Wells Fargo (WFC) finally appointed a new CEO to lead the bank following a six-month search effort. Charlie Scharf took the job and will start on October 21. The market was pleased, sending shares of Wells Fargo higher by about 4% today. Before taking the job, Scharf was CEO of Bank of New York Mellon (BK), a firm that Warren Buffett's Berkshire Hathaway has an 8.5% ownership stake in. Buffett upped his stake in BNY Mellon in 2017 and 2018, perhaps a vote of confidence in Scharf since he was named the bank's CEO in July 2017. The Wall Street Journal notes that Scharf "has experience with turnarounds" and was tasked with overhauling BNY Mellon. Prior to his work at the bank, Scharf was [...]

Prospect Capital (PSEC) is one of the largest and oldest business development companies, or BDCs.  All BDCs are basically middle market lenders, which means they lend to or take equity stakes in the 200,000 or so subprime businesses that generate about a third of the U.S. economy.Essentially, BDCs serve a market of small companies across the country that regular banks don’t want to touch, helping those businesses fund acquisitions, leveraged buyout transactions, recapitalizations, and growth projects.Prospect Capital's portfolio includes more than 130 investments across nearly 40 industries and nine different investment strategies. The portfolio's annualized yield exceeds 10%, reflecting its higher risk profile.

On September 25, Altria (MO) announced that merger discussions with Philip Morris (PM) ended with no deal. The environment for vaping products weakened significantly over the last month due to increased regulatory uncertainty, which likely prevented the two tobacco giants from reaching an agreement. Philip Morris's stock jumped more than 5% on the news as its shareholders were relieved the company would not expose itself to the more dynamic cigarette and vaping markets in America. However, Altria's stock finished the day slightly lower. It's hard to say why Altria's stock didn't perform better after some uncertainty was lifted. Some speculators may have bought shares in anticipation of Philip Morris paying a premium for the company and headed for the exits once no deal was [...]

This morning Philip Morris (PM) announced that merger discussions with Altria had ended without a deal. Investors responded positively to the news, lifting PM's stock price by about 5% in early trading. As we discussed earlier this month, shareholders were concerned that a merger would increase Philip Morris's risk profile by exposing the company to a more dynamic and challenging business environment in America, where cigarette volumes are declining at a faster rate. The firm's U.S. exposure would have increased from 0% to nearly 40% of net revenues, and Philip Morris would be roped into the latest regulatory drama with Juul (Altria owns a 35% stake in the controversial vaping company). Instead of combining, the companies will focus on working together to make Philip [...]

Increasing regulatory headwinds in recent weeks have clouded the long-term outlook for part of Altria's (MO) business. These issues appear unlikely to threaten Altria's dividend assuming the company remains independent. However, they have created greater uncertainty about the terms Altria would receive if management decides to push forward with a merger with Philip Morris (PM). Due to this uncertainty, which has potential to result in a moderate (10-15%) dividend reduction for Altria shareholders if a merger takes place, Altria's Dividend Safety Score is downgraded to Borderline Safe until more clarity is provided. We plan to continue holding our Altria shares in our Top 20 Dividend Stocks portfolio and expect more information on a potential merger to be known within the next quarter or two.

Lowe's (LOW) was founded in 1946 and is the world’s second largest home improvement retailer. The company operates over 2,100 home improvement and hardware stores (almost all in the U.S.) and helps homeowners, renters, and other customers complete a wide array of projects. The company’s stores are famous for being a one-stop shop for both do-it-yourself (DIY) customers (75-80% of revenue) and professional contractors (20-25% of revenue). A typical Lowe's store stocks more than 34,000 products across virtually every home improvement product category (lumber, paint, appliances, flooring, tools, cabinets, etc.). Approximately 5% of Lowe’s sales are made online today, but the company’s strategy is focused on omni-channels sales to capitalize more of the e-commerce trend.

With roots tracing back to the 1860s, Royal Bank of Canada (RY), or RBC, is one of the oldest and largest banks in the world. The firm is well-diversified across businesses, geographies, and client segments, serving 16 million customers across Canada, the U.S., and more than 30 other countries. RBC operates through five business segments:  Personal & Commercial Banking (49% of earnings): provides a broad suite of financial products and services to individuals and businesses for their banking, investing, and financing needs. Offerings include home mortgages, personal loans, checking and savings accounts, mutual funds, credit cards, auto financing, and commercial loans.  Capital Markets (22% of earnings): RBC is one of the top 10 largest investment banks in the world with with core markets [...]

Shares of Occidental Petroleum (OXY) are down more than 30% since early April 2019 when Oxy emerged as the high bidder for Anadarko. As a result, Oxy's dividend yield topped 7% last month, reaching an all-time high. Although Oxy's dividend continues to look sustainable based on the price of oil today, investors clearly remain concerned about the company's risk profile following its purchase of Anadarako, which closed on August 8. For more background on this major acquisition, please review the in-depth note we published in April 2019 reviewing the deal's strategic merit and dividend implications for Oxy. Here was my conclusion:

Target (TGT) opened its first discount store in 1962 and is now one of America's largest retailers with annual sales of $70 billion and more than 1,800 stores across the U.S. Target’s stores focus on convenient one-stop shopping and competitive discount prices, offering a broad range of products including beauty & household essentials (24% of sales), food & beverage (20%), apparel & accessories (20%), home furnishings & decor (19%), and hardlines (furniture, appliances, etc. — 17% of sales).The company has increased its dividend for 46 consecutive years, making Target a dividend aristocrat and setting it up to be crowned a dividend king in 2022.

Founded in 1945, Walmart (WMT) is the world’s largest retailer with more than $500 billion in annual revenue and over 11,000 stores. About half of Walmart’s stores are located in international markets, where the company has had a presence since 1991. However, the majority of Walmart’s sales and profits are derived from the company’s U.S. stores (64% of revenue) and Sam’s Club (12%).Walmart sells just about everything. From groceries (56% of U.S. sales) to health & wellness products (11%) to general merchandise (32%), the company’s strategy is to be the low-price leader in every product category.In addition to its brick-and-mortar operations, Walmart's website offers millions of products that can be shipped or picked up at one of the retailer's thousands [...]