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.
Countless 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
As 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
Top 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
There 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:
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
The 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.
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