Dividends and The Secret Life of Groceries

If you are a small to medium sized investor, one of the many ways to continue determine what your asset mix should be is to read. The are multiple publications both on line and in print for your work or to earn an income. But if you read other things you may pick up an interesting idea. For example going to the public library is a good thing to do.

Recently picked up a book called The Secret Life of Groceries by Benjamin Lorr published by Penguin Random House Books, NY, 2020. Most of us who do not work at the grocery store do not pay attention to what is on the shelf and how it gets there, but people in the grocery stores do. Some of it is interesting, some of it is background information rarely to come to the foreground.

One of the interesting pieces concerns something that almost everyone has in their home – the cardboard box. In the 1850’s, the cardboard box was invented. Life did not change until the1890’s when cardboard boxes were used for gentleman’s hats. Then a shift begins.

If you think about the western movies, in the town was services including a bar, hotel, law office, sheriff’s office and jail, barber shop and a general store. Most things in the general store were sold in bulk, which is why there were people to get whatever you wanted. After the cardboard box was being used for hats, there were many other technological changes including the preservation of food to move from fragile, expensive glass to cheap and hardy tin. Card stock, the thinner version of corrugated is perfected on an industrial stage for cereal and cracker boxes. By the 1900’s, the shift is momentous: packaged food is responsible for 1/5 or 20% of all manufacturing in the US.

The boxes eventually get a name or advertising on the box. Nabisco Brands begins to sell Uneeda Biscuit and it is a blockbuster, soon the company is selling more than 100 million packages of Uneeda Biscuits a year. The bulk items change to packaged items which gives the customer – choice.

In 1916, the first grocery store offering self service is opened, the store is called Piggly Wiggly and expands to become a chain. By 1930 there are more than 2,500 stores across the land. The chain is smaller today but it still operates. In the 1940’s the grocery store grew in size from 6,000 sq ft to 9,000 sg. ft to 18,000 sg ft in the 1950’s to today;s Walmart and Costco of 200,000 sg ft.

Linking to dividend paying stocks, there are an incredible number of good ideas in the marketplace, but it does not necessarily to translating into national brands unless a number of other things that complement the process happen. The cardboard box is invented but it takes years before the logistics chain uses the cardboard box to its fullest degree. Often time you want to keep an eye on how logistics works for your investments.

There are more questions than answers, till the next time – to raising questions.

Dividends and France mulls restrictions on private jets as a way to curb climate change

One of the major concerns for the next number of years is climate change and people and companies will have to deal with. In every issue there is low hanging fruit because people can see the issue and it is readily available for solutions to be called for. It does not mean the issue is solved but there are starting points.

In Europe where climate change is seen everyday, countries such as France are going after low hanging fruit which also has political benefits. In the world of air travel, there are Boeing and Airbus planes moving people around and the manufacturers come up with energy saving measures on every new plane. For some, private jets are a way to travel and generally those either in high levels of government or corporations or very wealthy individuals have access to the planes.

In an article by Constant Meheut of the New York Times News Service, the aviation sector is considered one of the world’s top carbon emitters. And private jets are estimated to 5 to 14 times as much pollution as commercial planes per passenger, and 50 times as much as trains according to a study published by Transport & Environment.

In France, because of Paris and the Mediterranean Rivera (including Monaco) had the 2nd highest level of emissions from private jets in Europe, after Britain. In 2019, one tenth of all the country’s outbound flights were with private jets.

The result of this is there are now apps on social media which track flights. The government of France is considering limiting private jets usage.

Linking to dividend paying stocks, many profitable companies have their executives use private jets to save time and allow them to work. Social media will eventually track the flights for the environment, there are hedge funds which track executive jets to see patterns – why is a jet used by company A going to a place where it usually does not? who and what are they seeing? There is a need and usage of private jets but beware every year some aspects of corporate world is tracked for all to see and those that use the planes may have to justify it.

There are more questions than answers, till the next time – to raising questions.

Dividends and California to ban sale of new gasoline powered cars by 2035

In every industry there is a the biggest market where the sales occur. By virtue of being the biggest market when governments change regulations, the suppliers will and have to adjust or they will be shut out of the biggest market for sales of their products. In the case of the automotive sales, the biggest market is California. If California is changing regulations, then other states will copy, there will be some states who say they will not change, but auto companies sell to the biggest markets not the smallest ones.

In an article from Coral Davenport and Lisa Friedman of the New York Times News Service, the Governor of California announced by 2035, there will be a ban on the sale of gasoline powered cars. It is likely hybrids are ok, but all the major companies have stated they will have a full line up of electric power vehicles by 2030.

In California, the regulatory body which made the decision is called the California Air Resources Board. The Board believes fossil fuel emissions are chiefly responsible for the warming of the planet and set interim targets of by 2026, 35% of the vehicles should produce zero emissions and that would climb to 68% by 2030. The reason why California could act in this manner is President Biden restored the Clean Air Act that allows California to set auto pollution and mileage rules. Former President Trump loosened the rules as part of free rules and regulations from business.

John Bozzelia, President of the Alliance for Automotive Innovation, which represents large US and foreign automakers, said the rules would be extremely challenging to do. The automakers in general want to see more electric vehicles on the road and issues on affordability, charging stations will need the help of state and local governments.

Linking to dividend paying stocks, government is important to all industries for it sets rules and regulations. If a company wants to block the competition, it will say the rules and regulations need to be toughened. If a company wants to make more money, they often say the rules and regulations need to be loosened. There is some sort of balance which the market place will tell for what sells is the key.

There are more questions than answers, till the next time – to raising questions.

Dividends and Junk bonds bounce back as appetite for risk returns

When you have savings and want to invest the money, besides the stock market you look at returns on interest rate vehicles. As a saving you have something somebody is looking for – money and what rate of return would you take to allow them the use of it. As a saver, you are at the top of the food chain and at the bottom are the people who can not save and need to use high cost money mart type of chains. As a saver, you would not want to take a loan, but the companies do serve people in the market place. Take the same way of thinking to the corporate market, ideally treasurers save money and have A and BBB ratings. The interest rate will be closer to prime or what the Federal Reserve charges the banks. But some companies do not have savings, but they could and they are in the junk bond or pay higher interest rates.

In an article from the New York Times News Service, in the middle week of August, companies raised $4.1 billion in junk bonds. That total was higher than the total offerings in July. One of the companies which raised money was Royal Caribbean Cruises which raised $1.25 billion at 11.63%. If you ever cruised with Royal Caribbean, watch out for fees, they need to raise money to pay their debts.

Royal Caribbean is using some of the money to pay back debt it raised in 2012. At that time, Royal Caribbean raised $650 million at 5.25%.

Linking to dividend paying stocks, all companies will go to the bond market for companies have lots of reasons to use the money. Chief Financial Officers are always examining when they raise money is it better to raise with equity or bonds? As a investor you can easily determine what the rating is on the debt of the company. The higher the rating, the lower the investment world sees as a risk. There are many funds which do not invest in low rating companies, you can have the same standard for the rule of investing is try not to lose your money.

There are more questions than answers, till the next time – to raising questions.

Dividends and Europe’s scorching summer puts strain on energy supply

If you read headlines from Europe you likely read about the weather – it was sunny and hot. While for many people that might be a good thing, it is not good for agriculture and water levels. The lack of rain in Europe has caused crops not to grow and similar to California – wildfires have flared up, in addition the rivers that flow through Europe are much lower than normal. The lack of rain and higher temperatures means people turn to air conditioning for longer periods of time. This pushes up demand for electricity. How does Europe generate electricity.

In an article by Jason Horowitz of the New York Times News Service, some of the electricity goes from gas power plants, however due to the war in Ukraine and Russia, the President of Russia wanted Europe to support Ukraine less so he had Gazprom slow gas distribution to Europe.

Europe had to turn to over sources including hydro power from Norway. If you think about Norway images of steep fjords, where there is abundant water to generate electricity are found and many areas have hydro plants. The hot summer has been hurting Norway with reservoirs (think Lake Mead in Nevada) are going down. This means salmon swimming upstream to spawn have lacked enough water to migrate as well as hydropower reservoir supplies, provides 90% of Norway’s electricity as well as exports to other countries, have sunk to the lowest levels in 25 years. The shortages have caused tension – higher prices for electricity and political tension – other countries need more power.

Norway did not have much snow during the winter and has experienced the dry spring, April was the driest in 122 years which caused the reduced water levels in rivers and lakes.

Linking to dividend paying stocks, when you invest in an utility company particularly one that uses hydro, there is capital cost to put up the dam, but then the dividends should be standard operating procedures. The regulators ensure prices go up to ensure good maintenance and people costs, but after that it should be good for stockholders. Climate change affects everyone, it is important to understand what and how your company adjusts to it which meets your expectations.

There are more questions than answers, till the next time – to raising questions.

Dividends and Norway’s wealth fund loses record $223 billion in 1st half of 2022

If someone mentioned wealth funds, you would likely think about countries with oil and consider countries in the Middle East. There are some very wealthy funds in the Middle East although most are tied to the Kingdoms which means there is less for the average citizen. In fact, the largest sovereign wealth fund money does come from oil and gas but is located in Norway. The government of Norway owns oil and gas reserves in the North Sea and has very strict rules on the spending of its oil money. The result is Norway’s Sovereign owns approximately 1.3% of stocks traded on the stock exchange. The fund has over $1.3 trillion in holdings and owns 9,300 companies globally.

In an article by Victoria Klesty of Reuters, the fund which made the second highest profit last year, over the first half of the 2022 lost $223 billion or 14%. Not to worry, markets have recovered in July and August which means the second half is looking good.

The fund manager is Norges Bank Investment Management whose CEO is Nicolai Tangen. At the end of June the fund held 68.5% in equities, 28.3% in fixed income, 3% in real estate and 0.1 in renewable energy infrastructure. On the equities, the fund is a large shareholder in big tech such as Meta, Amazon, Apple and Alphabet.

Linking to dividend paying stocks, often times we believe if the we had a little more money we would have institutional sized portfolio and be sheltered from the ups and downs of the stock market. The reality is the market goes up and down, however dividends help protect your overall return. Investors and Investment management professionals are studying companies from around the world and make decisions. As a small investor, the issue is why do you own the stock – does it continue to make profits, can it pay its dividend, then you can hold and reap the rewards.

There are more questions than answers, till the next time – to raising questions.

Dividends and China moves to support some property developers

Everyone has a view about how the economy is doing, and when you are aware that 67% of the American economy is based on shopping, there are many with terrific insights. At a different level, the economic development or booster agencies will look at number of construction cranes in a city or housing development. Invariably people need a place to live and the property development sector offers mortgages and rents or both demand and outlook concerns. The property industry often goes through boom and busts cycles because it is a lagging indicator, when housing prices go up, people want in and developers are usually happy to supply, until there is oversupply and then a bust or slowdown happens. When this happens the banks which financed the mortgages slow down and seemingly the economy slows. In China the bust is happening.

In an article by Clare Jim of Reuters, the government of China will guarantee new onshore bond issues by a few select private developers to support the property sector. China has used the property industry to build apartments across China but some cities are ghost cities because few people live there. The jobs are elsewhere.

In China, some developers had defaults on their bonds as home sales slumped. State planners are trying to implement policies that will boosting economic demand in a strong, reasonable and moderate demand. This would allow property developers to keep developing but not bust.

Linking to dividend paying stocks, after you own your home, you hope that the value increases if you need to sell, but if you do not need to sell the property market fluctuations mean less to you as long as prices are moderate or slowly growing. In similar fashion, when you buy a stock you hope it goes higher, but if you are receiving dividends you can wait until you need to sell. There are many similarities to why you buy and hold to other sectors and somewhere along the way if you are wealthier in the end, you have made good decisions.

There are more questions than answers, till the next time – to raising questions.

Dividends and 3rd Point discloses stake of close to $1 billion in Disney, pushes for multiple changes

If you have ever read the history or some of the history of Disney, you will know over the years particularly after Walt Disney passed away, the stock in the company dropped and there was a fight to control the company. The new Board installed Michael Eisner and he helped turn around the company, ensure the company assets were productive and grew the company. It was a good story for the franchise and shareholders. The company over the years has gone through many changes and some things it does very well, however similar to all companies changes could be made.

For most of us, when we buy shares, we hope the company does well and over time if the shares do well we will continue to hold the shares. For some shareholders, their timeframes are shorter and when you add the control of greater assets, they tend to have more public influence. One would imagine, if you were investing close to $1 billion in the shares you would also have talked to senior management. If you were investing a few thousand, it may be possible to talk to senior management but likely it would be on conference call with other shareholders.

In an article by Svea Berbst-Bayliss and Dawn Chmielewski of Reuters, a hedge fund called Third Point which is run by Daniel Loeb has bought close to $1 billion in shares. Mr. Loeb and his hedge fund would like Disney to make some changes such as spinning off media assets (sell parts to the public), buyback shares, pay down debt and other ventures in order to increase the value of the shares. For the billion dollars in buying shares, Third Point owns 0.4% of the shares.

In early September, seeing the interest in ESPN, Mr. Loeb says Disney should keep the asset. Mr. Loeb on closer examination found that ESPN is a major asset for Disney.

Linking to dividend paying stocks, in every company shareholders come in for a reason and generally making money over the long term will keep most people contented, however there will always be some who believe more can be done. Sometimes the markets like more debt, sometimes less debt, sometimes the market likes companies to be streamlined, sometimes the markets like the companies to have significant fingers in many pies. In depends on the strategic plan and if the company is making money. If the company is making money and is profitable, many shareholders will be content to let management execute on their strategic plan. When they do not, everyone is a critic and as a shareholder must be listened to (think about sports fans – when the team is losing everyone has an opinion).

There are more questions than answers, till the next time – to raising questions.

Dividends and Blowout

Yesterday post was about Saudi Aramco making billions of dollars as both demand and oil prices increased, as investors it is not hard to like that combination. With every industry and within every industry there are different sides of the prospective. It is good or bad, it depends.

A view of the other side is Rachel Maddow author of the book Blowout published by Crown, New York, 2019.

The oil and gas industry because it is based on a commodity that has high front end costs, but if oil is struck can and will pay out for years brings along many different characters. Some are outstanding citizens, some ensure the oil is drilled and connected to a pipeline which is connected to some device to allow everyday citizens to use the product whether it be gasoline or natural gas. In the oil and gas world, it is relative easy to see those who receive more than their share and do not share with others, there is a whole gambit of people.

John D Rockefller built his company on turning out the finest product on the market, at the lowest price to the consumer. Along the way he also monopolized the pipelines and refining, but the consumer had a inexpensive product to power gasoline engine vehicles. One of the companies that was in the Standard Oil orbit has become ExxonMobil, the largest oil and gas producer in the US. In the book, the author writes Rex Tillerson graduated from University of Texas in 1975 with a degree in civil engineering. Over the years at Exxon, he is a fully realized creature of the corporation’s business, intellectual and ethical culture. Tillerson believed deeply in Exxon’s overriding mission, which was to maximize shareholder profits. He also believed deeply in Exxon’s secondary mission which was to bring the world’s most vital commodity to market at a low cost. He maintained a vigilant watch for any forces that could threaten either endeavor.

For Rachel Maddow writes all US producers including ExxonMobil continue to enjoy subsidies and tax incentives that had been in the tax codes for almost a century. This helps keeps its annual tax bills low, now matter how high the profits. Ms. Maddow also writes about fracking both pro and con, including what happens when the oil industry does not like the results of reports.

Linking to dividend paying stocks, there are other companies profiled in Ms. Maddow’s book and on the surface of energy dependence there were and are reasons for the bias towards the energy companies. Some of the biases one wonders are they too much, but if you were an investor you like the status quo. In most industries, if you examine the reality, there are good people and bad people operating. One hopes the end result is more positive than negative, as an investor you have bias towards making profits to paying dividends.

There are more questions than answers, till the next time – to raising questions.