Super Micro Computer Stock Plunged 37.6% in August: Here's Why
Shares of Super Micro Computer (NASDAQ: SMCI) fell 37.6% in August, according to data from S&P Global Market Intelligence. The server systems builder took two heavy hits last month, and shares are now trading 64% below the peak they reached in March.
Market-moving news
First, Supermicro reported its fiscal 2024 fourth-quarter results on Aug. 6. Earnings came up far short of both Wall Street’s consensus estimates and management’s guidance as Supermicro’s cost of sales grew faster than revenues. Soaring operating expenses also weighed on its net profits. Furthermore, earnings guidance for the next quarter came in below the average analyst’s projections.
Management also announced plans for a 10-for-1 stock split that day, but investors focused on the soft bottom-line result. The stock closed 20.1% lower the next day.
The second big drop came near the end of the month. A popular short-selling service posted a negative review of the company on the same day that Supermicro announced that the filing of its full-year 10-K report would be delayed. It’s hard to say which event hit the stock harder, but the overall effect was a single-session price drop of 19%.
Supermicro’s long-term shareholders are still doing great
The triple whammy of disappointing earnings, late financial filings, and a critical analyst report took the shine off Supermicro, but its long-term performance has still been impressive. There are 3,692 stocks on the U.S. market with at least five years of trading history. Supermicro leads the whole pack with a five-year compound annual growth rate of 95.1%.
So don’t cry for long-term Supermicro investors at this point — more recent trend chasers are the ones who have been left holding the bag.
Moreover, the stock looks reasonably affordable now, trading at 4.9 times trailing sales and 9.5 times forward earnings estimates. The artificial intelligence (AI) boom has created sustained high demand for powerful number-crunching computer systems, and Supermicro remains well positioned to exploit that trend. If you were keeping your hands off Supermicro’s soaring stock earlier this year, this steep price drop just might have created the buying opportunity you were looking for all along.
Should you invest $1,000 in Super Micro Computer right now?
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Super Micro Computer Stock Plunged 37.6% in August: Here’s Why was originally published by The Motley Fool
Verizon Is in Talks to Buy Frontier Communications
(Bloomberg) — Verizon Communications Inc. is in advanced talks to acquire rival telecommunications operator Frontier Communications Parent Inc., according to a person familiar with the negotiations.
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An all-cash deal between the two companies could be announced as soon as Thursday, the person said, asking not to be named discussing non-public information. A representative for Frontier declined to comment. A spokesperson for Verizon didn’t immediately respond to a request for comment.
The Wall Street Journal earlier reported on the talks. Frontier shares jumped as much as 38%, the most since emerging from bankruptcy in 2021, to $38.62. That gives the company a market value of $9.3 billion.
Dallas-based Frontier bills itself as the “largest pure-play fiber internet company in the US.” It reported sales of $5.8 billion in 2023, with about 52% of total revenue from activities related to its fiber-optic products.
With demand for data usage expected to continue to grow, telecommunications providers have been bulking up their broadband offerings. In July, for example, T-Mobile US Inc. said it would invest $4.9 billion in a joint venture with private equity firm KKR & Co. to buy fiber-optic internet service provider Metronet.
Sowmyanarayan Sampath, the head of the Verizon’s consumer group, told investors at a Bank of America Corp. conference on Wednesday morning that the company had a 20-year history offering internet access over fiber-optic lines and would continue to build on that.
“We like the space and we think the business is good,” he said.
In 2015, Verizon sold parts of its landline phone business in California, Florida and Texas to Frontier for $10.54 billion in cash. Frontier later declared bankruptcy, emerging in 2021 with about $11 billion less debt.
Frontier initiated an internal review of its business earlier this year. The company has faced pressure from activist investor Jana Partners to improve its returns.
–With assistance from Christopher Palmeri.
(Updates with industry details beginning in fifth paragraph.)
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Age Of Mythology: Retold Leads Xbox Game Pass September 2024 Lineup
Microsoft Corp. MSFT unveiled the first wave of games for Xbox Game Pass in September 2024 and it’s packed with a diverse lineup that promises something for everyone.
- Age of Mythology: Retold (Cloud, Xbox Series X|S and PC) – Sept. 4
- A real-time strategy game that blends historical warfare with global mythologies, allowing players to battle both nations and mythical creatures.
- Expeditions: A MudRunner Game (Cloud, Console and PC) – Sept. 5
- An action-packed off-road adventure that combines vehicle exploration with camp and crew management in untamed wildernesses.
- Riders Republic (Cloud, Console and PC) – Sept. 11
- An extreme sports sandbox featuring mountain biking, snowboarding, skiing and gliding in a vast open-world environment, supporting both single-player and multiplayer modes.
- Train Sim World 5 (Cloud, Console and PC) – Sept. 17
- A detailed train simulation experience that lets players master iconic routes and operate various trains across new cities with enhanced realism.
See Also: Xbox Game Pass Update: Core, Standard Tiers Face Up To 12-Month Wait For New Releases
As new games enter the Xbox Game Pass library, others must make their exit. On Sept. 15, a handful of titles will leave the service, including:
- Ashes of Singularity: Escalation (PC)
- FIFA 23 (Cloud, Console and PC via EA Play)
- Payday 3 (Cloud, Console and PC)
- Slime Rancher 2 (Cloud, Console and PC)
- SpiderHeck (Cloud, Console and PC)
- You Suck At Parking (Cloud, Console and PC)
Players who wish to continue enjoying these games can purchase them at a 20% discount while they remain available on Xbox Game Pass.
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Simon® to Present at BofA Securities 2024 Global Real Estate Conference
INDIANAPOLIS, Sept. 4, 2024 /PRNewswire/ — Simon®, a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment and mixed-use destinations, announced today that the Company will present at the BofA Securities 2024 Global Real Estate Conference on Tuesday, September 10, 2024 at 10:20 a.m. Eastern Time.
A live audio webcast of the presentation will be accessible from the Investors section of the Company’s website at investors.simon.com. An online replay will be available following the presentation at the same location.
About Simon
Simon® is a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment and mixed-use destinations and an S&P 100 company (Simon Property Group, NYSE: SPG). Our properties across North America, Europe and Asia provide community gathering places for millions of people every day and generate billions in annual sales.
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Short seller Hindenburg takes aim at AI hype, sinks two companies’ stocks
Investors continue to gobble up shares in AI companies, eager to profit off the red-hot sector, but the sharks are circling. The activist short-selling firm Hindenburg Research, famous for its market-making takedowns of top companies such as Block and Adani Group, published two reports last week on companies it views as unduly benefiting from the AI boom: the server and storage manufacturer Super Micro, and the software company iLearningEngines. Both companies’ share prices fell sharply in response.
The reports come amid escalating hype around AI companies, from hyperscaler giants such as Microsoft and Google to hardware firms and even utilities that could profit from the demand. Last week, the GPU manufacturer Nvidia announced better-than-expected earnings results but its stock price still dropped, reflecting growing caution about the frothy industry, especially among institutional investors.
The twin reports from Hindenburg are an even stronger signal of bubble fears, with short-selling firms known to aim at companies or sectors they view as overvalued. Some, including Hindenburg, will take short positions—or bets that a stock will go down—on a company before publishing their findings, hoping they will reap a handsome return from a falling share price.
View this interactive chart on Fortune.com
‘Accounting manipulation’
Hindenburg’s first report came on Tuesday focused on Super Micro, a manufacturer of hardware such as servers and motherboards that are key to AI companies. Prior to Hindenburg’s research, Super Micro had a market cap of around $35 billion, though it fell as much as 26% in the day following the report and has remained around $26 billion.
Super Micro already had a track record of dubious practices, including a temporary delisting from Nasdaq in 2017 for failing to file financial statements, along with SEC charges in 2020 for “widespread accounting violations” that came with a $17.5 million settlement.
In its report, Hindenburg alleged that Super Micro had “ridden the wave of AI enthusiasm” while continuing what the short seller deemed “accounting manipulation.” Based on interviews with former employees and customers, Hindenburg found fresh evidence that Super Micro rehired top executives who were involved in the previous scandal, pushed salespeople to ship defective products to meet quotas, and maintained relationships with undisclosed parties, including two Taiwan-based entities owned by the youngest brother of Super Micro’s CEO. “Basically it’s a governance issue,” a former executive told Hindenburg.
The day after the report, Super Micro issued a press release announcing that it would not file its annual report with the SEC on time in order to “complete its assessment of the design and operating effectiveness of its internal controls over financial reporting.”
When reached for comment, a Super Micro spokesperson shared a CEO letter from Tuesday filed with the SEC on Tuesday stating that neither the Hindenburg report nor the delayed annual filing “affects our products or our ability and capacity to deliver the innovative IT solutions that you rely on every day.” The letter added that the report contained “false or inaccurate statements about our company including misleading presentations of information that we have previously shared publicly.”
Despite the negative outlook, Hindenburg did admit a bull case for Super Micro, which would entail “meteoric growth” in response to demand for AI chips. The short-selling firm cited Bloomberg, where analysts forecast 87% revenue growth in 2025—or at least, before the report came out.
‘Artificial partners and artificial revenue’
Hindenburg’s report on iLearningEngines from Thursday proved even more damning. Similar to Super Micro, Hindenburg characterized iLearningEngines as a company taking advantage of the AI wave, though the short seller expressed skepticism that the company ever had a focus on the emerging sector prior to the boom.
iLearningEngines went public through a SPAC in April 2024, though its share price sat around just $3 before the report, falling to under $1.50 after Hindenburg’s investigation with a market cap of around $175 million.
While iLearningEngines claims to be an “early pioneer in enterprise AI” through “learning automation” software, Hindenburg alleged that the company lied to the SEC during its SPAC process by misrepresenting its partners and revenue streams. Hindenburg also argues that iLearningEngines has “no obvious industry presence” and nonexistent revenue, despite claiming more than 1,000 enterprise customers. “We do not expect it will remain a public company for long,” the short-seller concluded.
“We have reviewed the full report and believe it contains misleading statements,” iLearningEngines said in a statement published following Hindenburg’s report. “We intend to respond in the coming days.”
A spokesperson did not immediately respond to a request for further comment.
While Super Micro and iLearningEngines are smaller companies in the broader AI field, the entire sector experienced a sell-off on Tuesday, the first day of trading in September. Nvidia and other chip manufacturers continued to trade down, with the tech-heavy Nasdaq falling over 3%.
This story was originally featured on Fortune.com
Tim Walz Stocks: Why 99 Million Americans Have the Same Portfolio as the VP Candidate
Like it or not, American politicians are free to trade stocks just like every other citizen, though sometimes they have greater access to non-public information, and the ability to influence laws that have a real impact on private-sector companies.
For example, among the factors putting downward pressure on Chinese stocks in recent months are U.S. export restrictions on high-powered chips and the tech used to make them. Similarly, helpful legislation also has the ability to bolster stocks: Consider the CHIPS Act of 2022, which allocates tens of billions of federal dollars to companies like Intel to help them build new chipmaking plants in the U.S.
In that light, it might seem refreshing, or at least unusual, that Democratic vice presidential candidate Tim Walz does not own a single stock. Not only that, but Walz does not own bonds or real estate, having lived in the governor’s mansion in Minnesota the past six years. Essentially, Walz has no direct ownership of any major financial assets, though he does have pensions from his years working as a teacher and his time as a congressman.
That lack of financial assets makes him something of an outlier in Washington, but among everyday Americans, his position is far from unusual.
According to research from The Motley Fool, 62% of Americans do own stocks. That’s 162 million U.S. adults, but that still leaves a substantial percentage who don’t hold equities. There are 99 million of them.
It’s unclear why Walz doesn’t own stocks. Perhaps he decided to rely on his pensions for retirement. Other Americans may have a number of different reasons for having passed up the wealth-creating engine that is the stock market. Three reasons in particular appear to be common — and if you’re among the people who have been letting one of these things keep you away from stocks, you may want to reconsider.
1. Fear of losing money
The percentage of Americans who own stock has risen notably since the post-financial-crisis era, when it plunged, bottoming out at 52% in 2013.
The best explanation for that pattern is that stock market crashes scare off retail investors. They understandably come to feel that the risk of losing half or more of their investment dollars is too big to take, even if the potential rewards of investing can be substantial.
However, major stock market crashes are relatively rare. The S&P 500 has historically fallen by 30% or more about once every decade. More importantly, though, the broad-market index has always bounced back from those bear markets to recover and set new highs. In fact, it touched another all-time high just weeks ago. The dynamism of the U.S. economy has made the stock market a reliable long-term growth vehicle for investors. Over its history, the S&P 500 has achieved a compound annual return of about 9% with dividends reinvested. That’s a difficult standard to beat over the long term in any asset class.
2. They can’t afford it
Many Americans believe that they can’t afford to invest in the stock market, or that they don’t have enough money to invest to make it worthwhile.
Although it may be hard for those living paycheck to paycheck to put money into savings, you don’t need much money to get started in investing. In fact, a number of major brokerages, including Fidelity and Robinhood, will allow you to buy fractional shares for as little as $1, and with no commissions. Charles Schwab will let you buy fractional shares for just $5.
People looking for more immediate returns on their investments may want to consider dividend stocks, which pay their shareholders a portion of their profits, typically every three months. For many investors, dividend stocks offer the best of both worlds, income and growth.
3. They don’t know how
Once upon a time, investing in the stock market wasn’t so easy. In the pre-internet days, you needed to either call up a stockbroker every time you wanted to make a trade or trust your investments to a financial manager.
Nowadays, it’s as easy as downloading an app on your phone, and most major brokerages can get you set up within 15 minutes. It’s not much different than downloading a payments app like PayPal. You typically just have to prove your identity and connect your brokerage account to a funding source like your bank account.
However, setting up a brokerage account is just half the battle. You also have to make the decision to invest in something. For beginning investors, the easiest option may be to buy shares of an exchange-traded fund (ETF). These are investments that trade like stocks, but actually own entire portfolios, giving investors exposure to a diverse array of stocks. Some are index funds, which (as the name implies) are designed to track the results of benchmark indexes like the S&P 500 or the Nasdaq-100.
If you’re just starting out, a good first investment is the Vanguard 500 Fund (NYSEMKT: VOO), an S&P 500 index ETF that puts your money into all of the stocks in that broad-market index for a very small annual fee.
If you’re looking for another reason to invest, you may want to consider the perspective of a different politician. Back in 2021, then-Speaker of the House Nancy Pelosi argued that legislators should be able to trade stocks, saying, “We are a free market economy. They should be able to participate in that.”
Pelosi is right. Participating in the stock market is one of the easiest and most rewarding financial decisions you can make. It’s never too late to start, even for someone like Tim Walz.
Where to invest $1,000 right now
When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 755% — a market-crushing outperformance compared to 166% for the S&P 500.*
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Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions in PayPal. The Motley Fool has positions in and recommends Charles Schwab, PayPal, and Vanguard S&P 500 ETF. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel, short September 2024 $62.50 calls on PayPal, and short September 2024 $77.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.
Tim Walz Stocks: Why 99 Million Americans Have the Same Portfolio as the VP Candidate was originally published by The Motley Fool
C3.ai Dives After Earnings; Is AI Stock A Buy Now?
Artificial intelligence may well be the next big technological revolution after the internet. But investors looking to participate in this growth story have their work cut out trying to identify whether C3.ai (AI) is a potential leader. That begs the question, is C3.ai stock a buy now?
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How To Buy Stocks: 4 Factors For Finding Quality Trade Ideas
C3.ai reported its first-quarter results after Wednesday’s market close. Sales grew 21% to $87.2 million, above analyst estimates for $86.9 million, and well ahead of the company’s own prediction for $82.5 million at the midpoint. C3.ai reported a loss of 5 cents per share, ahead of views for a 13-cent loss. Still, shares plunged more than 15% in after hours trading.
Shares of C3.ai soared after the company posted its fiscal fourth-quarter results in May and rebounded from the 50-day line. But the stock has given up those gains now.
Shares rose 0.5% on Sept. 3, but are in a downtrend and below the 50-day and 200 day moving averages.
Weakening Relative Strength For C3.ai Stock
C3.ai stock has a Relative Strength Rating of 13, a sharp drop from 97 a year ago. Investor’s Business Daily recommends focusing on stocks with an RS Rating of 80 or above. Its chart is also bearish as the 200-day moving average is above the 50-day line.
The stock has been underperforming the S&P 500 as well.
In January, the S&P 500 rose 1.6% while C3.ai fell 14%. In February, the stock catapulted 50% on fiscal third-quarter results and bullish guidance, while the S&P 500 gained 5%. But most of its gains evaporated in March as the stock fell 27% vs. the S&P 500’s gain of 3%.
It underperformed the index again in April, although fourth-quarter results helped the stock outperform the benchmark index in May as it gained 31% vs. the index’s 4.8% rise. In June and July, the stock fell 2% and 7.6% while the S&P 500 gained 3.5% and 1.1%. In August the index gained 2.3% with C3.ai stock falling 12.8%.
The stock is also prone to drastic swings. On Nov. 20, 2023, C3.ai stock jumped more than 5% but reversed lower to close with a 4.3% loss when Sam Altman was ousted as chief executive from another artificial intelligence specialist, OpenAI. Altman quickly returned to OpenAI, but the news apparently triggered speculative trading as the market continues to search for leaders in the space.
Shift In Pricing Model
However, industry trends have worked in its favor as well. C3.ai stock skyrocketed Feb. 1, when users successfully tapped OpenAI’s ChatGPT artificial intelligence app to generate answers, texts, emails and even write books.
The ChatGPT app reached 100 million monthly active users in two months, beating popular apps like TikTok and Instagram. OpenAI’s partnership with Microsoft‘s (MSFT) ChatGPT uses natural language to help users write emails, write code and find answers to daily questions.
There are other considerations. In December 2022, C3.ai changed its pricing model from subscription to consumption-based pricing.
The move brought the company in line with industry standards for software-as-a-service providers. The practice is common across Amazon.com‘s (AMZN) Amazon Web Services, Alphabet‘s (GOOGL) Google Cloud and Microsoft’s Azure, as well as smaller players.
Consumption pricing works like a utility bill. That is, the higher the consumption, the pricier the service. Since AI customers will benefit from having access to an AI enterprise platform with unlimited use and developer licenses, the switch to consumption pricing could drive revenue growth, but not immediately.
C3.ai CEO Thomas Siebel has indicated the consumption-pricing model will also lower barriers to entry because companies do not have to be tied to long contracts.
Artificial Intelligence News And AI Stocks To Watch
Is C3.ai Stock A Buy Now?
Redwood City, Calif.-based C3.ai makes software applications equipped with artificial intelligence that can be configured for different purposes.
The software can make networks more reliable by detecting fraud, balancing inventory and demand, solving supply-chain issues and increasing energy efficiency. It can also help defend against money laundering.
The enterprise software stock popped on its first day of trading on Dec. 9, 2020. Shares leapt from an IPO price of 42 to finish at 92.49 that day.
C3.ai stock has some work to do to improve its Composite Rating, which stands at 26 out of 99. The EPS Rating lags even more, at 14. Shares are also below the 50-day moving average with no base in sight yet. The stock is not a buy now.
To find the best stocks, check out IBD Stock Lists and IBD Data Tables.
Please follow VRamakrishnan on Twitter/X for more news on AI stock.
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MEI Class Action Notice: Robbins LLP Reminds Stockholders of the Methode Electronics, Inc. Class Action
SAN DIEGO, Sept. 04, 2024 (GLOBE NEWSWIRE) — Robbins LLP reminds investors that a shareholder filed a class action on behalf of all persons and entities that purchased or otherwise acquired Methode Electronics, Inc. MEI common stock between June 23, 2022 and March 6, 2024. Methode designs, engineers, and produces mechatronic products for Original Equipment Manufacturers (“OEMs”).
For more information, submit a form, email attorney Aaron Dumas, Jr., or give us a call at (800) 350-6003.
The Allegations: Robbins LLP is Investigating Allegations that Methode Electronics, Inc. (MEI) Misled Investors Regarding its Business Prospects
According to the complaint, defendants’ failure to disclose adverse facts regarding problems at the Company’s Monterrey facility and efforts to transition away from the GM center console program caused Methode stock to trade at artificially inflated prices during the class period.
Specifically, plaintiff alleges: (a) that the Company had lost highly skilled and experienced employees during the COVID-19 pandemic necessary to successfully complete the Company’s transition from its historic low mix, high volume production model to a high mix, low production model at its Monterrey facility; (b) that the Company’s attempts to replace its GM center console production with more diversified, specialized products for a wider array of vehicle manufacturers and OEMS, in particular in the EV space, had been plagued by production planning deficiencies, inventory shortages, vendor and supplier problems, and, ultimately, botched execution of the Company’s strategic plans; (c) that the Company’s manufacturing systems at its critical Monterrey facility suffered from a variety of logistical defects, such as improper system coding, shipping errors, erroneous delivery times, deficient quality control systems, and failures to timely and efficiently procure necessary raw materials; (d) that the Company had fallen substantially behind on the launch of new EV programs out of its Monterrey facility, preventing the Company from timely receiving revenue from new EV program awards; and (e) that, as a result of (a)-(d) above, the Company was not on track to achieve the 2023 diluted EPS guidance or the 3-year 6% organic sales CAGR represented to investors and such estimates lacked a reasonable factual basis.
Following a series of corrective disclosures, the price of Methode stock dropped precipitously from a class period high of over $50 per share to less than $10 per share by mid-June 2024 – a decline of more than 80%, causing investors to suffer hundreds of millions of dollars in financial losses.
What Now: You may be eligible to participate in the class action against Methode Electronics, Inc. Shareholders who want to serve as lead plaintiff for the class must submit their application to the court by October 25, 2024. A lead plaintiff is a representative party who acts on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery. If you choose to take no action, you can remain an absent class member. For more information, click here.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.
About Robbins LLP: Some law firms issuing releases about this matter do not actually litigate securities class actions; Robbins LLP does. A recognized leader in shareholder rights litigation, the attorneys and staff of Robbins LLP have been dedicated to helping shareholders recover losses, improve corporate governance structures, and hold company executives accountable for their wrongdoing since 2002. Since our inception, we have obtained over $1 billion for shareholders.
To be notified if a class action against Methode Electronics, Inc. settles or to receive free alerts when corporate executives engage in wrongdoing, sign up for Stock Watch today.
Attorney Advertising. Past results do not guarantee a similar outcome.
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STATEMENT FROM THE STRONACH GROUP REGARDING STRONACH v. STRONACH CIVIL LITIGATION
TORONTO, Sept. 4, 2024 /PRNewswire/ — The Stronach Group is pleased to announce that the litigation between Andrew Stronach and Selena Stronach and Belinda Stronach, Frank Walker, Nicole Walker, Alon Ossip, the Estate of Elfriede Stronach and Stronach Consulting Corporation has been settled by the parties.
Belinda Stronach will continue as the Chairman, CEO and President of The Stronach Group, leading the company’s world-class Thoroughbred racing, gaming, content, media, entertainment, real estate and related assets. This includes all businesses under The Stronach Group’s consumer-facing brand, 1/ST.
Belinda Stronach said: “I am very pleased that the litigation with my brother and niece has been resolved. We look forward to moving ahead with exciting plans for our business and moving forward as a family.”
The terms of settlement are confidential, and the parties will not be providing any additional comments.
Press Contact:
Tiffani Steer, VP, Communications – tiffani.steer@stronachgroup.com
About The Stronach Group and 1/ST
The Stronach Group is a world-class technology, entertainment and real estate development company with Thoroughbred racing and pari-mutuel wagering at the core. The Stronach Group’s 1/ST business (pronounced “First”) is North America’s preeminent Thoroughbred racing and pari-mutuel wagering company and includes the 1/ST RACING & GAMING, 1/ST CONTENT, 1/ST TECHNOLOGY and 1/ST EXPERIENCE businesses, while advocating for and driving the 1/ST HORSE CARE mission. 1/ST represents The Stronach Group’s continued movement toward redefining Thoroughbred racing and the ecosystem that drives it. 1/ST RACING & GAMING drives the best-in-class racing operations and gaming offerings at the company’s premier racetracks and training centers including: Santa Anita Park and San Luis Rey Downs (California); Gulfstream Park – home of the Pegasus World Cup and Palm Meadows Thoroughbred Training Center (Florida); the Maryland Jockey Club at Laurel Park, The Preakness Stakes, Rosecroft Raceway and Bowie Training Center (Maryland). 1/ST CONTENT is the operating group for 1/ST’s media and content companies including: Monarch Content Management, Elite, TSG Global Wagering Solutions (GWS) and XBTV. 1/ST TECHNOLOGY is racing’s largest racing and gaming technology company offering world-class products via its AmTote, Xpressbet, 1/ST BET, XB SELECT, XB NET, PariMAX and Betmix brands. 1/ST EXPERIENCE blends the worlds of sports, entertainment and hospitality through innovative content development, elevated national and local venue management and hospitality, strategic partnerships, sponsorships, and procurement development. As the advocate for critical industry reforms and by making meaningful investments into aftercare programs for retired horses and jockeys, 1/ST HORSE CARE represents The Stronach Group’s commitment to achieving the highest level of horse and rider care and safety standards in Thoroughbred racing on and off the track. The Stronach Group’s TSG Properties is responsible for the development of the company’s live, play and work communities surrounding its racing venues including: The Village at Gulfstream Park (Florida) and Paddock Pointe (Maryland). For more information, visit www.1st.com or follow @1ST_racing on Twitter or @1stracing on Instagram and Facebook.
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All It Takes Is $800 Invested in Each of These 3 High-Yield Dividend Stocks to Generate Over $100 in Passive Income Per Year
The Federal Reserve could begin cutting interest rates as early as this month — which could be great news for dividend stocks.
Higher rates have made certificates of deposit and high-yield savings accounts more attractive to income investors over the past two years or so. But as rates of return begin going down again, there will be more incentive to hold dividend stocks. And that’s not counting the ways lower rates could benefit the kinds of companies that often pay dividends. For capital-intensive businesses that tend to carry a high amount of debt on their balance sheets, lower interest rates can reduce the cost of capital and make debt financing less expensive.
Lower rates should be excellent news for investors in pipeline and energy infrastructure giant Kinder Morgan (NYSE: KMI) and utilities Dominion Energy (NYSE: D) and Southern Company (NYSE: SO). Investing $800 into each stock should produce over $100 a year in passive income. Here’s why all three companies are rock-solid dividend stocks to buy now.
Kinder Morgan has made the necessary moves to regain investors’ trust
Kinder Morgan slashed its dividend by 75% in December 2015 to preserve cash and address its overly leveraged balance sheet. Nearly nine years later, Kinder Morgan has turned its business around by managing spending and paying down debt.
The blueprint for a successful midstream oil and gas company like Kinder Morgan is to build useful infrastructure projects that can earn steady cash flows for decades. Kinder Morgan’s pipelines act as toll booths for exploration and production companies, while its terminals provide storage, distribution, blending, and logistical needs for petroleum products, chemicals, and renewable fuels.
Kinder Morgan has made several reasonably sized acquisitions in recent years for legacy assets and to boost its exposure to liquefied natural gas and low-carbon fuels. Kinder Morgan also believes natural gas will play a role in powering the growth of energy-intensive data centers, though the extent of that opportunity remains to be seen.
With a dividend that’s steadily risen over the past few years and yields 5.3% at recent prices, Kinder Morgan can power your portfolio with passive income.
Meet the new Dominion Energy
Dominion Energy might be beating the S&P 500 this year, but zoom out and the stock has been a terrible performer over the medium term, losing 28% of its value over the last five years.
Blame the bulk of that underperformance on a business model that used to be more complex. Dominion used to own oil and natural gas production assets, pipelines, and utilities. But it has sold off a large portion of those assets over the last five years to Berkshire Hathaway Energy and Enbridge. Today, Dominion is more focused on its regulated electric utility assets.
Dominion is concentrated in Virginia, West Virginia, North Carolina, and South Carolina. These states are ripe for offshore wind opportunities, between coastal access to shallow waters along the continental shelf and the government’s desire to bring down emissions. Dominion’s Coastal Virginia Offshore Wind (CVOW) project is costly but expected to be decently efficient. Subsidies, such as those provided by the Inflation Reduction Act, will help make the project more affordable. And Stonepeak acquired a 50% interest in CVOW in February, which will help reduce Dominion’s commitment. With less capital at stake, Dominion is better positioned from a risk management perspective.
For years, Dominion has been a messy company to invest in, and dividend investors suffered. Dominion cut its quarterly payout from $0.94 per share to $0.63 in late 2020 to reset expectations and get the dividend back to a manageable point. It has since raised that payout back to $0.6675 per share for an impressive yield of 4.8% at recent prices.
With the worst likely in the rear view, Dominion looks like a good dividend stock to buy now.
The perfect role player in a passive income portfolio
With a market cap around $95 billion, Southern Company is one of the most valuable U.S.-based utilities — and for good reason. Primarily focused on the Southeastern U.S., the utility’s foundation is centered on traditional electric operating companies. But it also has a natural gas distribution and utility segment and a power generation arm that includes wind, solar, and natural gas generation facilities. Southern Company’s business model helps it generate predictable cash flows from long-term contracts and power purchase agreements.
The company has raised its dividend for over 20 consecutive years, with the dividend roughly doubling during that period. It’s not the fastest growth rate, but Southern Company wants to ensure it keeps its payout ratio in check. For that reason, we can expect the dividend to grow at roughly the same pace as earnings so Southern Company can maintain a payout ratio between 50% and 75%. That way, the dividend expense doesn’t become too much of a burden.
With a 20.6 price-to-earnings ratio and a yield of 3.3% at recent prices, Southern Company is a reliable dividend stock for income investors to consider now.
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Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Enbridge, and Kinder Morgan. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.
All It Takes Is $800 Invested in Each of These 3 High-Yield Dividend Stocks to Generate Over $100 in Passive Income Per Year was originally published by The Motley Fool