Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk. Â This isÂ best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another companyÂ or by reviewing theÂ 10 Stocks for Using A Benjamin Graham Value Investing Strategy – MarchÂ 2017.Â By using theÂ ModernGraham methodÂ one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries. Â What follows is a stock analysis showing a specific look at how Dime Community Bancshares Inc (DCOM)Â fares in theÂ ModernGraham valuation model.
Company ProfileÂ (obtained fromÂ Google Finance): Dime Community Bancshares, Inc. operates as a holding company for Dime Community Bank (the Bank), a chartered savings bank. The Company is a unitary savings and loan holding company. The Company operates through Community Banking segment. The Bank’s principal business is gathering retail deposits, and lending them primarily in multifamily residential, commercial real estate and mixed use loans, as well as investing in mortgage-backed securities (MBS), obligations of the United States Government and Government Sponsored Entities (GSEs), and corporate debt and equity securities. The Bank’s primary sources of funds are, in general, deposits; loan amortization, prepayments and maturities; MBS amortization, prepayments and maturities; investment securities maturities and sales, and advances from the Federal Home Loan Bank of New York (FHLBNY).
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Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass all 6 of the following tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$758,308,676||Fail|
|2. Earnings Stability||Positive EPS for 10 years prior||Pass|
|3. Dividend Record||Dividend Payments for 10 years prior||Pass|
|4. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||55.90%||Pass|
|5. Moderate PEmg Ratio||PEmg < 20||13.99||Pass|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||1.33||Pass|
|Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.|
|1. Earnings Stability||Positive EPS for 5 years prior||Pass|
|2. Dividend Record||Currently Pays Dividend||Pass|
|3. Earnings Growth||EPSmg greater than 5 years ago||Pass|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||2.80%|
|MG Value based on 3% Growth||$20.99|
|MG Value based on 0% Growth||$12.30|
|Market Implied Growth Rate||2.75%|
|% of Intrinsic Value||99.30%|
Dime Community Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. Â The Defensive Investor is concerned with the Â small size. The Enterprising Investor has no initial concerns. Â As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.22 in 2013 to an estimated $1.45 for 2017. Â This level of demonstrated earnings growth supports the market’s implied estimate of 2.75% annual earnings growth over the next 7-10 years. Â As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Dime Community Bancshares, Inc. revealed the company was trading below its Graham Number of $20.94. Â The company pays a dividend of $0.56 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Â Its PEmg (price over earnings per share – ModernGraham) was 13.99, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Dime Community Bancshares, Inc. performs fairly well in the ModernGraham grading system, scoring a B.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2017|
|Long-Term Debt & Capital Lease Obligation||$763,725,000|
|Shares Outstanding (Diluted Average)||37,550,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$1.29|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$1.45|
Other ModernGraham posts about the company
None. Â This is the first time ModernGraham has covered the company. None. Â This is the first time ModernGraham has covered the company.
Other ModernGraham posts about related companies
The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.