Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
- Rolling 4-yr Div. > 15%
- Dividend Growth Rate
- Years of Div. Growth
- 1-Yr. > 5-Yr Growth
- Payout 15% of avg.
- NPV MMA Diff.
- Years to >MMA
Other: JCI is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. JCI is a well-managed company with a strong balance sheet. In the near-term, the weak domestic auto market will be a drag on JCI's results. Other concerns include higher costs for raw materials and pricing pressure from customers..
Conclusion: JCI lost one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of negative one Star. Since my scale bottoms out at zero, this quantitatively ranks JCI as a 0 Star-Avoid stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $23.84 before JVI's NPV MMA Diff. increases to the $3,000 NPV MMA Diff. that I like to see. At that price JCI would yield 2.18%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the $3,000 NPV MMA Differential I'm looking for, the calculated rate is 16.6%. This dividend growth rate is well above the 13.0% used in this analysis. JCI won't find its way into my income portfolio with results like this.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I had no position in JCI (0.0% of my Income Portfolio) . What are your thoughts on JCI?