Public Storage’s Traditional Free Cash Flow Coverage of the Dividend Is Unique for a REIT
February 25, 2021
Image Source: Mike Mozart By Brian Nelson, CFA Public Storage (PSA) reported better-than-expected fourth-quarter 2020 results February 24. For the period ending December 31, 2020, net income came in at $1.67 per common share, down from last year’s level but mainly because of a non-operating negative impact related to forex on Euro denominated debt ($35.1 million). On an operating basis, Public Storage’s self-storage net operating income advanced $16.5 million year-over-year in the quarter, which was only modestly offset by higher general and administrative expenses ($12.3 million). Underlying business performance at Public Storage remains very healthy, in our view. Core funds from operations (FFO) per share came in at $2.93 in the quarter, up 3.2% in the year-ago period (above the
Realty Income’s Dividend Track Record Unfazed by Its Weakened Theater Exposure
February 25, 2021
Image Source: Realty Income By Brian Nelson, CFA On Monday, February 22, Realty Income (O) reported solid fourth quarter results that beat expectations. For the quarter ending December 31, 2020, net income per share came in at $0.33, adjusted funds from operations per share was $0.84, and the REIT collected 93.6% of contractual rent, a decent percentage given that the troubled theater industry comprises ~5.6% of its annualized contractual rent. Regal Cinemas and AMC Entertainment (AMC) are top-10 customers. Though Realty Income continues to face headwinds from its non-investment grade client tenant portfolio, the REIT continues to invest for the future, with over $1 billion allocated to properties and properties under development or expansion in the period. As with many
Garbage Hauler Republic Services Expects Record Year in 2021
February 24, 2021
Image Source: Republic Services By Brian Nelson, CFA There are few things as certain as death and taxes, but garbage may be one of them. One of our favorite ideas within the municipal solid waste coverage is Republic Services (RSG), a holding in the Dividend Growth Newsletter portfolio. We love its free cash flow generating ability, visibility into future revenue, enviable position with respect to disposal capacity, CPI-based book of business, and exposure to fast-growing economic areas in the US. Republic Services reported strong fourth-quarter results Monday, February 22, and issued favorable 2021 full-year guidance. Revenue during the fourth quarter was largely flat, but adjusted net income rose to $1.00 per diluted share from $0.88 per diluted share in the
Home Depot Shows the Home Has Never Been More Important
February 24, 2021
Image Source: Home Depot. By Brian Nelson, CFA On Tuesday, February 23, Home Depot (HD) reported fiscal fourth-quarter 2021 results (period ending January 31, 2021) that came in better than consensus estimates across the board. Not only did the top- and bottom- lines beat, but comparable store sales growth of 24.5% exceeded even some of the most optimistic forecasts for the home improvement retailer during the period. The average ticket price and the number of transactions advanced, while both professional (“Pro”) and Do-It-Yourself (“DIY”) customer revenue increased at a double-digit pace in the quarter. Home Depot also raised its dividend 10% and now yields ~2.5% on a forward-looking basis ($6.60 per-share dividend on an annualized basis). We continue to like
Korn Ferry Leaps Higher Toward Our Fair Value Estimate
February 23, 2021
Image Shown: Korn Ferry’s stock has surged since it registered a 9 on the Valuentum Buying Index. The company is also included as a holding in the Best Ideas Newsletter portfolio. Brian Nelson, CFA During the trading session Monday, February 22, Best Ideas Newsletter portfolio holding and 9-rated on the Valuentum Buying Index, Korn Ferry (KFY) jumped nearly 9% thanks to better-than-expected fiscal third-quarter 2021 results. Korn Ferry’s fee revenue advanced 9% on a sequential basis as the global consulting firm hauled in record operating income of $65.2 million, record adjusted EBITDA of $96.7 million, and record net income of $51.3 billion during the three months ended January 31, 2021. Here’s what CEO Gary D. Burnison had to say in
Johnson & Johnson’s COVID-19 Vaccine Candidate Nears the Finish Line
February 21, 2021
Image Source: Johnson & Johnson – Fourth Quarter of Fiscal 2020 IR Earnings Presentation By Callum Turcan Over the past several months, shares of Johnson & Johnson (JNJ) have steadily climbed higher as investors are warming up to its improving outlook and strong financial position. In April 2020, Johnson & Johnson increased its quarterly per share dividend by over 6% sequentially, highlighting its commitment to income seeking investors. Johnson & Johnson is actively working towards developing a safe and viable vaccine to help put an end to the ongoing coronavirus (‘COVID-19’) pandemic. Recent updates indicate the firm’s COVID-19 vaccine candidate is near the finish line. We include Johnson & Johnson in both the Best Ideas Newsletter and Dividend Growth Newsletter
Two High-Quality REITs Report Earnings: Crown Castle and Digital Realty
February 21, 2021
Image Shown: Crown Castle International Corp. forecasts that its core financial metrics will continue to grow in 2021. Image Source: Crown Castle International Corp. – Fourth Quarter of 2020 IR Earnings Presentation By Callum Turcan Searching for lofty yields in a low interest rate environment comes with substantial risks as high yields can sometimes be more indicative of the expected headwinds facing the company or entity in question rather than an excellent risk-reward opportunity. We published an article back in September 2020 titled High Yield Dividend Income Investing in a Time of Need (link here) that highlighted our thoughts on this issue and why we think investors in high-yielding enterprises need to keep their guards up. All yields–even of the
Xpel Is an Intriguing Play on the Auto Industry
February 21, 2021
Image Shown: Most of Xpel Inc’s business is built around its paint protection film products for automobiles. Image Source: Xpel Inc – November 2020 IR Presentation Executive Summary: Xpel has a pristine balance sheet (nice net cash position), strong cash flow profile, ample growth opportunities, and a plan to boost its margins. The company primarily sells paint protection film products for automobiles, and its outlook appears quite promising as the firm is moving into adjacent areas while putting up rock-solid performance of late. We are highlighting Xpel given its potential for additional capital appreciation upside, though we caution shares of XPEL are up almost four-fold over the past year as of the middle of February 2021. By Callum Turcan Xpel
PayPal Expects to Double Its Annual Free Cash Flows By 2025
February 19, 2021
Image Shown: PayPal Holdings Inc views its total addressable market across the payment processing and solutions sitting at approximately $110 trillion, an enormous opportunity that the firm is well-positioned to capitalize on. Image Source: PayPal Holdings Inc – 2021 Investor Day Presentation By Callum Turcan We continue to be huge fans of PayPal Holdings Inc (PYPL) and include shares of PYPL as a top-weighted idea in the Best Ideas Newsletter portfolio. As of this writing, shares of PYPL have surged higher by ~140% over the past year as the company’s business model has proven to be incredibly resilient in the face of the coronavirus (‘COVID-19’) pandemic. PayPal’s ability to generate meaningful free cash flows in almost any environment is supported
Newmont Approves Another Massive Dividend Increase
February 18, 2021
Image Shown: An overview of Newmont Corporation’s resource base, which is heavily weighted towards gold with its producing mines primarily located in the Americas and Australia. The company also has some exposure to copper and silver along with other raw materials. Image Source: Newmont Corporation – Fourth Quarter of 2020 IR Earnings Presentation By Callum Turcan On February 18, gold miner Newmont Corporation (NEM) reported fourth quarter earnings for 2020 that beat consensus bottom-line estimates but missed consensus top-line estimates. We appreciated the major improvements in Newmont’s balance sheet last year (i.e., sharp reductions in its net debt load), the resilience of its operations in the face of the coronavirus (‘COVID-19’) pandemic, and the company’s ability to continue churning out
