First Look at 9% High Dividend Stock Vector Group LTD (VGR). Stop Smoking and Stop Buying VGR.

Preferred stock: None.

Bonds: $1.7 billion outstanding.  Nothing is due soon, but Vector has other debt troubles (see balance sheet below).

Image004

What does the company do?  Vector Group manufactures cigarettes through subsidiaries. Its Liggett Group subsidiary produces cigarettes under discount brands and private labels. The company also produces cigarettes in Russia. Recently, Vector Group has launched QUEST, which it claims is a genetically engineered nicotine-free cigarette.

DIVIDEND RECORD: Vector Group is a steady dividend payer and grower, but the money company is paying out more than it earns.

Dividend: $0.40

Dividend yield: 9%  ($1.20 annual dividend / $17.72 share price)

Dividend payout: 129%  ($1.20 / $0.93 recent EPS) –OR- 164% ($1.20 / $0.73 average adjusted earning power)

Image009

EARNING POWER: $0.73 per share @ 79.57 million shares

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created)

EPS

Net income

Shares

Adjusted EPS

12/2007

$0.93

$74 M

74 M

$0.93

12/2008

$0.69

$61 M

82 M

$0.77

12/2009

$0.31

$25 M

77 M

$0.31

12/2010

$0.68

$54 M

78 M

$0.68

12/2011

$0.93

$75 M

79 M

$0.94

Five year average adjusted earnings per share is $0.73

Consider contrarian buying below $5.84 (8 times average adjusted EPS)

Consider value buying below $8.76 (12 times average adjusted EPS)

Consider speculative selling above $14.60 (20 times average adjusted EPS)

Vector Group LTD (VGR) is currently trading at 24 times average adjusted EPS.  This is stock is speculatively priced.

BALANCE SHEET – Hideous!!  Negative equity!

Image013

Most of the damage to the balance sheet has been due to an increase of short-term debts and other long-term liabilities.

Fiscal year ends in December. $USD in millions except per share data.

2007-12

2008-12

2009-12

2010-12

2011-12

Current liabilities

Short-term debt

21

97

22

52

135

Accounts payable

7

6

4

9

10

Deferred income taxes

24

93

17

37

36

Taxes payable

12

44

30

25

Accrued liabilities

34

69

46

40

42

Other current liabilities

24

19

15

59

68

Total current liabilities

109

296

149

227

315

Non-current liabilities

Long-term debt

277

Deferred taxes liabilities

142

49

45

52

61

Accrued liabilities

2

Pensions and other benefits

35

34

39

46

Other long-term liabilities

156

304

512

678

593

Total non-current liabilities

575

388

591

769

702

Total liabilities

684

684

740

996

1017

Book value per share: ($1.12)  Vector Group has a negative book value per share.  This means stay away at any price.  There are much better stocks to buy.

Price to book value ratio: Not applicable because of the negative book value (under 1.0 is good)

Current ratio: 1.61 latest quarter (over 2.0 is good)

Quick ratio: 1.00 latest quarter (over 1.0 is good)

Debt to equity ratio: Not applicable because they have no equity. (lower is better)

Percentage of total assets in plant, property, and equipment: 6.1% (the higher the better)  Other assets include: Current assets 54.94%, Intangibles 11.59%, and Long Term Assets 27.32%

CONCLUSION – Vector Group LTD is a 9% high dividend stock, but I don’t trust their ability to payout the dividend in the future.  They are going to have to issue more shares or debt to finance the dividend.  The stock is speculatively priced at 24 time average adjusted earning power.  The balance sheet is horrifying.  They have negative equity and no plan to fix the situation.  I wouldn’t buy this stock until its balance sheet is repaired.  Stay away from Vector Group LTD.  It is headed for a cliff when the worldwide recession reappears.  This appears to be a poorly run company.

Image014

DISCLOSURE – I don’t own Vector Group LTD (VGR)

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Advertisements
Published in: on March 26, 2012 at 5:04 pm  Leave a Comment  

The URI to TrackBack this entry is: https://myhighdividendstocks.wordpress.com/2012/03/26/first-look-at-9-high-dividend-stock-vector-group-ltd-vgr-stop-smoking-and-stop-buying-vgr/trackback/

RSS feed for comments on this post.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: