ENB

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

An Important Measure of Leverage for Dividend-Growth and Income-Oriented Shareholders, One That Is Dividend-Adjusted

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As more and more investors rely on company dividends for income, dividends, in our view, have become more debt-like commitments in nature, especially from the perspective of dividend-growth or income-oriented shareholders. Years ago, we rolled out a measure of financial leverage that considers both the company’s debt and the present value of its future expected cash dividend obligations, which, in the eyes of die-hard dividend-growth or income-oriented shareholders, may be implicitly assumed to be debt-like commitments in substance. We think this leverage ratio can be used in conjunction with the Dividend Cushion ratio to gain additional insight into the dividend-paying financial health of an entity. Note: There is often great confusion with respect to published measures of financial leverage, and … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

Latest Report Updates

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Select the company’s link below to access their stock webpage where their 16-page stock report (pdf) can be downloaded. The stock webpage also houses the company’s dividend report (pdf), where applicable, as well as the latest company/industry commentary and news. For companies updated this week, their stock webpages will reflect the new data this weekend. American Tower (AMT) AutoZone (AZO) Best Buy (BBY) BHP Billiton (BHP) Bristol-Myers Squibb (BMY) ConocoPhillips (COP) Crocs (CROX) Cisco (CSCO) Cintas Corp (CTAS) CubeSmart (CUBE) Dollar Tree (DLTR) DocuSign (DOCU) Estee Lauder (EL) Ford (F) FedEx (FDX) Fiserv (FI) First Solar (FSLR) General Electric (GE) General Motors (GM) Global Payments (GPN) Leggett & Platt (LEG) Eli Lilly (LLY) Lululemon (LULU) McDonald’s (MCD) MercadoLibre (MELI) 3M … Read more

Kinder Morgan Now Covers Cash Dividends with Traditional Free Cash Flow

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By Brian Nelson, CFA On October 18, Kinder Morgan (KMI) reported third-quarter results that came in lower than expectations, but we’ve taken note of the company’s improved free cash flow generation that now runs in excess of its cash dividends paid, a huge change from a decade ago, where capital spending and cash dividends paid far outweighed its operating cash flow capacity. The company’s dividend stands at $1.13 per share on an annualized basis, and Kinder Morgan now has a forward estimated dividend yield of ~6.7%, which is quite attractive. Shares are trading meaningfully below our estimate of their intrinsic value, too, and we’re warming up to the company’s financials. Its net debt position likely precludes it from being added … Read more

We Like NextEra Energy’s ESG Focus But Capital Market Conditions Now Showing Cracks

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Image Source: NextEra Energy By Brian Nelson, CFA We’ve written in the past about NextEra Energy (NEE), and our latest note can be found here. The company remains one of our favorite utilities, but mostly because of its renewables energy exposure as it relates to ESG considerations. When it comes to utilities, more generally, however, we tend to take a pass on almost all of them given the capital intensity involved in their operations and their interest-rate sensitivity, especially now in an environment where interest rates are returning to “normal” levels in the mid-single-digits. The forward estimated dividend yield on the Utilities Select Sector SPDR ETF (XLU) stands at ~3.8% at the time of this writing, and if investors are … Read more

Our Latest Report Updates

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The data for these companies will be updated on their respective web pages this weekend. Download their updated 16-page reports (pdf) by selecting the link below. Chevron (CVX) ConocoPhillips (COP) Enbridge (ENB) General Mills (GIS) Keurig Dr Pepper (KDP) Kimberly-Clark (KMB) Kroger (KR) Mondelez Intl (MDLZ) Occidental Petroleum (OXY) Paramount Global (PARA)  Pioneer Natural Resources (PXD) T-Mobile (TMUS) ———- In our 16-page equity research reports, we offer a fair value estimate for each company based on a rigorous and transparent discounted cash flow process, assess the attractiveness of a stock based on a firm-specific margin of safety, and provide a relative valuation comparison in the context of the company’s industry and peers. Each report includes detailed pro forma financial statements, … Read more

In the News: Lockheed Martin, Apple, Enbridge

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Image Source: Björn Lammers By Brian Nelson, CFA On September 6, Dividend Growth Newsletter portfolio holding Lockheed Martin (LMT) announced in a regulatory filing that it expects to deliver 97 F-35 fighter jets during 2023, down from its previous expectation of 100-120 planes. Reports indicate that the production hiccup occurred at supplier L3Harris Technologies (LHX) with respect to the development of the aircraft’s integrated core processor, pushing back Lockheed’s delivery timeline for the combat jet. Though the news is not good, we’re not reading much into it. Lockheed noted that it continues to produce F-35s at a pace of 156 per year. We’re viewing this as a mere timing issue and not making any changes to our $440 per share fair … Read more

Magellan Midstream Soars on Takeout Deal

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Image: Magellan Midstream Partners soars on a takeout offer from ONEOK, Inc. By Brian Nelson, CFA We’re as happy as we can be to see a midstream energy master limited partnership (MLP) takeout. On Sunday, May 14, it was publicly announced that Magellan Midstream (MMP) would be bought by ONEOK, Inc. (OKE) in a cash and stock deal worth ~$18.8 billion including assumed debt. According to the deal terms, the transaction would give $25 per share in cash and 0.667 common share of ONEOK for each MMP common unit. Though many are questioning the rationale behind the deal, energy infrastructure rollups continue to reduce the number of energy MLPs trading on public markets, as we predicted years ago. Units of … Read more