Summary
Activist investor Dan Loeb wants a clean-out of the board and aggressive asset sales.
Forward earnings multiple is not a good valuation metric to go by considering the pending asset sales.
Dividend payout has now been $0.35 per quarter for 2 years.
Value investors will want more.
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At the back end of September, Campbell (CPB) declared a quarterly dividend of $0.35 per share. The reimbursement will be paid out at the end of the month. This means that the dividend has now remained the same for 24 months which is worrying. Why? Well although an investment in Campbell is still able to provide a 3.6% dividend yield, the growth as such has remained stagnant and it looks like it will remain like this for the foreseeable future.
So here is how income investors should put things in perspective. The 10-year US yield spiked to almost 3.2% yesterday. These are the types of numbers that income investors can now get in fixed income investments. Furthermore, looking at how interest rates are trending, we find it difficult to imagine the 10-year bond yield, for example, not continuing to grow, which, over time, will close the gap even further on yields on popular dividend-paying stocks.
That is really the issue here. Astute income investors want annual increases which are keeping up with inflation. They are not getting it currently with Campbell. Moreover, any stock investment brings more risk to the table in terms of total investment. In saying this, value investors (due to the significant pullback in shares) will state that there is justification in buying at present with a view to the investment being a long-term play. Let's discuss this and also look at the dividend and what we would need to see before entertaining any thought of going long.
