Day: September 18, 2024

Dividend stocks could soon get a closer look from investors. That’s because the Federal Reserve is expected to cut rates on Wednesday, beginning a new cycle of lower rates, which will bring down Treasury yields and interest rates on savings accounts.

That process makes dividend stocks more attractive. Dividend stocks are likely to move higher as bond yields fall because bond investors will rotate back into dividend stocks in search of yield.

If you’re looking for dividend stocks, a good place to start your search is the S&P 500. Let’s take a look at the three highest-yielding dividend stocks in the broad-market index today.

1. Walgreens Boots Alliance (dividend yield: 11.1%)

If you’re a dividend investor, it’s important to understand the difference between a high-yield stock and a yield trap, and Walgreens Boots Alliance (NASDAQ: WBA) looks like a classic example of a yield trap.

Shares of the pharmacy chain are down a whopping 65% year to date, declining steadily as it’s struggled with a loss of COVID-related revenue, narrowing margins in its pharmacy business, an ongoing decline in the retail business, and challenges related to the misguided acquisition of VillageMD, a primary care clinic, which has led to significant losses in the business.

According to conventional metrics, Walgreens now looks dirt cheap, trading at a forward P/E of just above 3, but that’s based on adjusted earnings. However, that likely reflects investor fears over more write-downs and falling profits in the coming quarter. In fact, the company has taken impairment charges of $13.6 billion this year, mostly related to its acquisition of VillageMD.

It also had a negative free cash flow of $1.5 billion this year.

Walgreens could be forced to cut its dividend again, and the company seems likely to be removed from the S&P 500 soon as its market cap falls below $8 billion. The stock is best avoided.

2. Altria (dividend yield: 7.9%)

Altria Group (NYSE: MO) was one of the top-performing stocks in the market for roughly 50 years through 2017, but that’s changed more recently as smoking rates continue to decline and the company has struggled to evolve with new tastes.

Its $12.8 billion investment in JUUL Labs imploded and it also lost most of its investment in cannabis grower Cronos Group.

More recently, the company acquired NJOY for exposure to the vape market.

Tobacco stocks surged through the spring as investors seemed to sense a turning point as next-gen products went mainstream. Plus, bond investors may be preparing themselves for the rotation into dividend stocks.

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Altria is a solid dividend payer with a yield of 7.9%, and the company has raised its dividend 59 times in the last 55 years.

I’m still skeptical of the company’s ability to grow long-term given the decline in cigarettes, but you could certainly do worse than Altria if you’re looking for a high-yield dividend stock as its 7.9% yield is well-funded and reliable.

3. Ford Motor Company (dividend yield: 5.6%)

Like Altria, Ford Motor Company (NYSE: F) has been a leader in its industry for generations, but the stock has struggled in recent years as the company has lost money in international markets, watched demand for electric vehicles (EVs) plateau, and seems stuck growing slowly in a mature industry.

Shares tumbled following its second-quarter earnings report as the company expects a $5 billion loss in the EV division, and profits fell in the second quarter, due in part to pressure in the EV division and slowing demand.

The good news is that Ford’s other divisions, its combustion vehicle division, and its commercial vehicles, remain highly profitable.

For the full year, Ford expects an adjusted operating profit of $10 billion to $12 billion and adjusted free cash flow of $7.5 billion to $8.5 billion. That makes the stock look cheap, trading at just 4 times its adjusted operating profit and 5 times its adjusted free cash flow.

Ford now pays a dividend yield of 5.6%. If the company can benefit from the growth of hybrid vehicles, the stock could move higher from here. While Ford has underperformed the market for years, it looks like a decent buy at the current price, especially if you’re looking for a high-yield dividend stock.

Should you invest $1,000 in Ford Motor Company right now?

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Should You Buy the 3 Highest-Paying Dividend Stocks in the S&P 500? was originally published by The Motley Fool

(Bloomberg) — JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said whether the Federal Reserve cuts interest rates by 25 or 50 basis points, the move is “not going to be earth-shattering.”

Most Read from Bloomberg

“They need to do it,” Dimon said at a conference on Tuesday. But “it’s a minor thing when the Fed’s raising rates and lowering rates because underneath that there’s a real economy.”

Fed officials are expected to lower interest rates this week for the first time in more than four years. Ahead of the decision, bond traders have been divided over whether the Fed will cut by a quarter-point or a half point as the central bank continues to pursue a soft landing.

Dimon said last month that he doesn’t “think it matters as much as other people think,” citing ongoing economic uncertainty and inflationary pressures. He’s been warning for more than a year that inflation may be stickier than investors expect, and wrote in his annual letter to shareholders in April that his firm is prepared for interest rates ranging from 2% to 8% or more.

On Tuesday at the Georgetown Psaros Center for Financial Markets and Policy’s annual Financial Markets Quality conference, he said again that geopolitical issues — including wars in Ukraine and the Middle East as well as the US’s relationship with China — are his top concern. It “dwarfs any one I’ve had since I’ve been working,” he said.

“People overly focus on, ‘are we going to have a soft landing, a hard landing?’” Dimon said. “Honestly, most of us have been through all that stuff, it doesn’t matter as much.”

Most Read from Bloomberg Businessweek

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• Michael Dell is one of the world’s wealthiest people, with a net worth of more than $100 billion.

• The Dell Technologies founder made his fortune by democratizing the PC and striking shrewd deals.

• Here’s a look at his background, career, and how he spends his fortune.

Michael Dell, the tech entrepreneur who helped bring the personal computer to the masses, ranks among the world’s wealthiest people with a net worth of $108 billion, per the Bloomberg Billionaires Index.

From his early career as one of the youngest CEOs of a Fortune 500 company until now, Dell is used to getting his way. He was only 23 when his company had its IPO in 1988. Dell took the PC maker private in 2013 only to relist it five years later, and has now shifted the company’s focus toward serving the artificial intelligence boom.

Dell lives the extravagant life of a successful business figure as well, complete with all of the private planes, summer homes, and sweet rides you’d expect from a billionaire.

Michael Dell was born on Feb. 23, 1965, in Houston, Texas.

Dell was fascinated with gadgets from a young age. When he was 15, he bought one of the first Apple computers and disassembled it to see if he could put it back together.

Source: Academy of Achievement

When Dell was in high school, he got a job selling newspaper subscriptions.

After figuring out how to target an untapped customer base, he made $18,000 in just one year.

Source: Academy of Achievement

Though he was really only interested in computers, Dell entered the University of Texas at Austin as a pre-med student in 1983.

He spent his spare time upgrading PCs and selling them from his dorm room, making $180,000 in his first month of business. Though Dell never came back for his sophomore year, he returned to his dorm for a photo opp in 1999.

Source: Entrepreneur

In 2018, Dell tweeted out the first financial statement from his dorm PC company.

Dell used the statement to convince his parents that he didn’t have to go back to college.

He sold nearly $1 million worth of computers and, after paying salaries and expenses, made over $198,000 in gross profit.

He officially launched his company in 1984, under the name PC’s Limited.

It soon became one of the fastest-growing companies in the country, raking in more than $6 million in sales in its first year of business.

Source: Entrepreneur

He changed the company’s name to Dell Computer Corp. in 1987, and sales continued to soar.

It went public in 1988, raising $30 million. Dell made about $18 million from the deal, and by 1992, the 27-year-old CEO was the youngest person to lead a Fortune 500 company.

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Source: Entrepreneur, Academy of Achievement

In 1988, he went on a blind date with Susan Lieberman, a fashion designer from Dallas.

The two had an instant connection. “Most men I dated talked about themselves a lot and tried to impress me,” Susan told Texas Monthly. “He was the nicest guy I’d ever met.”

They were married in October 1989 and have four children.

In 2001, Susan Dell designed the inaugural ball gowns for Jenna and Barbara Bush.

She operated a successful boutique in Austin and even had two labels of her own before opening a new fashion brand, Phi, in New York City, which she closed in 2009.

Source: Austin Business Journal, Texas Monthly, New York Magazine

His son, Zack Dell, started following in his dad’s footsteps.

In 2014, at age 17, Zach cofounded his own dating startup Thread. Thread later became a photo-sharing app but is no longer around.

The family’s 33,000-square-foot home outside Austin is called “the Castle” because of its hilltop perch and heavy security presence.

The house boasts eight bedrooms, 13 bathrooms, a tennis court, indoor and outdoor pools, and gorgeous views of Lake Austin.

Source: The Independent

 

Dell also owns a 6,380-square-foot contemporary ranch house in the nearby hills, where the family keeps Arabian horses.

Source: Mother Jones, The Nation

The Dell family has spent vacations at the “Raptor Residence,” a seven-bedroom, 18,500-square-foot compound in Kukio, Hawaii.

Source: Business Insider and The Pinnacle List

Dell loved the resort area of Hualalai so much that in 2006, with the help of Walmart heir Rob Walton, he bought the hotel and resort through his investment company, MSD Capital

Dell started MSD Capital in 1998 to manage his family’s wealth. The firm has made investments in a number of companies, including IHOP and Applebee’s parent company, apparel company Phillips-Van Heusen, and offshore oil drilling company Independence Contract Drilling.

Source: Bloomberg, Pitchbook, SEC filings.

Through MSD Capital, Michael Dell also invested in real estate in Hawaii, Mexico, and California.

The company invests in luxury hotels, commercial and multifamily properties, and land development, and it participates in other real-estate-development funds.

Dell has his fair share of hot wheels as well.

His car collection at one point included a 2004 Porsche Boxster, a Porsche Carrera GT, and a Hummer H2.

Source: MSN

He’s also owned private jets including a Gulfstream V.

Private planes come in handy when Michael and Susan Dell travel for their nonprofit.

Since 1999, the Michael & Susan Dell Foundation has given billions to nonprofits and social enterprises in the US, India, and South Africa.

 

Dell is friends with other tech billionaires.

Salesforce CEO Marc Benioff is a particular buddy. The two of them did a public Fitbit walking challenge in 2014 and Benioff’s team won. But Dell is so competitive (and also a fitness fanatic), that Benioff jokingly suspected that Dell put his Fitbit on his dog to help him score more steps.

Source: Fitbit, Business Insider

CEO to chairman and back again

In 2004, Dell left the helm of his PC company and became chairman. But in 2007, with Dell’s share of the PC market declining, he shook up management, took the reins as CEO, and never let go again. As the PC market continued to decline, he expanded into new markets through new products and acquisitions.

In 2013, the Texan won a long battle to take Dell private, fighting off legendary activist investor Carl Icahn, who wanted to stop the deal, replace the board, and fire Dell.

 

Two years after winning that battle, Dell announced plans to buy EMC for $67 billion.

The financing of a deal this huge was complicated, and at first, skeptics thought it would fall apart, citing everything from tax complications to pushback from investors in VMware, a company EMC mostly owned.

Dell didn’t lose.

Instead, he catapulted his company into a much bigger one with the purchase of EMC. He became the leader of what was then the largest private company in the tech industry.

After five years as a private company, Dell went public again in late 2018 through a complex arrangement that involved buying back shares in VMware, the software business in which it held an 80% stake.

He received a huge windfall in November 2023, when Broadcom closed its $69 billion takeover of VMware.

The PC tycoon owned nearly 40% of the cloud-computing business before it was sold to the microchip giant. As a result, he received well over $20 billion in Broadcom stock and cash in exchange for his stake, filings show.

Dell stock has surged by over 300% over the past two years, as investors bet it will be a key player in the AI revolution.

Dell shares have soared from below $34 in September 2022 to around $115, valuing the company at about $82 billion.

The stock surge likely reflects the company’s pivot to providing a broad suite of AI solutions to corporations, selling everything from servers and data storage to AI PCs, networking, and services.

Dell trumpeted AI’s potential in an interview published this September, saying it would “accelerate and advance scientific discovery” and “make humans happier, healthier, and more successful.”

“I’m incredibly excited about it,” he added. “As with any new thing, there are all sorts of uncertainties and questions, including how’s it all going to happen. Nobody knows, and we love being in the middle of it.”

Source: McKinsey

 

Dell’s net worth has soared to more than $100 billion.

Dell’s surging stock has supercharged its founder’s net worth, raising it from about $45 billion two years ago to $108 billion.

Dell is now one of the dozen or so centibillionaires, and ranks 13th on the Bloomberg Billionaires Index.

Read the original article on Business Insider

This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

Gold might be hitting record highs, but silver is starting to turn investors’ heads once again.

The metal — at once precious and industrial — has surged for four straight days, poking above $31 per ounce for the first time since July.

While the 10% gain this week is already the best since the early pandemic days of August 2020 — and is enough to secure a two-month high — investors likely have their sights set much higher.

There are a few reasons why the second-place metal has potential. First, silver has slightly outperformed gold this year, but gold prices are still elevated with respect to silver on a historical basis when looking at the so-called gold-silver ratio.

When the multiple of gold to silver reaches 80, many investors will look for buying opportunities in silver, betting that the ratio will mean revert. Currently, it stands at 84 but was above 90 only weeks ago as gold was surging. According to DataTrek’s Nicholas Colas, the historical average of the ratio since 1990 is 70, which means silver has room to run long-term versus gold.

Technical analysis of silver prices also reveals long-term pent-up bullish potential, and the two looming peaks in silver’s history at about $50 per ounce could act as magnets for a breakout.

Silver prices surged and shook the investing world in 1980 when Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt attempted to corner the market on silver. The Hunt Brothers’ market manipulation scheme succeeded in inflating prices by 700% after they acquired about one-third of the world’s silver supply.

The trade ended in tears for the brothers, but the price target had been set.

After plummeting to $3 in the 1990s, silver mounted another rally as the global financial crisis kicked into high gear in the late oughts.

Amid the QE 1 and 2 boom years, silver futures hit another peak just shy of $50 per ounce in April 2011 — an appreciation of nearly 170% over the prior year.

Since that second trip to $50, the price again fell and has rallied in fits and starts. The pandemic sparked a rally in 2020 that took silver to $30, and this year, it’s managed to cross the $32 mark.

According to Goldman Sachs, $32 is the big level to watch for silver, which the bank said is “on the verge of a multi-month breakout.” The bank also noted that options on the iShares Silver Trust (SLV) had one of the biggest volume days in years last Friday.

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The bank cited Federal Reserve monetary policy on the verge of its first rate cut in years. But the real appeal may lie with the evolving demand for artificial intelligence, as silver is critical for chip fabrication. Silver investors will be closely monitoring how chip demand evolves this earnings season.

Yet another market narrative about Fed rates and AI.

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