Posts Tagged ‘dividend’
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.
The 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
Earlier 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
The numbers are still coming in pretty good this earnings season and corporate outlooks are holding up well for the year.
Stocks have been trading off of Federal Reserve Chairman Janet Yellen’s monetary policy report to Congress, and less so on earnings.
This market is tired and you can see it in the trading action of individual stocks that beat the Street with their earnings. Most market reaction is pretty mute.
One that wasn’t, however, was Intel Corporation (INTC). The company’s second quarter really got institutional investors fired up. The stock was $26.00 a share mid-May; now it’s close to $34.00, which is a very big move for this company.
Microsoft Corporation (MSFT) doesn’t report until next week, but the company’s shares moved commensurately with Intel’s.
Earnings strength from these older technology benchmarks is really good news for both the stock market and the economy in general. It means that the enterprise market is spending money again, and that’s exactly what the technology industry needs.
Even Cisco Systems, Inc. (CSCO) got a boost from Intel’s earnings results. This stock has been trying to break out of a long price consolidation. It hasn’t really done anything on the stock market since its bubble burst in 2000.
I actually view Microsoft as an attractive company for equity portfolios looking for higher-quality stocks.
The position is very fairly priced and offers a current dividend yield of just less than three percent. And management has a multifaceted business plan focused on growth in personal computers (PCs), the cloud, and devices.
But the best potential with a company like Microsoft is its prospects for … Read More
One of my favorite companies for long-term, income-seeking investors is Johnson & Johnson (JNJ).
While pharmaceuticals are the company’s anchor, its other business lines help with cash flow and dividend increases.
Investors have bid Johnson & Johnson shares tremendously in recent years, and it’s difficult to consider buying the company now, as the position is up another 10 points since March.
But Johnson & Johnson is the kind of stock income-seeking investors should keep an eye on for more attractive entry points, even though they may not come around all that often. The most recent possible entry points were in late September of last year and late January of this year.
My expectations for a mature company like this is for total annual sales to grow by the mid-single digits, with earnings growth and dividends producing an approximate 10% total annual return.
With a 10% annual return on investment, your money doubles every seven years.
Johnson & Johnson is typically priced at a slight premium to the S&P 500, but the company has earned its higher valuation by providing relatively consistent growth, reliable corporate outlooks, and a strong track record of dividend increases.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
Johnson & Johnson has typically been a good performer over the long term, but just like any large-cap, it can sit and produce no capital gains for long periods of time.
The position broke out at the beginning of 2013 after a number of years of modest capital gains. Institutional investors, wanting the earnings safety and solid dividends that the company provided, bid the stock … Read More
If there ever was an equity security epitomizing the notion that the stock market is a leading indicator, Caterpillar Inc. (CAT) would fit the bill.
This manufacturer is in slow-growth mode, but it’s been going up on the stock market as institutional investors bet on a global resurgence for the demand of construction and other heavy equipment and engines.
And the betting’s been pretty fierce. Caterpillar was priced at $90.00 a share at the beginning of the year. Now, it’s $110.00, which is a substantial move for such a mature large-cap. (See “Rising Earnings Estimates the New Catalyst for Stocks?”)
The stock actually offers a pretty decent dividend. It’s currently around 2.6%.
While sales and earnings in its upcoming quarter (due out July 24, 2014) are expected to be very flat, Street analysts are putting their focus on 2015. Sales and earnings estimates for next year are accelerating, and it’s fuel for institutional investors with money to invest.
The notion that the stock market leads actual economic performance is very real. Just like there are cycles in the economy, the stock market itself is highly cyclical. And while every secular bull market occurs for different reasons, there are commonalities in the price action.
Caterpillar’s share price is going up on the expectation that its sales and earnings (on a global basis) will accelerate next year.
Transportation stocks, as evidenced by the Dow Jones Transportation Average, are the classic bull market leaders.
Transportation, whether it’s trucking, railroads, airlines, or package delivery services, is as good a call on general economic activity as any. The Dow Jones Transportation Average was … Read More
There are some companies—mature businesses with well-known brands—that continue to execute in a manner worthy of the finest growth stories.
While the stock market does its thing every day, I find that there are actually very few investment-quality stocks that deliver respectable returns consistently over time.
The business cycle exists, and so does the enthusiasm that institutional investors have for particular companies.
One company that I continue to like for long-term investors is NIKE, Inc. (NKE). Here’s the thing about this well-known athletic footwear and apparel manufacturer—the company just keeps on growing.
The fact of the matter is that the running shoe business is a good one, and solid management execution has allowed this company to deliver continued double-digit comparable growth in a world where mature economies are barely growing at all.
NIKE is worthy of long-term portfolios. The company pays a dividend with a current yield that is approximately 1.3%.
The stock has been in consolidation for a good seven months, but it’s performed incredibly well over the last 10 years and should continue to do so.
Once again, NIKE beat Wall Street consensus and the stock jumped after it reported great 2014 fiscal fourth-quarter and year-end financial results.
Fourth-quarter sales from continuing operations grew 11% to $7.4 billion. Currency neutral, the gain was more like 13%.
NIKE owns the “Converse” brand, and its sales grew in the double digits to $410 million. NIKE-branded products experienced gains in all geographic regions except Japan, where sales were flat on a comparable basis.
The company’s gross margin expanded due to higher average selling prices and more direct-to-consumer sales.
Bottom-line earnings grew … Read More
Every stock market portfolio should consider restaurant stocks if the risk tolerance allows for it.
This industry sector has a long track record of delivering good capital gains to investors, recognizing, of course, that all restaurant chains experience periods of turmoil and changes among consumer preferences.
In the restaurant business, competition is fierce, and because there are so many options, margins are slim.
Sonic Corp. (SONC) just reported its financial results for its third fiscal quarter (ended May 31, 2014).
The company’s system-wide store sales grew 5.3%, with total revenues (including both company-owned drive-ins as well as franchises) growing to $152 million, compared to $147 million in the same quarter last year.
The company opened 10 new drive-ins during its fiscal third quarter and earnings grew to $16.8 million, or $0.30 per diluted share, from $14.8 million, or $0.26 per diluted share, for an earnings-per-share gain of 15%.
Sonic’s two-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
The company expects earnings-per-share growth of between 14% and 15% in fiscal 2014, and the position is fully priced on the stock market.
Operationally, Sonic is experiencing renewed momentum in its business, with most new store openings being new franchises.
The stock did incredibly well from the late 1990s to the end of 2007, until the company’s growth picture turned. It wasn’t until the beginning of 2013 (like so many other stocks) that the company was able to reenergize operations. The stock has doubled over the last 18 months.
All restaurant chains experience periods when they just can’t produce the same growth as they used to. Combined with changes in … Read More
The earnings are beginning to flow and it’s a total mixed bag out there again.
Carnival Corporation (CCL) beat the Street with its second-quarter numbers, with cruise line sales growing four percent over the second quarter of 2013.
Guidance, however, was mediocre and the position sold off on its earnings results.
Walgreen Co. (WAG) has been very strong on the stock market over the last 12 months. The drugstore chain produced a six-percent gain in sales to $19.4 billion, and a 16% gain in earnings to $722 million.
But the company is getting squeezed both by health insurers and pharmaceutical manufacturers, so its business model is getting pressured.
Walgreen is considering reincorporating overseas to reduce its tax burden, but it won’t have details on any potential plan until later in the summer. The stock went up on the news.
Second-quarter earnings results were actually a bit better than expected and once we get into blue chip numbers, I think the market will be a bit more appeased.
It is important to remember where stocks are coming from. It’s been an exceptionally good last few years for equities; 2013 was outstanding.
The first quarter was a tough one, both due to the weather and general business cycle conditions. The market isn’t expecting second-quarter numbers to be strong, and that goes for both gross domestic product (GDP) and corporate earnings.
All that corporations have to do is meet or beat on one financial metric and either affirm or improve existing full-year guidance. With this backdrop, institutional investors will keep buying.
Monsanto Company (MON) soared to a record 52-week high after releasing a … Read More
For years Micron Technology, Inc. (MU) struggled on the stock market as both competition and demand in the personal computer (PC) market took its toll on the chip maker.
Now the company is experiencing a bit of a renaissance, and the stock has been trending higher on genuine business growth.
In my mind, if Micron Technology is experiencing improved business conditions, it’s a positive indicator for almost everything else. This $34.0-billion company has really had a tough time since the technology bubble burst in 2000.
But the position broke out strongly at the beginning of last year. In January of 2013, the stock was trading for just less than $7.00 a share. Now, it’s more than $30.00 and is in a solid uptrend.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
In its most recent quarter, the company’s third fiscal quarter of 2014 (ended May 29, 2014), revenues grew 72% over the same quarter of the previous fiscal year to $3.98 billion.
Earnings were $806 million compared to $43.0 million.
Micron Technology recently acquired a Japanese chip maker, and as the company’s share price action illustrates, investors are more enthusiastic about the memory chip business.
This stock is not expensively priced, and it likely has more near-term legs in this market.
The business cycle is slowly changing, and so is investor sentiment. The semiconductor industry is notoriously volatile and boom-and-bust, but if business conditions are improving for Micron Technology, then there certainly is more optimism regarding the dynamic random access memory (DRAM) market.
Intel Corporation (INTC) recently surged on the stock market after the company raised its … Read More
Oracle Corp. (ORCL) reports on Thursday and it’s one of the first large corporations to do so this reporting season. Second-quarter earnings season is just about here, and it’s exactly what the stock market needs now.
The lull between earning seasons can make for some wacky trading action. Often trading volume diminishes and from a business perspective, what you want from a company you’re thinking about investing in (or divesting) is its most recent numbers.
I thought that first-quarter earnings season was pretty decent, and I think companies will surprise the marketplace again for the second quarter.
A couple of trends that emerged in the first quarter was that European operations of large multinationals showed improvement comparatively, and that’s important for these super big companies that do business in developed markets.
The other trend was that currency instability held back corporate earnings. In many cases I read reports where the bottom-line would’ve been one to three percent higher if it weren’t for major devaluations in developing economies with large populations. Of course, this is an ongoing investment risk that any multinational is going to face and as an investor, there really isn’t anything you can do about it.
It will be worthwhile perusing Oracle’s upcoming earnings report; it’s the company’s fourth fiscal quarter of 2014.
Oracle is a company that I’ve liked for a number of years as an investment-grade equity security for long-term investors. But the business does experience periods of stagnant growth. (See “Another Earnings Season Suggests Another Quarter of Slow Growth Ahead.”)
I was enthusiastic about this position early last year as a long-term cycle … Read More
PepsiCo, Inc. (PEP) is breaking out after a prolonged price consolidation since this time last year.
This mature enterprise fits into the very-slow-growth category, but the company offers a solid dividend. The stock is currently yielding three percent.
Some big investors are after PepsiCo to spin off its snacks business, but management has been reticent due to the fact that growth in beverages has been slow going.
Spin-offs or break-ups are typically wealth-creating for shareholders, but they can be one-time wonders.
Last quarter, PepsiCo’s earnings per diluted share grew a solid 14.5% on the back of flat revenues.
The company certainly could surprise the marketplace with a spin-off plan, but this is not really expected. The stock would soar on the news, however.
The Coca-Cola Company (KO) is actually yielding the same three percent currently. Over the last two years, PepsiCo has significantly outperformed Coca-Cola on the stock market, but both positions tend to go back and forth.
I don’t consider either company particularly attractive at its current price, but their yields are, and it would be reasonable for investors to expect earnings growth combined with an annual dividend of approximately 10% from either company.
Dr Pepper Snapple Group, Inc. (DPS) is a much smaller company compared to Coca-Cola or PepsiCo. It’s done a lot better on the stock market comparatively over the last five years. This stock currently yields just less than three percent, but its growth is slowing.
With such international businesses, currency risk is a major issue and when you have country-specific problems like what recently transpired in Venezuela, it can wreak havoc with earnings.
Monster Beverage … Read More
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