Screen #2: Dividend → Activist Screen
“The true investor…will do better if he forgets about the stock market and pays attention to his dividend returns.” — Benjamin Graham.
This post is partially free, the paywall is at the half-way mark.
✳️ Welcome back to 8% Value Activist where we discuss shareholder activism, activist stocks and Japan, currently activists’ hottest hotbed now with over 400 listed names being targeted by activists.
✅ In this post, we shall be looking at activist stocks with strong dividends. This is not a pipe-dream, there are companies that generate strong cashflows and pay good dividends, but can do more. If activists engage, share prices will go up!
✅ For this analysis, we are using both qualitative and quantitative screening tools which took a lot of time and effort despite having A.I. The A.I. promise feels like self-driving cars, or nuclear fusion. Yes, it will change everything, in x years time. After x years, the waiting period is still x years. 🤣
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✅ Our team can also do bespoke stock analysis, thematic research, quality due diligence should you, your fund, your family office require analytical work. We charge reasonably and have done many projects for startups, activist funds and family offices. Email us at arvelstrategic@gmail.com.
🎇 Okay, that’s enough advertising, let’s dive into today’s topic: activist dividend stocks. We will discuss two screens over two posts.
1️⃣ In today’s first screen, we used Fiscal.ai to screen for free cashflow (FCF) names with some growth, trading at reasonable valuations and paying dividends. We then checked each name to see if any activists are or have been involved in the past.
2️⃣ In the next post, we shall look into the c.100 activist names we have put together on our two popular posts: Japan Activist Stock Names and Prominent Global Activist Stocks. We then seek out the names with strong free cashflow and paying good dividends.
🦾 These lists are painstakingly put together because A.I. cannot do the work well enough yet. Maybe A.I. can do it in 2029. Then A.G.I some time in 2049, with Blade Runner and replicants.
🤔 Remember we keeping saying self-driving cars will be here in 2 years? Well, it’s been 20 years. Today, kids are taking driving lessons from 60-year-old human instructors. Hopefully A.I. can allow our grandkids to not learn driving.
👇 The following screenshot shows the factors we used in the screening. For the fundamental factors, we focused on FCF margins, ROEs and revenue growth. For valuation, we looked at FCF yield and dividend yield.
We cut off at market cap > USD5bn and the screen produced c.50 stocks across the countries targeted. These are mostly countries with past activist actions. The first batch of names are shown in the screenshot below.
Next, we asked A.I. each and every name whether activists were involved. While there were past actions, unfortunately “live” situations were far and few in between. The following provides a quick overview:
Amgen (AMGN US, Market Cap: USD163bn, PER: 14.7x, PBR: 22x, EV/EBITDA: 10.5x, Dividend 3.1%) : US biotech giant was targeted by Third Point and Carl Icahn in the past but there are no known activists currently. In 2014. Third Point proposed Amgen to split up its businesses into MatureCo and GrowthCo to extract valuation premium, but Amgen ultimately did not do so.
Comcast (CMCSA US, Market Cap: USD109bn, PER: 6.9x, PBR: 1.1x, EV/EBITDA: 5.3x, Dividend 4.5%) : Similarly, Trian engaged this media giant (c.2020) behind Universal Studios, NBC, Jurassic World and Minions but failed because its dual class shares gave its CEO >33% voting rights. Unresolved, this is partially reflected in its crazily cheap valuation above.
T-shirt design depicting Jurassic World Bristol-Myers Squibb (BMY US, Market Cap: USD89bn, PER: 17.5x, PBR: 5.1x, EV/EBITDA: 7.7x, Dividend 5.7%) : BMY, US oncology pharmaceutical powerhouse behind the gamechanging cancer drug Optivo, has been engaged by multiple activists including Starboard Value, Carl Icahn and JANA Partners in the past. Starboard famously tried to block its overpriced acquisition of Celgene but ultimately failed.
Public Storage (PSA US, Market Cap: USD54.9bn, PER: 30.7x, PBR: 10.9x, EV/EBITDA: 19.7x, Dividend 3.9%) : PSA is a specialized REIT acquiring self-storage facilities over 40 states in the US. It was targeted by Elliott in the past for lagging its peers in investment and generating growth. Elliott was ultimately successful and share price also did well.
While not the traditional shareholder activism, Fortescue Ltd (in the screenshot above) and Coterra Energy (below) has been targeted by ESG-focused institutional investors on key environmental issues and Coterra’s management famously lost a proxy fight on methane emissions in 2023.
As with the first section, this second one (below) has a couple of companies that were targeted by activists both in the past and currently.
Restaurant Brands International (QSP US, Market Cap: USD30.8bn, PER: 17.5x, PBR: 6.7x, EV/EBITDA: 12.5x, Dividend 3.7%) : Pershing Square famously own this restaurant behemoth with 32,000 outlets globally across brands like Burger King and Popeyes after selling part of Wendy’s business (Tim Horton) and continues to be a shareholder today.
Telus Corp (TU US, Market Cap: USD23.2bn, PER: 20.2x, PBR: 2.1x, EV/EBITDA: 8.2x, Dividend 7.8%) : One of Canada’s largest telco operator was engaged by Mason Capital in 2012-13 which led to a prolong legal battle. The case became a significant Canadian legal precedent regarding “empty voting*” and the duties of a board of directors.
