Top New Dividend Growth Idea: Parker Hannifin
May 10, 2019
It’s been a while since we’ve been this excited about a dividend growth stock. We’ll be looking to add Parker-Hannifin to the Dividend Growth Newsletter portfolio soon. By Callum Turcan Parker-Hannifin Corporation (PH) is an industrial company that supplies everything from water purification filters to check valves to fuel tank inerting systems to its customers all over the world. The firm yields 2.1% as of this writing and Parker-Hannifin is targeting a dividend payout ratio of 30 – 35% of its net income over the next five years. As Parker-Hannifin continues to grow its bottom line while sporting tremendous free cash flow conversion rate north of 100%, we see the firm as having a very promising dividend growth story. Note
Disney’s Mixed Report, Stamps Implodes, and Astronics for the Radar, More Reports
May 9, 2019
Disney’s Mixed Report, Stamps Implodes, and Astronics for the Radar, More Reports — In alphabetical order by ticker symbol: ATRO, DIS, ETSY, GDOT, NYT, PBPB, ROKU, STMP, SVMK, TPR, TVTY — Astronics (ATRO): We are strongly considering one of our favorite small-cap aerospace suppliers after a solid showing during its first quarter, results released May 8. If you may recall, Astronics was a winner in the Best Ideas Newsletter portfolio in the past, and even with Boeing on the skids given 737 MAX crashes, we’re not shying away from considering aerospace supply-chain exposure, given the massive backlogs at the airframe makers. Astronics’ sales advanced more than 16% in the quarter, and it registered its fifth consecutive quarter of record aerospace revenue.
Allergan’s Peculiar Non-GAAP Reporting, Wendy’s Free Cash Flow, More Reports
May 8, 2019
In alphabetical order by ticker symbol: AGN, EA, ENR, LYFT MYL, PZZA, S, WEN. — Allergan (AGN): Allergan’s first-quarter report, released May 7, came in better than expected, despite the headline numbers not looking that great. GAAP net revenue declined 2% on a year-over-year basis, while it posted a rather large operating loss. The Botox maker continues to advance its pipeline, and it raised its non-GAAP top and bottom-line guidance for fiscal 2019. However, we can’t get comfortable with the huge discrepancy between GAAP and non-GAAP bottom-line guidance. The former calls for a loss of $5.70 per share on the year, while the latter calls for a gain of $16.55 per share on the year. What’s worse, the GAAP bottom-line earnings guidance
US-China Trade Spats Continue, More Reports
May 8, 2019
US-China Trade Spats Continue, More Reports — Trade spats between US and China are back in the news. President Donald Trump has set Friday for a tariff increase (raising the tariff from 10% to 25% on $200 billion worth of Chinese goods), but we think the move is primarily to bring China back to the negotiating table as the White House believes China is “reneging” on some of its trade promises. Chinese Vice President Liu He is planning to visit the US this week, but there may be structural barriers preventing the two countries from being able to come together in a long-term accord. — The US may be too rigid in its demands, and China may not be able to put into
Recently Asked Questions
May 7, 2019
Image Source: Eric A version of this article appeared on our website November 2015. Article last updated June 2017. Republished May 7, 2019. The following questions cover the following topics: 1) Can you explain what the Dividend Cushion ratio measures and what it doesn’t? 2) Can you explain the difference between the raw, unadjusted Dividend Cushion ratio and the adjusted Dividend Cushion ratio? 3) Can you talk more about the Valuentum Buying Index (VBI) ratings? Why do some of your favorite ideas in the newsletter portfolios have lower VBI ratings than ones that are not in the newsletter portfolios? 4) Can you explain why you don’t always include companies in the newsletter portfolios that have strong Economic Castles, solid Dividend
Berkshire’s Buybacks, More Earnings Reports
May 6, 2019
Berkshire’s Buybacks, More Earnings Reports — In alphabetical order by ticker symbol: ANET, ATVI, BRK.B, CHD, DWDP, DNKN, GILD, HBI, K, TEVA — Arista Networks (ANET): Arista reported a solid first-quarter report May 2, but its outlook for the second quarter left something to be desired. The cloud networking company could offer a hint to what to expect from Cisco (CSCO) when it reports in the coming week or so. Arista’s revenue during the first quarter was fine, jumping 26%, and earnings per share also handily beat, but top-line guidance for the second quarter came in at $600-$610 million, below consensus forecasts. It’s still early in the year to jump to any conclusions, but investors in Cisco should perhaps set expectations
Energy Earnings Roundup
May 3, 2019
Image Source: Exxon Mobil Corporation – First quarter 2019 earnings presentation By Callum Turcan Energy earnings season is upon us and several major oil & gas companies have just reported their first quarter results. Global crude pricing benchmarks tanked during the last three months of 2018 and only partially recovered during the first three months of 2019, which depressed upstream raw energy resource realizations for those with a large liquids production base (meaning those that produce more natural gas liquids, crude oil, and condensate than “dry” natural gas). Chevron Corporation (CVX): The energy giant posted EPS of $1.39 during the first quarter, down from $1.90 in the same period last year. Weaker realized raw energy resource prices offset a 7%
Mortgage REITs Floundering, More Reports
May 2, 2019
In alphabetical order by company name: NLY, CAKE, CLX, CVS, EL, PBI, PSA, QCOM, O, SMG — Annaly Capital (NLY): We’ve been warning about the mortgage REITs (REM) for as long as we can remember, and we just issued yet another warning recently about the sustainability of group’s dividends. These equities are high-risk, and they’ve been underperformers for years. On May 1, Annaly Capital pre-announced a dividend cut to $0.25 per share, down from $0.30 per share previously. Economic leverage at the mREIT was 7x at the end of the quarter, and mortgage market dynamics remain as difficult to predict as ever. CEO Kevin Keyes characterized the current environment as one hindered by a “flattening yield curve and compressed spreads.” Buyer
Occidental Petroleum, Backed by Buffett’s Financial Firepower, Makes a Go At Anadarko Petroleum in an Affront to Chevron
May 2, 2019
Image Source: Occidental Petroleum Corporation – IR presentation The bidding war over Anadarko Petroleum is heating up with Warren Buffett’s Berkshire Hathaway offering to invest $10.0 billion in a new 8% preferred issue from Occidental Petroleum, along with warrants to purchase up to 80 million shares of OXY at $62.50, if the energy company successfully acquires Anadarko. Occidental is bidding against Chevron because both firms want Anadarko’s Permian Basin acreage, but the leverage Occidental would take on the fund the deal would be extremely onerous in our view. By Callum Turcan Apparently three’s a crowd in the energy world, with the bidding war over Anadarko Petroleum Corporation (APC) heating up now that Warren Buffett has thrown his hat into the
Apple Soars! Enterprise (Universal) Valuation Matters
April 30, 2019
Image: Apple’s (AAPL) shares have soared since the beginning of this year. We have maintained our fair value estimate of $222 per share following its fiscal second-quarter results, released April 30. — By Brian Nelson, CFA — On April 30, Apple reported better-than-expected fiscal second-quarter results. Headlining the press release was that “services revenue reach(ed) a new all-time high of $11.5 billion.” As is the case of many services business, this revenue is higher-margin and recurring, and we see only upside as Apple’s ecosystem continues to flourish. The company’s installed base is now over 1.4 billion users. — We have maintained our fair value estimate for Apple’s shares of $222 following the release of the report. In fact, our fair value
