Walgreen
Walgreen Company (NYSE:WAG), the largest U.S. drugstore chain, boasts a track record of 37 consecutive years of dividend increases. The streak is expected to continue into the future, given this company’s low payout ratio of 34% of the current-year EPS estimate and projected EPS growth of 13.5% annually for the next five years. Walgreen Company (NYSE:WAG) is presently yielding 2.2%.
Last year, the company’soperational performance was battered by a standoff with Express Scripts Holding Company (NASDAQ:ESRX), which resulted in client loss that hurt sales. Resolution of this stalemate has started to result in improved sales trends, even thought competitors still retain the majority of Walgreen Company (NYSE:WAG)’s customers gained during the Express Script standoff. The trend, however, is encouraging, and the current momentum looks poised to extend into the coming period. Walgreen Company (NYSE:WAG)’ sales in the fiscal third quarter, ending May 31, increased 3.3% year-over-year, with comparable store sales up 1.3% and prescriptions filled at comparable stores up 7% from the year earlier. Monthly sales indicate a rising momentum, as May sales rose 4.3% year-over-year, above the quarterly average, and total sales in comparable stores increased 2.8%. Prescriptions filled at comparable stores were up 7.1%, and would have been even higher without the adverse impact of the calendar shifts.
The company has embarked on new initiatives that are likely to boost its financial performance. Walgreen Company (NYSE:WAG)’s earlier-announced 10-year supply partnership with AmerisourceBergen Corp. (NYSE:ABC) will be beneficial to both parties in terms of sales and earnings. Moreover, it gives Walgreen Company (NYSE:WAG) and Alliance Boots the right to purchase up to 7% of AmerisourceBergen Corp. (NYSE:ABC)’s stock in the open market, as well as warrants exercisable for 16% in the aggregate of AmerisourceBergen Corp. (NYSE:ABC)’s equity. In addition to this deal and Alliance Boots’ synergies, the company’s long-term prospects are supported by aging populations, accretion from the implementation of the healthcare reform, higher healthcare spending, greater penetration of generic drugs with higher margins, and emerging market expansion.
Ford
Ford Motor Company (NYSE:F), the second biggest U.S. automaker by market share, is also one of the recent dividend growth picks of income mutual funds. The company has seen a major sales turnaround in the United States, where, last month, it posted its best May new-vehicle sales tally in years. In fact, Ford Motor Company (NYSE:F)’s14% gain in U.S. vehicle sales in May made for the best May since 2006. The F-series pickup trucks posted a 31% increase over the past year. The robust U.S. demand is supported by the U.S. energy boom and recovering construction markets, including the housing market’s expansion. The trends are also positive because of a pent-up replacement demand, as the age of the U.S. passenger fleet hovers aroundrecord-high levels.
Interestingly, demand for Ford Motor Company (NYSE:F)’s hybrid models is particularly robust this year—theautomaker has sold more hybrid vehicles this year than it has in any full year, breaking the full-year record set in 2010.These positive sales dynamics are helping Ford Motor Company (NYSE:F) increase its U.S. market share and are prompting productionincreases. As a result, last quarter, the company posted its 15th consecutive quarter of profitability.
However, the environment remains challenging in many markets outside the United States. In Europe, the company is enduring losses, but the outlook is improving, with expectations the company’s European operations will break-even within two years. In the Asia-Pacific-Africa region, Ford Motor Company (NYSE:F) will break-even this year, reflecting strong growth in volume, market share, and revenue. The rebound in global economies, and especially the rising middle class in emerging markets, bode well for the automaker’s growth potential in the long run. This is reflected in the company’s China growth, where May sales rose 45% from the year-ago levels, breaking records in passenger vehicle sales.
There are also several additional positives about Ford Motor Company (NYSE:F). Ford’s competitive edge over competitors rests with its short product cycle and the capacity to introduce new models faster than competitors.The company has achieved 12 consecutive quarters of positive cash flow. It boasts a solid balance sheet, with17.8% of its assets in cash and short-term investments and net receivables that cover almost 80% of the company’s long-term debt. Ford Motor Company (NYSE:F)’s stock is cheap at 9.2x forward earnings, especially given its 2.6% dividend yield (with a low payout ratio of 28% of the current-year EPS estimate) and the forecast long-term EPS CAGR of 11.9%.
