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Block Inc.’s stock has been a sizable laggard this year, and now it’s losing the leader of a critical business — albeit one that hasn’t necessarily lived up to investor expectations lately.
Alyssa Henry, the head of Block’s
SQ,
Square merchant business, is stepping down after a long tenure with the company, and Jack Dorsey will assume her role while continuing to lead Block on the whole, the company announced in a Monday filing.
The announcement comes as Block shares have declined 18% so far this year, while the S&P 500
SPX
has risen 16%. Other payment-technology stocks, including Shift4 Payments Inc.,
FOUR,
Toast Inc.
TOST,
and even PayPal Holdings Inc.
PYPL,
have logged better year-to-date performances.
Block’s stock closed at its lowest level since April 7, 2020 on Monday, according to Dow Jones Market Data. It was down about 2% in after-hours trading.
The stock is also down 82% from its all-time closing high achieved Aug. 5, 2021.
See also: PayPal’s ‘fresh start’ isn’t enough to help its stock, analyst cautions
The performance of the Square merchant business, which includes payment processing and other tools for sellers, has been a sore point for investors recently. Wolfe Research analyst Darrin Peller notes that Block’s second-quarter U.S. gross payment volume (GPV) was up 10% from a year earlier, a four-point spread above Visa Inc.’s
V,
domestic growth. Historically, the spread has been in double digits, he said.
Additionally, while the 12% overall growth in Square’s GPV “continues to imply that Square is a market-share gainer, we note that this growth spread relative to the industry has trended lower and also suggests slightly softer growth trends versus competitors like Clover,” which is part of Fiserv Inc.
FI,
whose shares are up 20% on the year.
“While some of Square’s success over the years should be attributed to Alyssa’s execution, the company’s more recent performance remains a concern for investors (and we suspect for management, internally),” Peller wrote.
He pointed to “mixed” feedback from investors thus far.
“Bulls argue that this change is positive, indicating that management is taking change seriously,” Peller said. “Further, it’s worth noting that Jack has been more receptive to cost management and other adjustments. Meanwhile, bears are citing that Alyssa was the ‘face’ of Seller and was more receptive to changes in Square’s business model compared to Jack (particularly around outsourced distribution).”
Block, for its part, said in its filing that Henry “provided significant contributions” to the company during a tenure that spanned more than nine years.
UBS downgraded Block shares earlier this month, in part due to concerns about the Square business. Analyst Rayna Kumar said she was concerned about a potential slowdown in gross-profit growth owing to a moderation in consumer spending.
Opinions expressed by Entrepreneur contributors are their own.
Harold Walters, CEO of Shootz Restaurant, understands the transformative power of social media storytelling. A crucial mindset shift occurred when he embraced the notion that the opinions of others aren’t his concern. He recognized his purpose is to inspire and bring value to others.
By embracing his purpose and focusing on telling the unique story of the Shootz Restaurant, Harold Walters found the freedom to authentically and intentionally walk his path. The CEO believes that storytelling is paramount in differentiating a brand from the competitors.
“Telling your story, especially if you have information that can be valuable to others and can save people’s lives. Like, you got to go out there and do it.” says Harold Walters to host Shawn Walchef of CaliBBQ Media during a conversation at the Spark LA event presented by Toast.
“And I think the story is so, so important because without a story, at the end of the day, your brand really is just a commodity.”
Shootz also leverages technology, such as Ovation, an innovative guest feedback platform, to receive real-time responses and enhance the business. This enables staff to identify areas for improvement, engage with guests, and increase positive reviews while limiting negative ones.
“They leave feedback, it goes directly to us, which allows us to, one, identify if we need to make any changes if we need to, and then also be able to communicate with the guests. And then also it increases our reviews, mitigates our bad reviews.” explains Walters.
Recognizing the significance of a well-rounded restaurant tech stack, Harold Walters made the switch to the Toast point of sale (POS) and restaurant management system as his preferred technology partner. He found that Toast offered comprehensive features and valuable data insights that were lacking in other systems like Clover which they had used before switching.
With Toast, Shootz gains access to essential features such as Toast Guestbook, which allows him to analyze customer spending patterns, lifetime value, and segment the customer base. Additionally, Toast seamlessly integrates with other restaurant software solutions in Shootz Restaurant’s tech stack, including Ovation, creating a central and efficient system for the business.
Harold Walters, through his utilization of technology and storytelling, has transformed Shootz Restaurant into a customer-centric, e-commerce establishment and the epitome of Digital Hospitality. Walters’ shift in mindset, focusing on purpose and storytelling, has allowed Shootz to stand out, transcending the boundaries of a typical dining establishment.
“At the end of the day, I have to live out my purpose in building and in bringing value to others.” says Walters.
***
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Shawn P. Walchef
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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,
that appear to fit the bill. The S&P Composite 1500 is made up of the S&P 500
SPX,
the S&P 400 Mid Cap Index
MID,
and the S&P Small Cap 600 Index
SML,
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.
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:
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, |
Real-Estate Investment Trusts | 8.33% | 25.25% | 16.92% |
| Hanesbrands Inc. |
HBI, |
Apparel/ Footwear | 8.33% | 17.29% | 8.96% |
| Kohl’s Corp. |
KSS, |
Department Stores | 7.68% | 16.72% | 9.04% |
| Rent-A-Center Inc. |
RCII, |
Finance/ Rental/ Leasing | 7.52% | 17.26% | 9.73% |
| Macerich Co. |
MAC, |
Real-Estate Investment Trusts | 7.43% | 18.04% | 10.60% |
| Devon Energy Corp. |
DVN, |
Oil & Gas Production | 7.13% | 14.47% | 7.33% |
| AT&T Inc. |
T, |
Major Telecommunications | 6.98% | 14.82% | 7.84% |
| Newell Brands Inc. |
NWL, |
Industrial Conglomerates | 6.59% | 17.42% | 10.82% |
| Dow Inc. |
DOW, |
Chemicals | 6.18% | 15.63% | 9.45% |
| LyondellBasell Industries NV |
LYB, |
Chemicals | 6.09% | 16.07% | 9.99% |
| Scotts Miracle-Gro Co. Class A |
SMG, |
Chemicals | 6.04% | 12.68% | 6.65% |
| Diamondback Energy Inc. |
FANG, |
Oil & Gas Production | 5.56% | 13.63% | 8.08% |
| Best Buy Co. Inc. |
BBY, |
Electronics/ Appliance Stores | 5.53% | 14.08% | 8.55% |
| Viatris Inc. |
VTRS, |
Pharmaceuticals | 5.50% | 28.95% | 23.45% |
| Prudential Financial Inc. |
PRU, |
Life/ Health Insurance | 5.38% | 13.30% | 7.91% |
| Ford Motor Co. |
F, |
Motor Vehicles | 5.23% | 15.95% | 10.72% |
| Invesco Ltd. |
IVZ, |
Investment Managers | 5.23% | 14.95% | 9.73% |
| Franklin Resources Inc. |
BEN, |
Investment Managers | 5.17% | 13.21% | 8.04% |
| Kontoor Brands Inc. |
KTB, |
Apparel/ Footwear | 5.17% | 14.15% | 8.98% |
| Seagate Technology Holdings PLC |
STX, |
Computer Peripherals | 5.11% | 13.19% | 8.07% |
| Foot Locker Inc. |
FL, |
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.