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Recent Articles
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In the News: Apple, Nvidia, ANSYS
Jan 6, 2024
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The first week of trading in the new year wasn't very welcome, but we think it is far too early to draw any conclusions about how the rest of the year will be. The Dow Jones Industrial Average, S&P 500, and NASDAQ faced selling pressure in the first week due in part to investors waiting until the new year to book the huge gains garnered during 2023. The market continues to digest critical employment data, as it watches movements in the 10-year Treasury closely, a key benchmark rate for asset pricing that now stands just north of 4%. Many bulls are saying 2024 may be a difficult year after the worst start in the S&P 500 for a new year since 2008, but we remain bullish on our positioning in the newsletter portfolios.
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Dividend Increases/Decreases for the Week of January 5
Jan 5, 2024
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Let's take a look at firms raising/lowering their dividends this week.
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It’s All About Free Cash Flow – Walgreens Cuts Its Payout
Jan 4, 2024
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Image: Walgreens’ shares have been under consistent pressure for years, and a turnaround is not guaranteed.
Today, January 4, Walgreens announced that it would slash its quarterly dividend payment to $0.25 per share, a 48% decrease. This should not be surprising to members. Walgreens’ Dividend Cushion ratio stood at -0.3 (negative 0.3), and we hope members have avoided this catastrophe of a Dividend Aristocrat. A Dividend Cushion ratio below 1 signals increased long-term risk to the payout, while a firmly negative Dividend Cushion ratio signals heightened risk. Our cash-based dividend growth process has led to outperformance in the Dividend Growth Newsletter portfolio the past couple years, while other areas have suffered, and it has also shown to be useful in predicting dividend cuts. Walgreens is now one of more than 50 companies across our coverage universe in recent years where the Dividend Cushion ratio has warned of significant risk to the sustainability of the dividend in advance of the cut.
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4 Very Good Reasons Why We Don’t Like Dividends of Banking Stocks
Jan 4, 2024
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Image: Bank Run in Michigan, USA, February 1933. Source: Public Domain.
It’s sometimes easy to lose sight of the fragility of a banking firm’s business model. Let’s examine the reasons why we don’t like banking firms’ dividends. Reason #1: A Bank Run Is Always Possible. Reason #2: Others Have Tried to Invest in Bank Dividends and Have Failed. Reason #3: Cash Flow Is Not Meaningful at Banks. Reason #4: There Are Plenty of Other Options. Let's dig in.
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