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Investing Specialists

Morningstar Runs the Numbers

We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended Sept. 29.

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Inspired by Harper's Index (with a tip of the hat to FiveThirtyEight's Significant Digits blog), Morningstar Runs the Numbers uses a numbers-based approach to highlight recent Morningstar research, along with some outside news stories.

Christine Benz started our 21 Days to Improve Your Financial Life series, where she is laying out a job a day to help investors get into better financial shape.

Fully 1 in 4 of today's 20-year-olds will become disabled before they retire according to the Council for Disability Awareness. Christine Benz thinks people need to keep this in mind when considering insurance coverage

If you couldn't do without your income for an extended period of time, it's imperative that you purchase disability coverage. Your employer may offer cost-effective coverage; sign up to pay for it using aftertax dollars, meaning that your benefits will be tax-free.

The tax reform framework envisions a corporate tax rate of 20%. Morningstar analysts think the plan is just a starting point and will be heavily revised in the months to come. We still think reform is more likely than not to pass.

One of the guiding principles for what we think plausible tax reform will look like is that it’s close to deficit-neutral after taking into account economic growth stimulated by tax reform. The unified framework looks similar to the House Republican blueprint, except it doesn’t include the border adjustment tax, which was estimated to raise approximately $1 trillion of revenue. Without the border adjustment tax, this framework would probably lead to a material increase in the public debt. One of the largest levers that Congress could pull to make this framework closer to revenue-neutral would be to only lower the corporate tax rate to 25%, which is what we’re assuming, instead of the 20% in the framework.

In her kickoff to our quarter-end insights, Elizabeth Collins says the market-cap-weighted price/fair value ratio for our equity analysts' coverage universe is 1.04, showing the market still looks slightly overvalued. On a sector basis, she writes: 

Communication services is the most undervalued sector, with a price/fair value ratio of 0.94. Basic materials is the most overvalued sector, with a price/fair value ratio of 1.37.

Keith Schoonmaker says  Union Pacific (UNP) is paying out around 40% of this year's earnings in dividends. This level makes him comfortable that the payout is "not only safe, but [it has] room to expand along with increasing earnings in the future."

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Vanguard FTSE Emerging Markets ETF does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.