Posts Tagged ‘dividend’
Why the Stock Market’s Sticking with These Two Pharma
By Mitchell Clark, B.Comm. for Profit Confidential
One sector we haven’t looked at in quite some time is the big pharmaceutical stocks sector. Exposure to this sector is always welcome in a long-term stock market portfolio.
Like every company, big pharmaceutical companies experience their own business cycles, but dividend payments within the group are significant and worthy of attention.
Bristol-Myers Squibb Company (NYSE/BMY) was one of the higher dividend paying stocks within the group.
The company got a major Wall Street upgrade from Citigroup, based on its Phase 3 development program for “Nivolumab,” a new cancer treatment.
The company recently experienced renewed stock market momentum after a period of consolidation. Its dividend yield is approximately three percent now because of the run-up. It was closer to five percent not too long ago.
I’m still a fan of combo pharmaceutical companies for long-term portfolios. By this I mean companies with other business lines, rather than pure-play drug development stocks. I’m referring to companies like Johnson & Johnson (NYSE/JNJ), which has pharmaceuticals, consumer products, medical devices, and diagnostics business lines. There’s also Abbott Laboratories (NYSE/ABT), which sells drugs, eye-care products, nutritional products, and dog food.
This multifaceted business approach that includes the expensive, but also rewarding business of drug development creates a nice bit of diversification as the business cycle changes.
Like virtually everything else in the large-cap space, Abbott has done great on the stock market over the last couple of years. The company only experienced two long periods of flat performance since 1999. Abbott’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
In its latest quarterly report, the company’s earnings from continuing operations improved substantially to … Read More
John Chambers Delivers, Big Investors Now Chasing Stocks
By Mitchell Clark, B.Comm. for Profit Confidential
The action in the stock market continues to amaze.
When stocks go up on bad news (like last week’s higher initial claims for jobless benefits and lower-than-expected housing starts), you know you don’t want to be short.
Cisco Systems, Inc. (NASDAQ/CSCO) is a component of the Dow Jones Industrial Average, and for such a mature technology stock, it recently reported a very solid quarter.
In its fiscal third quarter (ended April 27, 2012), Cisco announced sales of $12.2 billion, for a net gain of five percent over the comparable quarter. It was the company’s ninth consecutive quarter of record sales.
Earnings grew 14.5% to $2.5 billion, while earnings per share grew 15% to $0.46 per share, beating consensus estimates.
John Chambers, Cisco’s CEO, noted improving signs in the U.S. economy and other markets. Business conditions for the company are also improving.
Like many cash-rich, large corporations, Cisco recently repurchased 41 million shares of its own common stock, spending $860 million.
This, of course, is a pittance. The company finished its latest quarter with cash and cash equivalents of $47.4 billion.
Wall Street boosted the company’s earnings estimates and share price target.
Cisco is ripe for more gains on the stock market because of its valuation.
The company also offers a dividend yield of 3.2%, which is attractive in this market. The company’s huge cash hoard also makes it highly likely that at some point this year, the company will issue another dividend increase.
All institutional investors want to see in this stock market is stability and certainty.
Cisco provided that certainty in its latest earnings report, and this is … Read More
Coal Under Threat by Low Natural Gas Prices; Will This Be the End for Railroad Stocks?
By Mitchell Clark, B.Comm. for Profit Confidential
Coal is a gigantic problem.
Because 40% or so of total U.S. railroad tonnage is coal—the most important commodity for railroad stocks—the railroad sector is under threat by low natural gas prices.
According to the Association of American Railroads (AAR), the shipping of coal is responsible for about one in five railroad jobs.
One of the first railroad stocks to report its earnings this season was CSX Corporation (NYSE/CSX), based in Jacksonville, Florida. CSX’s numbers were flat, but it beat consensus.
CSX reported first-quarter revenues of $3.0 billion, with growth in merchandise, intermodal, and other sales offsetting a decline in coal shipments.
Earnings were a record $459 million, or $0.45 per share, compared to $449 million, or $0.43 per share. The company increased its quarterly dividend by seven percent and announced a new $1.0-billion share buyback program.
CSX said that it expects average annual earnings-per-share (EPS) growth of 10%–15% starting from the end of this year to 2015 (a positive). Earnings for fiscal 2013 are expected to be flat or down compared to 2012 (a negative, and below the previous average earnings estimate if that’s meaningful).
Among railroad stocks, CSX is less than half the value of Union Pacific Corporation (NYSE/UNP), which is my benchmark stock for the group.
The AAR releases a lot of statistics that are very useful, even outside the universe of railroad stocks. In 2012, railroads delivered 171,000 carloads of oil and petroleum products for a gain of 46% over 2011. This was less than the trade group previously expected.
According to the U.S. Energy Information Administration, U.S. crude oil production increased by a record … Read More
Little Gain Now for Lots of Pain Later: Fed Policies Will Hold the Economy Down
By Mitchell Clark, B.Comm. for Profit Confidential
A lot of people feel the Federal Reserve’s policies will result in a major stock market collapse, which is a very real possibility. What we know is that the current cycle is actually favorable for the stock market and corporations in terms of low interest rates and a growing money supply; but real economic growth is still a very tough thing to come by in the U.S. economy.
In these pages over the last few months, we’ve been looking at a lot of successful corporations—corporations that don’t require monetary stimulus from the Fed. (See “A Top Stock with Increasing Dividends and Record Profits.”) But realistically, this doesn’t tell the whole story. The business cycle exists for most companies, and without question, it certainly does exist for Main Street.
The economic times we’re experiencing now aren’t that different than they were in the 80s. Unemployment was lower then, as U.S. government spending and borrowing accelerated tremendously and the trade deficit was out of control. The stock market went up a lot, crashed, recovered quickly, and then accelerated again. There was the savings and loan crisis and another recession, but the economy got through it and it was boom times after that. Then the cycle happened again—twice.
These events are a fact of life in business and for the stock market. Times change, but not the business cycle. All these events are beyond your control as an individual investor; therefore, the only thing that matters is how you structure your portfolio to deal with them. There is always a lot of noise in the marketplace—noise from politicians, the stock … Read More
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