PPL

Utilities and Telecoms to Benefit Most from Corporate Tax Reduction?

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Image Source: Michael Vadon By Kris Rosemann and Brian Nelson, CFA Speculation over which sectors may be the biggest beneficiaries of the incoming Trump administration has been running rampant in recent weeks, and we’ve received questions from members pertaining to this topic, specifically with respect to the utilities and telecom sectors. In fact, an article in the Financial Times, released mid-November, tabbed the utilities (XLU) and telecom (XTL) spaces as two sectors that may be able to generate outsize earnings improvements thanks to a reduced corporate income tax. But will they truly benefit over the long haul? Let’s walk through our take on the impact a potential reduction in corporate tax rates may provide these two areas. It may not all be … Read more

Tough Month – My Goodness

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By Brian Nelson, CFA The market rallied hard this month and seemed to leave a lot of the Dividend Growth Newsletter portfolio ideas behind. I’m not going to sugarcoat the results: The Dividend Growth Newsletter portfolio disappointed this month, and for that I’m sorry.  A lot of it may be “explainable” in light of what happened on Election Day 2016, however. I think a lot of investors have shifted capital from the stronger dividend payers to the more-speculative ones in hopes that a new, pro-business Trump administration will be their saving grace. We hope so, but Trump cannot be President forever, and dividend growth investors should consider a long-term perspective, in my opinion, especially when it comes to compounding payouts … Read more

Keep Calm and Carry On?

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Image Source: War History Online, June 22 Brexit may or may not be a big problem. Time will tell. But what matters and eventually becomes its own catalyst, however, is valuation. The forward price-to-earnings multiple on S&P 500 companies (SPY) is currently ~16.5 times, above its 5-year (14.6) and 10-year averages (14.3). This is the real story. Assuming a reversion to the 10-year average multiple, for example, the S&P 500 can be considered “fairly valued” at $1,811, a drop of another 10% from ~2,000 levels. You don’t need us to tell you that the markets have practically gone straight up the past seven years from the March 2009 panic bottom through today, with the S&P 500 effectively tripling since that … Read more

Brexit: Secession Bells Are Ringing!

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First Baptist Church in Columbia, S.C., where the first secession convention in the United States opened on Dec. 17, 1860. Source: Library of Congress, Washington, DC. Photo. Encyclopædia Britannica Online. Web. 24 Jun. 2016. Global markets are plunging, and the implosion may still be in the early innings. Market valuations remain stretched among stagnant global economic growth, and “Brexit” may be the catalyst for a correction. In the paraphrased words of the well-known The Day of the Jackal author, Frederick Forsyth: the peasants have spoken. On June 23, the UK (EWU) held a referendum, in which anyone of voting age could take part, to decide whether the country should leave the European Union. The turnout was incredible at nearly 72%, and … Read more

No Value Lost in PPL Spinoff

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Dividend Growth Newsletter portfolio holding PPL Corp’s (PPL) shares were adjusted lower earlier this week, as the firm officially completed the spinoff of its energy supply business June 1. The move completes PPL’s transition to a focus on regulated utilities in the US and UK. PPL’s spinoff, now trading under the name Talen Energy Corporation (TLN), also includes the addition of RJS Power of Riverstone Holdings. As previously announced, all of the common stock of Talen Energy will be distributed pro rata to PPL shareholders. PPL shareholders received ~.1249 shares of Talen Energy common stock for each share of PPL owned as of May 20. Fractional shares were not issued; instead they were aggregated and sold in the open market, … Read more

Some Wiggle Room, Please

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Let’s go around the horn. Staples (SPLS) and Office Depot (ODP) will, in fact, join forces. The duo announced February 4th that Staples will pay $6.3 billion for its rival, valuing Office Depot at $11 per share, a nice premium to its previous day close and relative to our fair value estimate. Management expects to generate at least $1 billion in annualized cost savings. Removing redundant overhead, streamlining distribution and carving out other efficiencies will be par for the course. We also think pricing will ease up a bit, though competition from Walmart (WMT) and Amazon (AMZN) will always be present. We wouldn’t expect Office Depot’s equity to converge to the take-out price until the regulatory review is completed, likely … Read more

Third Quarter Earnings Season Pushes Forward

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The equity markets continue to propel higher despite what we would describe to be a mixed third-quarter earnings season. Let’s walk through a number of earnings reports from popular companies reporting so far this week. Some of them we include in the newsletter portfolios. Others we don’t. But all are worth keeping tabs on. Annaly (NLY) Annaly is a mortgage REIT (mREIT) with principal business objective to generate net income for distribution to shareholders. Being critical of the mREIT business is certainly unpopular, and we understand that many retirees generate vital income streams from such investments. Bulls and bears, however, both benefit from our independent voice, and we call out risks as we see them. Annaly and American Capital Agency … Read more

PPL Beats Expectations and Raises Guidance

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We recently wrote up a relatively extensive piece on ‘Utilities Are Safe Income Vehicles…Most of the Time,” that we think is worth reading before diving into PPL’s (PPL) solid second quarter results, released Thursday. For many income investors, dividends aren’t everything, they are the only thing, and we understand how important it is for us to focus on sustainable dividend growth in any idea that we present within the Dividend Growth portfolio, a collection of equities that we think will continue raising their dividends long into the future. We think PPL is one such company. The company’s second-quarter and first-half earnings from ongoing operations increased 15% over the corresponding periods from 2013. Management couldn’t have said it better: “Strong performance … Read more

Utilities Are Safe Income Vehicles…Most of the Time

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Many dividend growth investors have capital invested in steady-eddy utilities firms, and there is nothing wrong with that. In fact, we also have exposure to the Utilities Select SPDR ETF (XLU) in the Best Ideas portfolio and to PPL (PPL) in the Dividend Growth portfolio. Though the regulated ‘returns’ and steady performance of utility-entities are quite attractive, especially when they pay annual dividend yields of 3%-4% per annum or more, we think it is very important for investors of all types to understand that the dividends of utilities are not without risks. In fact, the nature of their capital structure sometimes exposes utilities to more risks than other entities, especially with respect to the dividend. Before we get started, it’s … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more