for 64% of net revenue in 2018, versus 51% in 2017) and reduces its manufacturing and distribution expenses. We expect gross margins to average above 63% over the next five years (around 150 basis points above its five-year historical average), given a greater proportion of higher-margin concentrate sales. Moreover, we expect operating margins to expand at a faster clip, due to Coca-Cola’s ongoing cost savings initiatives, which we think will primarily moderate supply chain and overhead expenses. We estimate these factors will lead to average operating margin around 33% over our forecast, compared with around 27% in 2018.

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.
 
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