Sunday, August 28, 2016

"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. 


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