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Tag: Dividends

  • Ford reveals third-quarter net loss, weighed down by supply chain problems and Argo A.I. investment

    Ford reveals third-quarter net loss, weighed down by supply chain problems and Argo A.I. investment

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    2023 Ford F-150 Raptor R

    Ford

    DETROIT – Ford Motor recorded a net loss of $827 million during the third quarter, weighed down by supply chain problems and costs related to disbanding its autonomous vehicle unit Argo AI.

    Still, the automaker was able to narrowly beat Wall Street’s subdued expectations for the period and guided to the lowest end of its previously forecast earnings for the year.

    Shares of the company were down roughly 1.5% in extended trading following the report.

    Here’s how Ford performed during the third quarter, compared with analysts estimates as compiled by Refinitiv:

    • Adjusted earnings per share: 30 cents vs. 27 cents estimated
    • Automotive revenue: $37.2 billion vs. $36.25 billion estimated

    The auto industry’s earnings and forecasts are being closely watched by investors for any signs that consumer demand could be weakening amid rising interest rates and looming recession fears. However, both Ford and crosstown rival General Motors continue to say demand for their products remains strong despite outside economic concerns and rising interest rates.

    Ford reported adjusted earnings of $1.8 billion for the quarter, down 40% from a year earlier but slightly above its own previously announced expectations, set last month.

    Ford in September partially pre-released its results, including projected adjusted earnings before interest and taxes in the range of $1.4 billion to $1.7 billion — some analysts had been expecting a quarterly profit closer to $3 billion — but affirmed full-year guidance of adjusted earnings before interest and taxes of between $11.5 billion to $12.5 billion.

    On Wednesday Ford updated its guidance to forecast full-year adjusted earnings before interest and taxes of about $11.5 billion. It raised its full-year adjusted free cash flow forecast, however, to between $9.5 billion and $10 billion – up from $5.5 billion to $6.5 billion – on strength in the company’s automotive operations.

    Argo A.I.

    Ford recorded a $2.7 billion non-cash, pretax charge on its investment in Argo AI, which the company initially invested in starting in 2017. It later split its ownership of Argo AI with German automaker Volkswagen in 2019.

    Ford CFO John Lawler said the company is winding down the operations to focus on advanced driver-assist systems such as its BlueCruise hands-free highway driving system and other operations that aren’t considered “fully autonomous.”

    “It’s become very clear that profitable, fully autonomous vehicles at scale are still a long way off,” he told reporters. “We’ve also concluded that we don’t necessarily have to create that technology ourselves.”

    Some of the roughly 2,000 employees for Argo AI are expected to be offered positions at Ford or Volkswagen, officials said. Volkswagen said in a statement that it will no longer invest in Argo AI.

    Ford’s Q3

    In pre-releasing some results last month, Ford attributed the lower-than-expected earnings to parts shortages affecting 40,000 to 50,000 vehicles as well as an extra $1 billion in unexpected supplier costs during the quarter.

    Lawler on Wednesday said the company still expects to finish those vehicles and have them shipped to dealers by the end of the year.

    The vehicles, largely high-margin pickups and SUVs, dragged down Ford’s North American profits. The company’s adjusted profit margin for the region was just 5%, down from 10.1% a year earlier.

    Ford’s North American operations recorded adjusted earnings of $1.3 billion during the third quarter, down 46% from a year earlier. The automaker recorded earnings gains in Europe and South America, while its operations in China lost $193 million.

    Ford’s overall revenue during the quarter, which includes its financial arm, was $39.4 billion, a 10% increase from a year earlier. Through the third quarter, the company’s year-to-date revenue was $114.1 billion, a 16% increase compared to that same time period in 2022.

    Ford’s earnings come a day after crosstown rival General Motors significantly outperformed Wall Street’s earnings expectations but slightly missed on revenue. GM’s adjusted profit margin for the quarter narrowed to 10.2% compared with 10.7% during the third quarter of 2021, including 10% in North America.

    – CNBC’s John Rosevear contributed to this report.

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  • Oil giant Shell reveals plans to hike dividend as it reports third-quarter profit

    Oil giant Shell reveals plans to hike dividend as it reports third-quarter profit

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    The logo of Shell on an oil storage silo, beyond railway tanker wagons at the company’s Pernis refinery in Rotterdam, Netherlands, on Sunday, Oct. 23, 2022.

    Bloomberg | Bloomberg | Getty Images

    British oil major Shell reported a third-quarter profit Thursday, but lower refining and trading revenues brought an end to its run of record quarterly earnings.

    Shell posted adjusted earnings of $9.45 billion for the three months through to the end of September, meeting analyst expectations of $9.5 billion according to Refinitiv. The company posted adjusted earnings of $4.1 billion over the same period a year earlier and notched a whopping $11.5 billion for the second quarter of 2022.

    The oil giant said it planned to increase its dividend per share by around 15% for the fourth quarter 2022, to be paid out in March 2023. It also announced a new share buyback program, which is set to result in an additional $4 billion of distributions and expected to be completed by its next earnings release.

    Shares of Shell are up over 41% year-to-date.

    The London-headquartered oil major reported consecutive quarters of record profits through the first six months of the year, benefitting from surging commodity prices following Russia’s invasion of Ukraine.

    Shell warned in an update earlier this month, however, that lower refining and chemicals margins and weaker gas trading were likely to negatively impact third-quarter earnings.

    On Thursday, the company said a recovery in global product supply had contributed to lower refining margins in the third quarter, and gas trading earnings had also fallen.

    “The trading and optimisation contributions were mainly impacted by a combination of seasonality and supply constraints, coupled with substantial differences between paper and physical realisations in a volatile and dislocated market,” Shell said in a its earnings release.

    Change in leadership

    The group’s results come soon after it was announced CEO Ben van Beurden will step down at the end of the year after nearly a decade at the helm.

    Wael Sawan, currently Shell’s director of integrated gas, renewables and energy solutions, will become its next chief executive on Jan. 1.

    A dual Lebanese-Canadian national, Sawan has held roles in downstream retail and various commercial projects during his 25-year career at Shell.

    “I’m looking forward to channelling the pioneering spirit and passion of our incredible people to rise to the immense challenges, and grasp the opportunities presented by the energy transition,” Sawan said in a statement on Sept. 15, adding that it was an honor to follow van Beurden’s leadership.

    “We will be disciplined and value focused, as we work with our customers and partners to deliver the reliable, affordable and cleaner energy the world needs.”

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  • Bank of America tops estimates on better-than-expected bond trading, higher interest rates

    Bank of America tops estimates on better-than-expected bond trading, higher interest rates

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    Bank Of America CEO Brian Moynihan is interviewed by Jack Otter during “Barron’s Roundtable” at Fox Business Network Studios on January 09, 2020 in New York City.

    John Lamparski | Getty Images

    Bank of America said Monday that quarterly profit and revenue topped expectations on better-than-expected fixed income trading and gains in interest income, thanks to choppy markets and rising rates

    Here’s what the company reported compared with what analysts were expecting, based on Refinitiv data:

    • Earnings per share: 81 cents vs. 77 cents expected
    • Revenue: $24.61 billion adjusted vs. $23.57 billion expected

    Bank of America said in a release that third-quarter profit fell 8% to $7.1 billion, or 81 cents a share, as the company booked a $898 million provision for credit losses in the quarter. Revenue net of interest expense jumped to $24.61 billion, on a non-GAAP basis.

    Shares of the bank rose 6.1%.

    Bank of America, led by CEO Brian Moynihan, was supposed to be one of the main beneficiaries of the Federal Reserve’s rate-boosting campaign. That is playing out, as lenders including Bank of America, JPMorgan Chase and Wells Fargo are producing more revenue as rates rise, allowing them to generate more profit from their core activities of taking in deposits and making loans.

    “Our U.S. consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts,” Moynihan said in the release. “Across the bank, we grew loans by 12% over the last year as we delivered the financial resources to support our clients.”

    Net interest income at the bank jumped 24% to $13.87 billion in the quarter, topping the $13.6 billion StreetAccount estimate, thanks to higher rates in the quarter and an expanding book of loans.

    Net interest margin, a key profitability metric for bank investors, widened to 2.06% from 1.86% in the second quarter of this year, edging out analysts’ estimate of 2.00%.

    Fixed income trading revenue surged 27% from a year earlier to $2.6 billion, handily exceeding the $2.24 billion estimate. That more than offset equities revenue that dropped 4% to $1.5 billion, below the $1.61 billion estimate.

    Like its Wall Street rivals, investment banking revenue posted a steep decline, falling about 46% to $1.2 billion, slightly exceeding the $1.13 billion estimate.

    Of note, the bank’s evolving provision for credit losses showed the company was beginning to factor in a more harsh economic outlook.

    While Bank of America released $1.1 billion in reserves in the year-earlier period, in the third quarter the firm had to build reserves by $378 million. That, in addition to a 12% increase in net charge-offs for bad loans to $520 million in the quarter, accounted for the $898 million provision.

    Analysts have said that they want to see bank executives factor in the possibility of an impending recession before investors return to the beaten-down sector. Bank of America shares hit a new 52-week low last week and have fallen 29% this year through Friday, worse than the 26% decline of the KBW Bank Index.

    Last week, JPMorgan and Wells Fargo topped expectations for third-quarter profit and revenue by generating better-than-expected interest income. Citigroup also beat analysts’ estimates, and Morgan Stanley missed as choppy markets took a toll on its investment management business.

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  • ‘Material risk’ looms over stocks as investors face bear market’s ‘second act,’ warns Morgan Stanley

    ‘Material risk’ looms over stocks as investors face bear market’s ‘second act,’ warns Morgan Stanley

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    Stock-market investors have been adjusting to the jump in interest rates amid high inflation, but they have yet to cope with profit headwinds faced by the S&P 500, according to Morgan Stanley Wealth Management.

    “While a rate peak may solidify estimates for the equity risk premium and valuation multiples, equity investors still face the bear market’s second act — the earnings outlook,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in a note Monday. 

    “They have been slow to recognize that pricing power and operating margins, which hit all-time highs in the past two years, are unsustainable,” she said. “Even without a recession, the mean reversion of profits in 2023 translates to a 10%-to-15% decline from current estimates.”


    MORGAN STANLEY WEALTH MANAGEMENT NOTE DATED OCT. 17 2022

    Unprecedented monetary and fiscal stimulus during the throes of the pandemic had led to the largest U.S. companies booking record operating margins that were 150 to 200 basis points above norms seen in the past decade, according to Shalett. 

    See: Stock market’s wild gyrations put earnings in focus as inflation crushes Fed ‘pivot’ hopes

    She said that company profits may now be imperiled by slowing growth, with “demand skewing toward services” after pulling forward toward goods earlier in the pandemic, and a likely reversal in “extremely strong” pricing power as the Fed fights surging inflation with interest-rate hikes.

    “Such risks are not discounted in 2023 consensus yet, constituting a material risk to stocks for the remainder of the year,” Shalett said.

    While many sectors have discounted the potential drop in 2023 profits from current estimates that could stir headwinds even with no recession, “the megacap secular growth stocks that dominate market-cap indexes have not,” she warned. “And those indexes are where risk gets repriced in the bear market’s final stages.”

    Morgan Stanley’s chief U.S. equity strategist Mike Wilson estimates as much as 11% downside from consensus estimates, with his base-case, earnings-per-share forecast for the S&P 500 for 2023 being $212, according to Shalett’s note. 

    U.S. stocks were bouncing Monday, with major stock benchmarks trading sharply higher in the afternoon, after sinking Friday amid inflation concerns as earnings season got under way. The S&P 500
    SPX,
    +2.65%
    was up 2.7% in afternoon trading, while the Dow Jones Industrial Average
    DJIA,
    +1.86%
    gained 1.9% and the technology-heavy Nasdaq Composite surged 3.5%, FactSet data show, last check. 

    In the bond market, Treasury rates were trading slightly lower Monday afternoon, after the 2-year yield hit a 15-year high and the 10-year yield notched a 14-year high on Friday, according to Dow Jones Market Data. Two-year yields ended last week at 4.507%, the highest level since August 8, 2007 based on 3 p.m. Eastern time levels, while the 10-year rate climbed to 4.005% for its highest rate since Oct. 15, 2008.

    The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.992%
    was down about 1 basis point Monday afternoon at around 4%, while two-year yields
    TMUBMUSD02Y,
    4.439%
    fell about five basis points to around 4.45%, FactSet data show, at last check.

    Meanwhile, as investors capitulated to higher inflation, “peak policy rates moved up aggressively in the fed funds futures market, with the terminal rate now at nearly 5%, an aggressive stance that smacks of ‘peak hawkishness,’” according to the Morgan Stanley note.

    “Critically, although the market is still pricing 1.5 cuts in 2023, the January 2024 fed-funds rate is estimated at 4.5%, a comfortable 100 basis points above our forecast” for core inflation measured by the consumer-price index, Shalett wrote.

    “Consider locking in solid short-term yields in bonds and shoring up positions in high growth, dividend-paying stocks,” she said. “Short-duration Treasuries look attractive, especially because the yield is more than 2.5 times that of the dividend yield on the S&P 500.”

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  • Investor Kevin Simpson highlights five dividend-paying stocks to get through high inflation

    Investor Kevin Simpson highlights five dividend-paying stocks to get through high inflation

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

    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:

    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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  • Weekend reads: What to expect now for home prices, stocks and bonds

    Weekend reads: What to expect now for home prices, stocks and bonds

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    This week Freddie Mac said the average interest rate on a 30-year mortgage loan in the U.S. had climbed to 6.70% from 6.29% the week before and 6.02% two weeks ago. The average rate a year ago was 3.01%.

    Would-be sellers who have low-rate mortgage loans are reluctant if it means they need to take out a new loan to fund their next home. Would-be buyers are forced out of the market, as the monthly principal and interest payment for a new 30-year loan, based on Freddie Mac’s figures, has increased 53% from a year ago.

    Home-sale contracts are being canceled at a record pace in some areas.

    But these factors could lead to a buyer’s market in 2023 if prices plunge. Here are the areas economists expect to see the largest home price declines.

    The strong dollar and the stock market

    Khaled Desouki/Agence France-Presse/Getty Images

    The dollar has strengthened as the Federal Reserve has taken the lead among central banks in raising interest rates. This is reverberating across the world, making it more costly for countries to make interest payments on dollar-denominated debt and increasing the cost of any commodity traded in dollars.

    The rising dollar lowers prices on imported goods for Americans and can also lower their international travel costs. But Michael Wilson, Morgan Stanley’s chief equity strategist, warns that earnings for the S&P 500
    SPX,
    -1.51%
    would decline as a direct result of the strong dollar and called the current foreign-exchange backdrop an “untenable situation” for the stock market.

    On the other hand: Companies are trying to blame weak earnings on the strong U.S. dollar, but that’s a lame excuse

    This is what happens when bearish sentiment runs high

    Michael Brush interviews David Baron, co-manager of the Baron Focused Growth Fund
    BFGFX,
    -0.76%    ,
    who describes opportunities cropping up as institutional investors dump stocks. He also explains his winning long-term strategy, which has included a very long-term investment in Tesla Inc.
    TSLA,
    -1.10%    .

    A a positive sign for the stock market: These 12 stocks have seen strong insider buying

    Time to buy bonds?

    When interest rates rise, bond prices fall. But it also means that if you have money to put to work, bond yields have become much more attractive.

    Khuram Chaudhry, a European equity quantitative strategist at JPMorgan in London, makes the case for buying bonds now.

    What about preferred stocks?

    Getty Images/iStockphoto

    Preferred stocks feature stated dividend yields and prices that move the same way bond prices do. That means prices for many issues are now heavily discounted to face value and that current yields are much higher than they were at the end of 2021. Here’s an in-depth guide on how to research preferred stocks and make your own selections.

    Related: 22 dividend stocks screened for quality and safety

    The problem with macro market projections

    Stanley Druckenmiller predicted a “hard landing” in 2023 for the U.S. economy while speaking at CNBC’s Delivering Alpha Investor Summit on Sept. 28.


    Bloomberg

    Stanley Druckenmiller predicted a U.S. recession in 2023 as a result of monetary policy tightening by the Federal Reserve. That may not be much of a stretch, considering that the U.S. economy contracted during the first half of 2022, according to revised GDP figures from the Bureau of Economic Analysis.

    But investors should be careful — macro forecasts often turn out to be incorrect, Mark Hulbert warns.

    More on stocks: It’s the worst September for stocks since 2008. What that means for October.

    Recessions and your retirement plans

    Getty Images

    Alessandra Malito has advice on how retirees and people planning for retirement can prepare for tough economic times.

    Also: Reset your retirement calculator now for today’s bleaker stock markets and make sure you’re still on track

    Investors tremble and a central bank scrambles

    The Bank of England’s headquarters.


    Agence France-Presse/Getty Images

    After the new U.K. government of Prime Minister Liz Truss announced a massive tax cut along with a new spending program to help counter rising fuel costs and new borrowing, the pound hit a new low against the dollar on Sept. 26 as investors and money managers panicked and sold-off U.K. government bonds. Steve Goldstein explains how and why the Bank of England came tot the rescue.

    A closer look at reverse mortgages

    Getty Images/iStockphoto

    Beth Pinsker digs deeply to explain how to use a reverse mortgage as a financial planning tool.

    Poking a little fun at Elon Musk

    Getty Images

    After Tesla CEO Elon Musk said the upcoming Cybertruck would be sufficiently waterproof to “serve briefly as a boat,” the San Francisco Bay Ferry offered this advice to patrons.

    Want more from MarketWatch? Sign up for this and other newsletters, and get the latest news, personal finance and investing advice.

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