Paychex (PAYX) Directors Buy 2,000 Shares in February Insider Trades
On February 5, 2026, two top executives at Paychex, Inc. (NASDAQ:PAYX) made bold purchases. The company’s Director, Joseph Doody, acquired 1,000 shares of the company’s stock in a transaction valued at $98,760. Meanwhile, another Director, Tom Bonadio, also purchased 1,000 shares of Paychex, Inc. (NASDAQ:PAYX), in a transaction worth $98,490.
Prior to these purchases, on February 2, 2026, UBS analyst Kevin McVeigh reiterated a Hold rating on Paychex, Inc. (NASDAQ:PAYX), with a price target set at $110. And most recently, on February 10, 2026, William Blair analyst Andrew Nicholas also maintained a Hold rating on the stock.
Additionally, earlier this year, on January 16, 2026, the company announced receiving approval from the Board of Directors to repurchase $1 billion of the company’s common stock, effectively replacing the 2024 authorization of $400 million repurchase. Alongside this announcement, the company’s Board of Directors also declared the quarterly cash dividend of $1.08 per share to shareholders of record as of January 28, 2026. The dividend is payable on February 27, 2026.
Headquartered in New York, Paychex, Inc. (NASDAQ:PAYX) is a leading provider of human capital management solutions for small to medium-sized businesses. The company has been operating since 1971.
While we acknowledge the potential of PAYX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
In a market obsessed with the next big thing, Warren Buffett has built his legacy by doing the opposite: owning great businesses and letting time do the heavy lifting.
One thing many investors have learned from Buffett’s portfolio is that investment is not simply about chasing the highest yields and flashiest stocks. Instead, it’s all about consistent, resilient, and dependable performance over long periods. And if you doubt the results, well, just remember that Buffett grew Berkshire Hathaway from a modest and struggling textile manufacturer into the first non-tech trillion-dollar company in 2024.
So, yes, if imitation is the highest form of flattery, then many investors are giving Buffett compliments by copying his portfolio. But for retail investors, investing in over 40 companies might not be the best option.
That’s why today I used Warren Buffett’s portfolio to find high-quality dividend stocks and checked which ones are certified Wall Street favorites.
Using Barchart’s Stock Screener, I selected the following filters to get my list:
Annual Dividend Yield (FWD), %: Left blank so I can rank them later from highest to lowest yield.
Current Analyst Rating: 4.5-5. Stocks that are “Strong Buy”, the best among the rest, according to Wall Street.
Number of Analysts: 16 or more. The higher the number, the stronger the rating confidence.
Power Investor Ideas: Warren Buffett Stocks.
I ran the screen and got four results. I’ll cover the top three, from highest to lowest dividend yield.
Let’s kick off this list with the first Warren Buffett dividend stock:
Coca-Cola Company is one of the world’s most recognizable businesses and needs little introduction. It is the largest beverage company with over 500 products in its portfolio, including Coke, Sprite, and more. Coca-Cola continues to modernize its brands to remain culturally relevant. From the market’s perspective, though, they don’t need to put in much effort: KO is one of the most popular dividend stocks in the world, and it’s been featured in many of my top dividend stocks lists, like this recent one about the safest dividend stocks right now.
Coca-Cola pays a forward annual dividend of $2.04, yielding around 3%. Plus, it has a 5-YR dividend growth of 21.25%, which I think is pretty decent for investors looking for a long-term, income-focused investment.
Further, a consensus among 25 analysts rates the stock a “Strong Buy”, suggesting around a 25% potential upside if it reaches the high target price of $87 within the next 12 months.
The next Warren Buffett dividend stock on my list is Visa Inc., a company with a vast payment network that connects credit, debit, and prepaid cards globally and is now expanding to support AI-driven transactions.
The company pays a forward annual dividend of $2.68, translating to a yield of around 0.75%. It may be modest, but it has a 5-YR dividend growth of 96.67%, which is pretty high – and I think it can continue to rally in the coming years.
With that, a consensus among 36 analysts rates the stock a “Strong Buy”, with a high target of $450, suggesting an upside potential of 28% in the next twelve months.
The last Warren Buffett dividend stock on my list is Alphabet, a conglomerate that goes way beyond Google search. Some of its subsidiaries include Google Cloud, Waze, and more. With AI demand accelerating, Alphabet recently agreed to acquire Intersect, strengthening its AI-related initiatives.
Alphabet also pays a forward annual dividend of $0.84, translating to a yield of around 0.27%. While it may not offer the highest dividend, there’s still significant upside to owning GOOGL stock. In fact, it was up 68% over the past 52 weeks.
Plus, a consensus among 55 analysts rates the stock a “Strong Buy”, consistent over the past three months, highlighting confidence in Alphabet’s long-term growth. The high target price is $400, suggesting a 13% potential upside. But considering Alphabet’s pedigree, I don’t think the growth will be limited to 13% if the company’s AI initiatives pay off.
There you have it, three Warren Buffett dividend stocks to buy in 2026 – all with”Strong Buy” ratings from Wall Street analysts. While there are many ways to approach investing, Warren Buffett’s track record is why his strategy continues to resonate with so many investors. His picks may not have the highest yields, but they have proven consistency and long-term performance, perfect for building portfolios that provide reliable income over time.
Still, this strategy should NOT be followed blindly. Instead, investors could use it as a blueprint; evaluate the fundamentals themselves, and make sure each stock fits their own financial goals and risk tolerance.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
In a market where growth stocks often steal the spotlight, reliable income still matters, especially during periods of uncertainty. High-yield dividend stocks with solid business models and steady cash flows continue to earn Wall Street’s confidence, offering investors a blend of income and stability.
Here are three high-yield dividend stocks Wall Street still trusts to deliver dependable income, even when markets turn volatile.
Valued at $170.7 billion, Verizon Communications (VZ) is one of the largest telecommunications companies in the United States, providing wireless, broadband, and enterprise connectivity services. The company’s core strength lies in its wireless business, which generates consistent, recurring revenue from millions of subscribers. This stability supports Verizon’s attractive dividend, making it a favorite among income-focused investors looking for consistency rather than quick growth.
Verizon pays a high dividend yield of 6.8% and maintains a healthy payout ratio of 57.6%, which leaves room for dividend growth as well as business expansion. It also has been paying and increasing dividends for the past 20 years, backed by steady cash generation from essential communication services. Verizon expects to generate free cash flow between $19.5 billion and $20.5 billion for the full year; that should help it continue the payouts.
Overall, Wall Street rates VZ stock as a “Moderate Buy.” Of the 28 analysts that cover the stock, eight rate it a “Strong Buy,” three recommend a “Moderate Buy,” and 17 suggest a “Hold.” Based on the average target price of $47.22, the stock has an upside potential of 16.6% from current levels. Its Street-high estimate of $58 further implies VZ stock can go as high as 43.3% in the next 12 months.
www.barchart.com
AT&T (T) remains a high-yield dividend stock that Wall Street continues to trust, thanks to its essential role in U.S. communications infrastructure. Valued at $177.1 billion, AT&T is one of the country’s largest telecom providers, delivering wireless, broadband, and enterprise connectivity services to millions of customers nationwide. AT&T’s wireless segment provides mobile voice and data services to consumers and businesses, generating steady, recurring revenue that allows it to pay consistent dividends.
AT&T’s dividend yield is 4.5%, which is significantly higher than the communications sector average of 2.6%. Its healthy payout ratio of 50% is supported by consistent cash flows from critical communication services. The company intends to generate free cash flow in the low-to-mid $16 billion range for the full year 2025, leaving the door open for dividend increases.
Overall, Wall Street rates AT&T stock as a “Moderate Buy.” Of the 28 analysts that cover the stock, 15 rate it a “Strong Buy,” three say it is a “Moderate Buy,” and 10 rate it a “Hold.” Based on the average target price of $29.68, the stock has an upside potential of 19.8% from current levels. Its Street-high estimate of $34 further implies the stock can go as high as 37.2% in the next 12 months.
www.barchart.com
Altria Group (MO) is one of Wall Street’s most trusted high-yield dividend stocks, built on decades of steady cash generation and disciplined capital returns. Best known for owning the iconic Marlboro brand in the U.S., Altria dominates the domestic tobacco market and has long been a cornerstone holding for income-focused investors.
Valued at $96.7 billion, Altria sells cigarettes and smokeless tobacco products, generating highly predictable revenue thanks to strong brand loyalty and pricing power. Even as cigarette volumes decline industry-wide, Altria has consistently offset this trend through regular price increases, protecting margins and cash flow. That resilience underpins one of the most reliable dividend profiles in the market. Altria’s high dividend yield of 7.4% is higher than the consumer staples average of 1.9%. Altria has earned the title of a Dividend King by increasing its dividend 60 times in the past 56 years, reassuring its status as one of the most reliable dividend profiles in the market.
Overall, on Wall Street, Altria stock is a “Hold.” Of the 14 analysts covering the stock, four rate it a “Strong Buy,” eight rate it a “Hold,” one says it is a “Moderate Sell,” and one rates it a “Strong Sell.” Based on the average target price of $61.45, the stock has an upside potential of 6.6% from current levels. Its Street-high estimate of $72 further implies the stock can go as high as 25% in the next 12 months.
www.barchart.com
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
Share prices were up 5% in after-hours trading on Thursday after the strong earnings beat.
Amazon (AMZN/NASDAQ): Earnings per share of $1.43 (versus $0.14 predicted) and revenues of $134.4 billion (versus $131.5 billion predicted).
Amazon Web Services (AWS) remains the golden goose, even though very few of Amazon’s retail customers know it exists. Revenues climbed 19% during the quarter, and totalled $27.4 billion. Amazon’s advertising revenues were another highlighted area of the report, as they were up 19%. Overall operating profits grew 56% year over year to $17.4 billion, mostly credited to the 27,000 jobs cut by the company since 2022.
Founder, executive chairman and former president and CEO of Amazon, Jeff Bezos was in the headlines this week in his role as owner of the Washington Post. He refused to allow the Post’s editorial team to print their endorsement of Kamala Harris for president, and it was met with widespread outrage from Post readers. As of Tuesday, more than 250,000 subscriptions were cancelled as a result.
Fortunately for Bezos, he purchased the Washington Post (one of the world’s premier news brands) for “chump change”—$250 million (roughly a mere 1.2% of his net worth). So, if he drives it into the ground, I don’t think he’ll shed tears.
No doubt co-founder and CEO of Tesla, Elon Musk, is making similar calculations with his luxury purchase two years ago of Twitter (which he rebranded as X). Critics say he has turned the social platform into an echo chamber for Republican presidential candidate Donald Trump. What are the billions for, if a person can’t even enjoy themselves by buying a little media, am I right?(That’s sarcasm.)
So far we’ve yet to see analysis to show Bezos’ editorial decision affecting Amazon’s share price or revenue numbers. Apparently Republicans buy Amazon Prime, too.
Canada’s best dividend stocks
Microsoft, Meta and Google: Predictably incredible earnings
While not having quite as large a market cap as Nvidia and Apple, other mega tech stocks in the U.S. are no slouches. For example, Microsoft is also as valuable as the entirety of Canada’s stock exchanges at $3.2 trillion. Alphabet and Meta clock in at $2.1 trillion and $1.5 trillion respectively. (All figures in this section are in U.S. dollars.)
Other Big Tech stock news highlights
Here’s what these companies announced this week.
Alphabet (GOOGL/NASDAQ): Earnings per share came in at $2.12 (versus $1.51 predicted) on revenues of $88.27 billion (versus $86.30 billion predicted).
Microsoft (MSFT/NASDAQ): Earnings per share of $3.30 (versus $3.10 predicted), and revenues of $65.59 billion (versus $64.51 predicted).
Meta (META/NASDAQ): Earnings per share coming in at $6.03 (versus $5.25 predicted) and revenues of $40.59 billion (versus $40.29 predicted).
All three companies crushed earning estimates across the board. However, shareholders’ reactions to these earnings beats were still muted. Meta shares were down 2.5% in after-hours trading on Wednesday, and it was a similar situation for Microsoft. Alphabet fared better as its shares were up 3%.
It’s hard to put these numbers into the massive context into which they belong, because the world has never seen anything like these companies before. Here are highlights from the earnings calls. (Scroll the chart left to right with your fingers or press shift, as you use scroll wheel on your mouse to read.)
Despite these setbacks, CPKC posted an income gain of 7% year over year. The four categories that made the most impact were grain, energy, plastics and chemicals, and they grew revenues by 11%. CPKC says the shipment of wheat to Mexico from the Canadian and American Prairies over the past 12 months was exactly the type of “synergy win” that it was hoping for when the former Canadian Pacific acquired Kansas City Southern back in 2021. This railway remains the only one to span Canada, the United States and Mexico.
CNR CEO Tracy Robinson commented on the railway’s operational challenges. “Our scheduled operating plan demonstrated its resilience in the third quarter, allowing us to adapt our operations to challenges posed by wildfires and prolonged labor issues,” she said. “Our operations recovered quickly and the railroad is running well. As we close 2024, we will continue to focus on recovering volumes, growth, and ensuring our resources are aligned to demand.”
CNR’s revenues were up 3% year over year; however, increased expenses meant the company’s operating ratio rose 1.1% to 63.1% (indicating that expenses are growing as a share of revenue). The railway announced it was raising its quarterly dividend from $0.79 to $0.845. This raise of nearly 7% is right in line with CNR’s mission to conservatively raise its dividend payouts each year.
Thursday’s revenue miss left some Rogers shareholders shaking their heads.
Rogers earnings highlights
Here’s what the large mobile company reported this week:
Rogers Communications (RCI/TSX): Earnings per share of $1.42 (versus $1.34 predicted) and revenues of $5.13 billion (versus $5.17 predicted).
While solid earnings numbers did take away some of the sting, Rogers’ share price was down 3% on Thursday. Lower-than-expected numbers for new wireless customers were at the root of low revenue growth. The oligopolistic Canadian wireless market remains uncharacteristically competitive as Rogers, Telus and Bell all continue to fight for market share. That competition is hurting profit margins for all three telecommunications giants at the moment. (Unlike in past years, when the three telcos all enjoyed charging some of the highest wireless plan fees in the world.)
One highlight for Rogers was its sports revenue vertical, which was up 11% from last quarter. Rogers has really doubled down on its sports media strategy over the last few years and now owns a controlling share of the:
Toronto Blue Jays in the Major League Baseball league (MLB)
Toronto Maple Leafs in the National Hockey League (NHL)
Toronto Raptors in the National Basketball Association (NBA)
Toronto FC in Major League Soccer (MLS)
Toronto Argonauts in the Canadian Football League (CFL)
SportsNet, a major Canadian sports network
Toronto’s Rogers Centre and Scotiabank Arena venues
Naming rights of sports venues in Edmonton, Toronto and Vancouver
National NHL media rights in Canada
Local media rights to the NHL’s Vancouver Canucks, Calgary Flames and Edmonton Oilers
Partial local media rights to the Maple Leafs and Raptors
Several minor-league franchises and esports (gaming) teams
Despite owning all those household-name sports assets, it’s worth noting that Rogers’ wireless and cable divisions were responsible for close to 90% of revenues, with sports and media making up the rest.
The Dow Jones Industrial Average(DJINDICES: ^DJI) has 30 industry-leading components that act as representatives of the U.S. economy. The index’s rich history has made it a go-to destination for investors looking for quality names that can help them generate dividend income.
Over time, the composition of the Dow has changed to reflect the growing influence of technology on the economy, which has helped the Dow produce impressive gains in recent years. But even stodgy Dow names like Coca-Cola, Home Depot, and McDonald’s have been roaring higher in recent months and helped the index achieve a fresh all-time high on Oct. 11.
Despite the Dow’s track record, not every component has a high yield or has been a trustworthy dividend stock. Boeing‘s slew of challenges pressured the company to suspend its dividend. Tech stocks like Microsoft, Apple, and Salesforce have yields under 1%, and Amazon doesn’t pay dividends.
Johnson & Johnson(NYSE: JNJ), Dow(NYSE: DOW), and Chevron (NYSE: CVX) are three of the highest-yielding stocks in the index. Investing $2,500 into each stock produces an average yield of 4.2% and should generate at least $300 in passive income per year. Here’s why all three dividend stocks are worth buying now.
Image source: Getty Images.
J&J has dealt with significant challenges over the last few years
Johnson & Johnson (J&J) is a Dividend King with 62 consecutive years of dividend increases. The company has long been known as a stodgy passive-income powerhouse. But the last few years have been challenging, as reflected in its languishing stock price.
J&J was a leader in COVID-19 vaccine developments, which was initially a boon for the company. But rapidly declining demand for the vaccine has been a drag on the company to the point where J&J now reports many of its results as “excluding the impact of the COVID-19 vaccine.”
Another challenge has been adjusting to the spinoff of J&J’s consumer health business, which occurred in August 2023. Former J&J brands, such as Band-Aid and Tylenol, are now under the new entity Kenvue. The spinoff should help J&J be a faster-growing company by focusing on just two segments — Innovative Medicine and MedTech. However, it does remove some of the safe and stodgy parts of the business that made J&J a rock-solid dividend stock, no matter the economic cycle.
Finally, J&J has been dealing with lawsuits that allege its talc-based products led to cancer development. J&J restructured and made a subsidiary called Red River Talc LLC, which filed for Chapter 11 bankruptcy on Sept. 20 to handle current and future claims.
After a messy few years, J&J is finally ready to turn the corner. The business has been putting up solid results and growing at a rate that should support good, if not excellent, dividend raises going forward. J&J generates a ton of free cash flow that easily covers its dividend expense. And with a yield of 3.1%, J&J stands out compared to the S&P 500 dividend yield of just 1.2%.
Dow is a coiled spring for economic growth
Not to be confused with the “Dow” in the Dow Jones Industrial Average, Dow makes chemicals used in plastics, seals, foams, gels, adhesives, resins, coatings, and more. The commodity chemical company has three key segments — Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings.
Dow’s business model is capital intensive and vulnerable to ebbs and flows in global demand and supply. Dow has been hit hard by volume declines and lower margins. In the following chart, you can see that revenue and margins surged in 2021 and early 2022 but have fallen considerably since then. Similarly, the stock price has gone practically nowhere since the spinoff.
Dow has blamed macroeconomic factors as a key reason for its weak results. However, low interest rates could greatly benefit many of the company’s end markets. For example, lower mortgage interest rates could boost housing demand, which would help Dow’s polyurethanes and construction chemicals business. Lower interest rates could also boost demand for durable goods.
Overall, Dow is well positioned to see a sizable uptick in earnings next year. Analyst consensus estimates call for just $2.26 in earnings per share (EPS) in 2024 but $3.55 in 2025 EPS. Although Dow looks expensive based on trailing earnings, it would have a far more reasonable valuation if it delivers on expectations.
Despite the volatility of Dow’s performance, it has proven to be a reliable income stock spinning off from DowDuPont in 2019. Dow yields 5.2%, making it the second-highest yielding stock in the Dow Jones, behind only Verizon Communications. Dow hasn’t raised its payout since the spinoff, but it has incorporated stock repurchases as part of its capital return program. The company’s goal is to return 65% of earnings to shareholders through buybacks and dividends so it has enough dry powder to fund long-term investments in new production plans, low-carbon efforts, and more.
Overall, Dow is a good value stock for income investors to consider now.
A quality energy stock with a high yield
Like Dow, Chevron can be a highly cyclical business whose results are heavily impacted by commodity prices. But Chevron has a strong balance sheet, a diversified upstream business that doesn’t depend on one production region, a massive refining business, and a track record for raising its dividend no matter what oil prices are doing.
In fact, Chevron has paid and raised its dividend for 37 consecutive years. Chevron yields 4.3%, which is the third-highest yield in the Dow Jones. The company’s track record for dividend raises, paired with its high yield, makes it arguably the single best passive income play out of the 30 Dow components.
Investors worried about declining oil prices can take solace in knowing that Chevron has a large margin for error in supporting its dividend. Chevron’s capital expenditures and buybacks are near five-year highs. If oil prices tank, Chevron can simply pause buybacks and pull back on capital expenditures. Chevron didn’t cut its dividend when oil prices crashed in 2020, so it stands to reason that it would take a prolonged downturn for the company even to consider reducing its payout.
Chevron stands out as a balanced buy for investors looking for a safer way to invest in oil and gas and power their passive income stream.
Should you invest $1,000 in Johnson & Johnson right now?
Before you buy stock in Johnson & Johnson, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Johnson & Johnson wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $845,679!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Chevron, Home Depot, Kenvue, Microsoft, and Salesforce. The Motley Fool recommends Johnson & Johnson and Verizon Communications and recommends the following options: long January 2026 $13 calls on Kenvue, long January 2026 $395 calls on Microsoft, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Netflix (NFLX/NASDAQ) shareholders were happy on Thursday, as they saw share prices rise 5% in after-hours trading on the back of another excellent earnings announcement. (All figures in U.S. dollars.) Earnings per share came in at $5.40 (versus $5.12 predicted) and revenues were $9.83 billion (versus $9.77 billion predicted).
Paid memberships also topped expectations, at 282.7 million, compared to the 282.15 million predicted by analysts. Netflix chalked up the increase in viewers to new hit shows such as The Perfect Couple, Nobody Wants This and Tokyo Swindlers, as well as new seasons of favourites Emily in Paris and Cobra Kai. Looking ahead to the next quarter, Netflix is banking on the new season of Squid Game and its foray into the world of live sports. Two National Football League (NFL) games and a massively anticipated boxing bout between Jake Paul and Mike Tyson represent new attractions for the streaming giant.
Photo courtesy of United Airlines
United Airlines shares take to the sky
Tuesday was a massive earnings day for United Airlines (UAL/NASDAQ) as earnings per share came in at $3.33, well outpacing the $3.17 that analysts were predicting. (All figures in U.S. dollars.) Revenues were $14.84 billion (versus $14.78 billion predicted). Shares were up more than 13% on the outperformance and the news that the airline was starting a $1.5-billion share buyback program.
Corporate revenue was up more than 13% year over year, while basic economy seat sales clocked an even more impressive 20% increase. Last week, the company announced new international routes headed to Mongolia, Senegal, Spain, Greenland and more.
The best online brokers in Canada
The inflation dragon has been slain
It doesn’t seem that long ago that annualized inflation rates were topping 8%, and there appeared to be no end in sight. Well, the end has arrived. Statistics Canada announced this week that the Consumer Price Index (CPI) annualized inflation rate for September had dropped all the way down to 1.6%. That’s substantially lower than the Bank of Canada’s 2% target.
Led by deflation in clothing and footwear, as well as transportation, the downward trend appears to be widespread. Gasoline was also down 10.7% from this time last year.
Of course, increased shelter costs remain the major concern for many Canadians. Rent increases were up 8.2% year-over-year; while that’s down from August’s figure of 8.9%, it’s still a bitter pill to swallow for many.
For a decade now, big acquisitions by Canadian oil-and-gas producers have mostly been met with distaste by investors. So we’ll take it as a heartening sign how well the markets received Canadian Natural Resources’ (CNQ/TSX) decision to buy the Alberta upstream assets of Chevron Corp. (CVX/NYSE) for USD$6.5 billion in cash. CNQ stock rose 3.7% Monday in the wake of the announcement. Chevron was up 0.7% on a day when oil prices increased.
The assets in question comprise a 20% stake in the Athabasca Oil Sands Project, along with 70% of the Kaybob Duvernay shale play. That should add 122,500 barrels of oil equivalent per day to Canadian Natural Resource’s 2025 output, the company said. It also announced a 7% bump to its quarterly dividend, to 56.25 Canadian cents a share, beginning in January.
Chevron explained the asset sale in terms of freeing up cash for U.S. shale acquisitions as well as targeted positions abroad, such as in Kazakhstan, which it considers to hold better long-term profit potential.
Canada’s best dividend stocks
Nvidia moves up to number 2 in market cap
Reports of the death of the Magnificent 7 tech stocks’ decade-long run are greatly exaggerated, Nvidia (NVDA/Nasdaq) seemed to say this week as its shares rose past $130. (All figures in U.S. dollars.) That pushed its market capitalization ahead of Microsoft Corp. to $3.19 trillion. That leaves only Apple, with a market cap of $3.4 trillion, worth more than the AI-focused chip-maker.
Nvidia’s stock is up 26% in the past month, compared to a 6% advance for the S&P 500. Nvidia has grown tenfold in just two years. The price movement this week appeared to come from a positive report from Super Micro Computer, a provider of advanced server products and services. It found that sales of its liquid cooling products, deployed alongside Nvidia’s graphics processing units (GPUs), would be even stronger than expected this quarter. Analyst estimates of Nvidia’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the three-month period ended this month is $21.9 billion.
The best online brokers in Canada
Pepsi earnings leave a sour taste
Posting its second straight disappointing set of quarterly results on Tuesday, beverage-and-snack maker PepsiCo lowered its full-year guidance for organic revenue unrelated to acquisitions.
Results were hampered by recalls of the company’s Quaker Foods products, related to potential salmonella contamination. PepsiCo also experienced weak demand in the U.S. and business disruptions in some overseas markets, such as the Middle East. Pepsi’s North American beverage volumes fell 3% year-over-year, mostly due to declines in energy drink sales. Meanwhile, its Frito-Lay division suffered a 1.5% decline.
“After outperforming packaged food categories in previous years, salty and savory snacks have underperformed year-to-date,” executives said in a prepared statement. Overall, PepsiCo revised its 2024 sales growth outlook from the previous 4% to low single digits.
Investing in a high-yielding dividend stock can come with significant risks. Oftentimes, a yield is high because it comes at a cost: uncertainty. Even though a dividend may look attractive, investors may not want to buy a stock if they are concerned about its ability to continue paying its dividend.
Two incredibly high-yielding stocks you can invest in today are Walgreens Boots Alliance (NASDAQ: WBA) and Altria Group (NYSE: MO). Neither of their payouts is particularly safe, but I’ll break down which one may be the better option for dividend investors today.
The case for Walgreens Boots Alliance
Pharmacy retailer Walgreens Boots Alliance is undergoing a lot of changes right now. Under new CEO Tim Wentworth, who has been on the job roughly a year, it appears just about everything is on the table. Not only is the company contemplating selling assets and reducing the number of stores it operates, it’s also considering dumping its investment in VillageMD, which would have been unfathomable even a year or two ago as it was seen as a pivotal part of its healthcare strategy.
Nowadays, however, Walgreens is struggling to grow, its bottom line isn’t strong, and the company even slashed its dividend at the start of the year. Despite the cut, the stock’s yield remains astonishingly high at 11.5%. But that isn’t because the yield was even higher to begin with, it’s because Walgreens’ stock can’t stop crashing. It’s down 67% this year with its valuation going to levels it hasn’t been at in decades.
But the good news is that Walgreens has levers it can pull on to simplify its operations. By reducing its store count, that can bring down its expenses and focus on just its most profitable locations. It has assets it can sell to free up cash flow as well. And with the new CEO not outright eliminating the dividend, that may be a sign he sees it as a key part of the company’s future. And even if there’s another a dividend cut, the yield may still remain fairly high and above the S&P 500 average (1.3%).
There’s a lot to be worried about with Walgreens, but the business may not be doomed. Wentworth has been on the job for just a year and if he’s able to turn things around, not only could the dividend be safe, but investors could also see a huge rally for this beaten-down stock. By no means is this a safe stock to own, but if you can handle the risk, the upside could be huge.
The case for Altria
Altria faces a tough future of its own, but that’s due to the industry it operates in. Smoking rates have been coming down for years and that’s a trend that’s not likely to change anytime soon as people become more concerned about their health. But despite this, there hasn’t been a drastic decline in sales for Altria and in fact, things have been fairly stable over the past few years. Although revenue did fall last year, the top line isn’t exactly nosediving.
MO Revenue (Annual) Chart
The company is also generating enough in earnings to cover its dividend payments. For the second quarter of 2024, which ended on June 30, Altria’s adjusted earnings per share totaled $1.31, which is higher than the $1.02 it pays in quarterly dividends. As long as it can maintain that level of profitability, the dividend should remain safe. In fact, the company even announced a 4.1% increase to its dividend in August, marking the 59th time in 55 years that it has raised its payout.
For years, Altria has made for a safe dividend stock to own and while its dividend yield of 8.1% may seem high, there aren’t any red flags to suggest that a cut or suspension to the payout is coming anytime soon.
Which stock is the better option for dividend investors?
Picking between these two stocks isn’t easy. From a strictly fundamental point of view, Altria may look to be the better dividend stock to own simply because in the near future, it may not have to cut or suspend its payout.
For the long term, however, I’d go with Walgreens for the simple reason that the business has more levers it can pull on to turn its business around. The healthcare industry is growing and by providing consumers convenient access to pharmaceuticals and other necessary day-to-day products, Walgreens plays an important role for communities across the country. While its strategy hasn’t worked thus far, Walgreens may have more ways it can turn its business around than Altria might, which could continue to face declining sales for years to come.
Both stocks, however, are risky options and for many investors the best option will probably be to pick neither investment. There are many better dividend stocks to choose from than these two and while you may end up going with a lower-yielding stock, the result could make for a much less stressful investment to hold in your portfolio. Ultimately, it comes down to your level of risk tolerance.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $20,579!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,710!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $389,239!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Some experts speculate the real sticking point in negotiations isn’t about wages but protection from automation. The ILA refused to allow its members to work on automated vessels docking at U.S. ports. As a result, American ports are getting more and more inefficient, ranking not only behind ports in China, but also Colombo, Sri Lanka. (The Container Port Performance Index is put together annually by The World Bank and S&P Global Market Intelligence.)
For reference, the highest-rated port in Canada is Halifax, listed at 108th in the world. Halifax’s port efficiency was well behind not only Sri Lanka, but also economic powerhouses like Tripoli, Lebanon. To give further Canadian context, Montreal is 348th, and Vancouver is 356th, which is just ahead of Benghazi, Libya.
Something tells me that negotiating for USD$300,000-per-year dockworkers is not going to help these North American efficiency numbers. The higher salaries get, the more attractive automation strategies will quickly become. Clearly there will be an eventual reckoning. In the meantime, for at least one more important presidential news cycle, dockworkers will be able to extract large wage gains as they hold the broader economy hostage.
Why utilities aren’t “boring”—any more
As income-oriented Canadian investors start to grow less enamoured of high-interest savings accounts and guaranteed investment certificates (GICs), the dividend yields of dependable North American utility stocks should begin to look more attractive. Given how quickly interest rates are likely to fall, it’s clear that there is a stampede of investors heading for the stocks of utility companies.
The iShares U.S. Utilities ETF (IDU/NYSE) is up more than 30% year to date, and the iShares S&P/TSX Capped Utilities Index ETF (XUT/TSX) is up about 15% year to date. (Check out MoneySense’s ETF screener for Canadian investors.)
Most of the time utilities (especially those in sectors regulated by federal and local governments) are perceived as “boring.” Sure, the profits are dependable, but if the government is going to determine how much is paid for electricity or natural gas, then a company’s profit margins are tough to change. The dividend income is dependable. But that’s really the whole sales job in a nutshell.
Lately, however, due to AI’s electricity needs and possible AI-fuelled efficiency increases, utilities have been getting some glowing press. Falling interest rates mean that annual interest costs will drop (utilities often have to borrow a lot of money to complete big projects). Meanwhile, Canadian investors looking for safe cash flow are pouring in. Utility stocks make up about 4% of the S&P/TSX Composite Index. The largest utility companies—such as Fortis, Emera, Hydro-One and Brookfield Infrastructure—are some of Canada’s largest companies.
Some of the same income-oriented investors who like utility stocks may also be interested in two new exchange-traded funds (ETFs) that J.P. Morgan Asset Management Canada just launched. The JPMorgan US Equity Premium Income Active ETF (JEPI/TSX) and the JPMorgan Nasdaq Equity Premium Income Active ETF (JEPQ) use options strategies to “juice” the income already provided by higher-dividend-yielding stocks.
The Chinese government commands the economy to grow
Many people like to sort countries’ economies as either communist, socialist, capitalist or free markets. But these days, every country has some version of a mixed economy. The practical implementation of fiscal and monetary policy is becoming increasingly more grey than our old black-and-white economics textbooks would have us believe. Yet, even within the grey, China’s approach for its economic system is uniquely difficult to define.
Back in 1962, when asked about building a socialist market economy, future China leader Deng Xiaoping famously said, “It doesn’t matter whether the cat is black or white, so long as it catches mice.”
Well, the current China leaders have let the fiscal and monetary cats out of the bag, and they’re hoping those cats are hungry.
We wrote about China’s housing problems about a year ago, warning about rising deflation fears. These issues seem to have gotten worse, and the biggest news in world markets this week was that China’s government decided enough was enough. And in a “command” economy (which is probably the most accurate way to describe its approach), the government has a very high degree of control over economic levers. Consequently, markets reacted swiftly and positively to this news.
Here are the highlights of the multi-pronged fiscal and monetary stimulus that the Chinese government has decided to implement:
Banks cut the amount of cash they need in reserve (this is known as the reservation requirement ratio) by 0.50%. This will incentivize banks to lend more money (basically “creating” 1 trillion yuan, USD$142 billion).
The People’s Bank of China (PBOC) Governor Pan Gongsheng said another cut may come later in 2024.
Interest rates for mortgages and minimum down payments on homes were cut.
A USD$71 billion fund was created for buying Chinese stocks.
That last point is pretty interesting to me. Here you have a supposedly communist government essentially creating a big pot of money to spend within a free stock market. The fund is to directly purchase stocks, as well as providing cash to Chinese companies to execute stock buybacks. Good luck defining that action in traditional economic terms.
The idea is to give investors and consumers faith that they should go out there and buy or invest in China’s expanding economy. Clearly something major had to be done to jolt Chinese consumers out of their malaise.
Early reports are speculating that the Chinese gross domestic product (GDP) could fail to rise by less than the 5% target set by the government. If so, we’re about to see what happens when the commander(s) behind a command economy decide that the GDP will rise no matter what.
U.S. Fed cuts rates for the first time in four years
The U.S. dollar remains the most important currency in the world, and the American economy is arguably the most important financial system as well. Consequently, when the U.S. Federal Reserve makes a big announcement, it creates an economic wave that ripples everywhere. That’s why Wednesday’s decision to cut the key overnight borrowing rate by 0.50% is a very big deal.
Many speculated the U.S. Fed would begin cutting rates this week, but it was generally thought it would go with a 0.25% drop to begin an interest rate-cut cycle. The 50 basis points cut lowers the federal funds rate range 4.75% to 5%.
The U.S. Fed announced in a statement: “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”
Federal Reserve Chair Jerome Powell said, “We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with this inflation. That’s what we’re trying to do, and I think you could take today’s action as a sign of our strong commitment to achieve that goal.”
Immediately after the news of the U.S.’s first interest rate cuts in four years, major stock market indices responded with a brief jump on Wednesday. But they ended the day nearly flat. That seemed to be a bit of a delayed reaction from investors, as the Bulls returned Thursday with Nasdaq soaring 2.5% and the Dow leaping 1.3% to pass 42,000 for the first time ever.
Notably, former U.S. President Donald J. Trump continued to criticize the monetary decisions made by the U.S. Federal Reserve. This despite centuries of financial wisdom telling us that politicians getting involved in short-term monetary policy is a bad idea. (See: Turkey – Erdoğan, Tayyip.) At bitcoin bar PubKey on Wednesday, Trump said, “The economy would be very bad, or they’re playing politics.”
The larger-than-expected rate cut left some commentators questioning if this action would spook the markets. But, if the U.S. Fed manages to thread the needle and cut rates without a recession, it could be a good thing. The historical precedents are very positive for shareholders.
This large rate cut helps ease pressures on emerging markets that borrowed in U.S. dollars. And, it takes some of the pressure off other central banks around the world that didn’t want to see their currencies devalued too much relative to the mighty USD.
Tuesday’s earnings call was the best day that Oracle shareholders have seen in a while.
Oracle earnings highlights
All figures in U.S. currency in this section.
Oracle (ORCL/NYSE): Earnings per share came in at $1.39 (versus $1.32 predicted), and revenues of $13.31 billion (versus $13.23 billion predicted).
Share prices rose more than 13% after the tech giant showed profits that were up nearly 20% from last year. Revenues across the company’s cloud services division continue to increase. And CEO Safra Catz said, “I will say that demand is still outstripping supply. But I can live with that.”
Founder Larry Ellison (who recently passed Mark Zuckerberg to become the second richest person in the world) excitedly predicted that Oracle would one day operate more than 2,000 data centres, which is up from the 162 today. The current project that he highlighted is a massive data centre that will use three modular nuclear reactors to produce the needed gigawatts of electricity.
In other U.S. stock market news, Trump Media and Technology Group (DJT/NASDAQ) investors face a big decision this week. The stock plummeted from highs of $66 per share on March 27, to $16.56 after the debate on Wednesday. Don’t say we didn’t warn you.
That’s not the worst news for DJT investors though. Next week, a potentially crippling event occurs: the entity that owns 57% of the shares can sell the stock for the first time. If it were to sell all its shares (in order to get as much money as possible out of a business venture that loses millions of dollars every month), the share price would tank.
What is the “entity”? It’s actually a question of who not what: Donald Trump.
Even at reduced share price levels, Trump’s slice of Truth Social is worth about $1.9 billion. It’s not like he needs money for pressing issues or anything like that…
Dell and Palantir kick American Airlines and Etsy out of the S&P 500
In other big events to look forward to, September 23 will see major U.S. market indices experience a reweighting. Given that trillions of dollars are now passively invested into indice-based index funds, whether your company is a member of a specific index or not can make a big difference in its share price. That said, these indice moves are largely anticipated by the market, so a lot of the value movement has already been priced in.
For the third straight month, the Bank of Canada (BoC) decided to cut interest rates. The quarter-point cut takes the Bank’s key interest rate down to 4.25%.
The news that’s perhaps bigger than the widely anticipated rate cut was how aggressive BoC governor Tiff Macklem sounded in his prepared remarks. Macklem stated, “If we need to take a bigger step, we’re prepared to take a bigger step.” That sentence will be focused on by financial markets looking to price in larger potential cuts in the months to come. As of Thursday, financial markets were predicting a 93% probability that October would see another 0.25% rate cut. Several economists believe interest rates would fall to around 3% by next summer.
While describing a potential soft landing to the bumpy pandemic-fuelled inflation flight we’ve been on, Macklem stated, “The runway’s in sight, but we have not landed it yet.” It appears that the real debate is no longer if the BoC should cut interest rates, but instead, how quickly it should cut them, and whether a 0.50% cut may be in the cards sooner rather than later.
With unemployment rates increasing, it follows that the inflation rate of labour-intensive services should continue to fall. Lower variable-rate mortgage interest payments will automatically have a deflationary impact on shelter costs across Canada as well.
Last week we wrote about the Alimentation Couche-Tard (ATD/TSX) proposed buyout of 7-Eleven parent company Seven & i Holdings Co. If the buyout goes through, ATD would go from being Canada’s 14th-largest company to being in the running for third-largest company. That’s a big if: on Friday morning, just hours before we went to press, Seven & i said it is rejecting ATD’s $38.5-billion cash bid on the grounds it was not in the best interests of shareholders and was likely to face major anti-trust challenges in the U.S. (All figures in this section are in U.S. dollars.)
It’s interesting to note that 7-Eleven has been much better at running convenience stores in Japan (where it has a 38% profit margin) versus outside of Japan (where it has a 4% margin). That’s partly due to the fact that locations outside of Japan sell a large amount of low-margin gasoline. Couche-Tard, however, has been able to unlock margins in the 8% range in similar gasoline-dominated locations, indicating substantial room for growth. With 7-Eleven’s overall returns falling far behind its Japanese benchmark index over the last eight years, there is clearly a business case to be made to current shareholders.
The political dimensions to the acquisition are much harder to quantify than the business case. While Japan did change its laws to become more foreign-acquisition-friendly in 2023, it still classifies companies as “core,” “non-core” and “protected,” under the Foreign Exchange and Foreign Trade Act. Logically, it seems that a convenience-store company would fit the textbook definition of “non-core.” However, Seven & i Holdings has asked the government to change the classification of its corporation to “core” or “protected.” That would effectively kill any wholesale acquisition opportunities.
There is also an American legal aspect to the deal. The Federal Trade Commission (FTC) would have to rule on whether ATD’s resulting U.S. market share of 13% would be too dominant. Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, speculated that the most likely outcome might be a sale of 7-Eleven’s overseas assets to ATD, with the company holding on to its Japan-based assets.
What Stocks Does Donald Trump Own? New Financial Disclosure Revealed
As Donald Trump campaigns for a return to the White House, his latest financial disclosure offers a look into the investment strategy of the businessman-turned-politician.
The Aug. 13, 2024, filing shows a portfolio that spans from high-flying tech stocks to reliable dividend payers. Outside of the individual stocks Trump owns, his disclosure lists real estate holdings valued in the hundreds of millions, and government bonds valued in the millions.
Don’t Miss:
If Trump were a money manager, he might be defined as one who balances growth potential with steady income.
While Trump’s 64.9% stake in Trump Media & Technology Group dwarfs his other holdings at $2.4 billion, his investments in other companies are substantial and diverse. The former president has placed large bets on multiple ‘magnificent seven’ stocks, with stakes valued between $500,001 and $1 million each in Apple, Microsoft and NVIDIA.
Trending:
Those holdings suggest Trump has embraced Wall Street’s enthusiasm for artificial intelligence (AI), the nascent sector that has driven much of the market’s gains in recent months. His portfolio also includes positions in other magnificent seven stocks, including Alphabet and Amazon, valued between $100,000-$250,000 and $250,000-$500,000 respectively.
But the former president’s strategy extends beyond Silicon Valley darlings. His disclosure lists hundreds of individual stocks, including positions in financials like JPMorgan Chase and Warren Buffett’s Berkshire Hathaway.
See Also:
Trump’s portfolio also features a significant number of dividend stocks, which include household names like Coca-Cola, Johnson & Johnson and Procter & Gamble.
Here’s a look at some of the stocks Trump owns that are valued at more than $15,000.
Apple Inc ($500,000 – $1,000,000)
Microsoft Corp ($500,000 – $1,000,000)
Nvidia Corp ($500,000 – $1,000,000)
Amazon.com, Inc ($250,000 – $500,000)
Alphabet Inc (Google) ($100,000 – $250,000)
Meta Platforms Inc ($100,000 – $250,000)
Berkshire Hathaway Inc ($100,000 – $250,000)
PepsiCo Inc ($100,000 – $250,000)
JPMorgan Chase & Co ($100,000 – $250,000)
Tesla Inc ($50,000 – $100,000)
Coca-Cola Co
Exxon Mobil Corp
Chevron Corp
Home Depot Inc
McDonald’s Corp
AbbVie Inc
Adobe Inc
Broadcom Inc
Booking Holdings Inc
Caterpillar Inc
Cisco Systems Inc
ConocoPhillips
Lockheed Martin Corp
Netflix Inc
Pfizer Inc
Qualcomm Inc
Union Pacific Corp
United Parcel Service, Inc.
As the 2024 election race goes on, Trump’s investment choices may face increased scrutiny. His stake in Trump Media & Technology Group, which owns the social media platform Truth Social, is likely to be the most talked about Trump holding.
Trending:
The “lockup” agreement preventing insiders from selling shares is set to expire in late September, potentially allowing Trump to cash out some of his $2.4 billion position. According to the disclosures, Trump owns 114,750,000 shares of the media brand or 64.9% of the entire company.
Read Next:
“ACTIVE INVESTORS’ SECRET WEAPON” Supercharge Your Stock Market Game with the #1 “news & everything else” trading tool: Benzinga Pro – Click here to start Your 14-Day Trial Now!
Because I grew up in near Winnipeg, the Slurpee Capital of the World, I thought I knew everything the 7-Eleven universe had to offer. Then, I visited Japan and Thailand last year. I realized that I hadn’t seen anything yet. (All figures in U.S. dollars in this section.)
In much of Thailand and Japan (among other places in Asia), the convenience store is a daily touchstone stop. In Tokyo, there are more than 3,000 7-Eleven stores, a large part of the country’s 56,000-plus convenience store locations. While 7-Eleven was a big part of my childhood, it pales in comparison to the role it plays within many Asian communities.
So, it quickly caught my attention when Canadian corporate darling Alimentation Couche-Tard (ATD/TSX) announced it was making a friendly takeover bid for Tokyo-based Seven & I Holdings Co (SVNDY/NIKKEI). The possible deal is historic for many reasons.
The acquisition of Seven & I Holdings Co is the largest-ever Japanese target of a foreign buyer.
It’s the first test of new 2023 takeover rules by Japan’s Ministry of Economy, Trade and Industry (METI), designed to make foreign acquisitions more welcoming and Japanese companies more internationally competitive.
It would likely top Enbridge’s $28 billion acquisition of Spectra Energy Corp back in 2016, to become Canada’s largest-ever corporate takeover.
It would combine Couche-Tarde’s convenience store empire of 16,700 stores in 31 countries, with 7-Eleven’s 85,800 stores in 19 countries.
By combining ATD’s and 7-Eleven’s U.S. market share, Couche-Tard would control more than 12% of the U.S. convenience store market, with the closest competitor being Casey’s General Stores at only 1.7%.
It’s a massive bite to take for ATD, currently valued at about $56 billion, since 7-Eleven is currently worth about $38 billion.
The potential acquisition is so large that many analysts believe ATD would have to raise $18 billion in new equity to complete the deal. That would be the biggest stock offering in Canada by a wide margin. It would also be in addition to the $2 billion in cash on hand ATD has, and its ability to borrow about $20 billion. There’s speculation that Canadian pension plans would be a key source of capital in order to get a deal done.
Neither company disclosed the precise terms of the deal, but Couche-Tard described the offer as “friendly, non-binding.” That’s a key differentiator from a “hostile takeover.” (A hostile takeover is when a company tries to purchase more than half of another company’s shares on the free market against the wishes of the targeted company’s management, thus taking over operational control.)
This move is not totally out of the blue for ATD, as the company has taken big acquisitional swings before. The Quebec-based operator has a long history of successfully integrating new acquisitions. Its attempt three years ago to purchase French grocery chain Carrefour for $25 billion was scuttled at the last minute by the French Finance Minister citing food security issues. Similar protectionist governmental instincts could prevent this massive deal from getting done.
That said, Couche-Tard has been circling (Circle K-ing?) 7-Eleven for over two years now. Perhaps it believes it has what it takes to navigate the new Japanese corporate legal waters and get the deal done.
While there will likely be some nervous customers of 7-Eleven (nobody wants to see change at their favourite corner store), Seven & I Holdings’ shareholders must be happy. Shares were up 22% upon announcement of the proposed acquisition.
1900 vs. 2023 stock markets
It’s always worth keeping the long run in mind when thinking about trends and market forces. When we consider just what an incredible run the U.S. stock market has achieved over the last few years, it’s important to remember that it’s unlikely to continue that outperformance forevermore.
On Tuesday, Statistics Canada stated that the Consumer Price Index (CPI) measured inflation of 2.5% for July. That’s down from 2.7% in June, and is the lowest inflation rate recorded since 2021.
Deceleration in headline inflation led by shelter component , 12-month % change
CPI basket items
June 2024
July 2024
All-items Consumer Price Index
2.7%
2.5%
Food
2.8%
2.7%
Shelter
6.2%
5.7%
Household operations, furnishings and equipment
-0.9%
-0.1%
Clothing and footwear
-3.1%
-2.7%
Transportation
2%
2%
Health and personal care
3.0%
2.9%
Recreation, education and reading
0.6%
-0.2%
Alcoholic beverages, tobacco products and recreational cannabis
In fact, if you take shelter out of the equation, we’re getting close to zero inflation. And that’s significant for two reasons:
The shelter-inflation rate (primarily a measurement of rent and mortgage expenses) did come down substantially between June and July.
As the Bank of Canada (BoC) cuts interest rates, the inflation component of the CPI will inevitably go down as Canadians will have access to mortgages with lower rates.
Notably, passenger vehicle prices were down 1.4% in July. Clothing and footwear was also down by 2.7%. Food and gas were up by 2.7% and 1.9% respectively. British Columbia and New Brunswick had the highest inflation rate growth, while Manitoba and Saksatchewan had the lowest.
It’s pretty clear there’s no longer an overall inflation crisis in Canada. It’s now simply a home affordability issue at this point. Economists were widely predicting that this continuing trend of a downward inflation rate would clear the way for continued interest-rate cuts in the coming months. Money markets are now predicting a 0.25% cut minimum on September 4, with a 4% probability that the cut will be 0.50%. Looking further down the road, those same markets are predicting there is a 76% chance we will see a 2% decrease by October of 2025.
Target Corporation posted a big earnings beat on Wednesday and shareholders saw its shares increase in value by 11.20%. The Minneapolis-based discount retailer is the seventh-largest in the U.S.
Retail earnings highlights
All numbers are in U.S. dollars.
Target (TGT/NYSE): Earnings per share of $2.57 (versus $2.18 predicted). Revenue of $25.45 billion (versus $25.21 billion estimate).
Lowe’s Companies (LOW/NYSE): Earnings per share of $4.10 (versus $3.97 predicted), and revenues of $23.59 billion (versus $23.91 billion predicted).
Same-store sales for Target grew 3% last quarter, after five straight quarters of declining sales. More purchases of discretionary items like clothing were responsible for the positive reversal to the declining sales trend.
Target’s COO Michael Fiddelke had a very cautious tone, though. “While we’ve been pleased with our performance so far this year, our view of the consumer remains largely the same. The range of possibilities and the macroeconomic backdrop in consumer data and in our business remains unusually high.” And Target CEO Brian Cornell cited price reductions and a value-seeking consumer as reasons for increased foot traffic in the quarter.
It was very much a mediocre earnings report for Lowes, though, as it beat earnings expectations decisively but cut its full-year forecast. Shares were down by about 1% on Tuesday after the earnings announcement.
Lowe’s CEO Marvin Ellison said consumers were waiting for cuts in interest rates before taking on large home improvement projects. Because 90% of Lowes’ customers are homeowners (as opposed to contractors), they are particularly sensitive to movements in interest rates, he shared. Same-store sales were down 5.1% year over year.
After much speculation about when the U.S. will finally begin cutting its interest rates, the CME FedWatch tool reports a 100% chance that the U.S. Federal Reserve will cut its rates in September. Market watchers are pretty confident, with a 36% chance that the U.S. Fed will go right to a 0.50% cut instead of nudging the rate down. And looking ahead, the futures market predicts a 100% chance of 0.75% in rate cuts by December this year, with a 32% chance of a 1.25% rate decrease. The forecasts became stronger this week as the annualized inflation rate in the U.S. slowed to 2.9%, its lowest rate since March 2021. There are a lot of percentages here, but the gist is people are expecting big interest rate cuts.
Those probabilities should take some of the currency pressure off of the Bank of Canada (BoC) when it makes its next interest rate decision on September 4. If the BoC were to continue to cut rates at a faster pace than the U.S. Fed, the Canadian dollar would substantially depreciate and import-led inflation would likely become an issue.
Here are some top-line takeaways from the U.S. Labor Department July CPI report:
Core CPI (excluding food and energy) rose at an annualized inflation rate of 3.2%.
Shelter costs rose 0.4% in one month and were responsible for 90% of the headline inflation increase.
Food prices were up 0.2% from June to July.
Energy prices were flat from June to July.
Medical care services and apparel actually deflated by 0.3% and -0.4% respectively.
When combined with the meagre July jobs report, it’s pretty clear the U.S. consumer-led inflation pressures are receding. As the U.S. cuts interest rates and mortgage costs come down, it’s quite likely that shelter costs (the last leg of strong inflation) could come down as well.
Walmart: “Not projecting a recession”
Despite slowing U.S. consumer spending, mega retailers Home Depot and Walmart continue to book solid profits.
U.S. retail earnings highlights
Here are the results from this week. All numbers below are reported in USD.
Walmart (WMT/NYSE): Earnings per share of $0.67 (versus $0.65 predicted). Revenue of $169.34 billion (versus $168.63 billion predicted).
Home Depot (HD/NYSE): Earnings per share of $4.60 (versus $4.49 predicted). Revenue of $43.18 billion (versus $43.06 billion predicted).
While Home Depot posted a strong earnings beat on Wednesday, forward guidance was lukewarm, resulting in a gain of 1.60% on the day. Walmart, on the other hand, knocked the ball out of the park and raised its forward guidance and booked a gain of 6.58% on Thursday.
Walmart Chief Financial Officer John David Rainey told CNBC, “In this environment, it’s responsible or prudent to be a little bit guarded with the outlook, but we’re not projecting a recession.” He went on to add, “We see, among our members and customers, that they remain choiceful, discerning, value-seeking, focusing on things like essentials rather than discretionary items, but importantly, we don’t see any additional fraying of consumer health.”
Same-store sales for Walmart U.S. were up 4.2% year over year, and e-commerce sales were up 22%. The mega retailer highlighted its launch of the Bettergoods grocery brand as a way to monetize the trend toward cheaper food-at-home options, and away from fast food.
There’s increasing uncertainty these days. The economy is starting to show some signs of slowing, and the possibility of an escalating conflict in the Middle East is creating anxiety. On top of that is the upcoming presidential election.
All this uncertainty has investors rattled, with the market recently having its worst day since early last year.
These factors might have you fearing that another bear market could be around the corner. One potential way to help shelter your portfolio against a future market storm is to insulate it with high-quality, high-yielding dividend stocks. WEC Energy(NYSE: WEC), Enbridge(NYSE: ENB), and Northwest Natural Holding (NYSE: NWN) stand out to these Motley Fool contributors as great safe havens.
A boring utility with impressive dividend growth
Reuben Gregg Brewer (WEC Energy): One of the most attractive things about WEC Energy is that it flies under the radar. As a fairly traditional regulated electric and natural gas utility serving around 4.7 million customers in parts of Wisconsin, Illinois, Michigan, and Minnesota, its business is very straightforward.
And because of the importance of energy to modern life (and the monopoly WEC has been granted in the regions it serves), its customers are going to keep using power no matter what the market is doing.
Sure, interest rates are high, and that’s going to be a headwind for WEC Energy, which like most utilities makes heavy use of debt to fund its business. And it is dealing with an adverse regulatory ruling in Illinois with regard to natural gas. But these problems have depressed the share price and increased the attractiveness of the stock for income investors, given that it now yields a historically high 4% or so.
WEC Chart
That dividend, meanwhile, is backed by 21 consecutive annual increases. The average yearly increase over the past decade was roughly 7%, which is pretty attractive for a utility. Meanwhile, management expects earnings growth to fall between 6.5% and 7% a year for the foreseeable future.
If history is any guide, the dividend will follow earnings higher. And given the regulated nature of the business, the good news should continue to flow even through a bear market. But jump quickly or you might miss the opportunity here.
A model of stability and durability
Matt DiLallo (Enbridge): Enbridge has one of the lowest-risk business models in the energy sector. The Canadian pipeline and utility operator gets 98% of its earnings from stable cost-of-service or contracted assets, like oil and gas pipelines, natural gas utilities, and renewable energy facilities. These assets produce such predictable cash flow that Enbridge has achieved its financial guidance for 18 straight years.
The company took a notable step to further enhance the stability of its cash flow over the past year by acquiring three natural gas utilities. When it sealed the deal in late 2023, CEO Greg Ebel said, “These acquisitions further diversify our business, enhance the stable cash flow profile of our assets, and strengthen our long-term dividend growth profile.”
The transaction will increase its earnings from stable natural gas utilities from 12% to 22% of its total. The company partly funded that deal by selling Aux Sable, which operates extraction and fractionation facilities for natural gas liquids.
Enbridge also has a strong investment-grade balance sheet and a conservative dividend payout ratio. It has billions of dollars in annual investment capacity after paying its dividend (which yields an attractive 7%).
That gives it the flexibility to fund its roughly $18 billion backlog of secured capital projects. It also has the capacity to make opportunistic acquisitions and approve more expansion projects.
The company’s secured growth drivers and initiatives to reduce costs and optimize its assets should grow its cash flow per share by around 3% annually through 2026 and 5% per year after that. Its visible earnings growth and strong balance sheet suggest it should have no trouble increasing its dividend, which it has done for 29 straight years.
That high-yielding and steadily rising payout supplies a very strong base return, providing investors with some shelter amid a future financial storm.
68 consecutive years of dividend increases, and counting
Neha Chamaria(Northwest Natural Holding): If you haven’t heard about Northwest Natural, the company’s dividend track record will stun you. Utilities often pay regular and stable dividends, and Northwest Natural is no different.
What sets it apart, though, is that Northwest Natural has increased its dividend every year for the last 68 consecutive years. That’s one of the longest streaks among Dividend Kings.
Northwest Natural provides natural gas and water services through its subsidiaries, including NW Natural, NW Natural Water, and NW Natural Renewables.
NW Natural provides natural gas to nearly two million people in Oregon and southwest Washington State, while NW Natural Water serves around 180,000 people. As is typical with regulated utilities, Northwest Natural can earn and generate stable earnings and cash flows, which is why it not only can afford to pay a regular dividend but also grow it with time.
It’s a great dividend stock for several reasons. The utility expects to invest $1.4 billion to $1.6 billion in its natural gas business over the next five years, which could boost its rate base by 5% to 7%.
Management believes this investment, combined with its spending on water infrastructure, could boost its earnings per share by a compound annual growth rate of 4% to 6% between 2022 and 2027. Since the company prioritizes dividend growth, earnings growth should mean bigger dividends for shareholders year after year.
Its 68-year streak, of course, is the biggest testimony to how reliable Northwest Natural’s dividends are. With its high yield of 4.8%, this is the kind of stock that will let you sleep even during bear markets.
Should you invest $1,000 in Enbridge right now?
Before you buy stock in Enbridge, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Enbridge wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $657,306!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
Matt DiLallo has positions in Enbridge. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has positions in Enbridge and WEC Energy Group. The Motley Fool has positions in and recommends Enbridge. The Motley Fool has a disclosure policy.
The narrative around the Magnificent 7 mega-cap technology stocks has become mixed, even in the face of mostly positive earnings news.
Microsoft stock sold off on Tuesday even after the company narrowly beat Wall Street expectations for its fiscal fourth-quarter results and handily surpassed results from a year ago. Investors have been scrutinizing figures for AI operations in particular; Microsoft’s Intelligent Cloud revenue rose 19% year over year and contributed 8 percentage points of growth to its Azure and other cloud services revenue, which grew 29%. Evidently, that wasn’t enough.
Facebook and Instagram owner Meta Platforms, by contrast, easily bested analyst forecasts for the second quarter. It boosted net income by 73% over the same quarter last year and is gaining advertising market share over archrival Alphabet. Compared to its Mag 7 peers, Meta has been a stock-market laggard since 2022 but undertook a cost- and job-cutting campaign that now appears to be paying off.
Apple likewise surpassed expectations for revenue and earnings, posting particularly strong results in its iPhone and iPad divisions. Cloud services, computers and wearables were in line with estimates.
Amazon was punished after missing the analyst consensus for revenue, even though it beat estimates for earnings. Though Amazon Web Services performance was strong, the company’s core retail and advertising businesses disappointed.
Currency figures in this section are reported in USD.
Microsoft (MSFT/NASDAQ): Earnings per share of $2.95 (versus $2.94 predicted). Revenue of $64.7 billion (versus $64.5 billion estimate).
Meta Platforms (META/NASDAQ): Earnings per share of $5.16 (versus $4.63 expected). Revenue of $39.07 billion (versus $38.31 billion estimate).
Apple (AAPL/NASDAQ): Earnings per share of $1.40 (versus $1.35 expected) . Revenue of $85.78 billion (versus $84.53 billion estimate).
Amazon (AMZN/NASDAQ): Earnings per share of $1.26 (versus $1.03 expected). Revenue of $147.98 billion (versus $148.56 billion estimate).
The U.S. Fed stands pat for now
There were no assassination attempts or presidential nominees dropping out of the race for the White House this week. The news out of Washington, D.C. on Wednesday, however, was just as closely watched by markets.
The U.S. Federal Reserve elected to hold its overnight lending rate at 5.5%. In a statement, the central bank’s Open Market Committee acknowledged signs of a slowing economy but said it would not cut rates “until it has gained greater confidence that inflation is moving sustainably toward 2%.” The market continues to pin its bets on a rate cut in September, which would be the first since 2020.
That leaves the Bank of Canada, which has cut rates in both of the last two months, a full percentage point below the U.S. Fed. The Canadian dollar nonetheless gained slightly against the greenback, at USD$0.72485, in the wake of the announcement, suggesting the policy decision was expected.
