August 20, 2012
Recommendation: D-rated Sell
Welcome to the Stock of the Day for August 20, 2012. Thomson Reuters Corp. (TRI) goes ex-dividend tomorrow. Buying ahead of the ex-dividend date guarantees you the cash the stock will pay, but is TRI a good buy ahead of the dividend? There's only one way to know for sure and that's to dig into the company's financials. Let's take a look under the hood.
Company Profile: Thomson Reuters Corp. does many things, but what gets top billing are its information services and news services. The company bills itself as the world`s leading source of intelligent information for businesses and professionals. This is a $24 billion business and the stock currently pays a 4.4% dividend.
Sales and Earnings: TRI has beaten earnings expectations in each of the last four quarters. And they may very well beat again in the upcoming quarter, but the fact that sales are expected to be 1.7% lower than last year and that earnings are anticipated to come in 16.1% lower, I don't see a company that is moving in the right direction.
The Dividend: I love dividends and anything over 3% gets my attention. One thing you always want from a company is a long history of dividend payments. This shows that the company is dedicated to paying shareholders and it's a good indicator that future payments are secure. TRI has paid reliably for more than two decades. But that's really the only thing the stock has going for it right now.
Current Ratings: Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. And fundamentally, TRI has some serious troubles. We talked about negative expectations for sales and earnings—both are lacking. But the real trouble areas for this stock are in operating margin growth and buying pressure. This makes absolute sense to me because the market is rewarding companies that can expand margins in this economy. It's no wonder that despite paying an attractive dividend the stock has moved just 1.5% higher.
Bottom Line: As of this posting, August 20, I consider BKS a D-rated Sell.
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