Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

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.

Off-the-Radar Company Delivering Attractive Earnings

By for Profit Confidential

One Off-the-Radar Company with Attractive ResultsOn the day that the DOW, S&P 500, and NASDAQ Composite dropped two percent on global growth worries, once again, several companies reported very good numbers.

But investors are paying less attention to corporate results and more attention to economic news from around the world that suggests that the only mature economic engine running at any positive speed currently is the U.S. economy.

PepsiCo, Inc. (PEP) had another good quarter. The company’s two businesses, food/snacks and beverages, produced modest single-digit growth in consolidated sales.

Net earnings grew five percent, while earnings per share grew seven percent over the third quarter last year. Management also increased its expected constant currency earnings-per-share growth for this year from eight to nine percent.

The company expects to return a total of some $8.7 billion to shareholders this year, comprising approximately $3.7 billion in dividends and $5.0 billion in share buybacks.

PepsiCo is on track to deliver what investors expect. The stock just hit a new all-time record-high still with a 2.8% dividend yield.

Getting into third-quarter earnings season a little further should help focus the stock market’s attention but clearly, sentiment has really turned.

If the trading action continues to wane, good businesses are going to become more attractively priced and equity investors looking for new positions will have better choices.

I do believe that for the investment risk, sticking with existing winners is a good strategy regarding large-cap, dividend-paying blue chips.

Dividend income really matters in a slow-growth environment, and corporations would still rather return cash than take on major new ventures.

Previously in these pages, I’ve written that for long-term investors, I … Read More

The Stocks to Watch as Small-Caps Stall

By for Profit Confidential

Stocks to Watch as Small-Caps StallDespite the choppy trading action before the end of the third quarter, a lot of the market’s best stocks are still ticking higher. And the positive trading action remains especially prevalent with large-caps and dividend-paying blue chips.

Big investors want earnings reliability and dividend income in a slow-growth environment. It’s a trend that began with the stock market’s breakout at the beginning of 2013 and it still has legs right into next year.

The Walt Disney Company (DIS) is a dividend-paying blue chip that I continue to like. With solid operating momentum (sales and earnings) in both media assets and theme parks, this stock has been consistently ticking higher since October of 2011.

It remains a great holding with solid prospects for more capital gains near-term. This stock is a perfect example of what institutional investors are buying—revenue and earnings growth combined with some income and reliability in regards to its outlook.

Another dividend-paying blue chip that just broke through to new record highs is PepsiCo, Inc. (PEP). This mature enterprise has been consistently bid by investors since February.

Still yielding almost three percent, the company’s food and snacks business is expected to keep its earnings momentum in the upcoming quarter. Management increased its quarterly dividends substantially this year and investors have been buying the story.

On any major price retrenchments, I do believe these two companies make for attractive long-term holdings.

Previously, we considered these two companies with the addition of NIKE, Inc. (NKE), Johnson & Johnson (JNJ), V.F. Corporation (VFC), Microsoft Corporation (MSFT), Kinder Morgan, Inc. (KMI), and 3M Company (MMM). (See “Eight Stocks to Beat the Street.”)… Read More

Eight Stocks to Beat the Street

By for Profit Confidential

How Investors Can Beat the StreetCountless stocks are pushing new highs and a lot of them are still blue chips. The Dow Jones Industrial Average is lagging the other indices this year, but this is not unusual.

The fact that many blue chips are still slogging higher is further indication of a bull market, despite all the shocks, risks, and the fact that stocks haven’t experienced a real correction for a number of years now.

PepsiCo, Inc. (PEP) had a great second quarter (for such a mature brand). The company increased its quarterly dividend once again and Wall Street earnings estimates for this year and next have been going up across the board.

What large corporations and well-known business brands say about their operating conditions is as useful as any other kind of information or opinion regarding the equity market. Stocks get overvalued and undervalued, but the best investing information I’ve found is what corporations actually report about their businesses, regardless of whether a company meets, beats, or comes in below consensus.

What Caterpillar Inc. (CAT) says about its global heavy equipment sales is material information, even if you aren’t interested in buying the stock. The same goes for Intel Corporation (INTC), The Boeing Company (BA), Visa Inc. (V), and The Walt Disney Company (DIS).

Second-quarter earnings season came in better than expected, and while many blue chips reiterated their existing guidance, I suspect it’s a simple strategy to make it easier to beat the Street by keeping expectations modest.

It could easily be another great year for stocks with a fundamental backdrop that is still so favorable to equities. And this includes the reality … Read More

Where You Can Find Value in Stocks Right Now

By for Profit Confidential

These Stocks Offering Best Value in Current Stock MarketAs incredible as it may be, Chipotle Mexican Grill, Inc. (CMG) recently spiked above $600.00 a share and is now closing in on $700.00. This position could no doubt benefit from a share split.

The stock is trading with a forward price-to-earnings (P/E) ratio of approximately 40, and the company’s earnings estimates for this fiscal year and next continue to tick higher.

A more aggressive portfolio of stocks is typically well served by exposure to the restaurant sector. Many chains are consistently good earners, but you can’t get too attached to any positions; consumer tastes change and competition is fierce.

Restaurant stocks also experience waves of enthusiasm on the part of investors and because of this, you can actually find value among established brands.

Darden Restaurants, Inc. (DRI) is the owner of the “Olive Garden” and “LongHorn Steakhouse” chains. The company recently sold “Red Lobster” for $2.1 billion in cash, using $1.0 billion to pay down its debt with the rest to be spent on share repurchases.

This stock hasn’t done much over the last couple of years due to operational problems, but it now boasts a dividend yield of just less than five percent and is not expensively priced.

Value among restaurant stocks can also be found with Cracker Barrel Old Country Store, Inc. (CBRL).

This position has been flat since February, and its dividend yield has now crept above the four-percent level.

The company should soon report its financial results for its fiscal fourth quarter of 2014. In its third fiscal quarter (ended May 2, 2014), Cracker Barrel’s revenues grew 0.5% over the comparable quarter to $643 million. … Read More

The Boring Stock That Pays, Pays, and Pays

By for Profit Confidential

Boring Stock That PaysTop wealth creators don’t have to be the fastest-growing companies. In an environment where institutional investors are buying earnings safety and dividend income, consistency and reliability are top financial attributes.

And there actually aren’t a lot of companies able to provide consistency in business growth, especially among mature enterprises that throw off excess cash in the form of dividends.

One company that has proven to do so is Airgas, Inc. (ARG) out of Radnor, Pennsylvania.

This business is what I consider to be investment grade. The company sells industrial and medical gases, refrigerants, and ammonia products. It’s one of the leading producers of atmospheric gases in North America with more than 1,100 locations.

In its most recent quarter (ended June 30, 2014), the company’s sales grew three percent to $1.31 billion compared to the same quarter last year. Diluted earnings per share grew four percent comparatively.

Management noted that sales to energy-related customers produced organic sales growth, but sectors such as mining and heavy manufacturing are slow. The company even referred to its most recent quarter as “sluggish.”

This stock has been trading range-bound over the last year, but produced very good capital gains over the last 10 years.

As is the case with most equities securities, the stock trades on future business conditions and growth expectations for its next fiscal year are solid.

The company forecasts its sales will grow at a rate in the low single-digits in the current quarter and that diluted earnings per share will be between $1.27 and $1.32, representing a gain of zero to four percent comparatively.

In its most recent quarter, the company … Read More

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