One of the most common ratios investors use is the Price to earnings ratio because it tells you how long you will wait to receive your money back. It is also a easy comparison item as your narrow your selection of stocks to buy or sell. Since the decline of the stocks and now the rally back the ratios are getting larger.

In an article by Caroline Valetkevitch of Reuters, strategists say the P/E ratio could go higher given the monetary stimulus, but the huge uncertainity around earnings this year because of the economic fallout from the virus.

Many companies are expecting lower earnings, because of the shutdown, however there is hope in the market due to the economic stimulus packages and the virus seems to have reached peak levels. If peak levels are reached, then states will begin to open up more of their economies. Not to go to normal, but more people will be out and about.

The S&P 500 P/E Ratio in the beginning of May was 20.1, the highest in 15 years. Analysts believe the number will drop to 17.9%. First quarter earning for S&P 500 companies was expected to be down 14.8%, second quarter to fall 33.3% and third quarter to rise.

Linking to dividend paying stocks, stocks which pay dividends typically trade a consistent multiple because they have reasonably stable earnings. Typically they are less than growth stocks, but as the market goes down the multiples tend to trade up, then as markets move to another phase the multiples decline again but dividends are paid and profits role in.

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

If you think about the western movies, when the wagon trains were attacked their defensive position was to circle the wagons or turn inwards. There is a very good reason to circle the wagons and during the virus situation we have all turned inwards. Sometimes it is good to look outside to see what others are doing in the same situation.

In an article by Ian McGuggan examined a company in Scotland called Ballie Gifford, the company has been around for 112 years. For a company to exist for over 100 years, it look to the the long term. Lawrence Burns said when our firm invests we try to look to 5 to 10 years outwards and have a potential to multiply an investor’s money to multiple 10 to 15 times.

The company ins one of the world’s leading growth investors managing or advising on $290 billion assets for institutional investors around the world. The company while understanding people try to avoid loss, it is also important to recognize businesses that are capable of tremendous growth.

Ballie Gifford starting buying shares in Tesla in 2013 and is now the largest outside shareholders with a stake of $9 billion.

What other companies is Ballie Gifford taking positions in? Ocado Group is a British supermarket that has been running a purely online grocery business for almost 20 years. Ocado has partnerships with Kroger and uses robotics in its warehouses. Another company is HelloFresh SE, the German company that has the largest meal-kit operation in the world. Germany’s Delivery Hero, China’s Meituan Delivery.

The firm also owns shares in Spotify Technology for those who love music; Japan’s Softbank; China’s Alibaba Group and Canada’s Shopify. What unites all these companies is the room to grow.

Linking to dividend paying stocks, as investors we love companies that have the ability to generate profits on a yearly basis which allows them to pay dividends. For most of us, that should be the greatest part of your portfolio. The idea is your dividends allow you extra financial freedom, with some of them you can look and growth companies when they have do not burn through cash, they have gained traction in the marketplace. Dividend investors maybe own the growth companies when they first became public, but when they have are established and they will not lose money. Patience is a good thing.

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

We all listen to the updates from the White House and the President who says he is a cheerleader, says the US will have a V shaped recovery. Noting cheerleaders are on the sidelines, the players are on the field, what are other countries doing? The virus has affected the world and everyone is doing the same thing – social distancing, economies half shut down and wearing masks are required to go outside.

In an article by Leika Kihara and Tetshushi Kajimoto of Reuters, the Bank of Japan expanded its monetary stimulus and pledged to buy an unlimited amount of bonds to keep borrowing costs low as the government tries to spend its way out of the growing pain from the virus.

The Bank of Japan is doing what most other central banks around the world are doing. The bank will boost 3 fold the maximum amount of corporate bonds and commercial paper it buys to $20 trillion yen or $186 billion. The bank says it will buy the necessary amount of government bonds without setting an upper limit in order to keep interest rates near 0%.

The bank also offered financial institutions 0.1% interest rate to fund them, to encourage banks to lend to cash strapped firms.

Linking to dividend paying stocks, if central banks are going to these measures do you really believe the lifting of the restrictions will send consumers buying vehicles, furniture, clothes and leisure items? In all downturns cash flow is king, does the company have the cash flow to ensure profits?

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

Imagine yourself working with a food giant similar to Nestle before the virus, the company through a variety of divisions has good market share, many of its brands likely in the average person’s shelf and most of the competition is fighting for a higher 1 to 2%. Then comes the virus concerns and consumers begin to stockpile your products. That was both good and bad, it is good because according to an article by Siddharth Cavale and John Revil of Reuters, sales in North America and Europe increased by 4.3% beating analyst’s expectations of 3%.

In North America. Purina Pet care sales rose by double-digit percentage, while Nescafe and Coffee-Mate had high single digit increases. In the Middle East and Northern Africa Maggi noodles did very well.

Chief Executive Mark Schneider said Nestle was working to adapt to market conditions to ensure it had enough raw materials and factory capacity to meet the expected demand. (this is the bad – higher costs for raw materials and labor), but hopefully increased sales offsets it. The difficulty at Nestle is what is the future? what will demand be? Mr. Schneider believes the recovery will be slow.

A company such as Nestle sales to individuals and institutions or restaurants, cafeterias, etc. The sales to individuals were up, but sales to restaurants because they are closed was down. Nestle launched a financing program for the coffee machines it rents or leases.

Nestle is trying to concentrate on organic sales and is actively looking at possible takeover targets.

Linking to dividend paying stocks, for Nestle which pays a dividend the virus is good because they have the ability to ensure they could ramp up to the individual demand and begin to look for opportunities of companies which have great products but not the financial ability to be agile. One of the reasons to invest in dividend paying companies is if they are reasonably well managed, they can look for opportunities to enhance profits to continue to pay dividends.

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

When governments around the world ask me to stay inside and not met in groups of 5 or more, the economic fallout was and will be immense. One could easily have looked to companies which need people to mix and mingle – entertainment, leisure and travel companies would be bleeding red ink. The question on everyone’s mind is how long? For generations, people have flowed predictable patterns and industry expect economic returns to follow the same pattern. For most urban workers, go to somewhere warm is desired when it is cold; spring comes and outdoor events happen – from concerts to amusement parks to weddings. Each of these events people make a living around them, in normal times it was a good thing to do.

Now think about the financial aspect, aside from the personal aspect of the virus. Companies that previously could go into the bond market to raise money, the option is very different.

In an article by Kate Duguid of Reuters, existing bondholders are getting demoted by new debt issues. The layer approach is called “primed” or “layered” where a company in need of cash offers a bond backed by collateral, called secured debt. Being at the top of the capital structure means that in a bankruptcy those investors get paid paid first.

Since the start of the coronavirus epidemic, this has happened to investors in AMC Entertainment Holdings (movie theatres), theme parks Six Flags Entertainment and Cedar Park Entertainment, cruise ships Carnival Corp and propane supplier Ferrellgas Partners according to a Reuters analysis.

AMC Entertainment raised $500 million secured debt at a cost of 10.5%, that twice the cost of the last issue of debt. About 80% of high-yield bonds issued since 2011 is unsecured. Why? the cost of borrowing from Central Banks has been at all time lows, so issuers put in less investor protection, including the ability to issue new subordinate debt without telling bondholders.

Linking to dividend paying stocks, the economic world has changed because of the virus, that is expected and understood, but cash in the corporate world is always king. The ability to generate profits is important and when the company can not do that, unless you hope the government will bail out the industry, it is better to exit and leave it to vulture investors.

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

In every health care scare there is a run to buy health care stocks because the emphasis for everyone turns to health. The issue is which company do you buy? If you buy a large giant of a company, if it can distribute millions of doses of a vaccine all governments will pay billions of dollars for it. If it does not, does the other parts still contribute to making money? The issue is the health care system makes money for operation room being used, right now it is not being used, treatment for the virus is a priority. This means hospitals while the beds are being used, they are not making as much money as they were under normal circumstances. The government is going to send money or bail them out.

Gary Christie of Trading Central used his company’s data bank for the following criteria:

using the S&P 500 index companies in the biotech and pharma industries with a $10 billion capitalization or more.

strong revenue growth for their last quarter. Looking for companies who achieved a 5% growth over last year.

a return on equity of 10% or moe

a price to sales ratio of no more than 10

upper level on the debt to capital ratio of 0.85

Company Mkt Cap P/E Div ROE Price/ Debt/ Rev Growth 1 Yr Recent

($ bil) Yld Sales Capital % Perf % Price $

Humana 48.5 18.3 0.6 24.4 0.76 0.29 15 46.9 367.17

AmerisourceBerge 17.8 27.9 1.8 21.6 0.10 0.55 5.4 16.7 86.5

Anthem 66.3 14.2 1.3 16.0 0.66 0.36 17.3 4.8 262.96

West Pharma Svcs 12.6 53.0 0.3 18.2 6.97 0.17 11.4 47.7 184.96

Merck 202 21.0 2.9 37.4 4.41 0.47 7.9 7.0 81.35

ResMed 23.3 51.4 1.0 21.6 8.38 0.38 13.1 58.2 160.92

Agilent Tech 23.3 30.9 0.9 15.5 4.53 0.27 5.7 -0.8 75.17

Teleflex 15.5 34.0 0.4 16.7 6.06 0.40 6.1 19.8 334.03

Stryker 68.2 33.2 1.2 17.0 4.64 0.44 8.8 -1.7 181.92

Zoetis 59.7 40.5 0.6 61.3 9.68 0.69 7.0 24.4 125.81

Linking to dividend paying stocks, these charts help give you names of companies that are well run but they also help you to narrow the field. What are the most important metric for you? how will you know the company is doing what you want it to, beside the price of the stock going up? Investing is about narrowing the field of options and choosing well – a old TV show was Kung Fu with David Carradine, in the opening of the show the master would say when you can take the pebble from my hand, you will be ready. How are you getting ready, what homework must you do?

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

If you listen to the President during his virus updates, he talks about a V shaped recovery or a bounce back to what the economy was. He is hopeful, optimistic and is a cheerleader, but is it realistic? At the moment, no one knows but the expectations are it will not be a V shaped recovery. The first problem is when the closed shops are opened, will there be a rush to get in? Likely not as seen what is happening in China.

In an article by Reuters staff in China, the central bank slashed borrowing costs to stimulate the borrowing of money and people to start buying anything.

The GDP in China fell 6.5%, which is the first quarterly decline in 30 years for the world’s second largest economy. Will the largest economy, the US be that much different than the 2nd largest?

Japan based Nomura analysts noted unlike previous easing cycles, when most of the new credit went to finance spending on infrastructure, property and consumer durable goods, this we expect most of the new relief to help enterprises, banks and households survive the COVID crisis. (companies and people are trying to pay back bills).

One might expect in a service economy, the government almost has to give a monthly income for 3 months, before spending resumes the normal.

Linking to dividend paying stocks, if you own these stocks you are optimistic, the economy will be better however the economy will have and continuous to change. Start with your expectations and then move to bigger circles to determine what will get the economy back to normal? If those do not exist, what companies are doing well and continue to do well?

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

In mid April, the price of oil was plunging to -$37 dollars a barrel, it has since recovered as both Russia and Saudi Arabia cut production of oil, The cuts in production of oil tells you the game the two countries played was silly and the economy in general is in bad shape, if you believe the President’s projection of V shaped recovery – the economy is coming back better than before, reality maybe a better choice.

With every negative situation, somewhere there is a bullish situation or people believe there is a bullish situation. in terms of the weaknesses of oil prices, money is rushing to exchange traded ETFs for oil prices. In an article by Devika Krishna Kumas and Tim McLaughlin of Reuters, investors or “oil tourists” deposited $1.6 billion in the United States Oil Fund LP. When oil prices go up and return to what was normal, profits can be made.

John Love, chief executive of United States Commodity Funds LLC which manages the fund said the big fall in oil futures was the May crude but the fund did not hold any contracts. The fund had invested in forward contracts and short term US government debt. The fund has doubled in sized to $4.1 billion.

David Nadig of ETF Trends said all the money flowing into the fund are people trying to catch the bottom of the oil market.

The United States Oil ETF attempts to attract the price of West Texas Intermediate light sweet crude oil.

Linking to dividend paying stocks, in every market someone can see possible methods to capitalize on negative events. It is important you do that, for your own investments as people stay home longer than expected, are you invested in companies making money? Much of the analysis is how long with the situation last? one month – we can all adapt; 2 months or 3 months – we all need to make changes? You can seek opportunities but remember many investments become long term because the situation changed. If you are going to have long term investments try to ensure they produce dividends.

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

As part of your homework you should determine how to narrow the field to the best options of the best stocks which have also fallen in value. Then whatever decision you make is a good one.

Recently Sean Pugliese and Allan Meyer for Wickham Investment Counsel examined the S&P 500 index for low-volatility high dividend stocks with a focus on safety and value. The criteria were:

S&P 500 index focusing on large caps names.

beta to identify our low-volatility stocks – measures how much the stock moves relative to the market, to error of safety , the beta should be less than 1.

dividend yield , focusing on yields higher than 3.5%

dividend payout is the dividend payment divided by earnings. A lower number is preferred.

debt-to-equity which is debt outstanding divided by shareholder’s equity. Less leverage is preferred even though the interest rates are very low.

price to earnings is a valuation metric. The lower the number the better.

Company Mkt Cap beta Div Div Debt/ P/E Recent Price

($ Bil) Yld % Payout Equity $

Duke Energy 66.3 0.4 4.2 73.5 130.8 17.1 90.31

Pinnacle West Cap 9.2 0.4 3.8 81.3 105.8 16.6 82.23

Verizon Comm 237.8 0.5 4.3 52.0 181.6 11.7 57.44

Southern 63.6 0.5 4.1 54.2 168.5 18.8 60.33

Exelon Corp 38.1 0.5 3.9 48.1 117.3 12.8 39.15

Kellogg 21.5 0.6 3.6 80.3 288.4 16.2 62.74

Edison Internl 21.9 0.6 4.2 64.3 121.9 13.4 60.27

Pfizer Inc 196.3 0.6 4.3 50.3 82.6 13.6 35.39

Public Service Ent 26.7 0.6 3.7 56.0 107.5 15.7 52.95

Walgreens Boots 38.6 0.6 4.2 46.1 71.6 7.6 43.98

The other companies in the listed chart are Entergy Corp, Omnicom Group, PPL Corp, United Parcel Service, Paychex and Juniper Networks

Linking to dividend paying stocks, the above will give you names to consider and how to narrow a field down. What metric is the most important to you? The reason you wish to narrow the field is the idea is to buy and receive the dividend and it is safe and will be issued every year. The idea is not to buy for capital gains although any company making money consistently will over time be traded at higher P?E multiples and capital gains will come. Take your time, narrow the field and make good choices.

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