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Realty Income to Acquire VEREIT for $16 Billion; Dividend Remains Secure

Realty Income on Thursday announced plans to acquire VEREIT, a retail REIT about half of its size. The all-stock transaction is expected to close in the fourth quarter of 2021. This large acquisition will not impact Realty Income's dividend policy. If anything, the REIT's dividend coverage should improve moderately. Management expects the deal to increase Realty's adjusted funds from operations (AFFO) per share by at least 10% in year one. Based on the firm's current dividend level and 2021 AFFO guidance, we estimate Realty's pro forma AFFO payout ratio would be 74% this year versus 81% on a standalone basis. 

April 30th, 2021|

Pfizer Decides to Maintain Full Dividend Despite Spin-off as Covid Vaccine Demand Boosts Earnings

Since announcing in July 2019 plans to spin off its established drug business, Pfizer has communicated it would lower its dividend to reflect its reduced standalone cash flow. However, income investors were expected to be kept whole after accounting for the new dividend to be paid by the spinoff, Viatris. This dividend adjustment was expected to occur during the second quarter when Viatris declared its first dividend. But Pfizer on Thursday announced that it will now keep its full dividend intact going forward, resulting in an effective raise for shareholders: "The board has decided to maintain Pfizer’s quarterly dividend at its current rate despite the planned declaration of a dividend payment by Viatris Inc. that would be payable to those Pfizer shareholders that have elected [...]

April 22nd, 2021|

Potential Nicotine Reduction Proposal Weighs on Altria’s Longer-term Outlook

The Biden administration is considering proposals to ban menthol and reduce nicotine levels in cigarettes to non-addictive levels, the Wall Street Journal reported on Monday. If these policies move forward, they will almost certainly face legal challenges from the tobacco industry and take years to implement. Altria’s short-term outlook arguably has not changed. But the long-term consequences of these policies, if enacted, could be severe. Lowering nicotine levels has for decades been discussed as a potential endgame for combustible cigarettes. With less of this addictive chemical in each cigarette, more smokers would quit or pursue other forms of nicotine delivery, and prospective smokers may never develop the habit.

April 21st, 2021|

Coca-Cola’s Volume Returns to Pre-Pandemic Levels; Tax Case Uncertainty Still Looms

With vaccine availability increasing and more economies opening up, Coca-Cola on Monday reported that its total sales volumes in March recovered to levels last seen in 2019 prior to the pandemic. The firm's beverage volumes had declined as much as 25% in April 2020 when numerous countries implemented synchronized lockdowns. While trends slowly improved throughout the year, Coke was still seeing mid-single-digit volume declines through mid-February. The company's return to pre-pandemic volumes is especially impressive given Coke's distribution mix. Nearly half of the firm's revenue is generated from away-from-home channels such as restaurants, convenience stores, movie theaters, and event venues. This part of the business continues improving sequentially but has not yet fully recovered. Even Coke's U.S. restaurant volumes were still down in March [...]

April 20th, 2021|
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