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Sysco’s Dividend Likely to Remain Safe But Frozen Until at Least Late 2021 as Restaurant Volumes Recover

Sysco remains challenged by the pandemic as restaurants (more than 60% of revenue), schools, hotels, and other foodservice customers continue operating at relatively low capacity levels. The food distributor's revenue has gradually recovered following a 60% decline in late March last year, but sales were still off 23% last quarter. While the operating environment will remain difficult for the next quarter or two, the vaccine rollout is expected to significantly ease restaurant restrictions. This should deliver an immediate pop for Sysco's business as existing customers order more food and supplies. The company has already seen this play out in states such as Florida and Texas where dine-in restrictions are already limited.

February 11th, 2021|

Verizon’s Record Bid for Spectrum Expansion is Unlikely to Impact Dividend

Verizon closed out 2020 with solid financial results.  While sales contracted a modest 3% with minor pandemic related headwinds, earnings grew slightly thanks to margin improvements. Cash flows remained strong and investors were rewarded with Verizon’s 14th consecutive annual dividend increase. Overall, Verizon had a routine year despite the chaos found elsewhere as the world slogged through an economic downturn. But as the global economy continues to stabilize, telecom companies are entering this year with increased instability.

February 6th, 2021|

Magellan Remains Positioned to Preserve Distribution Despite Disappointing Guidance

Magellan on Tuesday reported earnings, closing out a year which management described as having "the most challenging industry and economic conditions experienced in our 20-year history as a public company." Magellan's units slumped more than 4% on the update after management's guidance indicated that this year may not be much better. The firm's distributable cash flow (DCF) fell 20% in 2020, and Magellan's guidance called for DCF to decline another 2% this year. A gradual recovery in fuel demand and the recent completion of various expansion projects will help buoy cash flow, but these factors aren't expected to fully offset continued weakness in crude oil transportation and blending profits. Magellan's crude oil segment (34% of operating income) consists mostly of long-haul pipelines [...]

February 3rd, 2021|

Exxon Expects to Maintain Dividend as Breakeven Oil Price Falls

Exxon believes its cash flow will cover capital expenditures and the dividend this year even if Brent oil prices average as low as $45 per barrel and its downstream and chemical businesses maintain their lowest margins in at least a decade. As part of the firm's earnings presentation on Tuesday, management laid out capital allocation priorities through 2025. Exxon's base plan this year expects Brent prices of $50 per barrel, but the firm highlighted its ability to flex its spending on short-cycle shale projects if market conditions change. Management believes this will enable dividend coverage and maintenance of balance sheet strength at Brent prices of $45 per barrel (versus $58 today) while allowing the firm to continue working on its largest and [...]

February 3rd, 2021|
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