While the bank has seen improving credit quality trends—a positive development that has resulted in lower loan loss provisions, which is boosting the bank’s bottom line—BOK Financial expects to see a continuing pressure on net interest margins this year. The bank’s ROE of 12.2% is much higher than the industry average of 8.1%.
BOK Financial is trading at a 40% premium to its book value and its industry’s price-to-book; however, its price-to-book is on par with its long-term average. The stock is up 14.6% year-to-date. Last quarter, Chuck Royce was also a BOK Financial shareholder.
Arthur J Gallagher & Co. (NYSE:AJG), an insurance broker and risk management services company, has a dividend yield of 3.5%, a payout ratio of 64%, and a five-year annualized dividend growth of 1.8%. The company has rallied some 16.1% so far this year, and it derives 75% of its revenues from the brokerage business and much of the remainder from the risk management business.
The company has seen robust revenue growth, with its combined brokerage and risk management adjusted sales rising 15% last year. Organic growth in base commissions and fees increased from 3.3% in 2011 to 4.7% in 2012.
The company’s CEO gave an encouraging outlook on the market, saying that in 2013 the firm sees “a rate environment that is still showing signs of firming in many lines, clients that are finding ways to grow their businesses even in these uncertain times, a strong M&A pipeline, and an operating environment where we can control our costs and improve our productivity.”
Arthur J Gallagher is trading at a price-to-book of 3.1x, versus 2.9x for the industry and the stock’s long-term average. However, based on EV/EBIDTAC, the company is trading at only 12.8x. Last quarter, Citadel’s Ken Griffin and Chuck Royce were hedge funders with largest stakes in the stock.
ConAgra Foods, Inc. (NYSE:CAG), a consumer and commercial foods company with brands in nearly 97% of American households, has a dividend yield of 2.9%, a payout ratio of 47%, and a five-year annualized dividend growth of 6.0%. The company completed its acquisition of Ralcorp Holdings in late January 2013, which now makes ConAgra, with annual sales estimated at $18 billion, one of the world’s 20 largest food producers.
The acquisition is accretive to earnings, which is reflected in ConAgra’s recent upside revision to its 2013 and 2014 EPS. The company now expects its 2013 EPS at $2.15, five cents better than its earlier guidance. However, as ConAgra’s debt has swollen with the acquisition of Ralcorp, the company will focus on aggressive debt reduction through 2015, which will result in the frozen dividend payout at $1.0 per share through that period.
On the other hand, the company is expanding operations through a joint venture in the flour-milling sector. Given all these changes, analysts are forecasting the company’s EPS CAGR at 10.7% for the next five years. The stock, which has rallied 19% so far this year, is priced at 15.1 times forward earnings, which is below the food products industry’s forward multiple of 17.8x. Last quarter, Ken Griffin was bullish about ConAgra.
In short, the KEELEY Mid Cap Dividend Value Fund is one of the best places for piggyback investors to find investment ideas, and it’s always important to pay attention to the world’s best money managers. Though each of the companies discussed here operate in different industries, they have served as strong income plays with price momentum as a bonus. Campbell Soup Company (NYSE:CPB) is still a value play despite its superb appreciation year-to-date, while Ryder and Arthur J Gallagher have solid tailwinds pushing their sails. ConAgra and BOK Financial, meanwhile, aren’t superb value plays, but each offers solid benefits for any income investors seeking stocks that have performed well lately.
Disclosure: none
