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PPL’s Rumored Merger with Avangrid Provides Interesting Potential

PPL (PPL) is in discussions to merge with Avangrid (AGR), according to The Financial Times. Neither company has publicly confirmed the rumors, and it's possible no deal is reached. However, a marriage of these two utilities could unlock some benefits for PPL shareholders. We've held shares of PPL in our Conservative Retirees portfolio since July 2015, but I've had the stock under review for potential sale for most of this year due to PPL's outsized exposure to the United Kingdom (U.K.). The U.K. accounted for just over half of PPL's 2018 earnings. Besides Brexit-related political instability and currency volatility, my main concern is the profitability of PPL's core electricity distribution operations.

October 15th, 2019|

GM’s Dividend Safety Profile Not yet Affected by Union Strike but the Long-Term Stakes Are High

General Motors (GM) remains locked in its longest labor dispute since 1970, costing the company more than $1 billion according to JPMorgan Chase and The Wall Street Journal. Nearly half of GM's workforce is represented by the United Auto Workers (UAW) union. The automaker's contract with the UAW expired last month, with the UAW's nationwide strike beginning on September 16 as they seek better terms. GM's stock has slumped 12% since the strike began, and its dividend yield now hovers near 4.5%. Many of GM's factories have idled, the company's finished car inventory is drawing down, and each passing day becomes more costly with lost vehicle production.

October 8th, 2019|

Imperial’s Dividend Safety Score Downgraded to Unsafe on Vaping Challenges, Management Change

On September 26, Imperial Brands (IMBBY) lowered its guidance for the year due to challenging conditions in the U.S. vapor market. One week later, Imperial's CEO Alison Cooper stepped down after leading the company since 2010. Ms. Cooper had spearheaded Imperial's push into the vaping category. As a result of these developments, which seem likely to pressure the firm's deleveraging efforts and need to invest in next-generation products (NGP), we are downgrading Imperial's Dividend Safety Score from Borderline Safe to Unsafe. An Unsafe score does not mean a dividend cut is imminent. After all, Imperial's payout is still technically covered by the company's cash flow.

October 7th, 2019|

Starbucks: Impressive Brand Strength and Dividend Growth

The first Starbucks (SBUX) cafe opened in 1971, and the company has since grown to become the world’s largest coffee purveyor with over 29,000 stores in 78 countries. Starbucks stores sell not just premium coffee but also tea, packaged coffee, juices, bottled water, pastries, and various lunch items. In addition, the company licenses several of its products, which are available in supermarkets and stores, and sells through other up-and-coming brands such as Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, and Ethos. In its most recent fiscal year, the vast majority of Starbucks' sales (80%) came from the company’s namesake, company-owned stores. Licensed stores and consumer packaged goods generated 11% and 9% of revenue, respectively.

October 4th, 2019|
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