Member Articles

Dividend Increases/Decreases for the Week Ending September 25

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Below we provide a list of firms that raised/lowered their dividends during the week ending September 25. 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 Accenture (ACN): now $1.10 per share semi-annual dividend, was $1.02. AltaGas (ATGFF): now C$0.165 per share monthly dividend, was C$0.16. FNB Bancorp (FNBG): now $0.15 per share quarterly dividend, was $0.13. Hingham Institution for Savings (HIFS): now $0.30 per share quarterly dividend, was $0.28. Lockheed Martin (LMT): now $1.65 per share quarterly dividend, was $1.50. Masco (MAS): now $0.095 per share quarterly dividend, was $0.09. New … Read more

Janet Yellen, the Positive GDP Revision, and Nike’s Swoosh

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Though it may seem much worse, the S&P 500 (SPY, DIA) is down only a few percentage points from the all-time highs set in May this year. We continue to remind equity investors that the US stock markets have roughly tripled from the March 2009 panic bottom only six short years ago, so further declines in the form of profit taking may still be ahead. However, the throngs of investors looking to “get back to even” before selling may account for more overhead supply than we care to admit. Returns have been so wonderful in yesteryears’ upward-sloping bull market that even flat equity market performance may become unbearable going forward, adding to yet more selling pressure. The swoon in late … Read more

Caterpillar Prepares for Continued Pressure; Slashing Our Fair Value

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Caterpillar’s (CAT) shares have taken a substantial hit following the firm’s restructuring and cost reduction announcement September 24. The slowing economy in China, the largest market for construction machinery in the world, has infected the export-dependent countries of Brazil, Canada, and Australia, resulting in severe weakness in mining activity and construction sales, almost everywhere on the globe. OPEC’s dedication to putting US producers out of business has wreaked havoc on the price of oil and orders for oil-related applications. Cat Financial’s exposure to increasingly weaker credits in the mining and energy arenas, however, has us most concerned. We’ve materially lowered our fair value estimate as a result.  Caterpillar’s cost reduction plans will begin in late 2015 and are indicative of … Read more

Recent M&A Activity

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Amid the recent market volatility, firms have remained active in M&A. Let’s take a closer look at what companies will be joining forces. DENTSPLY and Sirona to Join Forces DENTSPLY (XRAY) and Sirona Dental Systems (SIRO) announced September 15 that they have entered an all-stock merger agreement. The resulting company will be the world’s largest manufacturer of professional dental products and technologies. Under the proposed agreement, Sirona shareholders will receive ~1.8 shares of DENTSPLY for each existing Sirona share. If the transaction receives regulatory and shareholder approval, it is expected to close in the first quarter of 2016, and the combined company expects the merger to be accretive to adjusted earnings per share for both companies’ shareholders in the first … Read more

China, Petrobras and the Circling Sharks

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The Federal Reserve meeting last week came and went, and now the markets are back to focusing on fundamentals, as they should. The problem for equity investors, however, is that the fundamentals aren’t great, and it is becoming increasingly more difficult for even the most bullish investors to find reasons for optimism, at least in the near term. The economic environment in China (FXI) continues to worsen. We outlined our grave concerns regarding the implications of its collapsing stock market on the health of the country’s property market, and the resulting consequences on China’s largest banks. Commodity-linked entities in China continue to feel pain, and the preliminary reading on the Caixin China manufacturing purchasing managers’ (PMI) index fell to Financial … Read more

FAQ: The Wider the Moat, the Lower the Return, Right?

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Q: The wider the moat, the lower the return, right? A: Yes, that’s correct. Morningstar’s very own data from 2002 through 2012 shows that “no” moat stocks are the best performers. A former colleague of mine, Morningstar’s Warren Miller noted the following in his January 11, 2013 piece titled, “How Our Stock Star Ratings Have Performed:” Figure 3 further illustrates the idea that using moat ratings alone will not yield outsized returns. In fact, the wider the moat, the lower the return. There it is. Go ahead, look at Figure 3 (1). It shows that “no” moat stocks outperform “narrow” moat stocks, which outperform “wide” moat stocks. We don’t think Morningstar is doing anything wrong talking about moats, but we … Read more

Dividend Increases/Decreases for the Week Ending September 18

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Below we provide a list of firms that raised their dividends during the week ending September 18. 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 Artesian Resources (ARTNA): now $0.2216 per share quarterly dividend, was $0.2183. Blackstone Mortgage Trust (BXMT): now $0.62 per share quarterly dividend, was $0.52. Citizens Financial Services (CZFS): now $0.41 per share quarterly dividend, was $0.405. Elmer Bancorp, Inc. (ELMA): now $0.33 per share semi-annual dividend, was $0.32. The First of Long Island (FLIC): now $0.20 per share quarterly dividend, was $0.19. Golden Enterprise (GLDC): now $0.03375 … Read more

The Fed Freezes; Outlook as Bad as Feared or Worse?

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The cheering on CNBC has been short-lived. The sell-off we had expected irrespective of the Fed’s decision has ensued. Selling pressure in the markets may only intensify in coming weeks as uncertainty regarding Fed policy continues to take center stage. Broader market valuations remain stretched, market technicals remain weak, and sentiment is the worst it has been in some time. On September 17, the Fed announced that it has reaffirmed its view that the current 0%-0.25% target range for the federal funds rate “remains appropriate.” Though acknowledging US economic activity is expanding at a moderate pace and that both the housing sectors and labor markets have improved, it also indicated that “recent global economic and financial developments may restrain economic … Read more

Setting the Record Straight on Kinder Morgan

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Most, if not all, MLPs report distributable cash flow (DCF), which does not in the calculation consider growth capex, an important driver behind the generation of increased cash flow from operations in the future. When MLPs report distribution coverage ratios, this particular calculation also backs out growth capex from the equation, instead using only ‘sustaining capital expenditures.’ There are a number of contractual reasons why the data is presented in such a way, but from a valuation standpoint, we’ve always taken an issue with the MLP universe being implicitly valued on a future distributable cash flow stream that “covers” the distribution than on future free operating cash flow, which is a better measure of the free operating cash flow that … Read more

Altria Benefits from Major Beer Deal Talks

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Altria (MO) may be finally cashing in on its “hidden” assets that we have been highlighting for some time. The company owns a 27% stake in SABMiller (SBMRY), and its shares are receiving a nice bump as a result of increased merger talks surrounding the brewer after speculation began early September 15. Rumors have been swirling for some time around beer giants AB-InBev (BUD) and SABMiller, but this time the news is coming from the two companies themselves. The acquisition, which has been intimated to be in the works, would be the largest in the industry’s history and would create a company that produces approximately one third of the world’s beer. No proposal has been received, but AB-InBev reportedly plans … Read more