繼續整理學習美國投資書《終極股息投資攻略》第6章，作者來自美國基金評級公司晨星(Morningstar)。
Earnings Stability
No company, no matter how conservative or defensive, can generate a perfectly stable stream of earnings; real-world results are lumpy, whether investors like it or not. Among the key drivers of variability in the short run are these:
1. Revenue fluctuations. Every business encounters some variation in its revenue stream, even if that business is protected by an economic moat. Some businesses face much wider swings than others. In a recession, the sales of a steel mill or automobile manufacturer are likely to drop much further than those of a grocery store or a natural gas utility. In boom times, the reverse is true--heavy industries and consumer cyclicals will see larger upswings in sales while more defensive industries continue to plod along.2. Operating leverage. The cost structure of a business always contains a mix of variable and fixed costs. Variable costs are tied to the level of revenue. At your local grocery store, for example, most of the costs (that is, the groceries themselves) are variable. If revenue drops, the cost of merchandise sold will drop by a nearly identical amount. By contrast, a steel mill may have to employ 1,000 workers whether the annual output of the plant is worth $200 million or $1 billion. High fixed costs greatly magnify the effect of revenue changes on the bottom line.3. Financial leverage. Businesses with large debt loads are obliged to pay interest and principal when due. Lenders expect to be paid on time and in full, whether operating profits are large or small. Since interest expense doesn't vary with revenue and operating profits, it's simply another fixed cost: Interest magnifies the effect of changing revenue on earnings.
These three factors account for the bulk of short-run changes in earnings--affecting maybe just one year at a shot, or a couple of years in economically sensitive industries. Working in tandem, however, they can introduce substantial volatility to a company's profit stream.
It's hard to generalize what constitutes acceptable levels of revenue variability, operating leverage, and financial leverage. But the more you study a business, observing past changes in revenue and earnings, the more likely you are to recognize a bad situation when you see it. Any one source of variability may be manageable: Genuine Parts GPC, parent of the NAPA chain of auto parts stores, has a lot of fixed costs, but its revenue is very stable and debt load quite modest. A propane distributor like Suburban Propane Partners (SPH) may see wide swings in revenue depending on the price of propane, but most of its costs are variable and debt is manageable. But a firm with wide fluctuations in revenue, high fixed costs, and mountains of debt--General Motors(GM) comes to mind--will see extreme swings in profìts. (Deeply cyclical companies generally aren't worthwhile dividend payers in the first place; they're of little use to income investors anyway.)
These change factors naturally influence how low a stock's dividend payout ratio must be for us to consider it safe. Let's see how Compass Minerals stacks up on these considerations:
1. Revenue fluctuations. Compass's sales of deicing salt are going to fluctuate from year to year. Over the past five years, annual sales have run as low as $459 million (2002) and as high as $742 million (2005). Of course, these figures don't mean much unless you read the details behind them. In Compass' case, 2005 included very favorable weather conditions (for the firm, at least) in the first and fourth quarters; in 2006, deicing salte sales were abnormally low in both. (See Figure 6.5.)2. Operating leverage. At the operating profit level, percentage changes from year to year have been even larger than the fluctuations in revenue--evidence of the relatively high fixed costs you'd expect from a mining concern. (See Figure 6.6.)3. Financial leverage. At first glance, Compass's balance sheet looks dreadful: Liabilities actually exceed assets!(See Figure 6.7.) As it happens, this is more of a historical accident than a sign of insolvency. Mines and equipment that Compass bought long ago—assets that generate substantial earnings today—are recorded at original cost minus decades' worth of depreciation.
For most firms--including Compass--the interest coverage ratio is a better proxy for financial leverage. Among other benefits, it directly reflects the impact of the firm's debt burden on profits. For nonfinancial companies, an interest coverage ratio of less than 2 makes me nervous; however, Compass has cleared this hurdle every year since it came public in 2004. (See Figure 6.8.)
Let's take a look at how all of these factors have combined to influence Compass's bottom line in the past. (See Figure 6.9.)
It appears there are good doses of revenue fluctuations, operating leverage, and financial leverage at work with this firm. Compass's earnings from year to year, at least relative to most companies with 60 to 70 percent payout ratios, are not terribly stable. In any one year, we probably can't rule out the possibility that earnings might fall short of the dividend, even with a payout ratio well below 100 percent indicated at mid-2007. If I compare the firm's 68 percent payout ratio only with the potential for short-run earnings shortfalls, I might have to conclude that a 68 percent payout ratio doesn't provide an adequate margin of safery.
