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 [...]

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 [...]

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 [...]

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 [...]

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. [...]

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 [...]

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 [...]

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 [...]

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 [...]

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 [...]

On September 13, Gilead announced plans to acquire oncology company Immunomedics for $21 billion. Once the deal closes, we estimate Gilead's leverage ratio will increase from about 0.4x to around 2.0x, marking its highest level in at least a decade. In light of Gilead's higher financial leverage, we are downgrading the firm's Dividend Safety Score from Very Safe to Safe. [...]

Exxon Mobil has finally drawn a line in the sand with its balance sheet. During its earnings call in late July, the company said it does not plan to take on additional debt during this oil market downturn.  Instead of borrowing more money to fund the dividend until oil prices improve, Exxon hopes to keep [...]

Speaking at an investor conference on September 9, Magellan CEO Mike Mears reiterated his confidence in the firm's guidance and distribution safety. Mr. Mears said demand for gasoline, diesel, and jet fuel tracked Magellan's projections in July and August, keeping the partnership on track to meet its full-year financial targets. "Right now, based on what [...]

Annaly, the largest mortgage REIT, has lowered its dividend twice in the last two years, including a 12% cut announced in June. As we discussed in May 2019, Annaly's dividend has looked risky under our Dividend Safety Score system for years. While we continue to believe that mortgage REIT dividends are unreliable over a full economic cycle, Annaly's [...]

Kraft Heinz hosted its annual investor day on September 15 and announced several actions that improve the firm's dividend safety outlook. Therefore, we are upgrading Kraft Heinz's Dividend Safety Score from Unsafe to Borderline Safe. The packaged food maker previously cut its dividend in February 2019, but its smaller payout continued looking speculative due to the firm's debt-saddled [...]