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Exxon’s Dividend Hinges on Oil Rebound and Management’s Tolerance of Higher Leverage

None of the oil majors can cover their capital spending and dividends at today's oil price, even after slashing their investment plans. Oil needs to be closer to $50 to $60 per barrel for these companies to breakeven on their obligations, according to data from Bloomberg. Source: Bloomberg, U.S. Energy Information Administration, Simply Safe Dividends The price of oil has started to rebound off its April lows with lockdowns being lifted and supply falling. But at today's level near $35 per barrel, the oil majors will continue burning through cash. With an estimated breakeven price of $60 per barrel, Exxon is no exception.

May 29th, 2020|

AbbVie Begins Path to Strengthening Dividend Profile After Closing Allergan Acquisition

Shares of AbbVie (ABBV) have had a dividend yield above 5% for most of the past year, reflecting uncertainty about the biopharma company's growth profile. AbbVie's rheumatoid arthritis drug Humira, which in 2019 accounted for over 55% of sales and an even greater share of profits, loses exclusivity in the U.S. in 2023. That long-term hole will need to be filled by other revenue streams to continue supporting the dividend, driving AbbVie's decision last year to purchase drugmaker Allergan in an $80-plus billion deal. After completing its transformative acquisition on May 8, AbbVie can begin working to prove that its long-term outlook remains favorable even as Humira revenue starts declining in a few years.

May 28th, 2020|

NHI Will Decide Dividend’s Fate in June as Largest Tenants Work Through COVID-19 Headwinds

On April 13, we discussed the challenges facing National Health Investors (NHI) due to the COVID-19 crisis:  Overall, the pandemic has increased NHI's risk profile. The REIT has some of the highest exposure to senior housing and skilled nursing, two areas of healthcare that could face the most pressure from the coronavirus outbreak.Coupled with NHI's small scale and its growing number of communities reporting positive COVID-19 tests, some of its weaker tenants may eventually need NHI to reduce their rent if these headwinds intensify or persist. Since then, conditions in the senior housing industry (nearly 70% of revenues) have continued deteriorating. Based on our analysis below, we believe there is increased risk that NHI could reduce its dividend this summer as pressure [...]

May 27th, 2020|

Polaris Amends Credit Agreement, Maintains Dividend, and Expresses Optimism for Recovery

Polaris had good news for dividend investors yesterday when the company announced its regular quarterly payout and shared a brief business update. Earlier this month, we cited concerns about Polaris' leverage ratio (total debt to EBITDA) rising as cash flow declined due to closed dealerships, supply chain disruptions, and high unemployment crimping demand for the firm's products. The immediate concern for the maker of off-road vehicles is rising leverage as cash flow experiences a major shock. Polaris may be at risk of breaching certain financial covenants with lenders, which could threaten the dividend.Moreover, management may opt to be especially conservative with cash as unemployment reaches record highs, crimping demand for the company's high-price products (ATVs, snowmobiles, boats, and motorcycles)....In fact, management expects wholesale demand to drop [...]

May 27th, 2020|
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