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Altria Faces Long-term Growth Uncertainties But Says Dividend Remains a Top Priority

Altria (MO) shares have slumped over 20% since December 2018 when management announced plans to pay $12.8 billion for a 35% stake in e-vapor leader Juul. During that period, international cigarette manufacturer Philip Morris has seen its stock price appreciate about 7%, and the S&P 500 has gained 22%. Put simply, Altria's untimely investment in Juul has created nothing but headaches for the business and its shareholders (more on that later). Some investors now question if the Marlboro maker's dividend is safe given the stock's unusually high yield near 9%. Altria has had a Borderline Safe Dividend Safety Score since September 2019, and we expect the dividend to remain safe for now. Altria should continue covering its dividend with free cash flow this [...]

May 23rd, 2020|

TJX Officially Suspends Dividend But Commits to Resuming Payouts Once Conditions Stabilize

TJX Companies (TJX) reported earnings on Thursday and officially suspended its dividend through at least the second quarter. The off-price retailer closed all of its stores and online businesses in mid-March, resulting in an unprecedented decline in sales and cash flow. On March 20, we downgraded TJX's Dividend Safety Score to Borderline Safe given risk that stores would stay closed for a longer period of time, increasing the company's need to preserve liquidity: However, if management begins to believe that its stores may be closed for much longer than two weeks, it's not beyond the realms of possibility that the dividend could be temporarily suspended to preserve cash out of an abundance of caution. On April 9, we downgraded the company's Dividend Safety Score to Unsafe as it became clearer [...]

May 22nd, 2020|

Medtronic Increases Dividend 7% Despite Major Decline in Procedures

Medtronic (MDT) reported earnings on Thursday. The medical device company faced a very challenging operating environment but announced plans to increase its dividend by 7%, marking its 43rd consecutive year of payout raises. As expected, the coronavirus crisis caused significant disruption for Medtronic's customers (hospitals, surgical centers, other care facilities). Procedure volumes plunged as health care systems diverted their resources to fighting COVID-19, governments implemented restrictions on elective procedures, and people avoided seeking treatment even for emergency conditions. For the quarter ending April 24, Medtronic's organic revenue fell 25%. COVID-19 reduced sales in China for the entire quarter but only picked up around six weeks of virus-related revenue weakness for the rest of the world. As a result, management expects the current [...]

May 22nd, 2020|

Falling Occupancy, Rising Expenses Increase Pressure on CoreCivic’s Dividend

CoreCivic (CXW) is one of the largest private prison operators in America. The REIT generates 85% of its net operating income (NOI) from managing 50 correctional and detention facilities. CoreCivic also leases properties to government agencies (10% of NOI) and operates residential reentry facilities (5%). Though somewhat controversial, managing prisons has historically been a predictable business. CoreCivic provides an essential service and enjoys contractual cash flow paid by the government, resulting in minimal credit risk and an average contract renewal rate of 94% over the last five years. However, the COVID-19 crisis is pressuring the U.S. private prison industry in several ways. First, occupancy is falling. CoreCivic's prison population fell 3% in April, driving a similar decline in management revenues.

May 21st, 2020|
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