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Altria’s Tobacco Business Remains Resilient But Longer-term Growth Uncertainties Linger

Altria's third-quarter earnings report highlighted the tobacco category's resiliency during the pandemic. With consumers spending less on gas and entertainment, plus having more opportunities to smoke while working from home, U.S. cigarette volumes increased last quarter for the first time in years. Similarly, Altria's volume declines continued moderating from a 7% loss in early 2019 to a [...]

October 30th, 2020|Uncategorized|

Exxon Plans to Maintain Dividend in 2021 Contingent on Businesses Getting Back to Normal Cycle Lows

Exxon maintained its dividend for the fourth quarter despite reporting another set of weak earnings results this morning. While Exxon's operating cash flow improved from $0 in the second quarter to $4.4 billion last quarter, the firm remained far from covering its capital expenditures ($3.8 billion) and dividend ($3.7 billion). Despite this ongoing cash flow deficit, management's [...]

October 30th, 2020|Uncategorized|

Omnicom’s Dividend Remains a Top Priority But Digital Acceleration Creates Longer-term Uncertainty

Omnicom reported earnings on October 27. Organic revenue fell 12% as clients in struggling industries such as auto (10% of sales), retail (7%), travel and entertainment (5%), and energy (1%) reduced their marketing spending. Source: Omnicom Earnings Presentation Omnicom's sales decline was better than the company's 23% slump in the second quarter. But investors were disappointed by [...]

October 30th, 2020|Uncategorized|

Valero Stays Committed to Dividend But Needs 2021 Demand Recovery

Valero reported earnings on October 22, recording its second straight quarterly loss as the refining industry continues to be upended by the pandemic. Valero's refineries process crude oil into gasoline, diesel, jet fuel, and other products. With fewer people flying and driving during the virus outbreak, fuel demand remains around 15% below pre-crisis levels. Meanwhile, Valero's feedstock costs have [...]

October 28th, 2020|Uncategorized|

Energy Transfer Cuts Distribution by 50% to Prioritize Deleveraging

Energy Transfer is the latest midstream MLP to slash its distribution, announcing yesterday evening that it will chop its payout in half. Management will get to explain their rationale for the distribution cut when Energy Transfer reports earnings on November 4, but this action was necessary to address the firm's fragile balance sheet. As we discussed in July, Energy [...]

October 27th, 2020|Uncategorized|

Intel Falls on Soft Demand and Remains Under Review for Potential Sale in Our Portfolio

Intel slumped more than 10% on October 23 after reporting third-quarter earnings results. Sales fell 4% year-over-year as consumers opted for cheaper laptops and companies and governments pulled back on datacenter spending. These unexpected COVID-driven headwinds tilted Intel's mix towards lower-priced products, causing gross margins to surprise on the downside as well. Many of these dynamics are [...]

October 26th, 2020|Uncategorized|

Wells Fargo’s Dividend Coverage Improves as Profits Stabilize But Growth Headwinds Persist

Wells Fargo remains challenged by elevated restructuring costs, ongoing legal and remediation charges tied to its fake-accounts scandal, and low interest rates, which reduce the profits earned by its lending businesses (about 50% of revenue). Unlike its peers, Wells Fargo can't expand its balance sheet to help offset margin margin compression in its loan book. [...]

October 23rd, 2020|Uncategorized|

AT&T Shows Signs of Stability as Business Evolution Continues

AT&T shares rallied 5% in early trading today following the company's third-quarter earnings results. The media and telecom giant's revenue declined 5%, better than analysts expected and an improvement compared to the second quarter's 9% slump. AT&T's wireless business (around 40% of sales) recorded its highest level of postpaid phone net adds and lowest churn rate [...]

October 22nd, 2020|Uncategorized|

JPMorgan’s Dividend Remains Covered But Economic and Regulatory Uncertainty Persists

On September 30, the Federal Reserve extended through the fourth quarter its capital preservation measures on America's biggest banks. Banks with more than $100 billion in assets are not allowed to repurchase shares, and their dividends cannot be increased or exceed net income generated over the past year. Capping the amount of capital that can be returned [...]

October 13th, 2020|Uncategorized|

IBM to Spin Off Infrastructure Services; Dividend Investors Expected to be Kept Whole

Arvind Krishna took over as IBM's new CEO in April 2020 and has wasted no time putting his mark on the company. On October 8, IBM announced plans to spin off its managed infrastructure services business, which accounts for about 25% of IBM's revenue.  The spin-off transaction is expected to be tax free and close by the [...]

October 9th, 2020|Uncategorized|

Federal Realty’s Rent Collection Improves to 83% in Q3 Despite Ongoing Retail Headwinds

Federal Realty on Wednesday presented a business update. The retail REIT said it collected 83% of third-quarter rent, up from 68% in the second quarter. This trend gave management the confidence to raise Federal Realty's dividend by 1% in August, marking the company's 53rd consecutive annual increase. Source: Federal Realty Data, Simply Safe Dividends While higher [...]

October 7th, 2020|Uncategorized|

Enterprise’s Distribution Continues to Look Safe But Midstream Headwinds are Worth Monitoring

Build it and they will come. That was the midstream industry's mantra for much of the last decade as some of the largest firms combined to nearly triple their annual spending on pipelines, storage facilities, and other assets. Source: Simply Safe Dividends, Company Filings This rapid buildout of America's energy infrastructure was in response to [...]

October 7th, 2020|Uncategorized|