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.

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

What Sets This Company Above the Rest

By for Profit Confidential

Old Stock Is Worth Your TimeThere are lots of companies that are one-time wonders. They experience explosive growth (or the expectation of it), plateau, and very often collapse on the weight of an overly aggressive business plan.

The marketplace is full of these types of businesses, but what’s not in great supply is a business that provides consistency—both in terms of operational growth and investment return to stockholders.

One business that falls into the category of consistent growers is The Toro Company (TTC). This is a really good enterprise operating in an industry that doesn’t mind spending money on equipment.

Toro is based in Bloomington, Minnesota and the company manufactures professional turf equipment for golf courses. Toro also makes sprinkler heads and all kinds of irrigation products for sports fields, golf courses, and home systems. The company owns the “Lawn Boy” brand. Toro is a very good business and has proven to be a very good wealth creator for investors.

The company’s medium-term stock chart is featured below:

Toro Company Chart

Chart courtesy of www.StockCharts.com

This isn’t the fastest growing enterprise in the world, but it is consistent. The company’s most recent quarter beat Wall Street consensus on earnings and revenues and management increased its full-year 2014 guidance.

According to the company, its fiscal third quarter (ended August 1, 2014) saw revenues grow a solid 11.3% to a record $567.5 million. Sales growth was driven by what management reported as strong retail demand for both its professional and residential products.

Bottom-line earnings came in at $50.0 million, or $0.87 per share, compared to $40.1 million, or $0.68 per share, the previous year, which is very good improvement.

Double-digit … Read More

One Industry That’s Holding Up the Rest

By for Profit Confidential

Resilient Industry the Reason the Market’s Still UpThe resilience of this stock market is uncanny. Just when transportation stocks, a leading market sector at any time, took a well-deserved break, components turned upward and are once again pushing record highs.

Union Pacific Corporation (UNP) is a benchmark stock in transportation. It’s up fivefold since the stock market low in 2009 and looks to have continued upward price momentum.

This is an exceptional performance for such a mature, old economy type of enterprise. The position has a forward price-to-earnings (P/E) ratio of approximately 17 with a current dividend yield of 1.8%.

Three weeks ago, Union Pacific increased its quarterly dividend 10% to $0.50 a share, payable October 1, 2014 to shareholders of record on August 29, 2014.

In three of its last five quarters, the company has increased its quarterly dividend at a double-digit rate and as much as anything else, this is responsible for its great stock market performance.

Union Pacific had an exceptionally good second quarter. Freight revenues grew 10%, driven by gains in freight volume and rising prices.

The company’s operating ratio, which is key in the railroad industry, hit an all-time quarterly record of 63.5%, and management bought back 8.3 million of its own shares during the quarter, spending $806 million.

It’s a very good time to be in the railroad business. Not only are the pure-play rail companies mostly doing well, but the railroad services sector is also experiencing great business conditions.

The Greenbrier Companies, Inc. (GBX) is a company we’ve looked at before. It has been a huge stock market success. (See “Why These Stocks Are a Leading Indicator of the Read More

Top Opportunity in Mobile Market Lies in China

By for Profit Confidential

China Mobile Leading the Mobile Growth PackThe Chinese economy is showing signs of stalling, but there are numerous areas that continue to show decent growth metrics, including automobiles and mobile phones.

Now, if you think AT&T Inc. (NYSE/T) or Verizon Communications Inc. (NYSE/VZ) are big, take a look at China Mobile Limited (NYSE/CHL). China Mobile is the largest mobile phone operator in China, with about 790 million subscribers as of June 30—that’s more than the entire population of Europe! The company’s growth is even expected to expand as 3G and 4G networks grow in popularity.

You cannot ignore the fact that China is the top mobile market in the world with more than one billion users. Plus, you not only have the urban dwellers using these services, but we are seeing massive demand in the rural areas as well, especially when rural workers migrate to the cities, looking for jobs.

And with the mobile sector in the country being heavily regulated by the Chinese government as far as licenses and the landscape, there are currently only three major mobile operators in the country.

What’s most intriguing is the development of advanced mobile technologies. China Mobile only introduced its 4G network six months ago and already it has coverage in 300 cities and approximately 6.5 million users.

China is a key global growth market for Apple Inc. (NASDAQ/AAPL), too, which is searching for growth in the emerging markets. Apple’s deal with China Mobile will definitely help.

China Mobile is regarded as the top brand in BusinessWeek’s “20 Best China Brands.” The stock pays an annual dividend of $1.88, for a current dividend yield of 3.8% … Read More

The Problem With Reality in 2014

By for Profit Confidential

U.S. Economy Halfway to a Recession AlreadyEarlier this month, Jeremy Siegal, a well-known “bull” on CNBC, took to the airwaves to predict the Dow Jones Industrial Average would go beyond 18,000 by the end of this year. Acknowledging overpriced valuations on the key stock indices are being ignored, he argued historical valuations should be taken with a grain of salt and nothing more. (Source: CNBC, July 2, 2014.)

Sadly, it’s not only Jeremy Siegal who has this point of view. Many other stock advisors who were previously bearish have thrown in the towel and turned bullish towards key stock indices—regardless of what the historical stock market valuation tools are saying.

We are getting to the point where today’s mentality about key stock indices—the sheer bullish belief stocks will only move higher—has surpassed the optimism that was prevalent in the stock market in 2007, before stocks crashed.

At the very core, when you pull away the stock buyback programs and the Fed’s tapering of the money supply and interest rates, there is one main factor that drives key stock indices higher or lower: corporate earnings. So, for key stock indices to continue to make new highs, corporate profits need to rise.

But there are two blatant threats to companies in the key stock indices and the profits they generate.

First, the U.S. economy is very, very weak. While we saw negative gross domestic product (GDP) growth in the first quarter of this year, the International Monetary Fund (IMF) just downgraded its U.S. economic projection. The IMF now expects the U.S. economy to grow by just 1.7% in 2014. (Source: International Monetary Fund, July 24, 2014.) One more … Read More

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The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.

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