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. Dividends are often distributed quarterly and are 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.
Credit card companies are some of the best indicators in the global economy. Visa Inc. (V) just reported a pretty decent quarter. While earnings were down comparatively due to a one-time charge, adjusted earnings handily beat consensus.
The company’s fiscal fourth quarter came in solid, with growth of 10% on a constant dollar basis to $3.2 billion compared to the same quarter last year.
Recently, the company increased its quarterly dividend 20%, and a new $5.0-billion share repurchase program has now been authorized.
Management estimates that its upcoming fiscal 2015 will produce revenue growth in the low double-digits and diluted earnings-per-share (EPS) growth in the mid-teens, which is very solid.
Visa’s share price really hasn’t done anything for the last 12 months. But this is on the back of tremendous capital appreciation in 2012 and 2013.
This stock market certainly seems trendless as of late. Investors are taking in corporate earnings news, but not doing too much with it.
The earnings numbers from many large-caps and conglomerates are pretty solid. But this market is tired out and the near-term action seems muted.
September and October are often difficult months for stocks and it’s unclear as to why. But going by the earnings results we’re getting and the forecasts that corporations are providing, I think it’s reasonable to expect a good fourth quarter—barring any shocks.
The marketplace knows that the Federal Reserve is going to initiate a new upward cycle in interest rates. It also knows that the central bank has proven to be highly accommodative to equities in recent history and deflationary indicators will increase the duration of when rates … Read More
The big news so far this earnings season isn’t corporate financial results but the price of oil, which continues to be under pressure.
Domestic production has finally caught up to spot prices and combined with reduced expectations for the global economy, oil prices continue to be vulnerable.
Resource investing is inherently volatile; risk related to commodity-based investing is always higher. But as oil prices have given oil stocks a well-deserved buzz-cut, value is appearing, which is not a common trait in today’s stock market.
There are countless growth stories in domestic oil and gas production. The smaller-cap growth stories have been expensively priced for a considerable period of time. They just got a big haircut as well, and all of a sudden, they are much more fairly priced.
For quite some time, oil prices held firm just over the $100.00-per-barrel level, which makes the recent drop all the more momentous. Conspiracy theories abound.
Some of the best opportunities when oil bottoms, I believe, will be in the large-cap space, but it’s important to consider that the price of oil is currently in “turmoil”—it can’t, in a sense, be counted on near-term.
One company that’s a standout in the current environment is Kinder Morgan, Inc. (KMI), which is going through a major corporate reorganization. Acquiring its related master limited partnership (MLP) entities, it is now the fourth-largest domestic oil company by market capitalization.
This corporate reorganization is a rejection of the MLP business model, but also an opportunity for management to shed non-core assets. (See “This Company’s $70.0-Billion Acquisition a Boon for Investors.”)
What I like about Kinder Morgan is that … Read More
My favorite pharmaceutical company for long-term investors is still Johnson & Johnson (JNJ), for now.
This business has managed to produce very good financial growth in recent history and its share price has appreciated exceptionally well considering this is a DOW stock, especially over the last two years.
Large-cap companies can’t avoid the business cycle and they can’t avoid industry-specific trends. For pharmaceuticals in particular, the drug development cycle can be very long-winded.
Last quarter, Johnson & Johnson produced exceptional growth in its pharmaceutical business, which is the company’s largest contributor to revenues.
But while Johnson & Johnson’s share price has done extremely well, even over the last few months, it very well could be that this company’s operating momentum is about to change.
Wall Street earnings estimates for the upcoming quarter (the company reports October 14) have been ticking higher, but total sales growth in 2015 is currently very modest. Earnings growth in 2015 is expected to improve by mid-single digits over all of 2014.
Last quarter, company management said that it would not be able to maintain the exceptional sales growth in its pharmaceutical division going forward. We may see this result in next week’s report. (See “Drop in This Company’s Stock Price Makes It Very Attractive Now.”)
On the stock market, equity securities can experience their own business cycles as investors trade in a herd mentality.
Institutional shareholders can actually get tired or bored with a particular company. Johnson & Johnson has an exceptional track record of wealth creation with capital gains combined with dividend growth.
But from 2002 to 2012, the company just traded sideways on … Read More
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