"Not a great time to be jumping into the market, but I found a nice boring paper and forest company with a nice steadily rising dividend over the years. Benjamin Graham would probably like this one"

Dow Jones Industrial Average 18,395.40 --- (Down) - Week ending 08-26-16

Schweitzer-Mauduit International Inc. (Symbol SWM, $39.15)

I think this company started out by providing cigarette papers and cigar wrappers to the tobacco industry. A pretty mundane business. They happen to be the largest producer of cigarette papers in the world. 

According to Google business and Reuters this is their diversified business now:

"Schweitzer-Mauduit International, Inc. is a producer of specialty papers and resin-based products. The Company manufactures and sells lightweight specialty papers, which are used in manufacturing ventilated cigarettes, reconstituted tobacco used in producing blended cigarettes and banded papers used in the production of lower ignition propensity (LIP) cigarettes. The Company operates through two segments: Engineered Papers, and Advanced Materials and Structures. Its Engineered Papers segment produces both tobacco-related papers and non-tobacco-related papers. The Company's tobacco-related papers include various porous papers used to wrap parts of a cigarette, such as tobacco column and filter, and reconstituted tobacco leaf (RTL), which is blended with virgin tobacco in a cigarette. It manufactures and sells a range of engineered resin-based, rolled goods, such as films, nets, foams and other non-wovens. The Company operates approximately 20 production locations."

 Benjamin Graham - The Father of Value investing

The reason I am suggesting it as a buy is because it pays a 4.09% dividend and has raised the dividend since 2012. The stock price has been on a wild ride this year with a big drop back at the end of February/March  2016 trading as low as $29.00 share. But it has climbed all the way back to near its previous 2016 highs.

SWM has a lot of stats that Ben Graham would like to go along with the steadily rising dividend and the business being boring. The Return on Equity is 19.40 and the PEG Ratio is 1.27. The price to the current book value is P/B of 2.30. Graham really likes the Price to Book to be under 1 and other noted value investors seem to like P/B to be below 1.4. (Christopher Browne, John Heins &Whitney Tillson). 

SWM also is in good financial condition to maintain that nice dividend with a Current Ratio of 3.50. They also had quarter over quarter sales increase of 19.50%.

On the earnings front, The foward PE is 11.53 and trailing 12 month earnings are $3.09 per share and 2017 earnings are projected at $3.40 per share. The current PE is 12.3, well below market average.

I would wait until this market corrects a little and try to buy this stock around the $37.00 price point. But you should see that sometime within the next 30 days. 

 SWM should give you a nice steady stream of dividends. Someday people will stop smoking cigarettes and cigars,  but I don't think it is going to happen for a long , long time. 

Freewilly

"The numbers keep leading me to the home builder stocks. Analysts seemingly hate this one, but I like it. We are talking about Meritage Homes Corporation , (Symbol MTH, NYSE)

Dow Jones Industrial Average 18,576.47 (UP) and hit All-time high this week ending 08-12-2016

The last 5 out of 6 analyst reports on this stock have all been downgrades. JP Morgan, Deutsche Bank, Credit Suisse, FBN Securities, and Sterne Agee CRT have all downgraded this stock. For me though, the numbers tell a very different story for the long term investor. 

Meritage Homes Corporation, (Symbol MTH, $34.92) is a Top Ten home builder in the USA that is focused on building new houses in 9 of the fastest growing states in the USA. I found the stock looking for companies that were trading at close to current book value, plus that had run at least a 10% quarter over quarter sales gain, and that had a Return on Equity of better than 10%. 

MTH fit the bill. It trades at a Price to Book of 1.05 or just about at the current book value of $33.16 per share. This Scottsdale Arizona company had a 33.5% quarter over quarter sales gain and a 35.2% quarter over quarter earnings gain. The Return on Equity is 11.40% currently. 

I should mention at this point that the US markets are at all time highs and that it may be a good time to take off an item or two that have not worked in your portfolio. You should also take a little bit off the table of things that are approaching fully valued even though you still love them. Raise some cash so that you have it available if we get a correction to prices in the next few months.

If you look at the insiders's on Meritage Homes they are buying in at a 3 to 1 ratio. The company had $2.86 Billion in sales last year and for the past 5 years the sales have been up 22.3% so good long term trends. The Price to Sales is 0.49. Interest rates for mortgages are still cheap here in the US and should not rise dramatically.  

On the earnings side, MTH earned $2.97 per share in 2015 an is projecting $3.58 per share in 2016 and $4.08 in 2017. This is a current PE of 10.15 and a forward PE of 8.58. The PEG Ratio is a very healthy 0.95. (I like it below 1.5 as a general rule). EPS for the past 5 years have been up 52.91%

The company has a Market Cap of only 1.39 billion dollars so maybe could be a possible take out candidate. So how has the stock price done recently? YTD the stock is up 2.74% and for the last half year up 15.51% but the one year change has been -17.6% , so it has been moving up recently. 

So I would suggest to take a small position in this stock and then add to it on a dip and look to hold it for 2 to 3 years. It is mid August, and the rich guys are stacking up cash, so don't go crazy with anything here and don't speculate to try to increase your returns right now. 

Enjoy the sunny summer time and the summer wild flowers and dream about peaceful things.

Thanks for stopping by,

Freewilly