058 - How We Decide If A Stock Is Worth Investing In Or Not

We walk through 5 stock examples so you can see exactly what we look at to determine if a stock might be a contender for our portfolio or not.

What metrics do we look for and what makes a company good or bad based on our income investing strategy.

To actually see where we find this information in our Schwab brokerage, click here to watch what we're doing on YouTube.

You can find stocks that are going ex-dividend on investing.com.

5 Stocks that we evaluated in this episode

• PFE
• LOW
• RY
• EGBN
• RDUS

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**DISCLAIMER**
Ticker metrics change as markets and companies change, so always do your own research. The content in this podcast is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.

Episode music was created using Loudly.

Transcript

Welcome to Roaming Returns, a podcast about generating a passive income through investing so that you don't have to wait till retirement to live your passions. This week, we're going to evaluate five stocks going ex-dividend to see if they make the cut. This is how we determine if a stock is worthy of a spot in our investing portfolio.
If you're out and about, listen on, but if you want to actually see what we're doing, head over to our YouTube channel via the link in the show notes. Watch as we show you where we find all the relevant data and what makes a company a possibility versus a no-go. Hey, guys.
Something new. Welcome back. Yeah, we're doing something new.
We're recording video while we're doing this. We have to for what I'm about to show you. So today's episode is going to be about... Every week, I go through the stocks going ex-dividend, and every week, I have to run the numbers.
So this week, I'm going to show you five examples of stocks I just picked out of the blue, and then we'll see if any of them meet the criteria for the chart that I email out every week. If they do, I'll be happy. If they don't, whatever.
It's a learning curve for you. You get to see the metrics I use and the different things I look for whenever I evaluate a stock. Sound fun? I hope so.
I think it sounds fun. Okay. The first thing, every week, I go into this investing.com thing here, and you can actually look at what's going ex-dividend per week.
I want the 20th through the 27th, and it'll bring up this list here. Everything that's so far is reported that it's going ex-dividend for the period that I put in, the 20th through the 27th. So then you have to sift through all this to come up with ideas for fellow dividend investors.
I did that already. I have another thing in my Google thing. It's called my ex-dividend template.
I just put things in here that they look at. If you go to this list here, if it looks promising based on this, you want this to be one month or three months, you'd like a higher yield, and you'd like this dividend to be more than three cents, because there's one here that's 12 months. You don't want that.
That's bad. Bad. And you have this one here that's 1.29%. That doesn't pay enough.
Bad. So you look through this list here. You'll come up with a couple of ideas, and when you come up with an idea, it's easier to actually input it in an Excel or a Google spreadsheet.
So we have five stocks here that we're going to look up. So then you go into your brokerage account, whether it be Fidelity, E-Trade, Schwab, whatever it is, and the first one we're going to search for is PFE, which is Pfizer. The Pfizer.
Pfizer's had a bit of a shitshow since the COVID vaccine has stopped being administered. If you look at year-to-date, they are- I mean, the popularity of the whole crisis happened. So- They're kind of on an upswing.
You can see this here. They kind of crashed. If you go, if you pull further out, where was, coming with COVID, COVID was five years.
COVID was like, I think 2020- Here's when the vaccine came out. You see how Pfizer had just awesome, awesome-looking numbers, and then once the vaccine waned, and then all the problems with the vaccine, you see how it's just went into the dumpster here. You see here, it's down 31.08% from here, which is good if you're a contrarian investor.
You're like, okay, well, this is at it. There's people selling this left and right. I mean, you can also, if you care, you can look at Morningstar has the one to five.
They have it as a five star. Relatively recent, but I don't really pay any stock to what Morningstar has to say about pretty much anything. Because these are the experts we always talk about, right? These people that give these ratings.
Yeah, these are the experts. Another thing you want to look at, if this number is high, that means it's going to be very volatile because people are shorting it. Okay, so what's high? Because that's a 1.1. Like 10% would be around, I mean, seven, 10, 12.
So zero's better? If you want to look by way of comparison, hold on, I know one that's short a lot that I talk about all the time. We'll go back to Pfizer and I want to show you like what a heavily shorted stock looks like. Oh yeah, ABR has been very manipulated lately.
We talked about that in a couple episodes. See here how it's at 37.6%. So that's way above 10, but you see that it's gone down from 74 down to 70. So either they cashed out or less people are shorting it.
I don't know, whatever it might be. Oh, so is this where you find short interest? I didn't realize that was a thing. Yeah, but you don't want that number to be like preferably under like seven, six, five, six, 7%.
That'd be a decent amount of short interest because you do need people short in the stock because they'll actually drive the price when it gets too high or gets too low. So you kind of want them to have some say so in the stock because it'll actually help with the share price. All right, back to the Pfizer.
Okay, let's go back to Pfizer here and I'll show you what I'd look for whenever I pull up a stock so you guys can become experts. First thing I look at obviously was that chart that I just showed you, the five-year chart. I like to look at this.
Okay, so chart, five-year. Make sure that it's not at a peak. If you like say it was right here, you obviously wouldn't want to buy it because that's way too high like that.
Probability-wise, it's probably going to go down, but every now and then you get runners that go up. Like if you look at NVIDIA's chart, NVIDIA's chart probably has done the same thing and it just kept going up, but you kind of want it to be in this range here where you know this is where the price should be in this area here and then it's down here, means you have all this room for up growth, so that's good. You're getting a dividend grower that actually has a lot of room for price appreciation, so that's one of the ... If you don't care about price appreciation or capital preservation, you just want to find stuff that's at the bottom.
You can do that. I know some people actually just let those type in the highest yielding things, which is foolish, but ... 52-week low or 52, like that kind of hunting, they look at the bottoms to do contrarian. These stocks have other metrics that they're hitting, which means that we think they're actually able to go back up, whereas if you just do 52-week low, sometimes they're 52-week low for a reason and they're not going to come back.
They'll keep going down like my cons are prime example. We think Pfizer's going to pivot because Pfizer's always going to have a new product coming out. If you look at the macro trends, people are getting older.
People are going to need medicines and medical stuff. Pfizer's supplies a bulk of it, so there's Bristol-Myers Squibb is another one we hold. Same thing where it just went straight down after COVID.
We're in Pfizer. We're in Bristol-Myers because they pay a pretty good dividend, and while you're waiting for it to climb back up to this range, you're collecting a dividend for this entire period, which is nice. Yep.
More shares at lower price. I just look at the chart. I just glance at the chart, make sure it's not high.
Then we come down here to the dividend screen. What you want to look for here is you want, hopefully, within the last year, you see growth. I mean, that's not a lot of growth, but it's still growth.
One penny. That's a very important date. That means you have to have the stock before the 25th, but here's the shit thing about Pfizer is you have to wait two months to get paid.
Yeah, because quarterly, frequency quarterly, that means it's every three months. If you want to do a deeper dive into the dividends, they actually have a thing here where you can look at the dividends throughout time. Gone up.
Gone up. I like that slope. Quite nice.
It keeps going up, but it's not going up a lot, but still, that's still growth. I'm hoping it gets back to this point here where it's growing at like 5% to 6%. It's almost like they did anticipate.
It's like Pfizer knew that their growth couldn't sustain from the COVID situation because that was a circumstantial, so it sounds like that they made sense for making a dividend slope They only raised it by a penny versus the 5% from before, so that actually makes a lot of sense. To me, that signals a good company. I highlight it here.
What I look for is I want to make sure this is growing and I want to make sure this is a decent percent. Annual dividend yield is a decent percent. Now, there are some that will have a dividend yield and an SEC yield.
Maybe we'll see one of those. There's a difference between the annual yield and the SEC yield. If there's an annual yield and an SEC yield, you kind of want to lean towards the SEC yield because it has better numbers.
So that's what we look for. Okay. So that ticked both boxes? Yes.
Good chart? Good dividend growth? Here is why I like Schwab so much because I don't have to look this up. I just put it here. Forward PE.
I always go with the forward PE because this one here is backwards, whereas this one here is forward projecting with their earnings and their projected earnings, so I always use the forward PE as opposed to the price to earning because that's right now and then backtrack for like 12 months. And like they say in all stock stuff, the history does not indicate future output. And another thing I want you to look at here.
This is something that I don't look for necessarily, but like I will if I need to look at here. The blue is their actual earnings. They earned 67 cents per share, negative 17, 10 cents and 82.
So for four quarters, the earnings estimate and the actual estimate, so they have a chart that actually shows. The reason I look at this, I'll show you here in a second. So just remember this 82 because you want to make sure that the 82 cents can cover this.
So you see here it's 10 cents and you see here it's negative 17 cents. Well obviously that can't cover the dividend. So if this continues, they would have to do a dividend cut or borrow money in a high interest rate climate.
So this is a very bad period right here for Pfizer. But this 82 coming back, that's super good because it'll completely cover the dividend plus have money left over. Yep.
For their coffers to either grow or R&D. So look at that. Or make up for the dividend difference that they had from before that was off.
Now here, I don't know if Fidelity has this. I can't answer that, but this is like Pfizer compared to some of its competitors. You'll see its EPS is forecast to grow 14%, which is super nice.
All its competitors are less than that. Its dividend yield is 6%. It's super nice.
All of its competitors are lower than that. This here is kind of troublesome. That is a net profit margin.
That means that they don't have enough money to raise the dividend per se. You'd like to see that in at least the green, like these three here are. So three of the competitors have a 10%, a 21%, and a 19%.
But this isn't necessarily the end of the world, this negative 0.46%. You actually have to do a little bit more research. Go down here to their actual numbers, which again, why I love Schwab. You'll see that their assets have went down since 2021.
Okay. So we're basically chilling in the balance sheet at this point. You can see that their debt has doubled since 2021.
It's a heck of a circle. So that's bad. Okay.
So their debt's gone up, which actually makes sense. They're borrowing money in a 7%, 5%, 6% interest rate environment. That's going to be a problem down the road.
So that's a red flag. And the assets went down a little bit from 2021 to 2022 to 2023. Okay.
So that's a red flag. When we look at their income statement, let's see if their income shows anything. Revenue has went down.
Do you see that? How it went from 81 up to 100,000, which is a super good year. And then it went damn near in half down to 59-ish around there. That's no good.
Then you look at their net income, that's after their taxes and all their extra items that they pull out. But if you go back a couple more years before COVID and the vaccine situation came out, it actually is still above what they were at before. So those bigger inflated numbers to me represent the fact that the vaccine gave them a lot of profit, a lot of revenue.
Well, that is exactly what happened. Because here was COVID. Yep.
Here was the vaccine. So it takes some time for the numbers to reflect the vaccine. So that's why these numbers are super inflated.
They should be in this range here, but they're super inflated because of COVID here. Well, I'm a little worried if their debt number went up, either they're in, to me, that says that they might be in an R&D thing situation for like the next thing that happened or they have to pay off the debt that they acquired to actually produce the product or the vaccine to sell as much as they did. So they might be paying back based on those numbers from the balance sheet.
Right. So like their net bottom, just looking, net income has shit the bed. Yeah.
Revenue has been cut in half, but it's up whatever from here. So that you can just omit these two years if you want to. But that's at your own.
Well, I would think as a health company, though, they would have ebbs and flows and massive swings based on health crises, demand. And then here's the super huge, important number. All right.
So now we moved over to the cash flow statement. This is how much cash they actually have. What is this in? Billions? Millions? That's some number I can't even- Values are in millions.
Okay. So this here, financing means they're borrowing a shit ton of money. Okay.
So they went from 12 million to 14 to 32 to 29. And now in 2023- This is like billions or something like that. This is like 8.7 billion.
Well, yeah, but you have to put in millions. So I think this is 8.7 billion. This is 29.2 billion.
I was never good at reading those. Okay. But anyway, 8.7 and then total cash from financing.
So they went from not borrowing money- And actually having cash. To borrowing a lot. That is a significant.
That again makes me think they either had to borrow it to pay back whatever they incurred or they're planning for a new product to come out. So what we'll do- Which you wouldn't know until- What we'll do is we'll click back in here and we'll go into our Pfizer tab and we'll put the numbers in to see if it meets the criteria. So it's $0.42. I don't think it meets the criteria.
So- $0.42 in the dividend column. Yield. Because yield is super important if you're trying to live off income at 6.06. Price to earn.
Remember I circled that previously. The price- That's why I like Schwab. Price to PE is $11.77. Profit margin.
That was- Remember that was a negative number. I said, hey, that could possibly be a red flag. That's a negative.
Red flag. And we do PE. Now this is another thing.
This is another thing I really, really, really, really like about Schwab. Schwabie is the best. If you want to compare it to its competitors, you go up here.
You click on the pharmaceutical tab that's highlighted there. It'll pull up the sector and then you just click on curriculum evaluation and you'll see that the pharmaceutical sub-industry is ridiculously expensive. $84.46. That is insanity.
That's a great PE. So the PE is super nice. $84.46. $84.46. So you look at this and you think, okay, so this is probably like a C, but because it's a dividend grower, let's see, I don't like, I don't like this.
Okay. So- That means they can't grow the dividends. So as a dividend grower, you kind of need money to grow your dividends.
So like that's a big red flag. This would be like probably a number 10 on my list. Because the PE is still super low at $11.7. Yeah, because the PE, so it's undervalued compared to its peers.
Significantly. And it has a decent yield and I don't know how many years Pfizer's grown their dividend, but- Well, that would be something else to double check before you'd actually pull the trigger on this for sure. But for the intents and purposes of this, those are the numbers.
And Tim said the profit margin being at negative 0.46 is a red flag on this one. So this wouldn't be like a green light across the board. So I'd say it'd probably be number 10 on my list.
So let's look at the next one. Lowe's. Lowe's is going to be a banger.
I mean, it doesn't have what I want in form of dividend yield. I didn't know Lowe's ticker symbol is L-O-W. Okay.
So again, let's scroll down here and let's look at their five-year chart. Now why do you do five-year? Because it gives you a bigger snapshot? Because it gives me a bit more data. So that one looks like it's trajectory straight climbing up.
So it went straight up here. So that's good. And then it consolidated.
Yep. Then it dipped back a little bit. But it bounced off that resistance point.
So I think it's going to go up like this. So this one has a lot of potential to go up, but this is one that you may not want to put a lot of money into because you don't know if at this point here, if it's going to keep going up or if it's going to go down based on... Well, so draw the resistance points. So resistance points are basically areas that people will either, they'll hit and a whole bunch of buyers will get in to pull it back up.
So that's a resistance point. See how that's real close to the same price and it's bounced off that twice? That happens for the ups too. So because it bounced off that resistance point there on the top and it's come back down.
Now, when it comes back down and it hits that lower resistance point again, if it goes through it, it is going to continue to go down. If it bounces back off it, normally there's like three hits before it'll actually crash through an actual ceiling. So depending on what happens is that'll be something, and this isn't 100% science, but... So it hit once, bounced up, hit it twice, bounced up, hit it three times, bounced up, hit it four times, bounced up.
So this seems to be, in this area here, seems to be where it almost always hit, bounces, bounces up. So depending where this goes. So this might be one to put on the list to watch when it hits that point.
I actually, if you want to see what she's talking about in better detail, we'll take a sidebar real quick. Because I found one that I got into in the retirement portfolio yesterday that is a prime example of what she's referring to here on the chart. You'll see that it bounces here every time and then it bounces up to here.
So you have this area here to make profit, but it pays a really good dividend. And again, this isn't like exact science. Here's a three-year chart of that star where I was just talking about.
See, it bounces right around this area here, 17 to 18, and it bounces up to here, 21 to 22. So this is a really good... When I say something's trading sideways and that we love when things trade sideways, this is what I'm referring to because this is very predictable. It's going to go down, it's going to go up, it's going to go down, it's going to go up.
So you can, like, you get in at one of these... Well, that to me looks like it's actually... One of these points here. Narrowing into one of those, what do they call it, inversion triangles. If the gaps get smaller and smaller and smaller, that means it's consolidating and it's going to shoot either up or down through one of those resistance points.
This is one that we just got into because I know it's going to go up. Yeah. I was going to say, based on that chart, I would think it's actually going to go up too.
It's going to go up. It's going to go up to about 20 to 21. So this won't be a lengthy hold for us in the retirement account.
This will probably be like a less than 12-month hold because I know it's going to go up and it's going to hit this point at some point. Yep. I think there's a for-sure that's going to hit at least that.
But that was one that I saw yesterday. I was like, oh, that's it. That's it.
That kicks ass. I'll get into that one. So I sold some shares of Icon and then her mom's retirement account.
Oh, more Icon dropping. But her mom's up in Icon, so it is what it is. Okay.
So back to Lowe's. And that's a pretty good feat considering how much we were down on that. Okay.
You see what the Schwab experts think of Lowe's. They're on board. Yeah.
A, AAA. What is that? If you guys are experts- Go down a little more. Whereas Morningstar is just like, eh.
Neutral. And so is CFR, eh. So this is where it gets confusing for a lot of people.
Some extras will be on board, others will say sell. See, here this is less than 5%. That's a really good short interest.
That means they're not going to be able to manipulate the price whenever it gets too high. What happens, if you remember GameStop, there was like 40% to 50% short in GameStop. and once the price got too high or too low, the people can manipulate the price to make money off it.
So you want this number to be pretty low, that means it's gonna be kind of organic because there's not a lot of people that are manipulating the price for it to go down. If you're not familiar, short means you're betting on a stock to go down. So a lot of people don't see the stock going down, they see it going up.
So that can definitely help factor into your decision making process. Okay, so that was, we looked at that. Now let's go down here and look at this.
The dividends. Dividends. I know this one's growing, but it's not growing in the last time.
Yeah, this one's growing a lot. Oh yeah, that one is growing a lot. So it was pretty steady at a lower slope, and then it actually grew up a lot.
21% growth, 17, 16. That's a weak year. Nine.
What is that, 24? So it grows like 16 to 30-ish range every year. This year so far we are at, oh, let me click my pointer. So it went from $1.05 to $1.10 back last year, so they're probably due for an increase here in the next.
They are. Now that I say that, you see here it's paying $1.05, and then they bumped it up a nickel to $1.10. They held it for four quarters, and the next one's saying $1.15, so they're bumping up another nickel. So it looks like they're doing it every quarter? Every year.
Every four quarters. It looks like every summer quarter they bump it up, whatever, bump it up, bump it up, bump it up. So you see that one's going up.
So that's super good news. Did you know that before you pulled the trigger? I never bought Lowe's, because it's too expensive. Oh, I'm sorry, I forgot.
We were talking about Steward. It's too expensive. My problem with expensive stocks, this is why most of the time when I recommend something, it's like in the eight to $30 range.
So Lowe's is $213 a share right now. Yeah, $213. So if you, where's my calculator? Say you had $2,500 you could put into Lowe's.
If you divide that by the share price of $213.16. You're getting 11.7 shares. So 11 shares, so you can't get half. Even with that bump up of $1.15. Whoop-de-doo, Basil.
You'd only be making $13.48. Making $56 for the year, because it costs so much that you only get like a minimum number of shares. That's why it has to be something super spectacular for me to actually pull the trigger on that one. Like that CME one was one.
So do the same thing for one that's like a $20 some stock. So just do like $23. So if you, $2,500.
$2,500. Divide by the 23. Divide it by 23.
Gives you 109 shares. And then if that was at. If you multiply that by the $1.15, you're making $500 as opposed to $57.
So that's like a 10x difference. So that's why if you've been a long time subscriber that most of my recommendations are like pretty cheap is because I want share quantity. Because of the dividend per share.
I want share quantity before quality. Unless I'm in the retirement account, then it's quality and then share quantity. But they go together.
But for our income, for the living in the van, I want it to be as much income as I can generate. Whereas her mom's retirement, I want income, but I want capital. Preservation.
Preservation. So I won't go quality over quantity at that point. Okay, 213, that's really pricey.
Yeah. Damn. But you saw their dividend went up.
You see, that's why I said I think their yield's trash. But I mean, it does grow at 20% a year. So if you, this one.
So it's crazy that their dividend's that low when their yield is showing 2.16%. That's crazy. So what happens is this is one of those ones, like if you've ever looked at the dividend aristocrats that are paying like two to 3%, why they're so popular is because you're getting 2.3% when you initially get into it, but then they're growing their dividend between five and 10%. So if you, say it's 10%.
So that would be 10 years, would give you double your dividend. So within 10 years, you'd be at five point whatever percent. Five, four point six.
Yeah, so just because the stock at current metrics shows a specific dividend percent, like for this one it's 2.16 or whatever it was, if you bought in a while back at a lower share price, your dividend payout yield is gonna be a lot higher than that. So if you held on to something that was growing at 10% for 30 years in your retirement account, your dividend's actually, your yield's gonna be about 7%. And that's why people love those aristocrat dividend growers.
It's not the initial buy-in. And this was something I didn't understand initially, but now that I do, like, what do they call that where the yield tends to move with the actual price increase? That's the dividend magnet. So the dividend magnet, so the price of the yield will be the same over time based on the current price, but if you got in low enough, your dividend yield goes up higher and higher over time.
It's a pretty sweet deal. So you know they're paying a $1.10 and soon to be $1.15, but their actual earnings per share are killing that $1.10, $1.15, so that's super good. See there, you'll see their forward PE here is 17.46. Okay, so now I'm curious to see what the heck the peers is showing.
We'll get to that in a hot minute. We have to go look at the financial stuff first. Yeah, yeah, yeah.
So here, and remember I said that negative 0.46, so this one, they're actually growing their profit by 8%, and their EPS is forecast to grow 4%, so that's super good. So lows is better, price per earnings. So the price per earnings, this is how you basically compare lows to TJ Maxx and O'Reilly's, whatever.
So they're really, like, that's super good. Dividend yield is what it is. EPS growth, that shows me that these other companies are actually growing their revenue faster, which makes sense because they're- Smaller companies.
Well, now they, like, if you look here- No, they are about the same. Well, at least that one is. TJ Maxx, but these, yeah, these are smaller by market cap, so that one.
And the net profit. I do like TJ Maxx, but I don't really know how that's a comparative. But that right there is, that therein lies the conversation that I have with myself a lot, is which one's more important, the price to earnings, because that means it's lower price compared to where it should be, or EPS growth, that's future- Earnings per share.
Future earnings per share forecast. So that's 6% higher, but that's, like- Way more undervalued. So I always go, like, I always lean towards the PE for the EPS growth, but that's just me.
Other people might do it differently. Because it's more of a short-term growth thing, right? And then you can always change your mind? Because, like, if it's undervalued compared to its peers, the probability is that it's going to go up. Whereas this doesn't necessarily indicate that the share price will go up, even if the EPS grows up.
Whereas this, from what I've done, actually is pretty consistent that if this number's low, and say this is the average, it will, at some point, rise in price to- Match the average. Around this average. We talk about that all the time, where the price, the PE of a specific stock you're looking at, if it's low, it'll typically rise to the average.
So here you see, again, their assets have went down in the last couple years. Okay, so we're looking at the balance sheet. Total current assets has gone down over the last few years.
And their debt has gone up. The debt's gone up. So that's, eh.
Well, I think this is probably going to be pretty normal for most of these companies because of the interest rate hike, right? And people are spending less. What the hell? That's not good. But that's good.
So let's see there. It's actually the difference between net income and total revenue. Net income is after they take out all this other nonsense.
Yeah, all the other expenses. Your debts, just like when you're living and your paychecks. It's going to take out all the extra stuff.
So this would be like your paychecks. This is like when you work before your taxes and your rent or your mortgage, your car payment, whatever, so whatever your salary is. This is what they have left over after everything's paid for.
So that goes straight into their bank account, their wallet, whatever. So it looks like their income's gone up even though their revenue's gone down. Yeah, so that means they're becoming better at operating all their expenses and whatnot, possibly, potentially.
But I like that number. I like this a lot. Yeah, their net income looks pretty good.
This, eh. Not so much. Well, I kind of expect that though if people are spending less because I would think home improvements would be discretionary.
So they're borrowing less money. That was actually my instinct on what I was just looking at. So it makes sense if they are borrowing less money, so they're.
But they're generating less cash from their operation. So I think they're focused on getting their debt paid down because interest rates are high. That's actually a very smart move.
So this, yeah, this seems pretty good. Pretty good so far. But let's just do one more thing.
If you remember, I do the PE versus the peers. 20.9. 20.97. So they are undervalued compared to their peers. So that means TJ Maxx is actually overvalued compared to the peers.
The probability is they're actually going to go down towards the mean at 20.97. That's good to know. Okay, so we'll go to your chart. 20.97. Yield's 2.16. And their dividend's $1.15. So just to do a comparison between Pfizer and Lowe, I can already tell you that this one is way better.
Based on their profit margin. That's just. The fact that they grow their yield as much as they do.
That's just. No, it's not directly here. But this is one of those where people look at this and they automatically, they probably would dump money into Pfizer over Lowe's because.
They're only looking at yield. I look at all of it. You wouldn't get, you'd get more per year with this one, obviously, because it's only $28 a share.
Whereas this one, you're not getting very many shares at all for whatever you're putting into it. Yeah, but like you said, if the profit margin's going down as much, they might very well cut their dividend. That number's super huge. And if they cut their dividend, the cost of the shares are down. This number is super inflated because pharmaceuticals is the one area where like you can be between like a 8 P.E. and 150 P.E. so I don't really... So you'd be skeptical of the actual P to Piers of a pharmaceutical company? Yes. So next one is R.Y. I do believe that is a bank in Canada.
Canadian bank? So let's take a look see at R.Y. Royal Bank of Canada. Holy crap, I'm a genius. First thing, first impression, that's... Big price.
Super high. Experts love it. Chart, five years.
So this should be going up. It should be going up just because of interest rates and the banks have more money and everything. Look at that resistance point right where that straight line is at.
It bounced off it, rode it, dropped, came back up to it, crushed through, shot up. I think the resistance point is more in this area here. There's tons of resistance points but that one's a major one if it bounces off it.
But now it's moved because we're further forward. Yeah, so you're just looking at this chart. This should go up in the near future.
Well, again, I think that top one... If you don't know how to read charts, any time that there's a line like that, it generally continues on that line. And any time there's a line like that, so those will be your new points going forward. So it should be... Resistance points can go straight across parallel.
Yeah, or they can do that within the boundaries on an upward slope or a downward slope. We saw that one and I think it was either Lowe's or the one before it, where it actually was like a downward. Look at that.
There is no short interest in this bank. Smart people. I mean, it is Canadian.
Problem with... You have to remember with Canadian, there is a currency exchange. So when we get down here, the dollar one's going to be, I don't know, 90 whatever cents. So is this in Canadian dollars? Yeah, it's in Canadian money.
So I don't like how this dividend looks already. If you're an income investor... What did that say? I missed it. If you're an income investor, you want like stability.
This is at 90 what? 90 what? 103. 90 what? 102. 1. It's bouncing all over the freaking place.
Yeah, it's not actually trajectorying up. It's bouncing. Well, the reason I would like... The reason that you like consistency is because if you actually are living off of your income, you need to know that at the end of the month that what exactly is coming into your account.
I would still buy this one as an income investor and I would just plan for... Variable. Worst case scenario, you're going to get 97 cents for the dividend. Anything above that's gravy.
So I would like... If I bought this one, that would be my monthly dividend that I put into my chart. So you would actually plan conservatively based on the output. Anything above it would be... Where I think a lot of people get into trouble is they'll add all these up.
And they'll divide. And divide and they'll come up with a number like this. And there's like you see down here, there's three month or three out of four quarters where... Lower than that.
Lower than that. So if you're banking on that, you're creating a problem by using that math. Definitely, I agree with Tim.
I'll go on the conservative mode on that. So that's what I do. I would buy one like this and I would say this was like 40 cents.
And this was like 70 cents. And then I'd be more suspect because it's in a range of 104 to 97. Yeah, those are fairly close to each other, I think.
It's close enough where I could feel comfortable pointed trigger on that one. You don't see a dividend raise. I mean, you do.
But then you see a dividend cut in the same thing. So that's a decent issue. That's probably double what you get in the S&P.
I would think that this bank's motto or this stock company, whatever, that they basically pay out on a percent based on their revenue or something like that, which is why it fluctuates the way it is. So the one thing you have to make sure, remember, you have to make sure that their actual reported earnings cover their dividend, which these all four do. Yep, that looks really good.
There's their PE. It's like double. There's their forward PE, which I think is high for a bank, but we'll double check that in a minute.
Banks are generally in like the 10 to 12 range. I think that's a little bit high. So let's look.
PE. Competitors. So compared to its competitors, it's awesome, the PE.
Yep, it's a little on the low end. It's awesome in that. I mean, that's still good, but these numbers are better.
Yeah. You see, this one here seems to be pretty good. Well, and this is actually what happens a lot of times.
Tim will look into a company and he'll actually find one of the competitors might actually have better metrics. So that's pretty decent. Other than that, I mean, we'll have to look at what the bank, I'm pretty sure the bank's like 10 to 12, but maybe it's 14 by now.
But that would be one you might stick on your list to go do further research while you're doing this process, right? Yeah. So I like what I see there so far. Now we come down here and I don't even know how to read that number, that trillion.
I don't fucking know. We'll just use it to the ones. It's gone up every year.
That's awesome. That's gone up total debt pretty much every year. So that's not gone up.
Yeah, that's bad. But you look at their assets as far outpacing their debt. So I mean, the worst case scenario, they could just sell an asset to pay their debt off.
I mean, so if they needed to, you don't like to. But I mean, as a bank, it kind of makes sense that they're taking on more debt because interest rates are higher because they're probably expecting higher payouts over the next few years. Locking people in at the high interest rates and income.
So their income's gone down. Again, I would expect that way if they're taking on more debt. What is the debt situation? 230 some.
So that makes sense to me. Taking on a lot more debt. OK.
But they're actually making more of them. Seems like, wow. See, OK, so that is exactly what I was thinking, that because they're a bank, they're probably lending money out, which means they are taking on more debt.
However, they're probably their monthly payouts are probably actually increasing, which is exactly what this thing says to me. This is worse than Lowe's, but better than Pfizer. But let's look at banks just to see.
Maybe 18. So let's check out the average pay for the peers. 1338.
You thought it was about pretty spot on. So it's just a smidge low, right? Because it's like 12 something. So I do like CLM is an extensive process that I do every week for those emails.
But it's something that I'm doing anyway. So it's not a huge waste of time for me. In all honesty, he finds a lot of stuff that he didn't even, he wouldn't be doing or finding otherwise.
So it works out for sure. So, yeah, their PEE is a little lower than the average. Not anything crazy.
The profit margin is huge at 28 percent. Over like an older bank, that's super huge. So what I'm seeing here, just looking at the quick comparison, you're making a little bit less per share than Lowe's.
But remember, Lowe's is 216. Whereas ARP is 106. So you can get two shares pretty much for the same price as one.
So you're going to get 208 instead of 115. They do yield more. They have more room to raise their dividend.
But they don't lower their dividend like Lowe's does. And they're comparable to their undervaluedness. Yeah, that's what I have so far with my list.
Very exciting. Tainted. Now we're going to look at EGBN.
I never even heard of this company. EGBN. I can't even tell you if this is legit or not.
Who knows? But that's why I wanted to actually have some outliers like that that you've never seen. Yeah, no, I think that's good. Because you know this isn't staged then.
Tim just finds these randos. So that one's super cheap. $18.33. Just what we like to see.
That's in my price range. Look at what the experts think. That's fantastic.
They got an F rating. That is freaking awesome. What do the other ones say? Go down, go down.
I like what I'm seeing so far on this one. Yeah, go down. B. So they're all saying avoid.
Yeah, so let's look at their five-year chart. See what's going on with this one. Yeah, that does not look good.
I don't like that tip down at the bottom there. Does this have a news tab anywhere? Chart is shit. They do, but like to find out why.
Yeah, you'd have to do a lot more extensive research. So I wouldn't really dig into the news until you look at some of the other metrics. But this could very well be a freaking DQ just even based on chart.
So it should be right there. Around there is where it should be trained. The fact that it's... We'll draw a line from here to there across that top.
You see how it broke? Yeah, keep going. See how it broke down through that resistance point where it was back of the thing? That means that is now a new established ceiling for this lower mark. And that's scary.
You see what it did? Because it tried to hit it twice. Tried to hit it twice and it went down and it's going down even further. That's a bad sign.
That means it's probably going to break through another lower resistance point. More than likely. Unless something drastic turns around with either news or something else.
I mean, but that's a good number there. I didn't actually touch on the other ones. The fact that... Shares held by institutions.
Yeah, that means like the big money people are holding three quarters of the shares. It is a microcap though, so it doesn't have a lot of... Okay. So microcap does make it a little different.
But still this chart, I wouldn't buy this. This chart's scary. Well, let's look at some of the other stuff to go through the process.
Okay, so let's look here. 9.72% dividend yield. That's a good number.
Looks like the last quarterly dividend. It's been exactly the same price for the last four quarters for dividend payout. So it's growing it.
Growing a lot. This, I don't think they're going to be able to continue that growth. So now I'd be curious.
Where's that number that shows whether they can do it or not? Because it looks like to me that if it's 45, it's going to end up right here at 180. So that's actually going to be a zero growth year. So they grew it a lot when there was free money out there.
And once they started rising the interest rates, they didn't have the free money, the dividend growth went down a little substantially. But you see the dividend, like this is what I touched on earlier, what a dividend magnet looks like. See how the dividend is going up and the share price up here was going with it.
Something happened in this area. We have to look in the news feed or do a Google search. Why the dividend went up to 180 from 170, but the share price just plummeted.
So that's a big discrepancy. Remember, this isn't yield price. This is actually the dividends they paid per share.
So there's something that happened in this area that caused the share price to just go down to next to nothing. If it was nothing, if it was just something stupid like what happened with NEP, for example, where they said, well, they're not going to grow their dividend by 10%, but it's going to be like 1% or 2% and the share price plummeted. Well, then that's news that you can interpret as... So the fundamentals of the company are fine, but this looks like there's fundamentally something changed in the company.
And they didn't change yet. So I would think the dividend after is going to be... Where's the thing where it predicts the next one? I do believe there'll be a dividend cut in this one. Yeah, that's exactly what that looks like to me too.
So they paid 45 for a year now. Yeah. So that's good on them.
You'll see their four PEs. 12.65. Let's see, 67 covered the dividend, 91 covered the dividend, and 94 covered the dividend. They don't report until... What the hell day do they report in here? Oh, yeah.
So 7-24, they're going to report. This is what the experts are saying they're expecting. They think it's actually going to go up again.
So 47 would still cover the 45. So if that's indeed true, that's cool. So this would be one where I would be looking into the news to figure out what the heck actually happened.
Yeah, something fundamentally shifted this one. Something shifted. Because that's a really good number.
Yeah, that's really good. Their net profit margin. Those are good numbers.
Price to earnings is the lowest of all the peers. Those are good numbers. Dividend yields, best out of all the peers.
So something changed. We just have to figure out what it is. That's part of the detective work when it comes to... Well, that's why sometimes stopping on one of the first two metrics isn't always the best answer.
Sometimes you need to build the full picture and then sometimes you have to dig for more. Oh, look at that right there. That might be what it is.
They took on a crap ton of debt. That's a lot of debt. What is this company? Because that might make sense depending on what sector it's in.
Net income's gone down. Debt's gone up. Debt went up significantly.
Well, the income would make sense if they took on a lot of debt going down. And let's look at the cash flow. Cash flow should be nothing.
But let's... I don't know. The cash flow's done pretty decently. Yeah, cash flow's not... You see they're from finance.
Cash flow financing. They took a lot of debt on. Well, and they might have taken debt on to pay the dividend, right? Yeah.
This is one of those we had to look at. This is one of those ones where... Where like they didn't have enough money in their bank account to pay the dividend. So they actually borrowed money so they could pay their dividends.
This is one that you'd have to do a lot of research on. I don't like what I'm seeing in this one. This one's probably not even going to make my chart.
But what does this company do? She asked. It is a bank holding company for Eagle Bank that provides commercial and consumer banking services primarily in the United States. So it's a bank.
Okay, so it's a bank. Again, taking on debt to get more monthly payouts makes sense while interest rates are high. But that's a significant jump from what those numbers are showing.
Yeah, they took on... Probably more than makes sense. So it's undervalued compared to its peers of the regional banks, 1405. So I mean, yeah, but I still wouldn't... Yeah, too many red flags.
I wouldn't actually have this... Wouldn't do anything in this one. So delete. And the last one we're going to do... You can right-click, right? The last one we're going to do is RDUS.
RDUS, happy to see me? RDUS? The cat RDUS, happy. RDUS. I never heard of RDUS either.
Radius Recycling. Okay, I've never heard of this one. 1537, nice in our price range.
Yeah, I do like that. I mean, I like that as long as there's nothing wrong with the company. The ratings are kind of shoddy.
Hold, sell, derating. So I like what I'm seeing thus far. Let's look at the old five year.
That's one of those. Okay. I don't mind that chart.
I would think it should be trading about right here. So it's about fair value. So as long as it stays off that resistance point right there.
Like if it... It shot up here, but then it shot down. This is like, this is what I think it should be trading between based on what I got in my chart here. So this is an aberration.
Again, that was what COVID... Actually, that's interest rate correlated, I think. So that's interesting. Let's look at their dividend.
19, 19, 19 quarterly. So the last four quarters are all 19 cents, stayed even. So that's pretty decent.
Annual yield 4.72%. It says April 19th here, but if it hasn't updated, you just do... Extrapolation, April, May, June, July. You can go back to the actual chart and... August 5th. Yeah, so it'll be in there shortly.
So if it's not in your brokerage account to begin with... Checkinvesting.com. It'll be in, yeah. Okay. Okay.
Let's look at the historical dividend. It's just tedious, but it's pretty easy once you get the hang of what I'm doing. Once you go through this a few times, you can probably do this in a couple of minutes for each one.
So this one is the model of consistency. Oh my God, look at that. That is like, there is zero slope to that.
Straight across. So that means... So it's literally been consistent from 2016 through right now. Yes.
So that means this should end up being 75 cents, would be my guess. So the next one should be the same, barring or extenuating data that makes it change. So that's what I gather from that one.
So this isn't a dividend grower. But it's consistent as hell. No, this is one of those weird ones.
You see that it doesn't have this. This is how Schwab lets me down. So you actually have to do... Oh, that's troublesome.
Why are they below the bar there? That's troublesome. That's troublesome. Oh, they're negative.
So that means they're actually not earning enough earnings per share to cover their 19 cent dividend. So that's... Scary. Yeah, that's not no bueno.
That's not good at all. Derating might be justified. Here's another red flag.
But that makes sense if you look at the other thing. Yeah, it does make sense based on that other thing. I don't know if I did this before.
Like you actually like... Schwab has something cool where you can like look at it based on this stuff. Return on equity. This company.
Shit. That does not look good. Yeah, so I don't like anything I've seen in this.
I don't even have to look further, really. But I'll go through it just so you guys get the... Yeah, I was going to say go through and tell them what's giving you 20 cents. Here's something that I didn't touch on the other ones.
Dividend coverage ratio. That means... Negative 300% dividend coverage ratio. That's bad.
Yeah, Zeus, apparently. It's doing 741. Why can't you draw on a star? That's a good one.
These, no. Because I don't like those at all. Profitability, profit margins, shit.
Man. Yeah. Their direct competitor is, I think, a little worse than they are, but... These are all shit.
Shite, shite, shite. Recycling is probably not the area you want to invest in is what it looks like. I was wondering about that.
Because I've always heard it costs a crap ton of money. Here's what the experts... Where they put their money with their mouth. Okay, there's the hole.
There's the hole. They're saying outperform on this piece of shit. Wow.
Really? That's the one that was worse off than Radius. They're saying outperform on that one. Zeus.
So apparently recycling is the place where the experts want you to put your money into. So I'd be really hesitant to put my money in there if it's across the board like that. I'd ask why the experts are trying to divert money into... Because we just looked at these two companies and saw they were trash.
So why would they want you to put your money? Yeah, that doesn't make sense at all. Unless they're foreseeing like they're trying to do a predict a macro trend like recycling is going to be big in the future. I don't know.
I don't think that's going to happen for a while. We don't even have to really look at this. But we will.
Total assets. So debt's been consistent. Assets are the same.
Debt's been consistent the last two years. But it does look like they took out a lot more debt over the last two years. Like a lot more debt.
Income. And net income is trash. The revenue about averaged out.
Look at that. Holy crap. They're in the negative.
They're not making any money. But that makes sense again with the amount of debt taken on. So you have to like... Revenue's not terrible.
So like what I'm seeing here is here's how much they're making and here's how much it costs to run their business. So they're actually losing money. Yep, that's red flag.
That's crazy. How's this company still in business? I do not know. Just to verify.
Yeah, so this one's just garbage. Okay, so that one will get also deleted. So out of the five you had originally going into this little exploration, we only have three that left.
So we have three. Okay. And then the next episode we're going to go over these fun things here.
Close-ended funds. Close-ended funds. They are actually... You'd actually evaluate those differently.
But I hope you've learned what I look for whenever I'm doing the valuations. That's super... It's super important. Okay, so let's do a quick summary.
You can look at the five-year chart to see if you can identify any patterns on the chart. You can obviously identify the resistance and what's the other point? Support. Resistance and support lines.
Support lines. You can obviously do that with your charts. We also then will go down and we will look at the dividend per share.
Check out the consistency. Check out if it's going up. And then we go into their historical dividend to see if the dividend is going up or if it's going down.
If it's been like the same like this example where it was the same every year. Then we go down here into their historical earnings. You want to make sure the earnings... Their actual earnings.
Cover. Cover the dividend. Whereas this one's not.
So that means they have to either sell parts of their business to pay for their dividend or they have to borrow money to pay for the dividend. Which is either one of those cases is bad because it's... If you sell the business, you're not going to generate enough revenue. So you're totally... And if you take on debt, you're eating through interest rate.
So it's... I don't know who's running this company. Like it's making three billion a year in revenue. But like it's not making any money per share.
So I... Or what they did is they just made a shit ton of shares. Like they went from like say 150,000 shares to like 1.5 million shares or something crazy. They did some crazy shit with this one to just to make it this far.
Then you go down into the... Peers ratios where you get five... Schwab gives you five different direct competitors. Four different direct competitors. We look at the... The only numbers I really like in this one are they're important or the net profit margin.
So on the overview, net profit margin, you look at the price they're earning. You can also go to the dividends. You want to make sure the payout ratio is low and the dividend coverage is above 100%.
Well, this is a bad one to do that overview thing because the other one you were looking at the... Well, I mean, it's still... You can see this is... Anything under negative is bad. It means they can't afford the dividend. Anything above 100 is good.
That means they... Like that means they could pay their 741% of their dividend. So this is just the backup of that other chart we looked at pretty much. Okay.
So you can... But in this chart here, you want the payout ratio, you want it to be like under 100 preferably. And you want this to be over 100 preferably. Okay.
So payout ratio above 100. I can't even believe this is a D company. Should be an F. Garbage.
Okay. And then the last thing we look at is the financials that they actually report. We look at the... Balance sheet.
The balance sheet. We like... We look at the assets, make sure the assets are going up. Make sure the debt's going down or staying the same-ish.
And then we look at the income statement to make sure the revenue is going up. And that the net income is going up. And we look at the cash flow to see what's going on with their cash.
Like where all their cash is going. We did that for five and we came across three that were... And then you'd look at the PE to peers. Then you put it in your little spreadsheet and you'd be like, oh, nice.
So that's how you evaluate income stocks according to Tim. Other people might do it differently. I don't know.
So that's that one. Stay tuned for next one. It's the closing to fund one, which is different.
Yeah, they're a lot different. So closing to funds have different metrics that we look at. So they're a whole different animal.
So we'll give you guys an outline on those. Let us know if you guys like the... Bobelo. Like the whole... Shout out to Bobelo.
Keep me going. All right, guys. We'll see you next week's episode.