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Recent Articles
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Energy Pipelines: What a Difference A Few Years Have Made!
Jan 20, 2023
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Image: Midstream energy companies have significantly improved their free cash coverage of their payouts in recent years. We’ve taken note. Source: Relevant 10-Q filings.
We can hardly believe how much better things are looking for midstream pipeline companies these days, particularly as it relates to free cash flow coverage of their payouts, but also as it relates to improved financial transparency. Many midstream MLPs continue to be saddled with huge net debt positions, but what a difference a few years have made! Capital discipline is making their dividends/distributions incrementally more attractive, and we’ve taken note.
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Dividend Increases/Decreases for the Week of January 20
Jan 20, 2023
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Let's take a look at firms raising/lowering their dividends this week.
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Why Are the Dividends of REITs So Risky?
Jan 19, 2023
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REITs, as measured by the Vanguard ETF (VNQ), have generated a total return of 39.5% since the beginning of 2015 through the end of 2022, an eight-year period that has translated into a measly compound annual return of just 4.25%. This compares to a total return of the Vanguard S&P 500 ETF (VOO) of 116.3%, which translates into a compound annual return of 10.1% over the same time period. Not only have REITs underperformed terribly during the past 8 years, but there have been more than 100 dividend cuts by REITs over this time period, too. REITs just aren’t what some make them out to be. Be careful.
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Consumers Feeling the Pinch; S&P 500 Bounces Off Technical Resistance; Elasticities Breaking Down for Staples Stocks
Jan 19, 2023
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Image: The S&P 500 has bounced right off its technical resistance and will likely test 3,400, in our view. Image Source: TradingView.
Things continue to deteriorate across the broader U.S. economy, but it's worth reiterating that the economy is not the stock market. The labor markets remain strong, but we continue to hear of layoffs across Silicon Valley, consumers are working through their excess savings built up during the pandemic, while net charge offs are expected to double in 2023 as credit quality deteriorates. Consumer staples names may be struggling to make elasticities work of late in light of the weakness in operating income in P&G’s calendar fourth-quarter 2022 results. Consumers are finding ways to trade down to private-label products. The S&P 500 has bounced right off its technical resistance, and we could test 3,400 during the year on the index. We remain bullish on stocks in the long run, however.
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