Day: September 4, 2024

Recessions can be scary and have real-world consequences on jobs and the stock market. However, they are a part of life as a long-term investor. Recessions can threaten weak companies that lack the fundamental strength to survive economic downturns.

How do you know a business can survive tough times? Dividends are a great litmus test. Look for companies that can share their earnings with investors and continue increasing that payout through recessions. The U.S. economy has fallen into recession four times since 1990.

Investment management company T. Rowe Price (NASDAQ: TROW) has raised its dividend in all four recessions as well as annually for the last 38 years. Here is the secret behind T. Rowe Price’s longevity and why it could be an excellent buy for any long-term investor today.

A business built on the markets

The financial markets are the core avenue to building wealth in the modern world, but most people don’t have the time, desire, or education to manage all their investments independently. Investment management companies like T. Rowe Price sell various financial products, such as mutual funds, offer advisory services to clients, and operate retirement plans for employers. T. Rowe Price primarily generates revenue by charging fees on the collective $1.6 trillion in assets it manages.

T. Rowe Price’s assets under management (AUM) grow when clients invest more money in its products and services or when the assets themselves appreciate. The U.S. stock market continues to increase over the long term, and that builds growth into T. Rowe Price’s business. However, it also makes the company susceptible to market crashes because asset prices decline, and scared clients might pull their funds out of the markets.

You can see the occasional decline during recessions (2001, 2008, 2020), but the long-term trend points up:

Iron-clad financials support generous shareholder returns

T. Rowe Price gushes cash profits; the company has few expenses besides its employees, which means management can be very generous to shareholders. The company has gone beyond annual dividend raises and paid special dividends twice over the past decade. These are one-time dividends and usually far larger amounts than the typical payout. During that time, T. Rowe Price repurchased 15% of its total shares, which helped boost the stock’s price by increasing earnings per share.

Most importantly, management can do this without sacrificing the company’s financial health. Today, T. Rowe Price has $2.7 billion in cash and zero debt. When the next recession comes, management can supplement any dip in its profits with the cash it already has.

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Why T. Rowe Price is a buy today

One risk T. Rowe Price faces is that investors have increasingly moved to passive investment funds over the past decade. T. Rowe Price specializes in actively managed funds that charge higher fees than a passive fund that might follow a market index and charge investors less. This year, total assets in passive investments surpassed active for the first time, which could stunt T. Rowe Price’s long-term growth.

That said, the stock seems priced appropriately for that risk. Shares trade at a forward P/E ratio of 12 today, below its decade average of 15. Analysts believe T. Rowe Price will still grow earnings by almost 7% annually over the long term. Again, the stock’s valuation is pretty reasonable for that expected growth. Even if the stock’s valuation remains the same, investors could still see total annualized returns of around 11% because the dividend yield is 4.6% today.

T. Rowe Price could fall short of growth, and investors are getting a high-yield dividend stock that will likely continue raising its payout. That’s a solid worst-case scenario. On the other hand, the stock could outperform the market if the business delivers as expected. This heads-you-win, tails-you-still-win investment scenario makes the stock a buy today.

Should you invest $1,000 in T. Rowe Price Group right now?

Before you buy stock in T. Rowe Price Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and T. Rowe Price Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 26, 2024

Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends T. Rowe Price Group. The Motley Fool has a disclosure policy.

This 4.6% Yielding Finance Stock Raised Its Dividend Through the Past 4 Recessions was originally published by The Motley Fool

GE Aerospace‘s (NYSE: GE) shares declined by more than 5% as of 11 a.m. ET today. It’s not often you can blame a stock price decline on an analyst downgrade of another company, but in this case, it’s applicable. Wells Fargo‘s downgrade of GE’s principal partner, Boeing, sent a shock wave through both companies’ share prices.

Should GE Aerospace prospects also be downgraded?

A Wells Fargo analyst downgraded Boeing stock to underweight, arguing that Boeing’s cash-flow difficulties will run into the next investment cycle for the airplane manufacturer. That’s an issue for GE because it’s the leading engine provider to Boeing. Its joint venture, CFM International, provides the sole engine on the Boeing 737 MAX, and GE provides the sole engine the Boeing 777X and one of two engine options on the 787.

Any push-out of the development of a new Boeing model will negatively impact GE, not least as the company develops engines in anticipation of Boeing’s development. GE typically makes money from multiyear servicing of airplane engines after they are sold into new airplanes.

What it means to GE Aerospace investors

While this is merely an analyst opinion, it is based on solid arguments. Boeing looks highly unlikely to meet its medium-term cash-flow target, and new airplane development will take years and cost significant amounts of money.

Still, it’s worth noting that Boeing isn’t abandoning airplane manufacturing anytime soon. Moreover, while a potential equity raise (to help fund new airplane development) isn’t great news for Boeing shareholders, it’s something GE investors should be agnostic over.

After all, an airplane produced with the financial backing of an equity raise will likely be similar to one made without it, and GE Aerospace will benefit all the same.

Should you invest $1,000 in GE Aerospace right now?

Before you buy stock in GE Aerospace, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and GE Aerospace wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

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See the 10 stocks »

*Stock Advisor returns as of September 3, 2024

Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Here’s Why GE Aerospace Stock Slumped Today was originally published by The Motley Fool

Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.

Mar-a-Lago Profits Quadruple Since Donald Trump’s Presidency, Could Money-Making Property Keep Him From Selling DJT Stake?

Former President Donald Trump will be free to sell his stake in Trump Media & Technology Group Corp (NASDAQ:DJT) soon, but he might not have to thanks to the success of his Mar-a-Lago club.

What Happened: Trump’s Mar-a-Lago club and residence has made headlines for years and was one of the many talking points during a civil fraud case against the former president.

Trump purchased the 1100 S. Ocean Boulevard property in Palm Beach, Florida for a reported $7 million to $8 million back in 1985.

Check It Out:

Mar-a-Lago was valued at $18 million to $27 million by an assessor and valued at $24.15 million by Zillow. An expert who spoke on behalf of Trump’s team during the civil trial said the property could be sold for $1 billion to the likes of Bill Gates or Elon Musk as it is a one-of-a-kind property.

While the $1 billion price tag is high, a new report sheds light on how much money Trump’s famous property is making.

A Forbes report said profits at Mar-a-Lago have quadrupled since Trump left the White House in 2021. Among the ways the club makes money are rising membership dues, political fundraisers and other hosted events like weddings.

In 2023, the club took in around $40 million, which is double what the club made in 2019 before the COVID-19 pandemic put a damper on events. The figure is also triple what Mar-a-Lago made in 2014 before Trump started his political career.

The report says Mar-a-Lago brought in $90 million in the four years Trump was serving as the president of the United States. The three years after Trump left the White House have brought in $105 million in business.

Along the growing revenue, the annual costs to run Mar-a-Lago have mostly stayed in the $12 million to $16 million range. The profit margin went from 9% in 2011 to 60% in 2023 according to the report, with $22 million in 2023 profit.

“It is actually the best year we’ve ever had at Mar-a-Lago,” a manager told Forbes.

The club currently caps members at 500, who pay annual dues estimated at $15,000. Initiation fees are $700,000 and could rise to $1 million soon, with Forbes said the club has started a waiting list with all 500 spots filled.

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Why It’s Important: Trump’s political rise and past history as a president has helped boost the notoriety of the club and also the demand for memberships and to host events at the Florida property.

With Trump owning 100% of the club, the rising profits could help the former president with his mounting legal costs and 2024 election campaign. This could be potential good news for shareholders of Trump Media & Technology Group.

Trump owns 114,750,000 shares of the media company he co-founded, representing 64.9% of the company. By the end of September, Trump will be able to sell his stake in the company and maintain control, as Benzinga previously reported.

The decision of whether or not he will sell a portion or his entire stake comes as the social media stock, which owns the Truth Social network Trump frequently posts on, has hit new lows since completing a SPAC merger in March 2024.

The sale of the shares could lead to a further decline in the share price of Trump Media & Technology Group shares, while also freeing up additional capital for Trump to use in his election battle against Kamala Harris.

Trump’s stake is worth around $2.2 billion based on a price of $19.51 at the time of writing.

Trump Media & Technology Group shares opened for trading at $70.90 on March 26 when its long-awaited SPAC merger with Digital World Acquisition was completed.

While the company had a market capitalization of $8 billion and Trump’s net worth soared to $6.4 billion, the stock quickly fell after the public debut and has fallen in recent weeks after Trump was found guilty of 34 counts of falsifying business records.

Trump faces a $355 million fine from a previous ruling in a New York court, and has spent hundreds of millions on legal fees related to several court cases.

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This article Mar-a-Lago Profits Quadruple Since Donald Trump’s Presidency, Could Money-Making Property Keep Him From Selling DJT Stake? originally appeared on Benzinga.com

Move over, artificial intelligence (AI)! Wall Street has a new hot trend, and its name is stock-split euphoria.

A stock split allows publicly traded companies the ability to adjust their share price and outstanding share count by the same magnitude. However, these changes are purely superficial and don’t impact a company’s market cap or its operating performance.

Since 2024 began, 13 outstanding companies have announced and/or completed a stock split, including (all are forward-stock splits, unless otherwise noted):

• Walmart (NYSE: WMT): 3-for-1 stock split

• Nvidia (NASDAQ: NVDA): 10-for-1

• Amphenol (NYSE: APH): 2-for-1

• Chipotle Mexican Grill (NYSE: CMG): 50-for-1

• Mitsui (OTC: MITSY)(OTC: MITSF): 2-for-1

• Williams-Sonoma (NYSE: WSM): 2-for-1

• Broadcom (NASDAQ: AVGO): 10-for-1

• MicroStrategy (NASDAQ: MSTR): 10-for-1

• Sirius XM Holdings (NASDAQ: SIRI): 1-for-10 reverse split

• Cintas (NASDAQ: CTAS): 4-for-1

• Super Micro Computer (NASDAQ: SMCI): 10-for-1

• Lam Research (NASDAQ: LRCX): 10-for-1

• Sony Group (NYSE: SONY): 5-for-1

Among these top-notch stock-split stocks are two magnificent, inexpensive companies that are begging to be bought in September, as well as two highfliers that are priced for perfection and worth avoiding.

Stock-split stock No. 1 that can be bought hand over fist in September: Sirius XM Holdings

The first phenomenal stock-split stock you can scoop up with confidence in September is the only company of the 13 listed above that’s set to conduct a reverse-stock split: satellite-radio operator Sirius XM Holdings.

Whereas most companies completing reverse splits are doing so from a position of operating weakness, this isn’t the case with Sirius XM. Its roughly 3.85 billion outstanding shares have held its stock in the mid-single-digits for a decade, which might be a deterrent for some institutional investors who deem its low share price too risky. This reverse split will take place following the merger of Sirius XM with Liberty Media’s Sirius XM tracking stock, Liberty Sirius XM Group in a little over week, and likely make shares more attractive to big-money investors.

What investors get with Sirius XM is easily identifiable competitive advantages. For example, it’s the only licensed satellite-radio operator in the country, which affords it substantial subscription pricing power.

Sirius XM also generates its revenue differently than terrestrial and online radio providers. Instead of relying almost exclusively on advertising, as traditional radio companies do, Sirius XM has generated 77% of its net sales from subscriptions through the first-half of 2024. People are much less likely to cancel their service during periods of economic turbulence than businesses are to pare back to marketing budgets at the first sign(s) of trouble. In other words, Sirius XM is better positioned to navigate uncertain economic climates.

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A forward price-to-earnings (P/E) ratio of less than 10, coupled with a dividend yield of 3.4%, makes Sirius XM stock quite the bargain for opportunistic long-term investors.

Stock-split stock No. 2 to purchase with confidence in September: Sony Group

The other magnificent stock-split stock that’s begging to be bought in September is none other than Japan-based electronics goliath Sony Group. Sony’s American Depositary Receipts (ADRs) are set to undergo a 5-for-1 split on Oct. 8.

Even though we’re coming up on four years since Sony introduced the PlayStation 5, and it’s perfectly normal to see gaming console sales taper off late in the cycle, Sony has found a couple of ways to boost one of its top revenue channels.

For instance, it’s increasing the price of PlayStation 5 by about 19% in Japan to counter challenging economic conditions. It’s also seeing strong subscription sales growth from PlayStation Plus, which allows subscribers to play games with their friends and store gaming data in the cloud.

Though it’s best-known for gaming, Sony Group is a diverse company. It’s one of the primary suppliers of image sensors used in smartphones. With telecom companies upgrading their wireless networks to support faster download speeds, consumers and businesses have been steadily trading in their old devices for new ones that are 5G-capable. The 5G revolution is providing a healthy boost to Sony’s Imaging and Sensing Solutions segment.

A forward P/E of 16 is a fair (if not inexpensive) price to pay for a wonderful company that’ll likely be introducing a new gaming console in about two years’ time.

The first stock-split stock to avoid in September: Nvidia

However, not every stock-split stock is worth buying. Even though Nvidia has been the hottest megacap stock on the planet since the start of 2023, and its H100 graphics processing unit (GPU) is the preferred choice in AI-accelerated data centers, there are too many potential red flags to ignore.

A point I’ve been trying to drive home for months is that there hasn’t been a next-big-thing innovation, technology, or trend that’s escaped an early stage bubble-bursting event in 30 years. This is a nice way of saying that investors always overestimate how quickly new innovations/technologies are adopted by consumers and businesses.

The simple fact that most businesses lack a defined game plan for their AI data center investments strongly suggests that we’re witnessing the next in a long line of bubbles with AI. If and when the AI bubble bursts, I’d expect Nvidia’s stock to be clobbered.

Competitive pressures can also no longer be ignored. Advanced Micro Devices is ramping up production of its MI300X AI-GPU, which is substantially cheaper than the H100, and doesn’t face the same supply chain constraints as Nvidia’s chips.

Beyond external competition, Nvidia may lose out on valuable data center space from its top customers. The four members of the “Magnificent Seven” that account for around 40% of Nvidia’s net sales are developing AI chips of their own. Even with Nvidia’s H100 and Blackwell chips almost certainly hanging onto their computing advantage, we’re witnessing a concerted effort by America’s most-influential businesses to reduce their reliance on Nvidia’s hardware.

Nvidia’s sequentially declining adjusted gross margin suggests we’ve witnessed the peak of the latest hot trend on Wall Street.

The second stock-split stock to shy away from in September: MicroStrategy

The other stock-split stock of the 13 that’s worth avoiding in September is AI-inspired enterprise analytics software company MicroStrategy.

Although MicroStrategy is, technically, a software company, almost the entirety of its $27.2 billion market cap (as of this writing on Aug. 27) is derived from the Bitcoin (CRYPTO: BTC) it holds. As of July 31, MicroStrategy held 226,500 Bitcoins, which is more than 1% of the entire supply that’ll ever be mined. It also makes MicroStrategy the top corporate holder of the world’s largest cryptocurrency.

There are lot of ways to wager on Bitcoin if you’re a crypto optimist. However, buying MicroStrategy stock is, arguably, the worst possible way to do it. With Bitcoin trading at $59,338 per token, as of this writing, MicroStrategy’s Bitcoin portfolio is worth $13.44 billion. Yet, its market cap of $27.2 billion (placing a fair value estimate on the software segment of around $1 billion), implies a value of roughly $115,650 per token. Investors are paying a 95% premium for its Bitcoin assets, which makes no sense.

Another reason to shy away from MicroStrategy has to do with how the company is financing its Bitcoin purchases. With minimal positive operating cash flow generated from its software segment, CEO Michael Saylor has overseen a number of convertible-debt offerings to fund its acquisition of Bitcoin. If Bitcoin were to enter a steep bear market, as it’s done a couple of times over the last decade, MicroStrategy could struggle to meet its debt obligations.

Lastly, I’m not convinced that Bitcoin is in any way superior in the crypto arena. Its scarcity is based on lines of computer code that could, in theory, be altered with community consensus. Most importantly, Bitcoin’s payment network isn’t anywhere close to the fastest or the cheapest. It’s a first-mover network that’s been outdone by third-generation blockchain networks. MicroStrategy tethering its future to Bitcoin looks like a mistake I’d suggest avoiding.

Should you invest $1,000 in Sirius XM right now?

Before you buy stock in Sirius XM, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sirius XM wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 26, 2024

Sean Williams has positions in Sirius XM. The Motley Fool has positions in and recommends Advanced Micro Devices, Bitcoin, Chipotle Mexican Grill, Lam Research, Nvidia, Walmart, and Williams-Sonoma. The Motley Fool recommends Broadcom and Cintas and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

2 Magnificent Stock-Split Stocks to Buy Hand Over Fist in September, and 2 That Are Priced for Perfection and Worth Avoiding was originally published by The Motley Fool