Looking for an education in looking at a specific stock

[Romer]

I rolled my 401K over into my Schwab IRA so I have some cash to invest

I plan on an Indexed fund, a bond fund, maybe an international fund and a maybe some stocks. Lots of threads on those products

Not saying I am buying this stock, but interested in opinions on this based on how I am looking at the parameters and if I am missing anything.

I was looking for stocks that pay dividends with low risk of going belly up

Came across Mercedes Benz in a stock screener Mercedes Benz Group MBGAF

Currently $67 a share which is half way between 52 week high and low

It pays an annual dividend that has a return rate of 8.44%

It is rated well by all the services supporting Schwab

It's debt has reduced over the last 5 years. It's long term debt to equity is 70 which isn't bad nor really good (I think). Honda is lower with a ratio of 42 where as Ford is above 200.

Price to earnings ratio is 4.4. I believe that is low so it is undervalued

EPS 15.28 which is 15 times what Ford is. That is good I believe

again, interested in how more experienced folks would look at this stock, what additional parameters etc. This is how I selected stocks previously and have had some real winners and a few losers over the last 40 years. Never had anyone to run the methodology I picked up reading with anybody before.

I am not asking for you to give me the loaf of bread, but to help me grow the wheat to better pick the bread I bake Am I growing the wheat correctly is a better way to put it.

Lots of other threads on funds, Bonds, etc. This thread is focused on this stock and are there better ways to look at it then I am.

 

[Al18]

The numbers you listed above make it an interesting stock that should be selling at high volumes. However on Yahoo Finance it’s listed as an OTC stock - why? My only experience with OTC is these stocks usually sell for less than $1. This isn’t the case with MBGAF. Also, daily trading volume is 29.5K, while F is 52650K. Lastly, MBGAF has only issued dividends on 5/22 and 5/23. You may want to investigate further before investing.

 

[Qs Laptop]

First of all, determine what you want out of a stock. Do you want growth? Dividend income? A combination?

This particular stock, MBGAF, is not growing. The stock price is about the same as it was a year ago. It's about the same as it was in April 2019. Yes, it's had some peaks and valleys but it hasn't shown momentum of steady growth.

The stock is an OTC stock because it is a variation of MBG.DE, which is Mercedes Benz as traded on the German stock exchange. The OTC variation has little daily volume.

It has paid yearly dividends, however, that most recent 8.44% dividend was 2.40% in 2020, 1.75% in 2021, and 7.4% in 2022.

When I look at a potential stock purchase I look at a lot of statistics.

P/E ratio, obviously.
Quarterly revenue growth, year over year. This one is -1.40% , not impressive, but could be worse.
Profit margin: 9.82%. Pretty good for automotive, I think.
Quarterly earnings growth, yoy, -7.30. Tepid.
Current ratio: 1.24. Anything over 1.00 is decent.

I look at the balance sheet and income statements. I look at the shares issued portion of the balance sheet and the long term debt and current debt sections to figure out how they are getting their working capital. If they are issuing new shares every year that is a red flag for me. If they increasing debt, that is also a red flag.

Do they beat earnings expectations?
What's the short sell ratio?
How's their cash flow?

Etc.

 

[qwerty3656]

Fastgraphs is a great tool. Below (if I uploaded correctly) is a snapshot of MBGAF as well as a snapshot of JNJ (just for comparison). The Orange line is a 15 PE, the Blue Line is the normal PE it trades at and the White line is the dividend. As you can see MBGAF looks cheap, but it also looks cyclical and they seem to have recently cut their dividend.

Edit: I'm not suggesting JNJ is a good buy right now - Its just a sample for comparison.

 

[Romer]

Thanks. Comments exactly what I was looking for.

 

[Romer]

I should mention I was looking for Dividend stock is who I came upon that one. I read on Barons today about Walgreens being a good dividend stock, but I learned my lesson believing what I read. I bought a solar stock years ago that the "analyst" said was going to go through the roof. It sure did, right to bankruptcy or I should say floor. It was a cheap lesson and I always try and look at the parameters before I buy. I had been on set and forget for quite a while and wanted to go through how to evaluate a good stock again. It really helps to glean a perspective from someone else as it helps you see things you might not have.

Thanks Again!

 

[Qs Laptop]

I should mention I was looking for Dividend stock is who I came upon that one. I read on Barons today about Walgreens being a good dividend stock, but I learned my lesson believing what I read. I bought a solar stock years ago that the "analyst" said was going to go through the roof. It sure did, right to bankruptcy or I should say floor. It was a cheap lesson and I always try and look at the parameters before I buy. I had been on set and forget for quite a while and wanted to go through how to evaluate a good stock again. It really helps to glean a perspective from someone else as it helps you see things you might not have.

Thanks Again!

Earning dividends is well and good, if your goal is income generation. But lots of people fall into the dividend trap where they hold dividend paying stocks that lose value over time, or else don't gain in share price.

A good example of a recommended dividend stock that has lost value is Verizon, VZ. In the past four years it has paid a $.60 to $.65 per share dividend every quarter. But the stock price has dropped from $62 a share to $38 a share.

Better to seek a growth stock that pays a dividend. The goal is total return, after all.

 

[Al18]

WBA is a very good value stock. They are a dividend aristocrat, having raised their dividend for 47 years in a row. There’s nothing that stands out about the stock right now. They’re payout rate is 57.66%, so there’s reason to believe they will continue paying dividends.

The reason I like dividend aristocrats is not for the dividends, but for the company to do an excellent job managing their finances, year after year, decade after decade while continuing to grow the company.

 

[target2019]

Auto manufacturer's stock is cyclical. That's very obvious in the FastGraphs chart.

When you say "safe" can you elaborate on that?

You can find utube videos by FastGraphs. There is more to your challenge.

I'm about 2/3rds through converting inherited stocks to SCHD. Got tired of analyzing and watching.

Seeking Alpha has a free section where you can enter stock tickers to a portfolio, and quickly look up common parameters to compare.

I tell my kids VTI. Why go further than that?

 

[Romer]

By safe I mean low risk of going belly up. To me if it is performing well and they have reasonable debt that is being reduced, this is safe. Please throw darts at this

VTI- is this a Vanguard fund?

Reading the Bogleheads guide to investing right now. So far I am getting it is better to buy an indexed fund rather than individual stocks. I see that a lot on here as well

 

[Al18]

Stocks can go up, down or to 0 when a company goes bankrupt such as GM and Dodge a few years back.

I don’t believe any mutual fund has ever gone to zero - they are simply absorbed into another fund.

Most of my money is in broad mutual funds and ETF’s. A small % is in individual stocks.

 

[MarieIG]

By safe I mean low risk of going belly up. To me if it is performing well and they have reasonable debt that is being reduced, this is safe. Please throw darts at this

VTI- is this a Vanguard fund?

Reading the Bogleheads guide to investing right now. So far I am getting it is better to buy an indexed fund rather than individual stocks. I see that a lot on here as well

Yes VTI (Vanguard Total Stock Market Index Fund) is a Vanguard broad based US index ETF (exchange traded fund). It closed up 1.55% or $3.58 today (at $234.24).

 

[Romer]

Yes VTI (Vanguard Total Stock Market Index Fund) is a Vanguard broad based US index ETF (exchange traded fund). It closed up 1.55% or $3.58 today (at $234.24).

Thanks, I have been researching the three fund portfolio. Being a customer at Schwab I have come up with a combination of Schwab equivalent funds and a vanguard fund. These would be in IRAs/Roths so tax efficiency on the ETF wouldn't be a concern
Two of the funds are Schwab and reviewing Boglehead forums show them to be equivalent to VTIAX (Total Market) and VBTLX (Bond). Schwabs international fund seems lacking so will go with the Vanguard ETF which I can buy via Schwab

SWAGX Bond - IRA
VXUS - Intl - ROTH
SWTSX total market - ROTH

I seem to have hijacked my own thread switching from stocks to funds. I am going to use 3 funds for my 401K rollover, but also will be doing some Roth conversions and will still buy some stocks. May switch just to the 3 funds after a few years

 

[target2019]

By safe I mean low risk of going belly up. To me if it is performing well and they have reasonable debt that is being reduced, this is safe. Please throw darts at this

VTI- is this a Vanguard fund?

Reading the Bogleheads guide to investing right now. So far I am getting it is better to buy an indexed fund rather than individual stocks. I see that a lot on here as well

This page lists all the equivalents for 3-fund portfolio.

https://www.bogleheads.org/wiki/Three-fund_portfolio

At Schwab all of the Vanguard ETFs trade for free. Not so for the mutual funds.

Your picks are fine, but you don't have to go with mutual funds. It's your choice.

When the 401(k) funds or money shows up in your Schwab account (something like 0.50% earned in the cash account), be sure to buy SWVXX money fund, or something like CDs, treasuries, and similar.

If you're looking for individual companies that won't go belly up for now, and for some reason buy index funds later, I'm not sure I understand the investing logic.

Yesterday and today are a good example of why you should not wait to invest for the long term. Last year was a good example of stock and bond index funds both retreating. So, they won't go belly up, but there are defintiely years that leave you wondering.

 

[target2019]

Thanks, I have been researching the three fund portfolio. Being a customer at Schwab I have come up with a combination of Schwab equivalent funds and a vanguard fund. These would be in IRAs/Roths so tax efficiency on the ETF wouldn't be a concern
Two of the funds are Schwab and reviewing Boglehead forums show them to be equivalent to VTIAX (Total Market) and VBTLX (Bond). Schwabs international fund seems lacking so will go with the Vanguard ETF which I can buy via Schwab

SWAGX Bond - IRA
VXUS - Intl - ROTH
SWTSX total market - ROTH

I seem to have hijacked my own thread switching from stocks to funds. I am going to use 3 funds for my 401K rollover, but also will be doing some Roth conversions and will still buy some stocks. May switch just to the 3 funds after a few years

Sorry I didn't read this before my previous response.

What I would do (emphasis on I) is determine when the money will be needed. How old are you? Close to RMD? That info might help decide on the IRA choices.

For the Roth, I'd pick VTI. Maybe I would also include a growth fund (like SCHG) to tilt more to growth over the long term. I started out in 2005 with a strong belief in international due to Bogleheads. By the time I got to 2020 and a Rollover, my confidence had dropped. I have a healthy stake in VXUS, but it's something you'll wonder about, I think.

I'm headed towards 71, so measure what I say by that age. What I suggest may be inappropriate for your situation.

 

[Romer]

Thanks for the thoughtful response. I am 62 and will have fully converted my IRA to Roth over the next few years so not concerned about RMD's. I have decided to not use the SWAGX Bond fund in my IRA and instead use CDs since I can get 5% guaranteed insured returns until I complete the conversions

As such, my plan for the IRA portion is to put what I plan to convert in 2025 into a 1 year CD and everything else into a 2 and 3 year CDs based on my planned conversion schedule expecting my final conversion in 2027. When I say conversion, my intent is to move the total $$ I can move and stay under IRMAA and then pay bills out of the Roth (Open since 2014) what's left is essentially the conversion. I did some pretty big conversions the last few years and I actually changed my 401K elections to Roth well before I retired. Lots of threads on if conversions are the right thing and not debating that here. My end goal is to ensure my wife pays minimum Fed and no State Tax if I pass first. That keeps it really simple for her with just Social security to worry about for taxes.

I also have a few I Bonds so think that provides a good safe position to balance risk for the next few years

For my Roth, I plan on downsizing my individual stock portfolio and investing in VXUS - Intl and SWTSX total market. As I reduce the IRA over the next few years and CDs in the IRA I will then fund the bond fund in my Roth. I will look at your suggestion for a Growth fund to add to the mix. Thanks for that

As you can see my plan evolved as I researched and had the 2nd set of eyes from this forum. I appreciate you all letting me work this out in front of you and think I have a good path forward now. Always open to feedback.

 

[njhowie]

Not saying I am buying this stock, but interested in opinions on this based on how I am looking at the parameters and if I am missing anything.

I was looking for stocks that pay dividends with low risk of going belly up

Came across Mercedes Benz in a stock screener Mercedes Benz Group MBGAF

Currently $67 a share which is half way between 52 week high and low

It pays an annual dividend that has a return rate of 8.44%

MBGAF dividend is paid annually, once per year, and the amount of the dividend is not stable. It can be higher or lower by a significant amount year to year. So, if you buy today with the 8%+ dividend, there is no guarantee that they might not pay only 1% or 2% next year, or nothing at all.

Now, some would say "Well, no dividend is guaranteed". However, most folks investing in dividend paying (common) stocks are looking for a stable payer that, if anything, will raise the dividend over time. Clearly the 8.44% dividend is a big factor which attracted you to the stock and you're banking that you'll get it annually. You need to weigh that against the likelihood the dividend may be lower in years going forward.

These are shares in a foreign company, and investing in foreign companies comes with an additional set of issues to consider. First, generally, dividends will have some amount of taxes withheld before you receive any. The rate may vary, but generally you will need to recapture the withheld taxes through your own income tax filing. You will not be able to recover those taxes if the shares are held in a tax deferred IRA or similar. You indicate this is rollover IRA account...assuming non-Roth, you will lose the tax withheld and not be able to recover it.

Investors should also account for the 26% dividend withholding tax that Germany levies on the company’s dividend payments.

Next, shares of foreign companies may be more impacted by fluctuations in foreign exchange rates than US-based companies. Most folks investing in foreign companies are generally not looking to have the value of their investment swayed to a greater degree by foreign exchange rates. Lastly, when investing in a foreign company, you are not always afforded the same protections as investing in a US-based company. Other countries do not have the same protections for investors as does the US. Mercedes/Daimler is based in Germany/EU and they do have regulations in place and their own watch dogs. However, you should not automatically believe that you will be afforded the same protections that you have with US companies.

MBGAF shares are traded OTC-Pink - not on a major US exchange. Your broker will not provide much support relative to shares that trade on NYSE or NASDAQ. OTC is often referred to as "The Wild West" as far as trading goes. Spreads can be wide, and you need to be extremely careful. Additionally, you may pay a higher commission because the shares are not listed on a major US exchange like NYSE or NASDAQ. If you receive commission free trades, you should double check whether that extends to OTC-Pink traded shares.

So, based on your original post, I gather the primary attraction that is leading you to consider MBGAF is the fat dividend. Your first thought should be "There is a reason the market is pricing the shares accordingly to produce that 8.44% yield".

Bottom line, as is generally the case, "Do not chase yield".

Currency in USD
Date Dividends
May 04, 2023 5.756 Dividend
May 02, 2022 5.275 Dividend
Apr 01, 2021 1.584 Dividend
Jul 09, 2020 1.02 Dividend
May 23, 2019 3.624 Dividend
Apr 06, 2018 4.468 Dividend
Mar 30, 2017 3.499 Dividend
Apr 07, 2016 3.705 Dividend
Apr 02, 2015 2.637 Dividend
Apr 10, 2014 3.117 Dividend
Apr 05, 2007 2.002 Dividend
Apr 13, 2006 1.818 Dividend
Apr 07, 2005 1.929 Dividend
Apr 08, 2004 0.375 Dividend
Apr 10, 2003 1.61 Dividend
Apr 11, 2002 0.88 Dividend
Apr 12, 2001 0.41 Dividend
Apr 20, 2000 2.22 Dividend
May 19, 1999 2.5 Dividend

 

[GhostofTomJoad]

Likewise, I'm invested in a reliable, global Norwegian company (the ADR ticker is NHYDY)--- but it pulls 25% of your dividend away before you ever see it. I inquired, and was told I could apply for a reduction or exemption (and even a rebate!) if I set-up an account with the Taxation Authority in Norway. Buncha junk. I'm not going to put in THAT kind of work! So, I'll be exiting that holding and redeploying the proceeds. But I'm biding my time lately, while it moves upward for me. Surprise!

***Also, be aware of that final letter in the ticker: "F." That particular flavor comes with added expenses, compared to the ADR version, which ends in "Y." To see if there is an ADR of your desired foreign stock, just do a search like "Mercedes Benz stock price ADR."

American Depositary Receipt.

 

[njhowie]

The numbers you listed above make it an interesting stock that should be selling at high volumes. However on Yahoo Finance it’s listed as an OTC stock - why? My only experience with OTC is these stocks usually sell for less than $1. This isn’t the case with MBGAF. Also, daily trading volume is 29.5K, while F is 52650K. Lastly, MBGAF has only issued dividends on 5/22 and 5/23. You may want to investigate further before investing.

There are two classes of stock for Mercedes on OTC, MGBYY and MGBAF. MGBYY are the primary ADRs and trade about 250,000 shares per day. The primary shares trade on the Frankfurt stock exchange with symbol MBG and trade about 500,000 shares a day.

Shares on OTC can trade at any price. I can point you to some that trade in the $100s or $1000s. Most you see trade below $1 because listing requirements for OTC are extremely lenient and the listing fees are significantly lower than on major exchanges. They will get booted off of NASDAQ because they are unable to maintain the required $1 share price, decide not to reverse split their shares to maintain the $1 minimum share price, delist, and then move over to OTC.

 

[Romer]

Thank you for the good information. I didn't realize there was so much to think about with Foreign stocks. I have moved away from this stock and more into a Bogle type investment plan as you can see above. Although most of my investments are still in stocks, I expect to transition over the next few years. My current portfolio is made up of stocks I have owned for years on the just hold it and forget it plan

I did just roll over my 401K and bought a large 1 year 5% CD and large 4.7% 2 year CD (New release, non callable, FDIC Ins). That provides the lower risk aspect a bond fund would in the short term. That puts 30% in CDs and I-Bonds. Still aggressive leaning, but will transition as I said over the next few years.

I probably will always own some stocks so this is all great and useful information

 

[target2019]

Thanks for the thoughtful response. I am 62 and will have fully converted my IRA to Roth over the next few years so not concerned about RMD's. I have decided to not use the SWAGX Bond fund in my IRA and instead use CDs since I can get 5% guaranteed insured returns until I complete the conversions

As such, my plan for the IRA portion is to put what I plan to convert in 2025 into a 1 year CD and everything else into a 2 and 3 year CDs based on my planned conversion schedule expecting my final conversion in 2027. When I say conversion, my intent is to move the total $$ I can move and stay under IRMAA and then pay bills out of the Roth (Open since 2014) what's left is essentially the conversion. I did some pretty big conversions the last few years and I actually changed my 401K elections to Roth well before I retired. Lots of threads on if conversions are the right thing and not debating that here. My end goal is to ensure my wife pays minimum Fed and no State Tax if I pass first. That keeps it really simple for her with just Social security to worry about for taxes.

I also have a few I Bonds so think that provides a good safe position to balance risk for the next few years

For my Roth, I plan on downsizing my individual stock portfolio and investing in VXUS - Intl and SWTSX total market. As I reduce the IRA over the next few years and CDs in the IRA I will then fund the bond fund in my Roth. I will look at your suggestion for a Growth fund to add to the mix. Thanks for that

As you can see my plan evolved as I researched and had the 2nd set of eyes from this forum. I appreciate you all letting me work this out in front of you and think I have a good path forward now. Always open to feedback.

Really can be a challenge hunting down decent investments given the noise in the media and elsewhere. If you're looking for decent dividend payers, there's more safety in numbers, and choosing a dividend index that approximates your goals is much easier to implement than buying 1 or 10 or 100 individual companies.

I think bouncing your ideas off other minds is a good idea.

Yield is a quirky statistic. Some have the opinion that steady growth of the dividend is of more consequence.

 

[GhostofTomJoad]

Really can be a challenge hunting down decent investments given the noise in the media and elsewhere. If you're looking for decent dividend payers, there's more safety in numbers, and choosing a dividend index that approximates your goals is much easier to implement than buying 1 or 10 or 100 individual companies.

I think bouncing your ideas off other minds is a good idea.

Yield is a quirky statistic. Some have the opinion that steady growth of the dividend is of more consequence.

Growth of dividend, yes. And let's not forget PAYOUT RATIO. For some sectors (Real Estate?) That number, in isolation, is not too meaningful. Instead, the FFO is a better indicator; but always look at the Big Picture. Don't zero-in on any single statistic.

 

[Thunder Up]

I would recommend that you go to your local library and ask for their Value Line subscription. A wealth of unbiased information.

A Value Line subscription is pretty pricey but I have found the Value Line subscription at reasonably sized local public libraries. Good luck.

 

[marko]

I use marketbeat.com/dividend/screener and dividendmax.com for dividend paying stocks information. Very detailed and more info than you'll likely need.

 

[DrRoy]

To reduce risk, I have no individual stocks. You can do a dividend fund or ETF instead.