Even with the recent price retrenchment, there’s not a lot of value circulating in this stock market. Everything’s already gone up and the capital gains have been great the last few years. But it’s still a slow-growth environment in the global economy, and despite a very accommodative monetary policy, stocks can’t go up forever without experiencing a meaningful retrenchment.
Company earnings are pouring in and there have been some disappointments. But for a lot of mature large-cap businesses, this is a reflection of their industries’ cycles. Large companies in mature industries don’t grow by very much more than the low single-digits.
Which is why a company’s dividends are so important in a stock market that’s at a high but offering little value.
It’s difficult to imagine stocks this year serving up double-digit returns on the back of 2013’s standout performance.
And investor sentiment has changed, too, with oil prices being the catalyst for the recent “deflation worry” sell-off. (See “Is This Stock Sell-Off Just a Blip?”)
The stock market’s existing winners are the way to go going into 2015. There’s plenty of cash in company coffers for more dividends and more share repurchases. It’s a formula that’s worked for large … Read More
There are a lot of stocks bouncing off their all-time record-highs and Union Pacific Corporation (UNP) is one of them.
Not surprisingly, the company just announced a two-for-one stock split with the stock dividend, effective June 6, 2014 to shareholders of record on May 27, 2014. The last time Union Pacific split its shares was in May of 2008, also effecting a two-for-one stock split.
Management also announced the second installment of its new $0.91-per-share quarterly dividend. The previous dividend amount was $0.79 a share.
Only four years ago, the company’s dividend was $0.33 a share, illustrating just how good an investment this railroad has been.
And business is getting better. Union Pacific plans to spend $4.1 billion in total capital expenditures this year. The company recently boosted this figure by $150 million, saying that it needs to purchase 29 more locomotives than it previously estimated.
In October of last year, this stock was trading for $150.00 a share. It just bounced off an all-time record-high of $196.16. Despite being cut in half during the 2008/2009 financial crisis, this stock’s been going up since the beginning of 2005, which is an excellent track record.
The company’s stock chart is featured … Read More
There is clearly some selling capitulation towards the technology and small-cap stocks at this time. Following the run-up in 2013, we are now seeing the selling action picking up towards the higher-beta stocks. The S&P 500 and DOW may be looking fine, but the growth-oriented NASDAQ and Russell 2000 are showing added stock market risk. (Read “NASDAQ, Russell 2000 Signaling Buying Opportunity Ahead?”)
It’s time to unload some of your riskier holdings and look at some of the dividend-paying stocks that would likely provide more of a buffer against the current negativity in growth stocks.
Below, I have listed five dividend-paying stocks that are worth a look, especially if the overall stock market slides lower.
In the investment management sector, Och-Ziff Capital Management Group LLC (NYSE/OZM) pays out an impressive dividend yield. The company runs money from pension funds and other areas. In the fourth quarter, Och-Ziff beat the Thomson Financial consensus estimate by $0.32 after reporting a dividend of $1.15 per diluted share versus the consensus $0.83 per diluted share. According to the company, its assets under management have increased to $42.7 billion as of April 1, 2014.
Also in the investment area, Fortress Investment Group LLC (NYSE/FIG) has … Read More
Among the many lessons to be learned by 2013’s stunning stock market performance, one is that dividend-paying blue chips can also experience significant capital gains.
Portfolio strategy can be based on blue chips, but it can also include companies with varied market capitalizations; mixing it up is always useful.
The thing with blue chips is that they often experience long periods of underperformance, even if they are still paying their dividends. Periods like 2013 are pretty rare, but I do think there is enough momentum in this market to carry blue chips a little higher, with gains more likely towards the end of the year.
I still feel that existing winners, especially larger-cap companies that offer dividend income, are the way to go in a slow-growth environment. Top-notch balance sheets, including huge cash balances and the very low cost of capital are a boon to big companies.
The bears are always looking for reasons why stocks should go down, but blue chips have the pricing power and the economies of scale to keep earnings afloat.
Management teams are reticent to make bold investments in new plant and equipment, and the trend of keeping shareholders happy with increasing dividends and share … Read More
Last Thursday, the CEO of DIRECTV (NASDAQ/DTV) said “…we are pleased to announce a share repurchase program of $3.5 billion. This repurchase program reflects our strong balance sheet and confidence in continued strong DIRECTV revenue, earnings and free cash flow growth, as well as our belief that our stock is far below our intrinsic value.” (Source: “DIRECTV Announces Fourth Quarter and Full Year 2013 Results,” DIRECTV, February 20, 2014.)
DIRECTV is buying back its shares because it believes they are undervalued? Since when did CEOs of companies on key stock indices become stock pickers?
In 2013, DIRECTV’s total corporate earnings came in at $2.85 billion. That means the company is spending 122% of what it made in 2013 to buy back its stock. Talk about pumping up per-share earnings!
Cisco Systems, Inc. (NASDAQ/CSCO), another major component of key stock indices, reports it is “raising” $8.0 billion to repay some of its debt. It will use the remainder of the money to buy back its shares and pay dividends. (Source: Cisco Systems, Inc., February 24, 2014.) Yes, instead of raising money to invest in equipment, technology, or research and development (R&D), the new fad is for companies to raise money to … Read More
With the turmoil in global capital markets, the sell-off in stocks is serving as the consolidation/correction that we did not experience in 2013, which was an exceptionally strong year.
But stepping back from historical share price action, we have continued certainty regarding the Fed funds rate this year. The low interest rate environment remains a very positive catalyst for the equity market and the medium-term trend.
Stocks may very well have a difficult year in 2014, but that doesn’t mean that current fundamentals aren’t laying the groundwork for more capital gains over the next several.
The marketplace fully expects continued tapering of quantitative easing to occur over the coming quarters. There’s likely to be continued pressure on longer-term interest rates, but this is a market-driven precursor to economic activity; it’s perfectly normal and is a positive, market-driven reflection of financial market sentiment.
With this backdrop and so many large-cap companies boasting very good balance sheets, strong cash positions, and the expectation that cash flows will contribute to increasing dividends, a good buying opportunity for new positions may soon present itself.
Dividend paying stocks like 3M Company (MMM) are becoming increasingly attractive as their share prices retreat. The company missed Wall … Read More
This market has been due for a major correction for quite some time. The marketplace expected it (including myself), but what we got instead was share price consolidation with continued leadership from blue chips and small-caps.
Countless stock market indices are right close to their highs, including the S&P 500, Dow Jones Industrial Average, and Dow Jones Transportation Average. There’s also the Russell 2000 Index of small-cap stocks, which has performed exceptionally well throughout this year. Finally, the NASDAQ Biotechnology Index continues to be a powerhouse wealth creator, having doubled in value over the last two years.
All this in an environment of satisfactory earnings but very little in the way of top-line growth. While the stock market has every reason to pull back significantly, fighting the Fed has proven to be unprofitable in equities. The opportunity cost of not being in the stock market since the financial crisis has been significant.
The monetary reflation has seemingly worked for the stock market so far, but it’s very clear that corporations remain unwilling to make major new investments, which would go a long way in helping the Main Street economy. Instead, they are keeping shareholders happy by returning their excess cash … Read More
The stock market typically reacts quite positively when a company beats Wall Street consensus. But in a considerable number of cases, a company’s share price after-earnings bounce isn’t really warranted, considering the run-up in anticipation.
Many stocks go up in value after beating expectations, but many numbers this quarter actually reveal a contraction in business conditions.
Western Digital Corporation (WDC) is the Irvine, California-based maker of hard drives and solid-state hybrid drives for desktops and personal computers (PCs). The company beat the Street on earnings, but the company’s numbers actually represented a decline from the comparable quarter last year.
The company said that in its most recent quarter (fiscal 2014 first quarter), sales dropped six percent to $3.8 billion; earnings fell to $495 million, or $2.05 per share, compared to $519 million, or $2.06 per share, in the same period a year ago; and adjusted earnings came in at $2.12, while Wall Street was looking for a consensus of $2.05.
Naturally, the position moved higher on the stock market. The company did experience an improved gross margin, but it wasn’t a good quarter. The stock is up about 70% so far this year to an all-time record high.
There are … Read More
Well, it turns out that third-quarter earnings were pretty good for E. I. Du Pont de Nemours and Company (DD). The company surprised with solid volume growth and its cash balance soared.
DuPont recently broke out of a two-year-long stock market consolidation. Still yielding around three percent, this position is not expensively priced, and its latest numbers were very good, considering the size and maturity of this business.
The company’s third-quarter consolidated sales grew five percent to $7.7 billion. The strongest division was, once again, in agriculture, with a 15% gain in sales to $1.6 billion on stronger volumes and higher pricing in Latin America.
Every single operating division posted improved operating earnings comparatively, except for the company’s performance chemicals business. Sales in Europe, the Middle East, and Africa (EMEA) grew a surprising 10% during the quarter, while sales in North America and the Asia Pacific grew three percent; Latin American sales grew four percent.
Of note was the company’s strong improvement in shareholders’ equity, and as is typical with so many large corporations, DuPont’s cash and cash equivalents balance soared to $7.0 billion, from $4.3 billion at the end of 2012.
The company’s third-quarter dividend was $0.45 a share, … Read More
Back in early August, I turned negative on the big banks and suggested that a bearish double-top was forming on the Bank Index chart. At that time, the Bank Index was trading at just over 65, as you can see on the chart below. (Read “Four Important Stock Charts Showing Warning Signs.”)
In early October, the Bank Index fell to around 61 (as indicated by the lowest shaded oval in the chart below). The index held and has since rallied back above the upper resistance, suggesting that it could be set for a breakout back up to its July highs. However, my feeling is that the easy money in the big banks has been made and going forward, the big banks are now dividend plays.
Chart courtesy of www.StockCharts.com
Investment guru Warren Buffett continues to like the big banks. I don’t blame him, as Buffett has made more than $5.0 billion in paper profits on his initial $5.7 billion investment in the ailing Bank of America Corporation (NYSE/BAC; dividend yield 0.30%), when the sector was in disarray following the Lehman Brothers collapse.
So far in the third-quarter earnings season, the big banks have largely delivered decent results.
Bank of America … Read More
« Older Entries
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"