Advertising Services – Page 2

Netflix stock falls after subscriber growth, earnings forecast miss. But it’s bouncing back on ad plans, shared-password crackdown in U.S.

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Netflix Inc.’s stock initially plunged in after-hours trading Tuesday, after the streaming giant posted weaker subscriber growth and forecast a smaller profit than Wall Street expected. But shares later recovered and crossed into positive territory on company disclosures that its new ad-supported service is a success and its crackdown on shared accounts in the U.S. is coming this quarter.

Netflix
NFLX,
+0.29%
reported that subscribers increased by 1.75 million in the first quarter of the year, missing analysts’ average estimate of 2.2 million. Netflix reported fiscal first-quarter net earnings of $1.31 billion, or $2.88 a share, compared with $3.53 a share in the year-ago quarter.

Revenue improved to $8.16 billion from $7.87 billion a year ago. Analysts surveyed by FactSet had expected on average net earnings of $2.86 a share on revenue of $8.18 billion.

For the second quarter, Netflix executives guided for earnings of $2.84 a share on $8.24 billion in revenue, while analysts on average were expecting earnings of $3.07 a share on sales of $8.18 billion. Netflix no longer provides guidance on subscriber additions, a sign its years of rapid growth are clearly cooling.

Shares plunged lower than $300 in after-hours trading immediately following the release of the results, after closing with a 0.3% increase at $333.70. But shares had crossed into positive territory and were recently above $335 in the extended session.

Netflix executives have hoped to goose their financial results with cheaper, ad-supported options and a crackdown on password sharing. In a letter to shareholders Tuesday, company executives said the ads plan in the U.S. “already has a total ARM (subscription + ads) greater than our standard plan.”

At the same time, they disclosed a password crackdown in the U.S. will occur in the second quarter, a bit later from previous expectations.

“We shifted out the timing of the broad launch from late Q1 to Q2,” Netflix executives wrote. “While this means that some of the expected membership growth and revenue benefit will fall in Q3 rather than Q2, we believe this will result in a
better outcome for both our members and our business.”

Additionally, Netflix also announced that it will end the DVD-by-mail business that launched the company into consumers’ homes. Revenue from the DVD business had declined from $911 million in 2013 to $146 million in 2022.

“This a catch-22 environment for streaming companies as they are pivoting from chasing subscribers to chasing profits while at the same time inflation-weary consumers are reassessing their discretionary spending habits,” KPMG U.S. National Media Leader Scott Purdy said, in assessing the results. “Today’s figures, a bellwether for the industry at large, signal that winter is coming for the consumer. All of the subsidies are ending. Consumers can expect to be hit with ads, higher prices, and password sharing crackdown.”

Expectations among investors heading into Netflix’s quarterly report were muted. The focus was on Netflix’s switch toward better monetization with an ad-supported service and a rolling crackdown on shared accounts. Analysts in particular were closely watching the performance of Netflix’s new “Basic with Ads” plan ($6.99 a month) and its effectiveness in stanching the defection of subscribers to competing services from Walt Disney Co.
DIS,
+0.63%
and Apple Inc.
AAPL,
+0.75%.

Netflix’s rollout of the ad-supported tier could also have a temporary impact on margins: Netflix reported an operating margin of 21%, compared with about 25% in the year-ago quarter.

At the same time, Netflix put an end to paid shared accounts in some Latin American countries last year, and expanded plans to do so Canada, New Zealand, Portugal and Spain in February.

“In our view, the password-sharing crackdown will result in a greater number of subs as well as revenue because the primary account holder will either pay an additional fee for members who have moved out of the household or those sharing accounts become full subscribers,” Bank of America analysts said in a recent note.

Shares of Netflix have climbed 12% so far this year, while the broader S&P 500 index
SPX,
+0.09%
has advanced 8%.

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April 18, 2023

10 dividend stocks yielding at least 4.5% that are rated ‘buy’ by most analysts

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During a period of high interest rates, it might be more difficult to impress investors with dividend stocks. But the stocks can have an important advantage over the long term. The dividend payouts can increase over the years, helping to push share prices higher over time.

When considering stocks for dividend income, yield shouldn’t be the only thing you consider. If a stock’s price has tumbled because investors are worried about the company’s business prospects, the dividend yield might be very high. A double-digit yield might mean investors expect to see a cut to the dividend soon.

There are many ways to look at companies’ expected ability to maintain or raise their dividend payouts. But one can also take a simple approach to begin researching stock choices.

At the moment, you can get a bank CD with a yield of close to 5% pretty easily. Here’s a look at current yields for CDs and U.S. Treasury securities and an approach for laddering them not only to protect your cash but to hedge against interest-rate risk.

For investors who would rather aim for long-term growth to go along with dividend income, or take a relatively conservative approach to growth while reinvesting dividends, a screen of stocks in the S&P 500
SPX,
+0.33%
produces only 10 stocks with dividend yields of 4.5% or higher with majority “buy” or equivalent ratings among analysts polled by FactSet. Here they are, sorted by dividend yield:

Company	Ticker	Dividend Yield	Expected payout increase through 2025	Share “buy” ratings	April 16 price	Consensus price target	implied 12-month upside potential
Comerica Inc.	CMA, +4.00%	6.56%	10%	58%	$43.30	$60.53	40%
Citizens Financial Group Inc.	CFG, +4.19%	5.77%	12%	74%	$29.10	$39.29	35%
Healthpeak Properties Inc.	PEAK, +2.33%	5.71%	9%	60%	$21.01	$27.69	32%
Hasbro Inc.	HAS, +1.28%	5.34%	8%	69%	$52.40	$69.27	32%
Philip Morris International Inc.	PM, +0.46%	5.11%	11%	67%	$99.48	$113.56	14%
Realty Income Corp.	O, +1.30%	5.04%	7%	56%	$60.77	$70.00	15%
Fifth Third Bancorp	FITB, +3.33%	4.99%	3%	72%	$26.44	$34.55	31%
VICI Properties Inc.	VICI, +1.58%	4.82%	12%	95%	$32.35	$37.73	17%
Organon & Co.	OGN, +1.01%	4.71%	5%	55%	$23.80	$31.89	34%
Iron Mountain Inc.	IRM, +0.82%	4.69%	15%	78%	$52.76	$56.00	6%
Source: FactSet

Click on the ticker for more about each company.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

The dividend yields for this group of 10 companies are based on current annual regular payout rates, with all paying quarterly except for Realty Income Corp.
O,
+1.30%,
which pays monthly.

These two oil and natural gas producers would have passed the above screen based on their most recent dividend payments and analysts’ sentiment, however, they pay a combined fixed-plus-variable dividend every quarter, with the fixed portion relatively low:

Shares of Pioneer Natural Resources Co.
PXD,
-0.77%
closed at $230 on April 14. Among analysts polled by FactSet, 59% rate the stock a “buy” or the equivalent, and the consensus price target is $257.42. The company pays a fixed quarterly dividend of $1.10 a share, which would make for a dividend yield of only 1.91%. However, the most recent variable quarterly dividend was $4.48 a share, for a combined quarterly dividend of $5.58, which would translate to an annualized dividend yield of 9.70%. The consensus estimate for dividends in 2025 is $4.63 — the analysts are only estimating the fixed portion of the dividend. Pioneer has held preliminary merger discussions with Exxon Corp.
XOM,
-1.16%,
according to a Wall Street Journal report.
Devon Energy Corp.’s
DVN,
-0.72%
stock closed at $55.70 on April 14. The shares are rated “buy” or the equivalent by 55% of analysts and the consensus price target is $67.66. The fixed portion of Devon’s quarterly dividend is 20 cents a share, for an annualized dividend yield of 1.44%. The variable portion of the most recent quarterly dividend was 69 cents a share. The total payout of 89 cents would make for an annual dividend yield of 6.39%. Analysts expect the fixed portion of annual dividends to total $3.61 in 2025, according to FactSet.

Don’t miss: Buffett is buying in Japan. This overseas value-stock fund is also making bets there. Is it a good way to diversify?

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April 17, 2023

Microsoft Looks to ChatGPT AI to Transform Its Digital Ad Business

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Microsoft Looks to ChatGPT AI to Transform Its Digital Ad Business

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April 16, 2023

Ryan Reynolds Sells Mint Mobile for $1.35 Billion to T-Mobile

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Ryan Reynolds Sells Mint Mobile for $1.35 Billion to T-Mobile

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March 15, 2023

Trade Desk stock rockets after earnings as CEO says company is outperforming like never before

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Shares of Trade Desk Inc. surged on Wednesday after the advertising-technology company issued an upbeat outlook that helped quell fears about the digital-ad market.

Chief Executive Jeff Green spoke positively on the earnings call about the company’s performance relative to rivals, saying that the company grew 24% in the fourth quarter while most of its “large competitors” saw negative growth.

Trade Desk’s
TTD,
+25.60%
revenue rose to $491 million from $396 million, while analysts tracked by FactSet were modeling $490 million.

“I don’t think we’ve ever had the level of industry outperformance in our six years or so as a public company as we did in 2022,” he said, according to a transcript provided by AlphaSense/Sentieo. “And it means that we can be very confident that we’re gaining share and that our platform continues to gain traction with advertisers.”

Shares of Trade Desk were up 28% in morning action. Shares of streaming-media company Roku Inc.
ROKU,
+9.04%,
which is due to post results after the closing bell, were up more than 7%.

Executives at Trade Desk, which makes programmatic ad technologies for connected television, see that area of the market as particularly compelling right now.

“Not only is the shift from linear to CTV driving significant growth in digital spend as advertisers shift dollars from linear TV to connected TV, but more spend is happening outside the walled gardens as advertisers shift spend from user-generated content to premium streaming content,” Green shared.

The company reported fourth-quarter net income of $71 million, or 14 cents a share, compared with $8 million, or 2 cents a share, in the year-earlier period. On an adjusted basis, Trade Desk said it earned 38 cents a share, down from 42 cents a share a year before but ahead of the FactSet consensus, which was for 35 cents a share.

For the first quarter, management anticipates at least $363 million in revenue, along with about $78 million in adjusted earnings before interest, taxes, depreciation and amortization (Ebitda).

The FactSet consensus was for $358 million in revenue and $75 million in adjusted Ebitda.

“2023 will be the year that everything in TV changes,” Green told investors on the earnings call. “The market needs an upfront that is always on, but also leverages data so that content owners sell fewer, more relevant ads at higher CPMs and advertisers get more efficacy.” CPM stands for “cost per mille” and measures what advertisers pay for impressions.

The company also announced Wednesday that its board of directors has authorized it to buy back up to $700 million of its stock.

“The new share-repurchase program is designed to help offset the impact of future share dilution from employee stock issuances,” Trade Desk said in a release.

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February 15, 2023

Roku stock plunges as downbeat earnings forecast assumes ad budgets could ‘degrade’

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Roku Inc. shares plummeted 19% in after-hours trading Wednesday after the streaming company topped expectations with its latest results but gave a weaker-than-anticipated outlook for the holiday quarter as economic conditions could further “degrade advertising budgets.”

For the fourth quarter, Roku executives anticipate $800 million in revenue and a loss of $135 million on the basis of adjusted Ebitda. The FactSet consensus called for $899 million in revenue as well as a $48 million adjusted Ebitda loss.

“As we enter the holiday season, we expect the macro environment to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market,” the company said in its shareholder letter. “We expect these conditions to be temporary, but it is difficult to predict when they will stabilize or rebound.”

Chief Financial Officer Steve Louden shared on a call with reporters following the release that the company’s forecast “reflects the fact that we see a lot of challenges in the macro environment.”

He explained that Roku tends to be more exposed to the scatter ad market — which represents ads bought during the quarter — than the typical TV network. Scatter spending is easy for marketers to turn on, but also easier for them to turn off, he noted.

The forecast overshadowed the results from Roku’s third quarter, which were broadly better than expected.

The company posted a net loss of $122.2 million, or 88 cents a share, whereas it logged net income of $68.9 million, or 48 a share, in the year-earlier period. Analysts tracked by FactSet were expecting a $1.29 loss on a per-share basis.

Roku also reported a loss of $34 million on the basis of adjusted earnings before interest, taxes, depreciation and amortization. The company had posted positive adjusted Ebitda of $130 million in the year-before quarter. The FactSet consensus was for a $74 million loss on the non-GAAP metric.

Revenue rose to $761 million from $680 million, while analysts were anticipating $696 million.

The company generated $670 million in platform revenue and $91 million in player revenue. Analysts were expecting platform revenue of $613 million and player revenue of $87 million.

Roku had 65.4 million active accounts in the latest quarter, up from 63.1 million in the second quarter. Average revenue per user was $44.25 on a trailing-12-month basis, compared with $44.10 in the second quarter and $40.10 in the prior year’s third quarter.

Analysts were anticipating 64 million active accounts and $43.40 in average revenue per user.

Louden noted on the media call that the account numbers “outperformed expectations.” The company has seen “strong sales of smart TVs both in the U.S. and internationally,” with Louden adding that “it’s hard to tell how much is driven by a shift back to home or back to streaming, which is a very good value proposition if money is tight.”

Viewers spent 21.9 billion hours streaming content through Roku’s platform in the period. The FactSet consensus was for 20.9 billion hours streamed.

As companies like Netflix Inc.
NFLX,
-4.80%
and Walt Disney Co.
DIS,
-3.94%
explore ad-supported streaming more deeply, Louden sees opportunity for Roku to be of further value.

“That changes their focus a bit from only thinking about subscribers to thinking about engagement” and he sees Roku’s team members as “experts in understanding how consumers look at that.”

The company also noted in its shareholder letter that CFO Louden intends to leave Roku at some point in 2023 after helping to recruit and train his successor.

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November 2, 2022

Google ad sales take a hit and widely miss estimates, Alphabet stock drops 6%

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Alphabet Inc. is feeling the sting of a downturn in digital-ad spending. Google’s parent company reported just 6% sales growth year-over-year Tuesday and missed widely on its advertising revenue, pushing shares down in extended trading.

Alphabet
GOOGL,
+1.91%

GOOG,
+1.90%
reported net income of $13.9 billion, or $1.06 a share, in its fiscal third quarter, compared with net income of $1.40 a share in the same quarter a year ago. Total revenue improved a middling 6% to $69.1 billion from $61.88 billion a year ago, the slowest year-over-year growth since sales declined in June 2020, while revenue after removing traffic-acquisition costs was $57.3 billion, compared with $53.6 billion in the year-ago period.

Analysts surveyed by FactSet had estimated net income of $1.26 a share on ex-TAC revenue of $58.2 billion and overall revenue of $71 billion. Alphabet shares slipped more than 6% in after-hours trading immediately following the release of the results, after closing with a 2% increase at $104.48.

The results, which missed in several key product categories, further rattled investors, already spooked by poor quarterly results last week from Snap Inc.
SNAP,
+15.52%.
Facebook parent company Meta Platforms Inc.
META,
+6.01%
is scheduled to report its third-quarter results Wednesday.

Alphabet Chief Executive Sundar Pichai acknowledged the shortfall in ad revenue during a conference call with analysts. He vowed to take several measures, including a sharpened focus on products that improve search through artificial intelligence and to scale back hiring and other operating expenses.

“There is no question we are operating in an uncertain environment,” Alphabet Chief Business Officer Philipp Schindler said on the call, noting reductions in ad spending by financial services that deepened during the third quarter.

Google’s total advertising sales improved to $54.5 billion from $53.13 billion a year ago, but badly missed analysts’ average expectations for $56.58 billion. Search was $39.5 billion, compared with $37.93 billion last year. YouTube ad sales slipped to $7.07 billion from $7.21 billion a year ago.

“When Google stumbles, it’s a bad omen for digital advertising at large,” Insider Intelligence analyst Evelyn Mitchell said. “Not only did Google miss analyst expectations for topline revenue, YouTube ad revenues shrank for the first time since Google started reporting YouTube earnings separately in Q4 2019, due in large part to persistent competition in streaming and short video.”

Google’s Cloud revenue did climb to $6.9 billion from $4.99 billion; Google Cloud is believed to be third in cloud sales behind rivals Amazon.com Inc.
AMZN,
+0.65%
and Microsoft Corp.
MSFT,
+1.38%.

As is its customary practice, Alphabet did not disclose fourth-quarter guidance. But Alphabet Chief Financial Officer Ruth Porat cautioned during the analyst call that the company faces “tough comps” in the current fourth quarter. Last year, Alphabet raked in $75.3 billion in Q4 revenue.

Google’s stock has skidded 28% so far this year. The broader S&P 500 index
SPX,
+1.63%
is down 19% in 2022.

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October 25, 2022

Snap investors, do you still trust Evan Spiegel?

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When Snap Inc. went public in 2017, this column boiled down the entire investment opportunity to one, simple question: Do you trust Evan Spiegel?

As Snap
SNAP,
-0.64%
stock heads toward its lowest prices since March 2020, and potentially even lower, that question is even more important, and answering “yes” should be even harder.

Three months ago, amid the beginning of a huge slowdown in the ad business, Snap initiated a unique dividend meant to ensure that the founders maintained control of the company, even if they sold their stock — protecting themselves. Then in August, news came that Snap was laying off one in five employees. As Snap again reported disappointing results Thursday and saw the stock plunge again, the company decided now was the time to initiate a stock buyback plan, promising to spend up to $500 million to offset the dilution from employee stock plans — in the past nine months, Snap has spent $937 million on stock-based compensation.

On the face of it, this seems like an investor-friendly approach — Barron’s pointed out earlier this year that investors were suffering while employees were faring better with the hefty stock-comp plans. But it’s also worth pointing out who the biggest investors in Snap are: Spiegel and his co-founder Bobby Murphy.

As the company’s largest individual shareholders, Spiegel and Murphy are among the key beneficiaries of Snap’s plans to buy back stock, which usually leads to a boost in the stock price. Those two still control over 99% of the voting power of the company’s capital stock, and as the parent of Snapchat reminded investors in its annual report, “Mr. Spiegel alone can exercise voting control over a majority of our outstanding capital stock.”

Shares of Snap tumbled an additional 25% to just under $8 in after-hours trading, putting them near the lowest prices since March 2020. On Thursday, the company ended regular trading hours with a market capitalization of around $17.91 billion, but that was headed toward $13 billion with the after-hours collapse.

Besides protecting themselves and their investment, Snap’s executives have shown little ability to head off big issues, nor offer any worthwhile solutions to the current ad downturn. In the third quarter, its revenue grew a paltry 6%, down from the most recent second-quarter revenue growth of 13%. Snap appears to be in a steady revenue slowdown, from its peak growth of 116% in the June 2021 quarter.

Snap has blamed both privacy changes that Apple Inc.
AAPL,
-0.33%
made to the iPhone that affected ad tracking, and more recently, the macroeconomic advertising climate, while avoiding one of the biggest factors — the rise of TikTok. Top executives didn’t seem to see any of those challenges coming early enough, and did not do enough about them once they did.

“The company was slow to react — or acknowledge — the significant headwinds faced by privacy initiatives, compounded by competition, and more recently macro headwinds,” Colin Sebastian, an analyst at Baird Equity Research, wrote in a note.

The competition factor, mostly from China’s TikTok, was addressed briefly on the company’s call with analysts, but was not really acknowledged by Snap leaders.

“We believe that the differentiated nature of our service is what’s contributing to the daily active-user growth, which grew 19% year-over-year to 363 million daily active users,” Spiegel said. “In terms of the content specifically, I think there’s a lot of headroom, of course, to continue to grow content engagement.”

In the company’s shareholder letter, Spiegel acknowledged that the results were “far from our aspirations,” and that Snap would use this time of reduced demand “to pull forward and accelerate changes to our advertising platform and auction dynamics that we believe will deliver better results for our advertising partner.”

Spiegel is known for going by his own instincts and not listening to other executives, employees or even market forces, as was noted in a Wall Street Journal report that detailed his push for an unsuccessful product redesign in 2018. While the company appeared to have snapped back from that debacle last year, it is now facing a fiercer rival for young people on social media in the form of TikTok.

Investors who still have patience to wait and see if this stock ever recovers will also have to stick around with Spiegel — and as our IPO column noted — Snap is unapologetically founder-controlled. No change at the top can ever come unless it is initiated by Spiegel himself. Investors have to make a leap of faith that Spiegel can turn things around, but they need to remember that Spiegel usually thinks about himself first.

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October 20, 2022

Snap stock plummets more than 25% as online advertising continues to struggle

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A bruising year for Snap Inc.’s shares worsened Thursday, as the stock plummeted more than 20% in after-hours trading as executives launched the company’s first major share-repurchase program amid revenue issues in a poor environment for online advertising.

Snap
SNAP,
-0.64%
executives revealed that revenue increased less than 6% year-over-year in the quarter — its slowest quarterly grow ever recorded — and said that the holiday season is shaping up similarly, with sales increasing 9% so far in the quarter. The social-media company, which laid off roughly 20% of its staff this summer in response to the issues, also declined to provide a full forecast for the important fourth quarter.

“Our revenue growth continued to decelerate in Q3 and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition,” executives said in a letter to shareholders, outlining the results. “We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital.”

“Forward-looking revenue visibility remains incredibly challenging, and this is compounded by the fact that revenue in Q4 is typically disproportionately generated in the back half of the quarter, which further reduces our visibility,” executives explained about the lack of guidance in a letter to investors.

The board did approve a $500 million share repurchase, a first for the young company. In a news release, executives said that the move was meant “to opportunistically offset a portion of the dilution related to the issuance of restricted stock units to employees as part of the overall compensation program designed to foster an ownership culture.”

Snap’s results — the first among the major tech companies who rely heavily on digital advertising — likely portend even more turbulent times ahead for Alphabet Inc.’s
GOOGL,
+0.34%

GOOG,
+0.24%
Google, Facebook parent company Meta Platforms Inc.
META,
-1.28%,
Twitter Inc.
TWTR,
+1.18%,
Pinterest Inc.
PINS,
-0.30%
and others in the grip of inflation, a war in Ukraine, foreign-exchange worries and a widening recession.

Snap’s desultory news sent shares tumbling in extended trading for Pinterest (-8%), Trade Desk Inc.
TTD,
+2.26%
(-5), Meta (-4%) and Google (-3%).

Deteriorating macroeconomic conditions have left advertisers with little choice but to delay or cancel buys. At the same time, intensifying competition from the likes of TikTok and others has deepened headwinds.

“As a smaller player, Snap is more susceptible but no platform is immune,” Insider Intelligence analyst Jasmine Enberg told MarketWatch. “I expect more of the same results next week” when Google and Meta report, she added.

Snap reported a third-quarter net loss of $359.5 million, or 22 cents a share, compared with a loss of 5 cents a share a year ago. Analysts on average were expecting a loss of 24 cents a share.

Snap’s sales increased less than 6% to $1.13 billion, barely falling short of Street estimates of $1.14 billion. Daily active users rose 19% to 363 million. FactSet analysts had modeled 358.2 million.

Snap shares initially fell more than 20% in after-hours trading. They closed the regular trading session down 0.6% to $10.79. Shares of Snap have nosedived 77% this year, while the S&P 500 index
SPX,
-0.80%
is down 23%.

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October 20, 2022

Netflix Adds a Better-Than-Expected 2.4 Million Subscribers

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Netflix

shares were trading sharply higher after the streaming giant posted better-than-expected subscriber growth for the third quarter.

The company added 2.41 million net new subscribers in the quarter, beating its own forecast of 1 million additions. Netflix (ticker: NFLX) said it expects to add another 4.5 million subscribers in the December quarter.

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October 18, 2022

Asian stocks moving lower in wake of latest volatile session on Wall Street

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TOKYO (AP) — Asian shares were mostly lower on Wednesday following another volatile day on Wall Street, as traders braced for updates on inflation and corporate earnings.

Benchmarks fell in Tokyo
NIY00,
+0.09%,
Shanghai
SHCOMP,
-1.12%
and Hong Kong
HSI00,
-2.90%
but rose in Sydney.

South Korea’s Kospi
180721,
+0.34%
lost 0.1% to 2,189.86 after the Bank of Korea raised its key rate by 0.5 percentage point, amid the backdrop of Fed rate hikes in the U.S. and growing inflation risks from the weak won and rebounding global oil prices.

In currency trading the Japanese yen declined to a 24-year low against the U.S. dollar
JPYUSD,
-0.24
at 146 yen-levels, raising expectations of another intervention by Tokyo to prop up the yen. By midday the dollar
USDJPY,
+0.24%
was at 146.17 yen, up from 145.80 late Tuesday. The euro
EURUSD,
+0.12%
cost 96.96 cents, inching down from 97.07 yen.

The weaker yen raises costs for both consumers and businesses who rely on imports of food, fuel and other needs, but the bigger purchasing power for foreign currencies is expected to boost tourism. Japan reopened fully to individual tourist travel this week after being closed for more than two years because of the pandemic.

Japan’s benchmark Nikkei 225 lost 0.2% to 26,348.73 in morning trading. Australia’s S&P/ASX 200
ASX10000,
-1.54%
gained nearly 0.2% to 6,656.00. Hong Kong’s Hang Seng slipped 2% to 16,491.39, while the Shanghai Composite shed 1.2% to 2,943.24.

On Tuesday, the S&P 500
SPX,
-0.65%
fell 0.7%, marking its fifth straight loss, closing at 3,588.84. The Nasdaq
COMP,
-1.10%
dropped 1.1% to 10,426.19. The Dow Jones Industrial Average
DJIA,
+0.12%
added 0.1% to 29,239.19, while the Russell 2000 index
RUT,
+0.06%
rose 1 point, or about 0.1%, to 1,692.92.

Recession fears have been weighing heavily on markets as stubbornly hot inflation burns businesses and consumers. Economic growth has been slowing as consumers temper spending and the Federal Reserve and other central banks raise interest rates.

The International Monetary Fund on Tuesday cut its forecast for global economic growth in 2023 to 2.7%, down from the 2.9% it had estimated in July. The cut comes as Europe faces a particularly high risk of a recession with energy costs soaring amid Russia’s invasion of Ukraine.

See: Global economy most vulnerable since COVID crisis, with housing market at potential ‘tipping point,’ IMF warns

Wall Street is closely watching the Federal Reserve as it continues to aggressively raise its benchmark interest rate to make borrowing more expensive and slow economic growth. The goal is to cool inflation, but the strategy carries the risk of slowing the economy too much and pushing it into a recession.

“The market desperately wants a reason for the Fed to be able to stop tightening and the data recently hasn’t given them that opening with respect to inflation,” said Willie Delwiche, investment strategist at All Star Charts.

Computer-chip manufacturers continued slipping in the wake of the U.S. government’s decision to tighten export controls on semiconductors and chip manufacturing equipment to China. Qualcomm
QCOM,
-3.99%
fell 4%.

See: Intel reportedly plans to lay off thousands of workers, with details potentially emerging alongside quarterly earnings

Uber
UBER,
-10.42%
fell 10.4% and Lyft
LYFT,
-12.02%
slumped 12% following a proposal by the U.S. government that could give contract workers at ride-hailing and other gig economy companies full status as employees.

The Fed will release minutes from its last meeting on Wednesday, possibly giving Wall Street more insight into its views on inflation and next steps.

Investors still expect the Fed to raise its overnight rate by three-quarters of a percentage point next month, the fourth such increase. That’s triple the usual amount, and would bring the rate up to a range of 3.75% to 4%. It started the year at virtually zero.

Rex Nutting: Leading indicators show inflation is slowing, but Fed policy makers are too busy looking in rearview mirror to notice

The government will also release its report on wholesale prices Wednesday, providing an update on how inflation is hitting businesses. The closely watched report on consumer prices will be released on Thursday, and a report on retail sales is due Friday.

“Everyone is still hoping that every inflation report will be the one that shows that pressure is alleviating,” Delwiche said.

Wall Street is also gearing up for the start of the latest corporate earnings reporting season, which could provide a clearer picture of inflation’s impact.

Among the companies reporting quarterly results this week: PepsiCo
PEP,
+0.48%,
Delta Air Lines
DAL,
-1.97%
and Domino’s Pizza
DPZ,
-1.99%.
Banks including Citigroup
C,
-2.76%
and JPMorgan Chase
JPM,
-2.89%
will also report results.

In energy trading, benchmark U.S. crude
CL00,
-0.75%
lost 82 cents to $88.53 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude-oil prices fell 2% Tuesday. Brent crude
BRN00,
-0.56%,
the international pricing standard, fell 62 cents to $93.67 a barrel.

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October 11, 2022

21 dividend stocks yielding 5% or more of companies that will produce plenty of cash in 2023

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When the stock market has jumped two days in a row, as it has now, it is easy to become complacent.

But the Federal Reserve isn’t finished raising interest rates, and recession talk abounds. Stock investors aren’t out of the woods yet. That can make dividend stocks attractive if the yields are high and the companies produce more cash flow than they need to cover the payouts.

Below is a list of 21 stocks drawn from the S&P Composite 1500 Index
SP1500,
+3.12%
that appear to fit the bill. The S&P Composite 1500 is made up of the S&P 500
SPX,
+3.06%,
the S&P 400 Mid Cap Index
MID,
+3.18%
and the S&P Small Cap 600 Index
SML,
+3.80%.

The purpose of the list is to provide a starting point for further research. These stocks may be appropriate for you if you are looking for income, but you should do your own assessment to form your own opinion about a company’s ability to remain competitive over the next decade.

Cash flow is key

One way to measure a company’s ability to pay dividends is to look at its free cash flow yield. Free cash flow is remaining cash flow after planned capital expenditures. This money can be used to pay for dividends, buy back shares (which can raise earnings and cash flow per share), or fund acquisitions, organic expansion or for other corporate purposes.

If we divide a company’s estimated annual free cash flow per share by its current share price, we have its estimated free cash flow yield. If we compare the free cash flow yield to the current dividend yield, we may see “headroom” for cash to be deployed in ways that can benefit shareholders.

For this screen, we began with the S&P Composite 1500, then narrowed the list as follows:

Dividend yield of at least 5.00%.
Consensus free cash flow estimate available for calendar 2023, among at least five analysts polled by FactSet. We used calendar-year estimates, even though fiscal years for many companies don’t match the calendar.
Estimated 2023 free cash flow yield of at least double the current dividend yield.

For real-estate investment trusts, dividend-paying ability is measured by funds from operations (FFO), a non-GAAP figure that adds depreciation and amortization back to earnings. Adjusted funds from operations (AFFO) takes this a step further, subtracting cash expected to be used to maintain properties. So for the two REITs on the list, the FCF yield column makes use of AFFO.

For many companies in the financial sector, especially banks and insurers, free cash flow figures aren’t available, so the screen made use of earnings-per-share estimates. These are generally considered to run close to actual cash flow for these heavily regulated industries.

Here are the 21 companies that passed the screen, with dividend yields of at least 5% and estimated 2023 FCF yields at least twice the current payout. They are sorted by dividend yield:

Company	Ticker	Type	Dividend yield	Estimated 2023 FCF yield	Estimated “headroom”
Uniti Group Inc.	UNIT, +7.36%	Real-Estate Investment Trusts	8.33%	25.25%	16.92%
Hanesbrands Inc.	HBI, +5.56%	Apparel/ Footwear	8.33%	17.29%	8.96%
Kohl’s Corp.	KSS, +5.80%	Department Stores	7.68%	16.72%	9.04%
Rent-A-Center Inc.	RCII, +10.40%	Finance/ Rental/ Leasing	7.52%	17.26%	9.73%
Macerich Co.	MAC, +8.18%	Real-Estate Investment Trusts	7.43%	18.04%	10.60%
Devon Energy Corp.	DVN, +5.72%	Oil & Gas Production	7.13%	14.47%	7.33%
AT&T Inc.	T, +1.19%	Major Telecommunications	6.98%	14.82%	7.84%
Newell Brands Inc.	NWL, +5.16%	Industrial Conglomerates	6.59%	17.42%	10.82%
Dow Inc.	DOW, +2.96%	Chemicals	6.18%	15.63%	9.45%
LyondellBasell Industries NV	LYB, +3.64%	Chemicals	6.09%	16.07%	9.99%
Scotts Miracle-Gro Co. Class A	SMG, +5.01%	Chemicals	6.04%	12.68%	6.65%
Diamondback Energy Inc.	FANG, +5.23%	Oil & Gas Production	5.56%	13.63%	8.08%
Best Buy Co. Inc.	BBY, +5.86%	Electronics/ Appliance Stores	5.53%	14.08%	8.55%
Viatris Inc.	VTRS, +5.62%	Pharmaceuticals	5.50%	28.95%	23.45%
Prudential Financial Inc.	PRU, +5.66%	Life/ Health Insurance	5.38%	13.30%	7.91%
Ford Motor Co.	F, +7.76%	Motor Vehicles	5.23%	15.95%	10.72%
Invesco Ltd.	IVZ, +6.76%	Investment Managers	5.23%	14.95%	9.73%
Franklin Resources Inc.	BEN, +4.37%	Investment Managers	5.17%	13.21%	8.04%
Kontoor Brands Inc.	KTB, +0.73%	Apparel/ Footwear	5.17%	14.15%	8.98%
Seagate Technology Holdings PLC	STX, +4.09%	Computer Peripherals	5.11%	13.19%	8.07%
Foot Locker Inc.	FL, +1.35%	Apparel/ Footwear Retail	5.03%	15.52%	10.49%
Source: FactSet

Any stock screen has its limitations. If you are interested in stocks listed here, it is best to do your own research, and it is easy to get started by clicking the tickers in the table for more information about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

For the “estimated FCF yields,” consensus free cash flow estimates for calendar 2023 were used for all companies except the following:

For the REITs, (Uniti Group Inc.
UNIT,
+7.36%
and Macerich Co.
MAC,
+8.18%
), consensus AFFO estimates were used.
Consensus EPS estimates were used for Prudential Financial Inc.
PRU,
+5.66%,
Invesco Ltd.
IVZ,
+6.76%
and Franklin Resources Inc.
BEN,
+4.37%.

Don’t miss: Dividend yields on preferred stocks have soared. This is how to pick the best ones for your portfolio.

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October 4, 2022

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Cash flow is key