Member Articles

DGN Holding Microsoft Continues to Deliver

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We continue to like Microsoft in our Dividend Growth Newsletter portfolio and think the firm is well positioned to ride out any storm that may arise due to the synchronized slowdown in global economic growth. As a true free cash flow king sitting on a pile of (net) cash, there’s a lot to like about Microsoft’s income growth story. By Callum Turcan On September 18, Dividend Growth Newsletter portfolio holding Microsoft Corporation (MSFT) announced it was increasing its per share dividend by 11% on a sequential basis, good for forward-looking yield of 1.4%. Microsoft’s dividend coverage is great, and we give the firm a Dividend Cushion ratio of 4.0x which supports our income growth thesis. The company generated $38.3 billion … Read more

FedEx Bemoans Trade Wars and Issues Weak Guidance, Shares Get Crushed

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Image Source: FedEx Corporation – IR Presentation By Callum Turcan Global logistics and shipping giant FedEx Corp (FDX) reported first quarter earnings for its fiscal 2020 (ended August 31) on September 17 that underwhelmed, sending shares sharply lower (down almost 13%) on September 18. FedEx reduced its fiscal 2020 guidance and management made sure to call out what the company sees as its main problem, trade wars and the dynamic effect that is having on global shipping volumes. Here’s what management had to say (emphasis added): “FedEx is lowering its fiscal 2020 earnings forecast as the company’s revenue outlook has been reduced due to increased trade tensions and additional weakening of global economic conditions since the company’s initial fiscal 2020 … Read more

Saudi Arabia Attacked, Oil Prices Shoot Higher

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Image Shown: Saudi Arabia’s oil infrastructure was attacked over the weekend, causing WTI and Brent to rally at the start of the trading session. By Callum Turcan Disaster struck this weekend when several drones took out the Abqaiq oil processing facility and the massive onshore Khurais oil field in Saudi Arabia (KSA) on Saturday, with WTI and Brent both surging on the news once trading resumed at the start of the week. The Khurais oil field produces around 1.5 million barrels of crude per day and the Abqaiq oil processing facility is the largest in the world. Saudi Arabia’s oil production capacity was reduced by 5.7 million barrels of crude per day due to these attacks and the country is … Read more

Our Reports on Stocks in the Auto Making Industry

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Image Source: HRYMX Structure of the Auto Manufacturers Industry The auto manufacturers industry is characterized by high fixed costs, substantial operating leverage, and intense competition. Vehicle sales are impacted by general economic conditions, which are largely out of the control of participants, and by the cost of credit and fuel. Excess capacity, price discounting and other marketing initiatives can pressure the top line, while rising raw material and labor costs can squeeze the bottom line. Changing consumer preferences in type, model and fuel-efficiency can cause abrupt shifts in market share. The structural characteristics of the group are very poor. For our automaker coverage, please click here.

Oracle’s Cloud Business Solid; CEO Hurd Taking Some Time Off

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Oracle’s strong Dividend Cushion ratio reflects considerable free cash flow generation in excess of cash dividends paid. Fiscal first quarter free cash flow of $5.6 billion covered cash dividends paid of $795 million more than 7 times. By Brian Nelson, CFA On September 11, Dividend Growth Newsletter portfolio holding Oracle (ORCL) posted solid fiscal first-quarter 2020 results (ends August 31), but the company’s results were overshadowed by a slight revenue miss on the top line and news that CEO Mark Hurd would take a leave of absence; we wish him a speedy return to good health. Co-CEO Safra Catz and founder Larry Ellison will cover his responsibilities while away. Oracle remains in good hands. Oracle’s total revenue advanced 2% in … Read more

Semiconductors Broadcom and Cree Push Forward in an Uncertain Environment

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Image Source: Broadcom Inc – IR Presentation By Callum Turcan Broadcom (AVGO) posted third quarter earnings for its fiscal 2019 on September 12. The semiconductor and enterprise software giant reported GAAP revenues of $5.5 billion (up 9% year-over-year) and non-GAAP diluted EPS of $5.16 (up 4% year-over-year). The initial reaction from Wall Street was pessimistic on September 13 but shares of AVGO climbed later in the trading session to recover some of those initial losses. Reiterating FY2019 Outlook, FY2020 Outlook Uncertain Right off the bat, one thing we think is very important is that Broadcom reaffirmed revenue guidance for FY2019 calling for $22.5 billion in net sales ($17.5 billion from semiconductor solutions and $5.0 billion from infrastructure software sales). However, … Read more

Kroger Posts Solid Quarter, Issues Weak Guidance

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Image Shown: Kroger Company – IR Presentation By Callum Turcan On September 12, food retailer Kroger Company (KR) reported second-quarter earnings for its fiscal 2019 that ended August 17. The company posted 2.2% year-over-year same-store sales growth, when excluding fuel sales (due to the volatile nature of petroleum product prices), and that was assisted by 31% year-over-year digital sales growth. Its FIFO gross margin contracted by almost 30 basis points according to management due to pressures at its pharmacy and specialty pharmacy business. However, corporate initiative Restock Kroger allowed for the retailer’s GAAP operating margin to climb marginally year-over-year as operating expenses were kept relatively contained. Shares of KR, after a volatile trading session, ended flat September 12. Restock Kroger … Read more

Dividend Increases/Decreases for the Week Ending September 13

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Below we provide a list of firms that raised their dividends during the week ending September 13. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Aberdeen Emerging Markets Equity Income Fund (AEF): now $0.045 per share quarterly dividend, was $0.04. BIOQUAL (BIOQ): now $0.70 per share annual dividend, was $0.60. BRT Apartments (BRT): now $0.22 per share quarterly dividend, was $0.20. CNB Community Bancorp (CNBB): now $0.26 per share quarterly dividend, was $0.25. Exantas Capital (XAN): now $0.25 per share quarterly dividend, was $0.225. First Farmers Financial (FFMR): now $0.31 per … Read more

Merck Shows Impressive Margin Expansion

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Image Source: Merck & Co Inc – IR Presentation By Callum Turcan Pharmaceutical giant Merck (MRK) has performed well during the past few fiscal years by reducing operating costs while utilizing strong growth at some of its oncology drug offerings to drive sales higher. Shares of Merck yield 2.7% as of this writing and are trading at the upper half of our fair value estimate range after an impressive run up in Merck’s stock price began in April 2018. Management recently raised Merck’s full-year sales and non-GAAP EPS guidance for 2019, which we will cover in a moment. Enhancing Profitability Levels From 2016 to 2018, Merck cut its GAAP operating expenses from $35.1 billion to $33.6 billion (down over 4%) … Read more

Our Reports on Stocks in the Railroad Industry

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Image Source: Dan O’Brien Structure of the Railroads Industry The railroad industry operates at a significant competitive advantage relative to motor transportation in that it can charge lower rates for long-haul bulk shipments (coal, grain, rock). Still, participants face competition from other railroads that operate parallel routes, from motor carriers that provide similar services, and from barges in routes close to inland and Gulf Coast waterways. Operating a railroad is a capital-intensive proposition, and participants face cost pressures from both union labor and fuel. Pricing and volume trends in commodity categories can be quite volatile from year to year. We like the group. We’ve optimized our industrials coverage. Our reports can be found here.