Dividend Post
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Kellogg Company Symbol: K A company profile is available at Yahoo HERE
Earnings Per Share and Book Value Analysis
I have dissected some simple and readily available data on MMMThe share price on September 24, 2008 is hovering at $ 55.00/share
Current Dividend: $1.36/share
Yield: 2.47%
Current EPS are $ 2.82/share - based on estimates, earnings can compound at an annual rate
of 5 percent over the next 20 years. This number is not arbitrarily selected, but rather deduced
based on careful analysis of the past, and a high probability of achievement in the future given this
stellar past performance. Column 2 tracks earnings out 20 years at an annual compound growth rate of 5%
as shown in column 3 below.
I also used a forward PE average of 18 times earnings given historical PE
ratios, and this is shown in column 4 below. Now the PE may fluctuate, but
past performance again provides me a fairly high
probability of being right about this number going forward.
Column 5 then results in my best guesstimate for the future share price (average)
OVER TIME, clearly understanding that there will be ups and downs along the way.
Column 5 is simply calculated by multiplying column 2 (EPS) x Column 3 (PE ratio).
Column 5 shows that in year 10, the estimated share price would be about $ 279.00/shareIn Column 6, I have entered my best guesstimate as to the estimated annual compound rate of growth in book value.
The figure input is 11%, and this number is conservative given the consistency in the past. Today's book value
is highlighted in Column 7 and stands at about $ 6.60/share.Column 8 shows my best guesstimate as to the FUTURE Return on Equity (ROE) achievable over the next 10-20 years.
I have estimated 38% as a reasonable value again given the strong track record from the past.
Column 9 then estimates what to expect in terms of EPS given the return on equity expectation.
Column 10 estimates the probable share price over time with a value approaching $ 115.00 per share in year 10.Further down below the chart I have input today's share price along with a very basic estimate
for the annual dividend payments I can expect (on average), along with my estimated
share price 10 years out. I have selected $ 110.00/share or a close average of my two guesstimates.
As a result, one can determine an estimated return over time of at least 9 % given today's share price of $55.00.
The Dividend Post attempts to place a value on individual companies as well as estimated returns over time.
Your investment criteria and risk appetite will determine if you wish to invest in this equity, and will also help
you determine the price you might be willing to pay given your return expectations over time.
Company Name Sept. 24. 2008 Kellogg Co BEIGE area indicates where estimated data must be input. Current share price $55,00 Year EPS EPS Growth Rate PE average Estimated share price Book Value Estimated Growth Rate Book Value Estimated Return on equity' Estimated EPS based on ROE Estimated share price 1 $2,82 8,00% 18 $50,76 11,00% $6,60 0,38 $2,51 $45,14 2 $3,05 8,00% 18 $54,82 11,00% $7,33 0,38 $2,78 $50,11 3 $3,29 8,00% 18 $59,21 11,00% $8,13 0,38 $3,09 $55,62 4 $3,55 8,00% 18 $63,94 11,00% $9,03 0,38 $3,43 $61,74 5 $3,84 8,00% 18 $69,06 11,00% $10,02 0,38 $3,81 $68,53 6 $4,14 8,00% 18 $74,58 11,00% $11,12 0,38 $4,23 $76,07 7 $4,47 8,00% 18 $80,55 11,00% $12,34 0,38 $4,69 $84,44 8 $4,83 8,00% 18 $86,99 11,00% $13,70 0,38 $5,21 $93,73 9 $5,22 8,00% 18 $93,95 11,00% $15,21 0,38 $5,78 $104,04 10 $5,64 8,00% 18 $101,47 11,00% $16,88 0,38 $6,42 $115,48 11 $6,09 8,00% 18 $109,59 11,00% $18,74 0,38 $7,12 $128,18 12 $6,58 8,00% 18 $118,35 11,00% $20,80 0,38 $7,90 $142,28 13 $7,10 8,00% 18 $127,82 11,00% $23,09 0,38 $8,77 $157,93 14 $7,67 8,00% 18 $138,05 11,00% $25,63 0,38 $9,74 $175,31 15 $8,28 8,00% 18 $149,09 11,00% $28,45 0,38 $10,81 $194,59 16 $8,95 8,00% 18 $161,02 11,00% $31,58 0,38 $12,00 $216,00 17 $9,66 8,00% 18 $173,90 11,00% $35,05 0,38 $13,32 $239,76 18 $10,43 8,00% 18 $187,81 11,00% $38,91 0,38 $14,78 $266,13 19 $11,27 8,00% 18 $202,84 11,00% $43,19 0,38 $16,41 $295,40 20 $12,17 8,00% 18 $219,06 11,00% $47,94 0,38 $18,22 $327,90 What is your investment's price per share today? $55,00 How long do you plan to hold the investment (in years)? 10,00 What is the target price price per share? $ 110,00 What annual payments will the share provide? $ 1,40 This is your expected annualized rate of return: 9,10% ALL RIGHTS RESERVED VirtualMediaWorks
Dividend Post
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