2022 has been quite the year. Lots of disruptions and changes — war in Ukraine, political sturm und drang, extreme weather, recovery from Covid, and significant upheavals in the economy, to name a few, observes Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
It's no wonder the markets have been in the dumps and will finish the year well south of last December's close. Final numbers will be tallied soon, but it's certain the major indexes will all have negative percentage changes well into the double digits.
The Wilshire Total Market Full Cap Index, which includes reinvested dividends, is down -17.1% for the year so far, so it is with some pleasure that I report the 2 for 1 Index is down only -11.6% for 2022. That is well ahead of our usual annual outperformance of 2 to 3%.
There is only one split announcement to analyze for December. That would be the 3 for 2 split declared by Paccar Inc. (PCAR) on 12/6/22. The 2 for 1 Index contained PCAR once before, from 1997 to 2000. It was not a big winner then but it did finish its three years solidly in positive territory.
PCAR manufactures big trucks and truck components and sells them around the world. Think Peterbilt and Kenworth. Valuation numbers are good, with a P/E of 13.8 and price-to-book ratio of 2.8. The company is profitable with earnings averaging a year-over-year increase of over 29% for the last five years. PCAR is less volatile than the overall market.
The question before us is this — does PCAR earn a place in the Index just because it's the only recent split or does it get a pass because it's not a perfect candidate? The answer is, PACR is not a perfect candidate, but it's a very good candidate.
Our proprietary 2-for-1 ranking algorithm gives PCAR a winning score, confirming it deserves to be in the 2 for 1 Index. A modest but secure regular dividend of 1% is often boosted by a year-end special dividend. (Note, a special dividend of $2.80/share was payable on 1/5/23.)