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Chevron’s Balance Sheet Runway Appears Supportive of Dividend For Now

On March 6, we discussed why Chevron appeared to have one of the safest dividends in the energy sector. Days later, the price of oil plunged from around $45 per barrel to below $35 as Saudi Arabia engaged Russia in a price war for market share. At the time, we shared our thoughts that the price of oil could remain very weak for at least a few quarters, if not for more than a year. Since then, a bad situation has only gotten worse. With the coronavirus pandemic suddenly bringing many parts of the economy to a standstill and depressing short-term demand for fuel, last week oil suffered its worst loss since 1991, settling near $20 per barrel. This is an unprecedented environment for oil [...]

March 21st, 2020|

McDonald’s Says Dividend Remains “a paramount priority”

In a market filled with uncertainty, McDonald's CEO Chris Kempczinski provided income investors with a vote of assurance during his interview with CNBCtoday:  "The dividend for us is a paramount priority and so there's no changes planned for that." McDonald's is one of the few restaurant stocks positioned to continue its dividend during the coronavirus pandemic. Mr. Kempczinski said that only 50 of the company's 14,000 U.S. restaurants are closed, and that's only because they were located in larger buildings such as offices which are no longer open. McDonald's generates the majority of its business through drive-thru, delivery, and curbside pick-up, positioning it better than most to continue operating. Given people's essential need for food, management expects governments will ask them [...]

March 20th, 2020|

Store Closures Could Raise V.F. Corp’s Need to Preserve Capital Despite Stable Long-term Outlook

The coronavirus outbreak has prompted a growing number of retailers to temporarily close their stores to help slow the spread of the virus. Earlier this week V.F. Corp (VFC) announced plans to shutter its North American stores through April 6 in addition to previously announced closures throughout Europe and Asia. With revenue set to take a big hit for at least several weeks, retailers must decide how cautious to be with preserving capital.  Company-owned stores account for about 30% of V.F. Corp's revenue and provide the biggest hit to profitability when demand drops due to their high fixed costs. Online sales contribute another 10% and could be relatively more resilient during this period, but the remaining 60% of sales are generated from selling its [...]

March 20th, 2020|

Sysco Pivots to Serve Retail Grocers, Maintains Dividend For Now

The novel coronavirus outbreak has triggered temporary store closures and social distancing restrictions designed to slow the virus' spread.  The end result has been unprecedented disruption for most of Sysco's food distribution customers, including restaurants (62% of sales), hotels (9%), and schools and governments (9%). Based on the analysis shared below, we are downgrading Sysco's Dividend Safety Score to Borderline Safe and plan to sell the shares of Sysco that we hold in our Conservative Retirees portfolio on Monday, March 23. To show how rapidly the operating environment has changed, OpenTable, a widely-used online reservation platform, reported a 92% year-over-year drop in restaurant bookings in the U.S. for Thursday, March 19. As you can see, the trend has significantly accelerated over the last 10 [...]

March 20th, 2020|
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