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6/13/2011

Dividend Yields Investment Commentary ++ EON, RWE, NOK, JD

Dividend Yields Investment Commentary
Readers Question EON, RWE, NOK, JD
Recently, a reader of Dividend Yields, Mr. C#, ask for information about E.ON, RWE (both German utilities), Nokia and JD Sports. Here is our view:

E.ON and RWE suffered under the decision by the German government not to take back several nuclear power plants into operation. These plants were switched off by the state due to fears from the Fukushima disaster. E.ON and RWE generate with its nuclear power plants biggest profits. A trial by the utilities is pending. Profits of E.ON are down within the past quarters, the earnings of RWE are still strong. Both have a strong ability to pass higher energy production costs to customers. With a P/E ratio around 6, the market has priced high earnings declines. We think that could be a fair value in terms of the shutdown of the nuclear power plants. In addition many other threats like the CO2 Emission certificates are available. Should the tax on the nuclear burn elements be abolished, both shares have upside potential.

Nokia is the leading producer of smart phones with a current market share of 25 percent. That sound a lot. Not if you compare this figure with the past values. In 2008, the company had a share of 40 percent. Nokia losses market share in a gaining momentum. Manly responsible for this development is Apple with his iPhone and iPad. In May 2011, investors sold big shares due to bad interim results. The company cut predictions and adjusted their guidance. I believe that it is possible for Nokia to create a loss for the full year. The smart phone business has a very dynamic environment. Nokia is a value pick. Out there are rumors for the valuation. By separating the areas of mobile phones, infrastructure equipment, mapping software and finally the accounting of Nokia patents, the company could be worth EUR 27 billion. NOK could be a takeover candidate. For the time being, they have EUR 11.5 billion cash and EUR 4.1 billion long term debts. Last year, they generated an income of EUR 1.8 billion on sales of EUR 42 billion. The main question for an investor is if you believe in a turn around. If Nokia creates no turn, it could be a painful investment.

JD Sports Fashion PLC is a distributor of sport and athletic inspired fashion, footwear, apparel and accessories mainly within the UK. It has over 500 stores in UK and Ireland. JD is another high flyer from the apparel market and still a small cap. It could become a midcap one day if the store concept will be accepted overseas or in Europe. At the first view, I see that the margins are not as good as they must be in order to grow fast in retail space. The margin situation improved over the past ten years, that’s good. Like for like net sales are down 1.2 percent. That’s ok for a weak retail environment in the UK. They have also good balance sheet figures: Nearly no debt and GBP 90 million cash as of Q4/2011. JD is a growth stock with a wonderful momentum if this momentum hold on in the long-run, there could be a significant upside potential. In addition, they pay a good dividend for a growth stock.


Here is the table for a detailed view:
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Fundamentals (Click to enlarge)


Related stock ticker symbols:

EONGY, RWEOY, NOK, JD



Do you have any questions? Do not hesitate to contact us. We will discuss your question and share our view of the stock.

Please contact us and submit your questions here: dividendyields@googlemail.com

1 comment:

  1. Investment Hero6/16/2011

    JD Sports is a really interesting company. I never heard about that company. But I think I will buy some stocks in the near future.

    ReplyDelete

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