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Friday, 11/14/2003

A Drip with No Cords Attached
By Nich Sheldon
BDK - Black & Decker Corp

Company Description

Black & Decker is a leading global manufacturer and marketer of power tools and accessories, hardware and home improvement products, and technology- based fastening systems.

[Source: Company Press Release]

Reasons to Invest:

This week's Drip of the Week is a worldly renowned company of which has been publicly traded on the NYSE since 1970. A quick once over of their website and I found their vision statement, otherwise known as the company outlook and/or objectives. They claim that their objective is to establish itself as the preeminent global manufacturer and marketer of power tools and accessories, hardware and home improvement products, and technology-based fastening systems. Care to venture any guess on which company this is?

If this question has left you with a puzzled countenance, please allow me to introduce Black & Decker Corp (NYSE:BDK) as this weeks Drip of the Week. BDK looks attractive to us for quite a few reasons. First of all, their figures and performance history are quite impressive. Secondly, BDK announced an increase in their quarterly cash dividend less than a month ago, and was recently listed on the most active list for the DJ Retail Index.

A Look at the Figures

Over the first three quarters of this year, BDK's revenues rose two percent, to $3.23 billion. Their net income increased 26% to $193.5 million. The company reported that these figures reflect the positive effect of the foreign currency exchange rates from overseas business in Europe. Net income figures reflect lower net interest expenses and the cost reduction effect. These numbers are based on the first nine months of 2003, however I do see the need to break down the success of BDK's third quarter figures.

Net earnings for the third quarter were reported to be $74.4 million, or $0.95 per share on a diluted basis. This is a pretty hefty increase when compared to the third quarter figures of 2002, which came in at $54.9 million, or $0.68 per share on a diluted basis. You math geniuses can calculate that over the course of one year earnings increased by $0.27 cents per share, and net earnings increased by $19.5 million. Increases like this are becoming more frequent with each passing day of this improving economy, but these statistics are even more impressive when you compare them to BDK's competitors.

Performance History

On November 3rd, 2003, BDK hit its 52-week high of 48.47, which is 15.27 points higher than its March 12th low of 33.20. Now I understand that most of the drips that I have listed in previous articles have had a greater range of movement than BDK, but at its current level I still like the stock.

Since the November 3rd high BDK has been on a downward trend. The stock has closed lower 6 out of the past 9 trading sessions and is currently idling between its simple 10-DMA and 50-DMA. It seems apparent to me that since hitting its new 52-week high, traders have taken the past few sessions to seek profits. After all, BDK did climb 8 points in one month's time, further convicting bullish traders to dump the stock and claim their profits. While the MACD is giving off a sell signal on BDK I can't help but notice that the stock is starting to consolidate around short-term support of 45 and change. This makes me suspect that the current dip was not caused by bearish day traders, but rather bullish traders who were taking profits as if to give the stock a short breather before continuing higher. The reason I am noting this is because I suspect that at its current level, BDK is offering a nice entry level for us long-term investors.

Also noteworthy is the fact that BDK was listed on the DJ Retail Index as the 5th most active in terms of volume.

Dividend Information

On October 17th, 2003 Black & Decker Corp's Board of Directors announced that they would be increasing their quarterly dividend to $0.21 per share, from $0.12 per share. This nine-cent increase is even more the reason to invest in BDK as they are now yielding a 1.83% dividend. The new dividend is payable on December 26th, 2003 to shareholders on record by December 12th. This provides you a few weeks to consider and investigate if BDK is a worthy DRIP candidate for your portfolio.

Closing Thoughts

Black & Decker is quite the household name. They carry a wide variety of products ranging from irons and toasters to heavy-duty power tools. I like the fact that this company is so well known and trusted by people across the globe, not to mention their strong net earnings and revenue increases over the past year. If this is not enough to convince you that BDK is worthy of your portfolio, and the dividend increase doesn't entice you either, how about thinking along the lines of what special holiday is coming around the corner.

For instance, for Christmas my wife has already asked that I surprise her with Black & Decker's new cordless electric can opener, known as the "Gizmo." I suppose the world is becoming so advanced that everyone is seeking out new devices and technology that comes without the cords. Therefore, who would I be to say that our regular can opener (with a power cord) doesn't need updating? I suppose I would be in trouble if I told her that I thought our regular old can opener works just fine! (GRIN) I mean after all how much would we have to pay for batteries just to power this new cutting edge can opener? Maybe next week I will spotlight the battery company that provides these new cordless devices with power, as they must be raking in profits from all of this new cordless technology. Here I go ranting and raving over a can opener that is probably worth the price when what I really want for Christmas is a DeWalt (DeWalt is partnered with Black & Decker Corp and DeWalt power tools can actually be linked to from BDK's website) heavy-duty nail gun, of which won't be very inexpensive. Not that I am trying to stereo type men as using power tools and women as being the kitchen crusaders, but you have to admit, BDK has a little bit of something for every gender, further convincing me that we could see a pop over its longer-term resistance level of 48 by the end of the holiday season. If we do see a strong pop over this resistance level, and the trend holds over this level, I could see BDK turning resistance into support.

This ends another exciting episode of the DripAdvisor.com Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the DripAdvisor.com limelight.

Until Next Week,
Nich Sheldon
Editor

Broker Recommendations

Strong Buy         3
Buy                3
Hold               7
Sell               1
Strong Sell        0

Brokers Covering  14


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

Min/Max Investment = $50 to $60,000/Year


Reinvestment Fees - 
Dividend investment fees: None
Cash investment fees: None
Auto reinvestment fees: $1


Transfer Agent:
First Chicago Trust
800-519-3111


Corporate Headquarters:
701 East Joppa Road
Towson, MD 21286
Phone: (410) 716-3900
Fax: (410) 716-2610



 
 

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