Intel Cuts Dividend, As Expected
February 22, 2023
Image Source: Aaron Fulkerson By Brian Nelson, CFA The Dividend Cushion ratio caught another dividend cut. This time it was Intel’s (INTC). With a Dividend Cushion ratio of 0.4, Intel announced February 22 that it has slashed its dividend by nearly two thirds, to $0.125 on a quarterly basis, down from its prior quarterly dividend of $0.365. The company’s estimated forward yield now stands at ~1.9%, and we can’t say that the dividend cut was unexpected given its massive net debt position and significantly weakened free cash flow generation–the two most important components behind an assessment of its cash-based intrinsic value and dividend health. Intel’s fourth-quarter results and outlook for 2023, released January 26, were atrocious. Here’s what we
Walmart Warns: “Prices Are Still High and There Is Considerable Pressure on the Consumer”
February 22, 2023
Image Source: Mike Mozart By Brian Nelson, CFA As we wrote in “The Fed ‘Can’t Stop, Won’t Stop” in early January, the trade-down trends that we’re seeing in big box retail and with groceries, more generally, are interesting. Inflation started to accelerate with food-at-home prices moving aggressively higher in early 2022, and consumers have been trading down to better value. It probably wasn’t until egg prices soared, however — driven in part by a shortage of egg laying chickens (not just inflationary pressures) – that tipped everyday consumers to budget more cautiously, and the largest big box retailer in Walmart (WMT) is seeing this impact first-hand. Here’s what’s happening on the ground, per Walmart’s CEO Doug McMillon on the
Home Depot’s Comps, Operating Income Fall in Q4; Hikes Dividend 10%
February 21, 2023
Image Source: Mike Mozart By Brian Nelson, CFA On February 21, home improvement retailer Home Depot (HD) reported weak fourth quarter 2022 results that showed comparable store sales for the period falling 0.3% and operating income dropping 1.5% from the same period a year ago. Diluted earnings per share advanced 2.8% from last year’s quarter. The company is dealing with a weakened consumer spending environment and difficult comparisons from pandemic-driven demand of a year ago. Home Depot raised its dividend payout 10%, to $2.09 per share, or $8.36 per share on an annualized basis. That translates into a forward estimated dividend yield of ~2.6%. Looking to fiscal 2023, Home Depot’s sales guidance was rather weak. The company expects sales and
Phillip Morris’ Acquisition of Swedish Match Accelerates Smoke-Free Push
February 20, 2023
Image Source: Phillip Morris By Brian Nelson, CFA On February 9, Phillip Morris (PM) reported fourth-quarter 2022 results. The company’s performance continues to be impacted by the War in Ukraine. Net revenue growth came in at 0.6% for the quarter, while operating income fell 0.8%. However, excluding sales in Russia and Ukraine, net revenue growth advanced 7.9% in the quarter, while operating income growth advanced 10.3%, a much better showing on an adjusted basis. Smoke-free products accounted for ~36.0% of total net revenue in the period. Here’s what Phillip Morris’ CEO Jacek Olczak had to say about the quarterly results: Despite the challenging operating environment in 2022, due to the war in Ukraine, as well as supply-chain and global inflationary
Our Reports on Stocks in the Recession Resistant Industry
February 19, 2023
Dividend Yield: Estimated on a forward-looking annualized basis. VBI: The Valuentum Buying Index, a timeliness indicator that overlays a price-to-fair-value estimate consideration. Fair Value Estimate: Derived by Valuentum’s enterprise valuation process. Dividend Cushion ratio: A ratio assessing the health of the dividend (the higher, the better). Data as of the date of this article. Individual company reports may have been updated subsequent to the publishing of this article, so please download a company’s stock and dividend report for its latest information and data. Note: The data in the tables of each of the below companies’ respective stock pages is updated the weekend after the publishing of this update. Please click on a company name below to view the corresponding equity
Online Sports Betting Surges But DraftKings’ Cash Burn Continues to Intensify; We Prefer More Conservative Gaming Plays Such as Churchill Downs
February 19, 2023
Image: Online sports betting platform DraftKings continues to burn through hundreds of millions of dollars each year. Data: SEC Filings, Seeking Alpha. By Brian Nelson, CFA Sports betting is now legal in 36 states and mobile sports betting is now legal in 26 states, and more states are expected to legalize sports betting in 2023. According to a report from Grand View Research, the global sports betting market is expected to increase at a compound annual growth rate north of 10% through 2030. In 2022 alone, it is estimated that Americans wagered roughly $80 billion betting on sports online. The NFL is among the biggest draws, and some estimate that more than 50 million American adults bet on the Super
Investing’s Odd Couple: Value and Momentum
February 16, 2023
This article previously appeared on our website July 13, 2013. “For value investors, the sweet spot in investing is being able to buy an undervalued stock right before its value is recognized by the market and just before its stock price begins to take off. But how can a value investor tell when a stock is in the sweet spot? The answer, according to Brian Nelson, president of investment research company Valuentum Securities, is to identify stocks with good value that are just starting to exhibit good technical/momentum characteristics.” Kevin Truitt was a Valuentum contributor at the time of this original writing. Past results are not a guarantee of future performance. The Best Ideas Newsletter portfolio and Dividend Growth Newsletter
PepsiCo’s Pricing Actions Fantastic; Needs Better Free Cash Flow in 2023 to Cover 10% Dividend Hike
February 13, 2023
Image Source: PepsiCo By Brian Nelson, CFA On February 9, PepsiCo, Inc. (PEP) reported impressive fourth-quarter 2022 results that showed organic revenue growth of 14.6% and core constant-currency earnings-per-share expansion of 10%. The company also added to its long streak of consecutive annual dividend increases, raising the payout by 10%, to $5.06 per share on an annualized basis, starting with the June 2023 payment. PepsiCo has rewarded dividend growth investors with 51 consecutive years of dividend growth, and we have no reason to believe that the streak will be broken anytime soon. The firm expects to buy back $1 billion worth of its shares during 2023. PepsiCo showcased tremendous product pricing power. During the fourth quarter, volumes across its portfolio
The Dividend Cushion Ratio Warned of Risk to V.F. Corp’s Dividend
February 13, 2023
Image: The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. By Brian Nelson, CFA V.F. Corp (VFC) cut its quarterly dividend by more than 40% on February 7, to a quarterly rate of $0.30 per share from $0.51 per share previously. The cut is yet further evidence of the importance of paying attention to the cash-based sources of intrinsic value–net cash on the balance sheet and
Albemarle Outlines Strong Lithium Demand Outlook
February 12, 2023
Image Source: Albemarle By Brian Nelson, CFA Albemarle Corporation (ALB) released preliminary fourth-quarter numbers for revenue and earnings on January 23 that came in better than the consensus estimate. Net sales in the quarter are expected in the range of $2.59-$2.65 billion, up 190% to 196%, while adjusted diluted earnings per share is targeted in the range of $8.35-$8.75, up 727% to 766%. We’ll get final results for the fourth quarter on February 15, but clearly Albemarle is doing a lot of things right to put up such fantastic growth rates. For those just getting familiar with key ideas in the simulated ESG Newsletter portfolio, here is some background on Albemarle’s operations from its most recent Form 10-K; note
