Investment

The latest investment strategy menaced by flailing markets: dividend stocks – CNBC

Published

5 years ago

April 8, 2020

A pronounced economic slump sparked by the coronavirus outbreak has imperiled a popular investment strategy: buying dividend stocks.

These stocks have traditionally been highly coveted during periods of market turbulence because they provide shareholders a dividend or a guaranteed return, typically paid out annually out of the company’s profits or reserves.

That investment approach is now floundering due to the coronavirus pandemic as many companies have suspended dividend payments and scrambled to conserve cash given that their revenues have evaporated and swooning financial markets have fueled worries over their ability to repay debt.

Investors are concerned.

“Companies with high sustainable cash flow, in traditional yielding sectors such as telecom, infrastructure & real estate investment trusts, are not expected to cut dividends, so when they do, it is a shock to investors,” Sat Duhra, co-fund manager Asian dividend income strategy at asset manager Janus Henderson told CNBC.

In the last few days, large financial institutions such as HSBC and Standard Chartered have cancelled plans to make dividend payments for 2020. Airbus and Rolls Royce have decided to do the same.

Energy behemoths such as Exxon Mobile and Royal Dutch, which have paid generous dividends in the past, are resorting to cuts in capital spending and raising additional funds, just to keep their dividend promises.

The spotlight is on U.S. banks next. After the Reserve Bank of New Zealand asked banks in the country to put dividends on hold, Australia’s financial regulator followed suit by pushing local banks to do the same.

UK banks have halted payments and there are growing concerns that U.S. banks may cut dividends too.

Duhra of Janus Henderson told CNBC that he has reduced allocations to both energy & banks recently for a number of reasons, including worries around companies’ ability to pay dividends.

The same view holds for real estate investment trusts or REITS in Singapore that were dividend darlings until recently.

“This sector is a now a real concern with respect to dividends, and anything with exposure to retail and hospitality will continue to face pressure. We have sold any exposure to these areas. Singapore REITs have not shown the defensive qualities expected by investors and there may be further stress if dividends do indeed get cut. This is not currently a sector we are looking to add to.”

Given the spate of dividend suspensions, some investors are voicing their displeasure. HSBC investors have called for an extraordinary general meeting to explore options for action against the bank for culling its dividend due this year, the Financial Times reported.

Still, investors may have limited options to extract payouts from companies that have decided to suspend dividends.

Janus Henderson’s Duhra said the dividend policy of a company is at the discretion of the board and it is unusual for companies to guarantee dividends.

“Dividends tend to be linked to earnings”, he said, “which gives companies room to reduce dividends if profits fall sharply.”

As per Janus Henderson’s global dividend index report published late February, companies in Japan and the U.S. ranked the highest in terms of delivering high dividend growth to shareholders in the last decade.

Companies in Europe lagged their global peers while those in Singapore, Hong Kong, Canada did well in 2019.

Oil dividends rose the fastest in 2019 with technology being the leader in dividend payments in the last 10 years.

While large swathes of financial markets have been rumbled, dividend stocks in select sectors still offer potential to investors, according to Credit Suisse, which believes that investor concerns relate to the ability to pay, the willingness to pay and the potential for dividend delays.

While recognizing the current economic realities, the bank is recommending greater exposure to consumer staples, healthcare, real estate and telecom stocks.

Credit Suisse has recently added companies such as Sanofi, BAE Systems, Philip Morris and Elisa to its conviction list while removing big names like Blackrock and BP due to concerns over the sectors they represent.

Let’s block ads! (Why?)

Source link

Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

Source link

Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link

Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link