Watsco, Inc. (WSO) Dividend Stock Analysis

Linked here is a detailed quantitative analysis of Watsco, Inc. (WSO). Below are some highlights from the above linked analysis: Company Description: Watsco Inc. is the largest U.S. distributor of air-conditioning, heating and refrigeration equipment, and related products. Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1. Avg. High Yield Price 2. 20-Year DCF Price 3. Avg. P/E Price 4. Graham Number WSO is trading at a premium to all four valuations above. The stock is trading at a slight discount to its calculated fair value of $69.29. WSO earned a Star in this section since it is trading at a fair value. Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description: 1. Free Cash Flow Payout 2. Debt To Total Capital 3. Key Metrics 4. Dividend Growth Rate 5. Years of Div. Growth 6. Rolling 4-yr Div. > 15% WSO earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. WSO earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2001-2004, 2002-2005, 2003-2006, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 10 consecutive years. Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1. NPV MMA Diff. 2. Years to > MMA WSO earned a Star in this section for its NPV MMA Diff. of the $8,498. This amount is in excess of the $2,500 target I look for in a stock that has increased dividends as long as WSO has.12... Read more