Dividends and Giant sinkhole opens up near Lundin copper mine in Chile

The development of drones has made the world and business a smaller world because news organizations, governments and rival companies have a view of what is going on or what issues management is dealing with and how they are dealing with the issues.

In an article by Niall McGee of the Globe and Mail, a company called Lundin Mining Corporation is mining copper in the Chile. The mountains of Chile have some of the biggest mines and all the major mining companies are actively looking and finding minerals in the Andes Mountains. After locating potential deposits, it takes millions of dollars to extract the ore from the ground, but there are even more millions to be made if the deposit is of commercial quality.

In Alcaparrosa, Chile, Lundin Mining with a 80% share and Sumitomo Metal Mining Co of Japan has 20%, they mine copper, gold and silver. The annual production is about 160,000 tonnes of copper.

Chile’s geology and mining regulator, Sernageomin, posted a picture of the large sinkhole on Twitter, and a new challenge of analyzing why the sinkhole appeared. Lundin said the sinkhole has no impact on staff, equipment, or mine infrastructure. The mine where the sinkhole opened up accounts for 5% of the production of the Candelaria’s output.

Sinkholes form when the land underground can not support the weight coming from the surface and collapses. This could be a natural normal occurrence or caused by industrial activity.

Lundin purchased the mine site from Freeport-McMoRan for $1.8 billion in 2014.

Linking to dividend paying stocks, things happen and many happen because it is nothing normal, what is the new normal is everyone knows about the issue sooner and longer. The issue is how does management to tell its shareholders? Shareholders do not mind bad news, but if the company is not forthcoming, it is easy to seek new alternatives on the stock market.

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

Dividends and Visa, Mastercard face new set of legal challenges

In every company, they try their best to provide goods and services and the over whelming majority try to do it within the law or what is legal. We depend on people making decisions which abiding by the law is the better way to do business. Understanding the margins are much higher in the illegal ways, but then life expectancy is much lower.

In an article by Ephrat Livni and Laren Hirsch of the New York Times News Service, credit card companies including VISA and Mastercard dominate the credit card industry, in 2004 they held 75% of all debit purchase volume and in 2021 it rose to over 80%.

At one time the owners of the credit cards were the banks which issued the cards, since 2006 and 2008 when VISA and Mastercard went public the ownership structure changed.

For VISA and Mastercard, the legal department is large and there are many lawsuits filed against them every year. One such lawsuit against VISA is they are the credit card for MindGeek’s website Pornhub. Watch porn on line and pay with VISA. Pornhub has underaged females on their site and one of them has filed a lawsuit against VISA. A US federal judge refused VISA’s request to be dismissed from a case it conspired with MindGeek to profit from images of child sexual abuse.

The judge said, if VISA was aware that there was a substantial amount of child porn on MindGeek’s site, then it was aware that in processing the monetization of child porn, moving money from advertisers to MindGeek for advertisers playing along side child porn similar to the plantiff’s videos.

VISA said we provide a service and we would have to police billions of transactions, we co-operative with law enforcement but the onus should not be us.

In another case, Walt Disney filed an antitrust lawsuit against VISA and Mastercard saying the fees are too high or they are being overcharged on the merchants’ fee. Nobody knows if fees were lower, would prices be lower? but Disney (and many others) believe fees are too high.

Linking to dividend paying stocks, credit card companies have high margins (above 40%) and have long paid dividends to shareholders. All companies want to do what is legal, but how does any company ensure that everyone uses their products and services to be legal. People do all sorts of things, where does corporate responsibility stop?

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

Dividends and Antitrust trial on Penguin Random House, Simon & Schuster merger a key test for Biden

Everyday on the stock exchange there are mergers and acquisitions announced, some will be very good, some with be average and soon will not work out. The results of the merger and acquisitions can only be seen in retrospective or well after the process goes through. Many of the mergers will be add ons to the company, but some are mergers between giants in the industry. Although there are giants in the industry, change is happening to the normal practice of the industry and companies are trying to deal with the what worked in the past. Will it work in the future? maybe or maybe not. Government tend to look at the way the industry was in the past, not necessarily the threats in the future.

In an article by Marcy Gordon and Hillel Italie of the Associated Press, in the world of book publishing two giants are trying to merge – Penguin Random House and Simon & Schuster. The cost of merger is $2.2 billion. In large mergers, the Competition Bureau through the Justice Department has to sign off, the are objecting and the trial begins in August and likely last until October.

The government contends that the merger would hurt authors and ultimately readers. The publishers counter that the merger would strengthen competition among publishers to find and sell the hottest books, by enabling the combined company to offer bigger advance payments and marketing support to authors. It would benefit readers, booksellers and authors.

The Big 5 – Penguin, Simon & Schuster, Hachette, HarperCollins and Macmillan – dominate 90% of the market for anticipated top selling books.

Under former President Trump, the competition bureau allowed more mergers and acquisitions.

Linking to dividend paying stocks, governments change and sometimes the policies change at greater than the margin. One of the keys is how does governments look at mergers and acquisitions? Is it good because all governments tend to want growth; it is bad because people will be let go on cost savings; what do the political leaders think about the balance? When governments change, how well does the government relations department relate to the existing government.

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

Dividends and How Tencent weathered a crackdown by being useful to China’s censors

When a company is successful and that is the goal, at some level it is supported and sometimes does the work of the government in the country it is located in. If you look back into the history book’s company’s such as the East India Company had the support of the British Navy it is dealings with China (the East India company evolved from trading India raw materials with British manufactured goods to importing opium into China for Chinese silver). In more recent times the United Fruit Company which was headquartered in Boston through the US government agencies changed governments in the tropics to ensure its bananas were grown and transported to the US. There are many more examples, when a company sells outside its borders it works with the Embassies are the world to help sell goods and services. In recent times, the examples are Chinese companies doing the work of the Chinese government.

In an article by James Griffiths of the Globe and Mail, in 2018 a group of engineers at Tencent, one of China’s largest technology companies, started crunching data to see if they could predict which Communist officials would make it to the all powerful Politburo standing committee. In the western world, many companies do something similar, in China officials were not amused and Tencent was ordered to suspend rolling out apps and updates and the founder of the company disappeared from public view for a year

There is a new book about Chinese technology companies by Lulu Chen titled Influence Empire: The Story of Tencent and China’s Tech Ambition.

The above was a rare misstep for Tencent which has the most popular app in China WeChat. It is the most popular app because besides the messaging aspect, people can book taxis, order food in restaurants, pay bills, apply for loans and Chinese government regulations.

Tencent has been able to weather the storm of tech company crackdown by the Chinese government because the Chinese government sees how WeChat is valuable and the President of Tencent keep a low profile.

The government saw how important WeChat was to the average citizen, and found a level of insight into people’s lives that could be monitored and they do. Practically, the Chinese government has outsourced and privatized a lot of the work of building and running the monitoring of its people.

The author Ms.Chen believes private companies have always innovated better because they are practicing capitalism models and placing their capital with greater efficiency.

WeChat has benefited from scale and the government has encouraged Tencent to consolidated with many companies. However not everything is good from Tencent’s point of view. The company used to have a profitable gaming site but gambling has been heavily regulated which decreased revenues.

Linking to dividend paying stocks, every successful company deals with government officials sometimes even though they are only interested in selling goods and services, will do what the government wishes them to do. Generally the relationship is a good one, but policies at governments change and relationships are maintained. All companies are bias one way or another, although for shareholders there is a bias towards being profitable and paying dividends.

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

Dividends and Shell smashes record again with $11.5 billion 2nd quarter profit

For generations, every since the John Rockefeller founded Standard Oil, an investment in the oil company has generated consistent profits. The oil companies supply the oil and gas needed to drive vehicles and electricity to power plants for people to live in urban environments. There has been many good things which came out of the oil and gas companies.

In an article by Ron Bousso and Shadia Nasralla of Reuters, one of the 7 sisters of the oil business has been Shell Oil and it made $11.5 billion in profits. The record results topped the previous quarter. The company decided to use $6 billion to buy back shares (reduce the number in circulation) but did not increase its dividend. Last year, the company bought back $8.5 billion in shares. The company noted shareholder returns would be in excess of 30% of cash flow from operating activities.

In 2021, the company made $5.5 billion, in the first quarter of 2022 it was $9.1 billion and the second quarter it was up again to $11.5 billion, above analysts’ expectations of $11 billion.

Shell’s strong results reflected higher energy prices, higher refinery margins and strong gas and power trading.

Shell has debt of $46.4 billion, down from $48.5 billion 3 months ago. Shell’s debt to capitalization ration is 19.3%.

Linking to dividend paying stocks, it is hard not to own oil and gas stocks in a dividend portfolio because the companies have a history of making large profits. In the case of Shell profit was $5 billion and more than doubled to $11.5 billion, owning a stock with that type of earnings means you can hold on to for a long time. Over the years the combination of buybacks and dividends will increase your total return and that is a good thing.

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

Dividends and Britain brings some manufacturing back home

In every country in the world, the political leaders will at some point in time discuss the issue more manufacturing should be done within the borders of the country. This issue is regularly in the news, many elections had the issue as the top issue among voters, recently it was included in President Trump and America First. Politicians hand out tax grants and various incentives to the companies and most of the public agrees or accepts the need to give corporations free money. The companies promise good paying jobs, spin off activities and the community and state and country are better off, or at least the public believes the world is better off with the incentives that without.

In an article by Kate Holton of Reuters, manufacturing in Britain is starting to come back to the birthplace of the industrial revolution. The British founded the modern factories but over the decades, price was the number one concern, which meant factories moved from the developed world to Asia and in particular China. The Chinese government built the infrastructure that it was worth moving production to China and sending the goods back to Britain or the US to sell at a profit, than make the goods in the host country

According to Tony Hague, President of PP Control & Automation, it takes a bit of a seismic shock to make companies re-evaluate strategy, but price becomes fairly irrelevant if you can not get the stuff. In the past 2 years, his company has received more than $3.1 million worth of work that previously was done in Asia.

A survey by industry group Make UK, of the 132 companies participating in the survey 2/5’s had increased their British supply base. It should be noted the amount of people employed is up but automation and robots are being used in greater numbers.

Roger Crozier, owner of a precision stamping company called Brandauer said in previous years he could not compete against Chinese factories that could churn out products at speed, but with investments in automation, robotics and staff training the dynamics have changed. Now the price may be 5-15% higher, but a couple years it was 30-50% higher.

There are perils involved in the costly and time-consuming process of investing in new machinery, finding new suppliers for materials and building out logistics chains, all with a potential recession on the horizon.

Linking to dividend paying stocks, price and margins are important to maintaining profits to reward shareholders. As an investor, you may want the company to do most of its work in the country you live in, but if they do not make a profit will you keep the shares? Robotics and automation will change some of the pricing. What is important to you?

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

Dividends and Ship owners face risks to extract grains from Ukraine

One of the facts people in general know about Ukraine is that the country is the bread basket of the world. They might not not why, but if you think about the great plains in the US where the wheat grows, you will know the answer. Parts of Ukraine have been growing grains for thousands of years and the wheat goes to the markets in Europe and Africa. In many countries in Africa the government supports the price of wheat which allows food to be bought by the poorest of citizens. When Russia invaded Ukraine, the flow of grains was cut off.

For months, Turkey and the United Nations have been concerned and trying to negotiate to move the wheat and other grains from the Ukraine to markets. Russia wanted shipments to be halted because that would be a revenue source for Ukraine to buy more defense items.

In an article by Aya Batrawy of the Associated Press, agreements have been reached to allow ships to go to the ports in the Ukraine and deliver grains. That is the easy part to reach agreement. The hard part is every war leaves military explosives in the sea and near commerce generating facilities.

The theory according to Guy Platten, secretary general of the International Chamber of Shipping which represents 80% of the world’s merchant fleet is the grains would be moved through the Black Sea from the Ukrainian ports to Turkey where it would be inspected by people from Ukraine, Russia, Turkey and the United Nations. To journey from the Black Sea to the Mediterranean Sea the ships have to travel through the Bosphorus Strain in Turkey. That is the journey of the ships but in a war how does it work and will the ships be safe?

The grains to be sent include wheat, barley, corn and sunflower oil.

According to Michelle Wiese Bockmann, a shipping and commodities analyst at Lloyd’s List, a global shipping news publication, the big issue for the shippers is how much will be the insurance rates for the ships? A ship typically carries between 20 and 25 seafarers, will they be safe?

Prior to the war, approximately 4 to 5 million tonnes of grain were moving from Ukraine in addition Russian grains were being exported. In May, Ukrainian shippers were able to ship 1.5 to 2 million tonnes in May and June, but it cost more in terms of smaller loads on trains and smaller ships on rivers. Grain is one of those commodities where freighters make a great deal of economic sense to transport it.

Linking to dividend paying stocks, we all hope the normal cycles of the economy go through the normal cycles of economy and peace or stability is normal. Companies can deal with some weather concerns but man made wars are a different thing, because the time frame lasts longer. A weather event while damaging tends to be short in duration (less than a week until rebuilding time). When there are market opportunity people can find alternatives but there are less costly methods to doing logistics.

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

Dividends and Alphabet posts higher quarterly revenue

Alphabet is the parent company of Google the search engine and everyday, millions of people go to Google and search something. At that moment the aspect someone is searching for is recorded and if a company can advertise to the person, the ads will come up. Google makes its money selling advertising.

In an article from Reuters, Google’s ad business accounted for 81% of the quarterly revenue with sales of $56.29 billion falling short of expectations of $56.67 billion.

Over profit for the company in the quarter was $16 billion or $1.21 a share compared to the estimated $1.29 a share.

One of the ratios investors look at is costs to sales. Google has been averaging gross profit margins as high as 60%, Google similar to many tech companies has slowed down its hiring to better manage expenses.

Cloud computing is important to Alphabet as Google is the second largest cloud computing company behind Amazon and ahead of Microsoft.

Linking to dividend paying stocks, you can think of companies anyway you wish to, but as investors you want to know how do they make their money and what are their margins. In the case of Alphabet it sells advertising but we all know it as search engine. As the markets become greater segmented, companies need to buy advertising.

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