The calendar year 2016 is the most stressed relationship between Royal Dutch Shell’s dividend payout and current earnings that has existed since the oil crisis of 1986. That is something that catches my attention. After this morning’s post in which I discussed my hesitancy towards Ford Motor (F) stock due to the peak earnings trip, I thought it would be worthwhile to examine a company on the other side of that coin: Royal Dutch Shell.
I don’t have access to “Royal Dutch Shell: The Four Volume Set” because the last time I had the compendium it was checked out from the library, but going off of memory, I remember a passage that discussed the fact that Royal Dutch Shell had returned something outrageous like 14% annually for a century even while most analysts were downbeat on the stock. And according to Siegel’s copy of Stocks For The Long Run which … Read the rest of this article!
Somewhere along the line, it got assumed that value investing requires shunning the tech stocks that receive the overwhelming of media attention. This assumption might be true for the value investors that only want to purchase current cash flows that are being sold at a discount. But I’ve always had a much broader view of value investing: it’s about locating the best risk-adjusted future profits at the best price available.
The issue with the stocks that have become media darlings is that there is no way to make the numbers work even if you adopt an optimistic view about future earnings and future valuations.
Take Facebook, for example. If hitting a low of $17 in 2012, the stock has flown straight to the $100 mark (most recently trading slightly lower at $98). You can find no shortage of analysts that recommend it. I could never do that. It is currently … Read the rest of this article!
It is my expectation that two things will have a high probability of occurring sometime between now and 2026-2031: The taxes on dividends and capital gains will increase, and interest rates will be at a higher rate than they are right now. Although I echo and agree with the general frustration that any capital gains or dividend tax is essentially a “double tax” on the shareholder who already paid a ~35% tax on the same earnings at the corporate level, I also recognize that this view does not represent the pulse of the republic.
From a historical perspective, dividend taxes tend to settle somewhere in the 30% range, and I would plan accordingly (this prediction will intensify as Peter Drucker’s prediction of an hourglass America due to technology advancements becomes more realized.) I also expect thirty-year Treasury bonds to settle somewhere in the 5% to 6% historical range, compared to … Read the rest of this article!
Back in the 1910s, Henry Ford showered capital stockholders of The Ford Motor Company with regular dividends and larger special dividends as the booming growth of the Detroit locomotive manufacturer was gushing out profits well above what could be reinvested into the company and set aside for a rainy day. Whether or not they realize it, the current Board of Directors are following in the capital allocation footsteps of Ford himself by yesterday declaring a $0.15 quarterly dividend in addition to a $0.25 special dividend that will be paid on March 1st.
This has gotten a lot of income investors excited. And I understand why. At $12.85 per share, the $0.60 annual dividend represents a 4.66% dividend yield. The $0.40 dividend on March 1st (which includes the special dividend payout) represents an immediate cash return of $3.11 for every $100 of Ford stock that you own today. The investors that … Read the rest of this article!
Yesterday, shares of Under Armour (UA) fell 6.2% after Morgan Stanley analyst Jay Sole noted that Under Armour is reducing the sale price of its women’s footwear and is still expected to lose market share over the course of 2016. This is noteworthy because Under Armour is expected to reduce its women’s footwear pricing by 20% (compared to the industry average of 4%) and still lose market share over the course of 2016. Although the specific metrics have been first articulated by Mr. Sole, the understanding of this general trend has taken the stock from a high of $105.90 in 2015 to $69.96 at the close of yesterday’s trading.
This 30% decline in the price of Under Armour stock, even while earnings continue to grow, illustrate the power of “expectations” in setting the price of stock. It is such a powerful force that Professor Jeremy Siegel’s book “Stocks for the … Read the rest of this article!