Member Articles

Dividend Cushion Ratio Predicts Two More Cuts

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Forward-looking, cash-flow based dividend analysis has proven its worth once again. Chesapeake Energy (CHK) recently suspended its dividend, and Hi-Crush Partners (HCLP) has significantly cut its dividend. In each case, the Dividend Cushion ratio appropriately warned members. Early in July and prior to the elimination of its dividend, Chesapeake Energy ranked near the top of our list of dividend yields to avoid. Based on its Dividend Cushion ratio of -7.7, we rated its dividend safety as VERY POOR, and its dividend growth potential rating was also VERY POOR. The firm updated its financial strategy July 21 and eliminated its common stock dividend, effective in the third quarter of 2015. A reduction in investable capital due to the weak commodity price … Read more

Guide to Second Quarter Earnings; Big Cap Tech Sets Somber Mood

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Image Source: Fortune Live Media, Fortune Most Powerful Women Dinner With Yahoo CEO Marissa Mayer Apple (AAPL) There were no real surprises in Apple’s fiscal third quarter (calendar second quarter) results. The iPhone maker posted record quarterly revenue and net earnings of $49.6 billion and $10.7 billion, up ~33% and ~39%, respectively, thanks to record fiscal third-quarter sales of iPhone and Mac; its highest ever sales from services and the successful execution of the launch of the Apple Watch also buoyed performance. An “amazing quarter,” iPhone revenue advanced 59%, and customers and investors alike are looking forward to the release of iOS 9, OS X El Capitan and watchOS 2 in the fall. Apple’s gross margin expanded 30 basis points in … Read more

Keeping Both eBay and PayPal after Split

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eBay (EBAY) and PayPal (PYPL) are no longer the same company. As we had previewed in the pre-split piece, once shares of eBay and PayPal started trading individually, shares of legacy eBay fell and PayPal soared. But that’s merely semantics. At the end of the day, eBay and PayPal had jumped a combined 4%+, and we continue to believe both are underpriced. The Best Ideas Newsletter portfolio will be updated to factor in the split-up upon publishing of the August edition on the 15th. We plan to update our 16-page report on eBay and launch independent coverage of PayPal following its first full quarter as a standalone entity. Let’s walk through their last quarterly results as a combined entity to … Read more

Aerospace and Automotive Demand Powering Most Industrials

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Air travel growth and pent-up demand from delayed auto sales due to the Great Recession have provided a boom in spending within the commercial aerospace and automotive industries in recent years, respectively. The ever-increasing global population continues to be a driving force behind the expansion and adaptation of power end markets, and innovative solutions to meet growing global energy demand will continue to be a source of growth for industrials despite fluctuations in the energy-price markets. Such drivers in part have propelled the underlying performance of industrial giants GE (GE) and Honeywell (HON), among others. Winners and Losers Are Developing in Commercial Aerospace We expect commercial aircraft production and deliveries to continue to increase for at least the next three … Read more

Google Shows Why It Has Been a Best Idea

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Sometimes valuation is its own catalyst. That’s what we think has happened to Google (GOOG, GOOGL). This isn’t our first note on Google; the search giant was added to the Best Ideas Newsletter portfolio October 2012 at ~$340. Shares are approaching $700 at present. As with all of the holdings in the newsletter portfolios, they represent our best ideas at any given time. Image Source: Google Google’s financial profile continues to be one of the best in our coverage universe. A cash balance of nearly $70 billion showcases the firm’s tremendous financial flexibility; its short and long-term debt was just over $5 billion at the end of the second quarter. Cash flow generating from operating activities expanded nicely on a … Read more

Intel Beats Consensus Estimates and Weak PC Demand

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Newsletter portfolios holding Intel (INTC) reported solid results in the second quarter of 2015 on July 15, beating consensus estimates for both revenue and earnings per share. Revenue of $13.2 billion declined 5% from the year-ago period, and earnings-per-share was flat at $0.55. Net income dropped 3% in the period on a year-over-year basis. Though gross margin decreased 2 percentage points to 62.5% from the year-ago period, it was above the 62% midpoint of management’s guidance. The company is executing well against its strategies, but its business is not immune to economic trends. Weak global PC demand has had an impact on Intel’s results. The firm’s Client Computing Group, a combination of its former PC Client and Mobile and Communications … Read more

Dividend Increases/Decreases for the Week Ending July 17

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Below we provide a list of firms that raised/lowered their dividends during the week ending July 17. 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 Antero Midstream (AM): now $0.19 per share quarterly dividend, was $0.18. Bassett Furniture (BSET): now $0.09 per share quarterly dividend, was $0.08. Carnival (CCL): now $0.30 per share quarterly dividend, was $0.25. Carnival (CUK): now $0.30 per share quarterly dividend, was $0.25. Codorus Valley Bancorp (CVLY): now $0.13 per share quarterly dividend, was $0.125. Computer Services (CSVI): now $0.25 per share quarterly dividend, was $0.22. CONE … Read more

Best Ideas Newsletter Holdings Surge

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It’s hard for us to not be able to recommend stocks to you. That’s not what we do. We’re not a financial advisor, so we can never tell you what to buy or sell. This is not only the responsible thing to do, but it is also the law. We can’t possibly know your personal financial goals or risk tolerances. We do our best, however, to highlight our business analysis and the market mispricings that we see. Stocks that we pound the table on are included in the Best Ideas Newsletter portfolio. Stocks that we like as dividend growth ideas are included in the Dividend Growth Newsletter portfolio. We’ll be adopting a new designation for these companies in lieu of … Read more

J&J’s Quarterly Results Not Reflective of Underlying Strength

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Dividend Growth Newsletter portfolio holding Johnson & Johnson (JNJ) reported 2015 second-quarter results July 14. Though the healthcare and consumer goods giant experienced quarterly revenue and adjusted earnings-per-share declines of 8.8% and 3.9% during the period, respectively, both numbers beat consensus estimates. Divestitures and currency headwinds weighed heavily on reported results, with currency negatively impacting revenue by 7.9%. Revenue–excluding divestitures, acquisitions, and the impact of currency exchange–advanced 1.7% in the quarter; though this wasn’t great, the modest quarterly organic increase was nowhere near the pace of the reported top-line decline. More encouraging was the firm’s profitability in the quarter. Though adjusted net earnings and adjusted diluted earnings per share declined 6.3% and 3.9%, respectively, adjusted diluted earnings per share increased … Read more