Dividend
A dividend is the payment that a company distributes to its shareholders as a percent of earnings. Management can decide whether to pay a dividend, how much it is, and the frequency of payments. A dividend is often distributed quarterly and is quoted as the amount of dividend per share. Companies that are growing fast tend not to issue a dividend, as they pour money back into the business.
John Chambers Delivers, Big Investors Now Chasing Stocks
By Mitchell Clark, B.Comm. for Profit Confidential
The action in the stock market continues to amaze.
When stocks go up on bad news (like last week’s higher initial claims for jobless benefits and lower-than-expected housing starts), you know you don’t want to be short.
Cisco Systems, Inc. (NASDAQ/CSCO) is a component of the Dow Jones Industrial Average, and for such a mature technology stock, it recently reported a very solid quarter.
In its fiscal third quarter (ended April 27, 2012), Cisco announced sales of $12.2 billion, for a net gain of five percent over the comparable quarter. It was the company’s ninth consecutive quarter of record sales.
Earnings grew 14.5% to $2.5 billion, while earnings per share grew 15% to $0.46 per share, beating consensus estimates.
John Chambers, Cisco’s CEO, noted improving signs in the U.S. economy and other markets. Business conditions for the company are also improving.
Like many cash-rich, large corporations, Cisco recently repurchased 41 million shares of its own common stock, spending $860 million.
This, of course, is a pittance. The company finished its latest quarter with cash and cash equivalents of $47.4 billion.
Wall Street boosted the company’s earnings estimates and share price target.
Cisco is ripe for more gains on the stock market because of its valuation.
The company also offers a dividend yield of 3.2%, which is attractive in this market. The company’s huge cash hoard also makes it highly likely that at some point this year, the company will issue another dividend increase.
All institutional investors want to see in this stock market is stability and certainty.
Cisco provided that certainty in its latest earnings report, and this is … Read More
Coal Under Threat by Low Natural Gas Prices; Will This Be the End for Railroad Stocks?
By Mitchell Clark, B.Comm. for Profit Confidential
Coal is a gigantic problem.
Because 40% or so of total U.S. railroad tonnage is coal—the most important commodity for railroad stocks—the railroad sector is under threat by low natural gas prices.
According to the Association of American Railroads (AAR), the shipping of coal is responsible for about one in five railroad jobs.
One of the first railroad stocks to report its earnings this season was CSX Corporation (NYSE/CSX), based in Jacksonville, Florida. CSX’s numbers were flat, but it beat consensus.
CSX reported first-quarter revenues of $3.0 billion, with growth in merchandise, intermodal, and other sales offsetting a decline in coal shipments.
Earnings were a record $459 million, or $0.45 per share, compared to $449 million, or $0.43 per share. The company increased its quarterly dividend by seven percent and announced a new $1.0-billion share buyback program.
CSX said that it expects average annual earnings-per-share (EPS) growth of 10%–15% starting from the end of this year to 2015 (a positive). Earnings for fiscal 2013 are expected to be flat or down compared to 2012 (a negative, and below the previous average earnings estimate if that’s meaningful).
Among railroad stocks, CSX is less than half the value of Union Pacific Corporation (NYSE/UNP), which is my benchmark stock for the group.
The AAR releases a lot of statistics that are very useful, even outside the universe of railroad stocks. In 2012, railroads delivered 171,000 carloads of oil and petroleum products for a gain of 46% over 2011. This was less than the trade group previously expected.
According to the U.S. Energy Information Administration, U.S. crude oil production increased by a record … Read More
Little Gain Now for Lots of Pain Later: Fed Policies Will Hold the Economy Down
By Mitchell Clark, B.Comm. for Profit Confidential
A lot of people feel the Federal Reserve’s policies will result in a major stock market collapse, which is a very real possibility. What we know is that the current cycle is actually favorable for the stock market and corporations in terms of low interest rates and a growing money supply; but real economic growth is still a very tough thing to come by in the U.S. economy.
In these pages over the last few months, we’ve been looking at a lot of successful corporations—corporations that don’t require monetary stimulus from the Fed. (See “A Top Stock with Increasing Dividends and Record Profits.”) But realistically, this doesn’t tell the whole story. The business cycle exists for most companies, and without question, it certainly does exist for Main Street.
The economic times we’re experiencing now aren’t that different than they were in the 80s. Unemployment was lower then, as U.S. government spending and borrowing accelerated tremendously and the trade deficit was out of control. The stock market went up a lot, crashed, recovered quickly, and then accelerated again. There was the savings and loan crisis and another recession, but the economy got through it and it was boom times after that. Then the cycle happened again—twice.
These events are a fact of life in business and for the stock market. Times change, but not the business cycle. All these events are beyond your control as an individual investor; therefore, the only thing that matters is how you structure your portfolio to deal with them. There is always a lot of noise in the marketplace—noise from politicians, the stock … Read More
Beat the Street with Sweet Tea and Biscuits?
By Mitchell Clark, B.Comm. for Profit Confidential
Years ago, I used to spend a lot of money in restaurants. That was before I learned how to cook. Now, I particularly dislike going to fancy restaurants. The food is always way overpriced, and I don’t like playing the game. When I go out to eat, I feel much more at home in casual restaurants, and while I know it might not be appropriate, I love the food at chain restaurants.
One chain that is doing great, both operationally and on the stock market, is Cracker Barrel Old Country Store, Inc. (NASDAQ/CBRL). Cracker Barrel isn’t a franchise operation; it owns all of its 621 stores, which means that management can keep tight control over operations. Typically, the most profitable product that a restaurant sells is soda. For Cracker Barrel, its most recent quarter produced growth in comparable store sales of 3.3%, and its average check grew 3.1%.
Cracker Barrel is a dividend paying stock with a three percent yield. Recently, on the stock market, the shares soared 10% the day the company reported its latest earnings. According to the company, its revenues grew 4.4% to $702.7 million and Generally Accepted Accounting Principles (GAAP) diluted earnings per share grew to $1.47, way up from $1.10. The company beat the Street on revenues and earnings, and it raised its full-year outlook. Cracker Barrel’s stock market chart is below:
Chart courtesy of www.StockCharts.com
You know, there is a lot of doom and gloom out there, and investment risk is high. Times certainly aren’t as good as they used to be for a lot of people. But doom and gloom sells; … Read More
What This Tech Stock’s Saying About the Stock Market
By Mitchell Clark, B.Comm. for Profit Confidential
We all know that corporate earnings are managed, but in a sense, it works, because an investor is better off having some ballpark earnings outlook over nothing. Earnings estimates for mature, large-cap businesses are typically more accurate over traditional growth companies, and you can use these estimates for your buy and sell decisions on the stock market.
One company that has a long history of providing decent guidance is Automatic Data Processing, Inc. (NASDAQ/ADP) out of Roseland, NJ. Automatic Data Processing (ADP) is a payroll processing and human resources outsourcing firm that is actually considered a technology stock. The company belongs to the NASDAQ 100 index, and I view it as a great barometer on the stock market, investor sentiment, and employment.
On the stock market, ADP has been doing great for years, though it did get ahead of itself in the late 1990s, as did so many other stocks. The “overperformance” produced underperformance in the 10 years following 2001; but normalized stock market long-term returns from this business have been good, especially with the addition of dividends.
Chart courtesy of www.StockCharts.com
In its latest earnings report for the second fiscal quarter of 2013, ended December 31, 2012, ADP reported revenue growth of seven percent to $2.7 billion. Earnings were down slightly during the quarter, but management says the company can produce top-line growth between eight percent and 10% this year, with five to seven percent in diluted earnings-per-share growth from continuing operations.
Combined with dividends, an investor could expect a high single-digit rate of return from this stock, with the position now fully valued on the stock market…. Read More
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