Dividends and When Wolves Bite

One of the wonderful aspects to the stock market is people can have different opinions and be right. People buy stock for multiple reasons although the top reason is to be worth more at the end of the day than the start. It is good to do your homework, make an investment and others agree with you. However sometimes you can do your homework and others disagree, if you were committing a billion dollars to your idea, you want to scream why does not everyone see what I see?

In the book. When the Wolves Bite by Scott Wapner published by Hachette Books, N Y, 2018 the wolves are two icons of Wall Street. Carl Icahn and William Ackman and the company they see differently is Herbalife.

William Ackman through his company Pershing Square Capital Management was short the stock. Carl Icahn was long and owned enough shares to be on the Board of Directors.

The men are in the hedge fund world, and lasted over 10 years through wins and when the win big, the wins are in the billions. Although sometimes they lose money, but usually it is not more than hundreds of millions.

Each of the investor spent time doing their homework, talking to the President as well as trying to figure out how does the company make money? Who buys the product?

At the time, Herbalife was a mixture of selling products to distributors who made money selling product and recruiting more distributors. Which one is more important? This is where the decision of the 2 investors was different.

Both companies hired lobbyists to sell their story to the public and equally important to the regulatory body of the government, in this case it was the Federal Trade Commission or FTC and its Chair. William Ackman wanted the FTC to say Herbalife was a pyramid scheme, Carl Icahn wanted the FTC to say it was a normal business but could be cleaned up a bit.

Linking to dividend paying stocks, a book such as this one shows some of the methods in which the players are linked. Often times they have met, crosses paths at conferences (some conferences are seemingly more important than others, depending which industry you invest in, it is important to know about them, in the book the Ira Sohn Conference was very important) worked together and worked apart from each other. On Wall Street good ideas are good ideas, how you profit from them is the question.

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

Dividends and French telecom Orange to name first female chief executive

Many years ago in my job at at a bank, woman had a definite glass ceiling and while many good women were working there, there was a unwritten rule that woman could not be promoted to manager of a bank branch. Fortunately times have changed and more women are represented in the Board and maybe more than one CEO of a money centered bank in New York.

In an article by Mathieu Rosemain of Reuters, in France the biggest telecom company is called Orange and Christel Heydemann is to become the new Chief Executive Officer.

She will become the third woman CEO of the Paris CAC 40 blue chip index after Engie’s Caherine MacGregor and Veolia (a utility group) Estelle Brachlianoff.

Ms. Heydemann is a graduate of France’s elite engineering school Polytechnique and will replace Stephane Richard who was convicted of misuse of state funds but denies any wrongdoing.

The French government has deemed the company Orange to be strategic which means dealing with the President of France and the Finance Ministry overlooking their shoulder.

Orange is doing things similar to American telecom companies capital heavy investments in the new generation of internet mobile networks and broadband fibre-optic infrastructure. Its biggest markets are France and Spain. In addition in the mobile phone business there is a low cost competitor called Iliad’s Free Mobile which has resulted in price wars. Share prices are trading at prices about a third lower than 5 years ago.

Linking to dividend paying stocks, in this case it is often when governance is in a bit of a mess that women get promoted to the CEO’s position. However, it will be when Ms. Heydemann cleans up the company for investors. Women make up 50% of the population there is no reason to believe that they do not have the skills to be the CEO, but in the world change is slow. As investors whether it is a man or woman running the company should not matter, what matters is a profitable results.

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

Dividends and Vaccine trail results will test US investor optimism

If you listen to the President, the vaccine trials are going to be here sooner than you think, probably very soon. In an article by Lewis Krauskoff of Reuters, according to a UBS analysis 40% of the market’s gains since May can be pegged to hopes for vaccines to protect against COVID-19.

We know every major pharma company is working on a vaccine and as individuals we hope that one or more will be successful. We know because of the shape and adaptability of COVID it is a very hard task. In normal times, arriving at a vaccine takes years of work and is one of the biggest factors which allow big pharma to have a 21 year monopoly on their drugs before generic drugs can be made and sold at a fraction of the cost. The normal life cycle of a new drug is years as it goes through ideas to research in animals to sampling of a few people, then more against a placebo then an even bigger number to ensure that the drugs works and has few side affects for the general population. Just about every drug has a side affect, the trials for people will tend researches which organ or organs are being affected with the new drug or under intentional consequences. The decisions mean only a few drugs are released every year and those that do can generate billions in sales which is the reason to invest in big pharma.

In the article, Walter Todd, chief investment officer of Greenwood Capital in South Carolina said any news to the contrary could be a risk to the market.

There are at least 30 vaccines currently being tested in humans according to the World Health Organization and Liz Young, director of market strategy of BNY Mellon Investment Management said, we are setting ourselves up for success in the sense if you you throw enough spaghetti at the wall, hopefully one noodle sticks.

The leading companies are Pfizer, Moderna, AstraZeneca, Johnson &Johnson and Novavax.

Once a vaccine is approved and that will be great news, the questions of how easily and quickly it can be distributed will arise and according to Art Hogan, chief market strategist at National Securities, the time line is expect to be longer.

Keith Parker, head of US and global equity strategy at UBS believes an approved, broadly distributed and accepted vaccine will send the markets up 8% or add 300 points to the S&P 500. A disappointing clinical trial could result in a loss of 3% or 100 points.

Linking to dividend paying stocks, we all hope there will be a vaccine sooner than later, but try not to listen to the optimism of the President. Vaccines take time, there is a process so the everyday person has confidence in the vaccine and the process. Do you have confidence in the process?

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

Dividends and EU executive pushes for tougher 2030 climate target, billions in green bonds

The European Union’s chief executive Ursula von der Leyen said in mid September the European bloc want should commit to deeper emissions cuts over the next decade and pledged to use green bonds to finance its climate goals.

In an article written by Kate Abnett, the EU should set a target to cut its greenhouse gas emissions by at least 55% by 2030, against 1990 levels, confirming plans laid out in draft Commission documents previously reported by Reuters. The EU wants to reach net-zero emissions by 2050.

Ms. von der Leyen said 30% of the bloc’s E750 billion (about $1.17 trillion) coronavirus recovery package of grants and loans, which the EU as a whole will borrow, should be raised through green bonds. 37% of this package should be earmarked for projects to help industries decarbonize – by swapping coal for low-carbon hydrogen in industry, or installing electric car charging points.

Linking to dividend paying stocks, the European economy is the third largest economy in the world after the US and China and they are becoming green. The US and China will have to move towards green because of the size of the European community buying power. This means your investment companies need to have green policies or you will need to find alternatives.

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

Dividends and Freedom at Midnight

Freedom at Midnight is a book about how England disengaged from ruling India and in the book the authors Larry Collins and Dominque LaPierre, published by Avon Books, NY, 1975 write about the reason why England was interested in India in the first place.

If you think about Christopher Columbus, the reason why he left Spain was to find a shortcut to South East Asia to bring back spices. At the time, spices for generations had come from South East Asia to the Middle East through Egypt and finally to Venice, Italy where it was sent around Europe. The Dutch and Portuguese sent ships to South East Asia and controlled the spice the trade. In every commodity, there is a point where somebody thinks it is too expensive and desires to find alternatives.

In England, the Dutch controlled the spice trade in England and decided to increase the price of pepper by 5 shillings. Shortly afterwards, 24 merchants in the City of London gathered together to start a trading firm with an initial capital of 72,000 pounds and 125 shareholders, they thought the price increase was too high. The merchants called the company, the East India Trading Company. They went to the Queen and she gave the firm exclusive trading rights with all the countries beyond the Cape of Good Hope for 15 years. The company sent a ship to Bombay, India and it landed in India in August 24, 1600. The Captain and Emperor Jehangir, the world’s richest and powerful monarch, the fourth of the Great Moguls had a very good relationship and soon 2 ships a month were unloading mountains of spices, gum, sugar, raw silk and Muslim cotton on the docks of the Thames and sailing back with English manufacturing goods.

The little company became the greatest company in the world – the East India Company where dividends as high as 200% came to shareholders. The East India Company would eventually lead to military involvement from England and England to rule the country. As a sideline, when the England began to rule India, the East India Company needed to look to over markets and it would get into the drug business, opium with trade with China, but that is different book.

Linking to dividend paying stocks, the tales of riches of bringing back spices at less cost based on logistics is the era of the sailing ship. At some point for every commodity there is a price which makes people want to find alternatives. It typically takes a period of time, because you do not like it, does not mean your neighbor does not like it. There will be the early adapters, then eventually the general public and change will have taken place. With your investments, you need to consider what price will allow others to seek alternatives?

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

Dividends and Oil and gas industry assesses damage caused by Hurricane Laura

Towards the end of August, Hurricane Laura became a monster of a storm with its winds and storm surge or rising waters. The Hurricane fortunately for people and infrastructure came into the US where the least number possible were affected. If the Hurricane had been further east, the city of New Orleans would have been affected. If the Hurricane went further west Houston and Port Arthur would be affected. Houston has more national headquarters of oil and gas companies than any other city, while Port Arthur is the home of 40% plus of the refining capacity of the US. Those pipelines run to and from Port Arthur. If you add the other refineries along the Gulf Coast the volume of capacity increases to over 50%. The biggest refineries of about 2.2 million barrels per day shut down are operated by Valero, Total. Citgo and ExxonMobil.

In normal times, when a consumer watches the hurricanes affect Texas and Louisiana, they know that within a few days, the prices at the pump will jump. The good news for consumers even though 84% of the oil and gas produced in the region both onshore and offshore was shut down for safety concerns, the affect of the COVID and the hurricane on prices was minimal. Prices did not go up. The Gulf region normally produces 15% of the oil in the US and 61% of the natural gas.

There is a reason why oil and gas prices are down and energy companies are struggling, as we move into October hopefully there are signs where the normal commute can come back albeit with more fuel efficient vehicles.

Linking to dividend paying stocks, COVID dropped the demand in the oil and gas industry and it has been hard to adjust to it because for generations the oil and gas companies along with pipeline companies were some of the biggest most profitable and dependable dividend machines. Many dividend portfolios have an oil and gas company, but some companies are benefiting from COVID. If you still own the companies as an investment think long term.

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

Dividends and Business jet flights see uptick in demand

If you look back at history, the world was pieced together with trade and business travel. Somewhere there is an opportunity and if you think to the founding of the USA, Columbus has searching for a quicker trade route to South east Asia to bring back spices at less expense and sell at high margins. Columbus’s other trips lead to more lucrative trade bringing back gold and silver from Mexico and Peru and allowing Spain to become the wealthiest countries in the world. We will look at travel today, we look to the skies and aircraft travel.

If you are fortunate to be a frequent flier in executive class, you are the gold the airline industry is looking for. The airlines make more money from the trips of business class and there is competition if people want to go to a destination faster – private jets. In the world of COVID, private jets offer a level of safety that commercial airlines do not and the price is not that different if the reason for flying can make more money.

In an article by Allison Lampert of Reuters, flights catering to business people are beginning to show an uptick, but commercial airlines catering to business and leisure travel is down. According to FlightAware data, in late July business travel is down 20%, but commercial airlines are down 48%.

In the world of private jets, companies such as PrivateFly, according to Adam Twidell, CEO, his service for charter flights is relative to last year is 80% to customers flying to Europe and 100% in the US, with many from new passengers. New customers typically make up 60% of the company’s bookings compared with a 25% annual.

Berkshire Hathaway owns NetJets and Patrick Gallagher a marketing executive said business travel is down, but personal travel is up. At the moment, they are using existing fleets to meet demand.

Business jet makers are in a wait and see mode, General Dynamics’s Gulfstream, Textron and Bombardier have cut jobs and forecasters expect deliveries to be down 30%.

Linking to dividend paying stocks, while you can Zoom, there is nothing like meeting the other person particularly when there is a problem in the future to fix. Relationships help solve problems has been the case in the past and will be in the future. Business travel gives a reasonable indication of what is happening in the economy. Commercial or passenger travel is more dependent of holidays and prices to travel. Hopefully, the economy will open up and more people will be travelling which in turns help the economy as people spend money in a different location. Where do you want to go?

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

Dividends and Tapping into demand for cybersecurity

When COVID happened and governments shut down the economy for health reasons, people had to work from home which meant upgrades in security systems had to be made or should have been made. Who are the big players which your can money from?

Scott Clayton of TSI Network examined some companies using the following criteria:

TSI has a rating system which helps narrow the scope:

1 point for 5 years of continuous dividend payments, 2 points for greater than 5 years

2 points if the company has raised the dividend in the past 5 years

1 point for management’s commitment to dividends

1 point for operating in non-cyclical industries

1 point for limited exposure to foreign currency rates and freedom from political interference

2 points for a strong balance sheet, including manageable debt and adequate cash

2 points for a long term record of positive earnings and cash flow sufficient to cover dividend payments

1 point if the company is a leader in its industry

Companies with 10-12 have the most secure dividends; those with 7-9 have above average; 4-6 average sustainability and 1-3 below average.

Company Div Sustainability Points Div Mkt Cap 1 Yr Total Recent

Rating Yield % ($ Bil) Return % Price $

Cisco Systems Above Average 9 3.1 198.532 -18.8 46.90

Juniper Networks Average 5 3.3 7.999 -8.3 24.49

Norton LifeLock Average 5 2.4 11.745 44.0 20.70

ManTech Int’l Average 5 1.9 2.663 -1.2 66.38

Leidos Holdings Average 5 1.5 12.658 14.5 91.37

Linking to dividend paying stocks, a rating system such as the one TSI uses allows you to narrow the field of choices. What are you looking for? how much risk do you want? can you buy the stock and go away for a few months because you are more interested in the dividend as opposed to the capital gain? In the stock market there is never a perfect answer because that is against the law, however if your interest is in dividends and company can pay, then over the long term your wealth should increase.

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

Dividends and LATAM becomes largest global airline to file for bankruptcy amid pandemic

For generations, for many people, going to or near the airport and watching the planes take flight has been an enjoyable experience. The people on the ground watching and thinking about the travellers going around the world for business and pleasure. Eventually, they look at the names on the planes and take pride in their home town carriers. If you want to travel to South America, one of the airlines you may fly on is called LATAM.

LATAM was born in 2012 through a merger of Chile’s LAN and Brazil’s TAM airlines. The airline has more than 40,000 people working for it and dominates international travel in Brazil, Columbia, Chile, Argentia, Peru and Ecuador.

In article by Marcelo Rochabrun, Fabian Cambero and Tatiana Bautzer of Reuters, due to the COVID virus where every country has shut down travel, the airline began to bleed money and has filed bankrupcty. This was unfortunate because some airlines around the world fly to keep the host government happy and lose money, LATAM has made $700 million over the past 4 years.

Its ownership includes the Cueto family, Qatar Airlines and Delta which last year paid $1.9 billion for a 20% stake. The shares trade in New York and Santiago. The issue is will the government bail out the airlines similar to Germany bailing out Luthansa for a 20% stake. Similar to other airlines around the world, in Chile LATAM is considered a strategic company for the government.

LATAM said it had $7.6 billion in debt, the company has been downgraded by S&P and Fitch after the company did not pay interest and principal on $1 billion in debt tied to the financing of new aircraft purchases. Investment bank Moelis & Co is representing bondholders representing $3 billion in debt.

Linking to dividend paying stocks, what often seems simple is complicated. Prior to the COVID shutdowns, LATAM recently paid a dividend to the shareholders and the company was seemingly doing most things right. There were very good reasons to invest in the company and given its leading domestic position in the South American market, it looked like a long term hold. COVID happened and everything has changed quickly. LATAM is fortunate to have strong partners and potential government support for the correct reasons, however it has no cash flow. Not every investment works out, but if you do your homework and understand why the investment should work out, you can determine if the stock is worth holding or finding alternatives.

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