Chevron Releases Fourth Quarter Update
January 12, 2014
The fundamentals of a commodity-producing business are cutthroat. Not only are the prices of the relevant commodity extremely volatile, but a focus on the cost structure associated with extracting and producing the commodity is first and foremost on executives’ minds. Excessive financial leverage (a hefty debt load) doesn’t mix well with the uncertainty of a commodity-producing company’s operations, increasing the risk of financial distress during the depths of the economic and/or commodity pricing cycle. The latter consideration is why we prefer Chevron (CVX) as one of our top dividend growth ideas in the energy sector; unlike its major energy peers, the company has negligible net debt, offering significant financial flexibility to scoop up undervalued assets or to advance its lofty dividend.
Target’s Credit/Debit Card Nightmare Continues But Retailer Will Recover
January 11, 2014
The situation has deteriorated at Target. On Friday, the retailer announced an update to its investigation of the recent credit/debit card data breach, first made public December 19. The firm has learned that not only has the payment card data of individuals been stolen, but also certain guest information including names, mailing addresses, phone numbers or email addresses for up to 70 million individuals (was 40 million). Target is doing what it can to keep customers happy, including guaranteeing zero liability for the cost of any fraudulent chargers arising from the breach and offering one year of free credit monitoring and identity theft protection to all guests that shopped at US stores. Still, the good faith efforts by Target haven’t
Investor Alert! Marijuana Stock Scams
January 10, 2014
Update: In early January 2014, new laws regarding the legalization of marijuana for medical and recreational purposes went into effect in a number of states. At the same time, media coverage of the issue increased, as did investor interest in shares of marijuana-related companies. In some cases, volumes for the stock of otherwise thinly traded, marijuana-related companies increased dramatically—and prices became quite volatile. We are reissuing this alert to warn investors not only about the potential for fraud in this arena, but also to reiterate the risks of investing in thinly traded companies about which little is known. Regardless of industry sector, any so-called “hot” stock can burn your portfolio. Rather than getting swept away, take time before you invest
What a Week in Retail: Some Good, Mostly Bad
January 10, 2014
The week ending January 10 brought a plethora of news that confirmed our fears: promotional activity during the shortened holiday shopping season of 2013 wasn’t just bad, it was cutthroat. Many retailers were left unable to recover from the ice and winter storms that ravaged much of the US during December/early January. Bed Bath and Beyond (BBBY) Five Below (FIVE), Pacific Sunwear (PSUN), Sears (SHLD) and Zumiez (ZUMZ) all revealed difficult performance during the period. The variant business models of the aforementioned retailers suggest weakness was widespread. Surprisingly, even discount retailing giant Family Dollar (FDO) wasn’t able to lower prices enough to keep customers in the stores. No category seemed to be spared. Needless to say, we’re not expecting much
Alcoa’s 4Q Earnings Fall Short of Expectations
January 10, 2014
Aluminum giant Alcoa’s (AA) fourth-quarter results, released Thursday, left much to be desired. Revenue fell more than 5% from the same period a year ago, as a huge non-cash goodwill impairment charge tied to legacy smelting operations pushed earnings deep into the red. Though on an adjusted basis the firm generated net income of $40 million, or $0.04 per share, the performance was terrible and showed how weak aluminum prices, which were 7% lower than the year-ago period, can punish results. The aluminum giant earned $0.06 per share on an adjusted basis in last year’s period. At the end of the quarter, Alcoa noted that 57% of its revenue and 80% of its segment profits came from value-add businesses (Engineered
Dividend Increases for the Week Ending January 10
January 10, 2014
Below we provide a list of firms that raised their dividends during the week ending January 10. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports, please click here (or use our ‘Symbol’ search box in our website header). Firms Raising Their Dividends This Week DDR (DDR): now $0.155 per share quarterly dividend, was $0.135. Fly Leasing Limited (FLY): now $0.25 per share quarterly dividend, was $0.22. Ford (F): now $0.125 per share quarterly dividend, was $0.10. Sovran Self Storage (SSS): now $0.68 per share quarterly dividend, was $0.53. Spectra Energy (SE): now $0.335 per share quarterly dividend, was $0.305.
Ford Ups Dividend; Mulally to Stay
January 9, 2014
It hasn’t been that long ago since Ford reinstated its dividend, and Thursday brought the most recent increase, the second in two years. The automaker announced today that it will pay a first-quarter 2014 dividend of 12.5 cents per share, up 25% from the 2013 quarterly dividend of 10 cents per share. Though Ford’s Valuentum Dividend Cushion score indicates the pace of the advance is steep (and much higher than we would have expected), we like that management continues to put shareholders’ interests first. We think investors should expect a long-term dividend growth rate in the low-single-digits given the inherent cyclicality of the auto business. Ford will now yield in excess of 3.1% based on Thursday’s closing price. We plan
The Best Ideas for 2014 and Beyond: Part II
January 8, 2014
A portion of this article is excerpted from the January 2014 edition of the Dividend Growth Newsletter. Valuentum has two actively-managed portfolios: a Best Ideas portfolio and a Dividend Growth portfolio. Each portfolio has different goals and strategies. The Best Ideas portfolio seeks to find firms that have good value and good momentum characteristics and typically holds them from a Valuentum Buying Index rating of a 9 or 10 to a rating of a 1 or 2. The goal of the portfolio is to generate a positive return each year and to exceed the performance of a broad market benchmark. The Dividend Growth portfolio seeks to find underpriced dividend growth gems that generate phenomenal levels of cash flow and have
Apollo’s 1Q 2014 Results Show Continued Enrollment Declines, Weakening Cash Flow
January 8, 2014
Industry proxy for the ‘Education (For-Profit)’ group, Apollo (APOL) reported weak fiscal first-quarter 2014 results Wednesday. Net revenue declined to $856 million to $1.1 billion in the first fiscal quarter of last year. University of Phoenix Degreed Enrollment fell nearly 18% from the same period a year ago, while New Degreed Enrollment tumbled nearly 23%. Image Source: Apollo Operating income dropped significantly ($169 million, was $231 million), and income from continuing operations, excluding special items, came in at $1.04 per share compared to $1.22 per share in last year’s quarter. The for-profit education provider’s cash balance shrunk to $917 million from $1.52 billion as it paid down debt. Net cash from operations fell to $129 million in the three
JC Penney’s Holiday Sales Update Leaves Much to Be Desired
January 8, 2014
We’ve been warning investors about the seriousness of JC Penney’s (JCP) cash flow situation for some time (click here for an in-depth cash-burn breakdown). It looks now that even in-line commentary about the company’s holiday performance is being deciphered as underperformance, as shares are under significant pressure Wednesday. JC Penney reported today that the company is pleased with its performance for the holiday period, showing continued progress in its turnaround efforts. Customers responded well to the company’s offerings this holiday shopping season, both in store and online. JC Penney also reaffirmed its outlook for the fourth quarter of 2013, as previously set out in the Company’s third quarter earnings release dated Nov. 20, 2013. Though comparable sales are very important
