Posts Tagged ‘dividends’
Stocks are going to gyrate around second-quarter earnings, but that’s exactly what this market needs—the corporate bottom line and expectations for the rest of the year.
With so many stocks trading at their all-time record-highs, I view investment risk in equities as being high at this time.
This is actually a tough environment in which to be an investor looking for new positions. There’s not a lot of value around and good businesses have already been bid.
It’s been years now since the stock market was first in need of a material price correction, and the next one will probably come out of nowhere.
It could be a shock from the Federal Reserve, but the central bank has been extremely delicate in how it effects and communicates monetary policy. More likely, stocks will be vulnerable to an unforeseen shock like a geopolitical event or a big derivative trade gone bad.
The risks are out there and stocks are long overdue for a reckoning.
With this in mind, I’m still a fan of the market’s existing winners, especially dividend-paying blue chips. In the absence of a shock, I think they’ll just keep pushing new highs going right into 2015.
3M Company (MMM) is an enterprise worth following and owning as a long-term, income-seeking investor.
The company’s earnings are material and offer good market intelligence, even if you aren’t interested in owning the stock.
The position has tripled in value on the stock market since the beginning of 2009, while also paying some great dividends.
The stock is still strong in the current environment, and the company represents exactly the kind of … Read More
Union Pacific Corporation (UNP) is a company that’s getting upgraded by the Street and earnings estimates are ticking higher. It’s great news for this benchmark stock and top wealth creator.
The business cycle in old economy industrial businesses still has legs, and while Union Pacific’s share price is up some 25 points over the last 12 months, I think this stock can keep ticking higher into 2015.
The railroad business has proven to be a good one over the last several years. Most railroad companies have been able to increase their prices for freight without affecting demand, and that’s a very important metric and telling indicator.
Union Pacific’s share price was around $26.00 a share this time in 2009. Now it’s just over $100.00 (the company recently effected a two-for-one stock split) and the company has increased its dividends paid seven times since 2009. This is a good business, and it continues to pay as a stock market investment.
The company’s volume growth is coming from both agricultural and industrial products. And even its coal transportation business is showing improvement.
Union Pacific is moving a lot of freight cars related to the domestic oil business. While many might see this as carloads of crude, the company actually ships more carloads of fracturing sand than oil. It’s a growth area for the business, and it has been for several years.
The company’s one-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
This is a stock that has proven to be a worthy buy when it’s down. It hasn’t been down for long, and it remains a favorite among institutional investors, … Read More
Oracle Corporation (ORCL) announced a quarterly revenue gain of three percent, but Wall Street was looking for more and the company’s share price retreated on its earnings results.
If it weren’t for the Federal Reserve, we probably would be in a correction, if not a consolidation, which has been the broader market’s go-to trend when it should have retreated further.
It’s such a mixed bag out there both in terms of economic news and corporate reporting.
While I think dividend-paying blue chips have the advantage going into the second-quarter earnings season, if the Federal Reserve wasn’t so extremely sensitive to Wall Street, this market would probably be a lot lower.
Even the Fed’s recent language is assuaging. If this market had to operate on its own (with free market interest rates and liquidity), things would be a lot different.
But this isn’t the environment we live in. Economic history clearly supports the scenario that it doesn’t pay to fight the Fed and that Wall Street will move mountains when it has Fed certainty.
Lots of investors bemoan the quarterly earnings cycle or game, but I don’t. I want to know a public company’s up-to-date financial results as frequently as possible.
While earnings are managed, over time, a business can’t manufacture success unless it’s a fraud (which, sadly, does happen).
Big companies have the operational leverage and the cash to keep boosting their earnings per share. Oracle’s latest financial results were uninspiring, and while recognizing that this is a very mature business with growing competition in the cloud, the position advanced a material 10 points since last June—this seems so overdone…. Read More
The great monetary expansion is still alive and well and the effect on equity securities continues to be profound.
But what I find striking about the stock market’s continued advancement is that it’s blue chips that are pushing through to new record highs.
Speculative fervor in several sectors has diminished, but hasn’t completely disappeared. But it’s the big brand-name companies—a lot of which pay dividends—that just keep on trucking as institutional investors buy earnings safety and outlook reliability, and are betting on revenue and earnings acceleration going into 2015.
Union Pacific Corporation (UNP), a benchmark railroad stock, just hit another new record high on the stock market, breaking through the $100.00-per-share level. It was $35.00 a share this time in 2010.
And this from an old-economy, industrial enterprise that is probably not on many investors’ wish lists.
Amazon.com, Inc. (AMZN) broke down considerably at the beginning of the year when it was trading around $400.00 a share. It recently broke $300.00 a share, but has bounced back significantly and the position looks to be fighting hard.
And this is one of the speculative stocks on which investors booked their profits. This stock is on the comeback trail and so are Cisco Systems, Inc. (CSCO), The Priceline Group Inc. (PCLN), Oracle Corporation (ORCL), Apple Inc. (AAPL), and Google Inc. (GOOG).
The stock market has been digesting continued mediocrity in domestic economic data and slightly more positive numbers from China. Institutional investors are buying. I think that, in the absence of some kind of shock or new catalyst, the stock market can slowly keep grinding higher. It could very well turn … Read More
The resilience the stock market continues to have is a reflection of what continues to be extreme monetary stimulus. And while the stock market is a leading indicator and a bet on a future stream of earnings and economic activity, throughout history, the underlying goal of central banks has been price inflation.
Seemingly, the capitalist economic system is based on two basic underlying factors: property rights and price inflation. And in modern history, the latter, through central bank intervention, is the most important catalyst for the stock market.
In capital markets, long-run history is a very good guide and an important tool in helping to shape your market view. And most importantly, it’s very helpful in laying the groundwork for separating present-day conjecture from what has actually transpired before.
I’m reminded of J. Anthony Boeckh’s book titled The Great Reflation, which provides a non-political long-run analysis on the U.S. economy and its cycles.
It’s a historical breakdown of interest rates, inflation, and monetary and fiscal policies, and how they have affected the stock market. It is required reading for any serious long-term investor.
Written in 2010, the book breaks down financial crises and looks at the long-run effects of price inflation and the effects on capital markets. Boeckh offers some poignant analysis on all kinds of financial topics, and many of his observations have not only come to fruition, but they are also worth consideration.
Boeckh plainly states that the global financial system is flawed because of fiat paper money. And because we use paper money, price inflation exists and capital markets are subject to bubbles.
Add in … Read More
With stocks still ticking higher, portfolio safety and a strong adherence to risk management is key with the major indices pushing their highs.
Speculative fervor has come out of this market, but really only in the form of profit-taking. In order for stocks to experience a major price correction (which I view as a healthy development for the longer-run trend), the market requires a catalyst, and there isn’t an obvious one right now.
While individual stock selection is always important in portfolio management, generally, share prices move commensurately with each other based on sentiment. Accordingly, investors who own dividend-paying blue chips are just as well positioned if the broader market delivers more capital gains. And at a lot less investment risk to boot.
At the beginning of last year, in these pages, I put together a list of “Super Stocks”—the names of companies that I thought could be welcome in all but the most conservative of portfolios.
A lot of these positions are pushing their highs again. These stocks are back in favor with institutional investors and most have increased their dividends. (See “Super Stocks—Great Companies for Any Stock Market Portfolio.”)
The three positions that have been disappointments are Bunge Limited (BG), The Procter & Gamble Company (PG), and International Business Machines Corporation (IBM).
Bunge is heavily weighted to the agriculture sector, and as every commodity continues to prove over time, pricing, supply, and the business in general are volatile.
Procter & Gamble has a great dividend and that’s what is keeping investors interested. It’s just a very slow-growth story, being so global and mature.
I always follow … Read More
The spot price of oil is holding up and there are countless oil stocks pushing their highs.
If the 1990s were the decade for technology stocks, then the 2010s are the decade for independent oil producers.
While the largest integrated oil and gas companies are struggling to grow production, mid-tier, independent producers are filling the gap, and there are countless growth stories in the marketplace.
EOG Resources, Inc. (EOG) has been a top stock market performer and is likely to continue ticking higher. The company has net proven reserves of some 2,119 million barrels of oil equivalent, of which 94% is located in the United States.
Of the company’s total 2013 production, 88% came from the U.S. and Canada, representing a nine-percent gain over 2012.
First-quarter 2014 earnings were $661 million, compared to $495 million in the first quarter of 2013.
The company’s total crude oil and condensate production rose 42% over the comparable quarter last year, and management has significant hedges, locking in oil prices just under $100.00 a barrel. Approximately 30% of North American natural gas production is hedged for the remainder of 2014 at a weighted average price of $4.55 per million British thermal units (MMBtu).
The Street expects EOG Resources to grow its revenues by about 17% this year and about seven percent in 2015.
Previously in these pages, we looked at Cimarex Energy Co. (XEC), which has been very strong on the stock market since the beginning of February. (See “Where to Find the Best Price Momentum Right Now.”)
This oil and gas growth story is slowing, but the company is still expected … Read More
Despite a difficult start to the year, countless positions recently turned higher, even among slow-growth names.
E. I. du Pont de Nemours and Company (DD) is a company currently trading around 14 times its forward earnings, offering a 2.6% dividend yield. The stock just broke out of a three-month price consolidation.
This is the way the equity market has been trading since the March 2009 low. No big corrections, just consolidations of various durations. It’s a good reminder of just how powerful monetary policy can be (right or wrong) and that a company’s shares price is a relative valuation or bet on the future.
Du Pont has appreciated approximately 23% over the last 12 months, and this doesn’t include dividends paid. Year-to-date, the return is just less than seven percent.
The company’s sales in the first quarter of 2014 were down slightly compared to the same quarter of 2013 and earnings were cut in half.
The company experienced one percent lower volume, one percent lower selling prices, and a one percent adverse currency impact, comparatively. Yet the stock just keeps ticking higher. This time last year, the position was trading around $55.00 a share; now it’s $70.00.
One research firm recently increased its earnings estimate on the company for all of 2014, but like so many other blue chips, it’s the expectation that sales growth will accelerate in 2015, and this is seemingly the bet by investors.
Du Pont didn’t have a good first quarter, and its top operating division—agriculture—actually produced a six-percent drop in segment sales compared to the first quarter of 2013.
Two key themes seem to be … Read More
A lot of stocks are rolling over, breaking their 50- and 200-day simple moving averages (MAs). This is a tired market that could very well consolidate or correct right into the fourth quarter.
And the economic data has been softer, as well. Throw in geopolitical tensions with Russia and we have the makings of a material price retrenchment.
There’s still resilience, however, in some of the most important stock market indices. Stocks composing the Dow Jones Transportation Average are holding up extremely well, especially compared to the Russell 2000, the NASDAQ Biotechnology index, and the NASDAQ Composite index itself.
While the main market indices are mostly flat on the year, I don’t think investors can expect any capital gains until perhaps the fourth quarter.
From my perspective, relative price strength in the Dow Jones industrials, transportation stocks, and most of the S&P 500 index means that the longer-run uptrend remains intact.
With speculative fervor still coming out of initial public offerings (IPOs) and select biotechnology stocks, this action is an indicator of a tired market that’s long in the tooth, as investors are clearly less willing to speculate on those stocks that don’t offer income or relative safety in their earnings.
Risk aversion won’t kill a secular bull market. But it does mean that risk-capital opportunities are a lot less plentiful. Currently, among speculative stocks, one of the only sectors still experiencing decent price action is oil and gas drilling and exploration.
This is still a market that I think favors existing winners—blue chips, in particular. (See “Top Stocks for the Coming Correction.”)
These are the stocks to … Read More
Two years ago, when the former Kraft Foods Inc. broke itself up, spinning off its global food and beverage business (now Kraft Foods Group, Inc. [KRFT]), the company renamed itself Mondelez International, Inc. (MDLZ). Now, the company is mostly a global snacks business. The new Kraft Foods Group has done pretty well on the stock market since listing in September 2012; the position currently has an attractive dividend yield of 3.7%.
Large-cap corporate spin-offs are typically highly profitable for shareholders. (See “Top Market Sectors for 2014.”) Despite a slow start, Mondelez has finally broken out of its recent consolidation trend on new operational momentum.
Mondelez sells cookies, snacks, confections, and cheese. Some of the company’s iconic brands include “Cadbury,” “Oreo,” “Nabisco,” “Christie,” and “Trident,” among others.
The Street’s been bidding “safer” stocks recently, and investors liked Mondelez’s news of a restructuring plan and the spin-off of its coffee business, which will net the company $5.0 billion in after-tax proceeds.
Like many large-cap public companies, Mondelez has been buying back its own shares. In the first quarter, it spent $500 million on its own stock at an average price of $34.20 per share. Its two-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
If you happened to be a shareholder of the former Kraft Foods Inc. then you’ve done well with both spin-off businesses and both stocks remain attractive holds.
Mondelez isn’t offering as much income as the new Kraft Foods Group; its dividend yield is currently around 1.6%. And while top-line growth is always an issue for established large-cap consumer brands, Mondelez is an improving earnings story—that’s … Read More
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"