I saw the recent news release that Wal-Mart is shaking up its top management positions in an effort to spur growth, with the latest strategy involving small neighborhood stores and more organic, healthy grocery items lining the front area of the store. With back-to-back dividend increases in the 2% range, people have been wondering what issues currently exist at Wal-Mart that are worthy of an investor’s examination. The deep issue is this: It is difficult for a company that generates $487 billion in annual sales to grow at a fast rate. Shareholder wealth creation largely consists of buybacks, dividends, and efficiencies at that point rather than robust top-line revenue growth.
My take on … Read the rest of this article!
Funny how things can change so fast, isn’t it? This time last year, BP was making $3.96 per share in profits and paying out $2.34 in dividends for a payout ratio of 59%. When I first started writing about BP, I mentioned that the principal risk for shareholders involved the following conditions occurring at the same time (or near in time to each other): adverse legal judgments from the Gulf oil spill, a substantial decline in oil prices, and trouble securing income from the Rosneft project that accounts for nearly 20% of BP’s income. I mentioned those two last risks in passing—as almost a throwaway line—and unfortunately for BP shareholders, that trifecta of … Read the rest of this article!
Donald Yacktman once said that investors make serious money when there is a mismatch between an investor’s assumptions about the future of the company and the expectations of the general investor community at large. A lot of times, this shows up in the P/E ratio of the stock. Take Hershey for example. It is aggressively raising prices by 8% in a typical market, and volumes are still growing 3%, 4%, or 5%, depending on whether you use trailing, current, or short-term future expectations to make your projections. All in all, it is working its way through a high point of a cycle where profits could be growing around 12% per year during the … Read the rest of this article!
Although there are a couple of exceptions, there are very few things that send people to this site quite like searching Google for advice on how to start the beginning stages of dividend investing. It’s obviously a question I find complex enough to have written 536 posts here at The Conservative Income Investor and 536 over at Seeking Alpha (I wanted to mention that because I am currently at that magic point of equilibrium, like when Stan Musial finished his career with 1,816 hits at home and 1,816 on the road) so one post on the topic will be incomplete. But I can talk about the state of the mind that is important … Read the rest of this article!
Because of the coincidence that I wrote an article about AT&T’s merger with DirecTV on the eve of the Dow Jones announcement that Apple would be replacing AT&T in the Dow Jones Index, I received quite a few e-mails from readers asking whether that kind of move should be treated as a signal that Apple should be purchased or AT&T should be sold. I did not get a chance to respond to any of those readers, but hopefully my discussions here will provide an adequate answer to the question.
First, the Dow Jones Index has little rational bearing on actual buy-and-hold decisions these days, despite the fact that it is widely circulated in … Read the rest of this article!