Sunday, November 10, 2013

Dividend Compass Final Four- Walmart v Baxter

We are down to the second to last match, the second Final Four matchup. In the first match, Microsoft beat out Tim Horton's. Next up, its Walmart versus Baxter.

The Dividend Compass Cup rules are straightforward, we run the two quality, wide moat companies through the Dividend Compass to analyze which is the more interesting investing candidate. Todd Wenning's Dividend Compass scores them 1-5.

Walmart had to beat McCormick Spice and Exxon Mobil. Baxter took down Novo Nordisk and CH Robinson. Let's see who emerges victorious and wins the rights to face Microsoft in the Cup final.

Pundits say the recession recovery has been good for Costco shoppers but not so good for Walmart shoppers. Still if this is bad, I am sure most companies would trade for Walmart's operating metrics

Walmart metrics
FCF Cover, dividend growth and ROE are all excellent. About the only important category where Walmart struggles is operatin margin, but here we have the source of Walmart's moat in the first place. Quoting Jeff Bezos "you margin is my opportunity." And that 5% margin is the reason Walmart is one of the very few retailers to withstand the Amazon onslaught.

Walmart scores

Walmart racks up 4.57 five year average. Better yet for its investors, its weak operating margin scores can be seen as a source of enduring competitive advantage.

Baxter delivers strong metrics across the board with a sole but important exception. FCF cover dropped down to under 2x. This is the highest weighted category in the Dividend Compass Cup.

Baxter metrics

The FCF Cover slowdown shows up in bringing Baxter's most score all the way down to 4.45. Still its five average is impressive.

Baxter scores

Baxter did not finish strong, its weakening FCF cover put its most recent period below Walmart's five year average, still Baxter's long term track record is well above Walmart's and that is good enough to get Baxter through to the final where Microsoft awaits.

No comments:

Post a Comment