Are Dividend Yielding Equities Over Priced?

“Dividend stocks are soaring, thanks to the Federal Reserve’s low interest-rate policy, and some experts wonder whether these stocks are becoming overvalued.

For example, Procter & Gamble carries a 3.1 percent dividend yield and is expected to register earnings-per-share growth of 6 percent this year. Meanwhile Google has no dividend, but is expected to produce earnings growth of 18 percent this year.

So which stock has the higher price-earnings ratio? P&G at 18. Google’s ratio is 16.6.

It’s all about the dividend. Many slow-growing companies with dividends are receiving more attention from investors than fast-growing companies without dividends are.

“You have these tech companies that have double-digit earnings growth, no debt, huge cash balances and they’re trading at 12 times forward earnings, while you have a utility in Ohio at 16 times earnings,” James Swanson, chief investment strategist at MFS Investment Management, told The Journal.

“If you don’t think there’s a recession coming, how far do you go with this game?”

The boost in valuations of dividend companies, sparked by yield-hungry investors, is “the biggest glaring discrepancy I see in the market,” he said.

Donald Taylor, a portfolio manager at Franklin Templeton Investments, believes this price discrepancy will last for a while.

“The macro environment that has caused utilities and telecoms, as well as consumer staples, to be expensive relative to history … is not at all likely to change anytime soon,” he noted.

“This is not a product of equity investors buying defensive stocks and hiding out,” Chris Wallis, chief investment officer of Vaughan Nelson Investment Management, told The Journal.

“What we have is money that had typically gone to fixed income now coming into equities,” he added. “They’re looking for bond substitutes and it doesn’t mean that the money is going to exit and go either to cyclical stocks or go to cash. I think it’s going to stay where it is.”

Income-seeking investors don’t have an attractive set of choices in front of them, according to Michael Aneiro of Barron’s….”

Full article

“Company guidance during the current earnings season is sparking a tumultuous rotation of money from big, safe stocks into riskier names, according to Peter Kenny, managing director at Knight Capital.

Guidance is a bit confusing at some levels, he noted, particularly with some negative economic trends such as a drop in durable goods order, flat business investment and continued Eurozone weakness.

“We’ve seen the trading off of the earnings very dramatically volatile,” Kenny told Yahoo. “It’s led to a lot of volatility in the overall market.”

Kenny said the “lumpy and uneven” quarterly results has created a lack of market harmony, but has also uncovered some sectors that were previously neglected.

“Earnings and guidance are helping that rotation out of the defensives and into the more risk-oriented or growth-oriented or alpha-oriented issues, and away from the Dow 30 and into the S&P 500,” he said.

Kenny said both small-cap and mid-cap stocks are beating the Dow Jones Industrial Average at the moment….”

Full report

“Oil refiners Marathon Petroleum Corp. (NYSE: MPC) and Valero Energy Corp. (NYSE: VLO) reported first-quarter 2013 results before markets opened this morning.
Marathon posted diluted earnings per share (EPS) of $2.17 on revenues of $23.35 billion. In the same period a year ago, the company reported EPS of $1.71 on revenues of $20.28 billion. First-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $2.16 and $19.8 billion in revenues.

Marathon’s refinery throughput rose from 1.32 million barrels a day in the first quarter of 2012 to 1.67 million barrels. Sales volume also rose, from 1.53 million barrels a day to 1.88 million barrels. Gross margins fell, however, from $8.36 a barrel last year to $7.92 a barrel. Total income rose $200 million year-over-year, from $956 million to $1.16 billion.

Valero posted EPS of $1.18 on revenues of $33.47 billion, compared with an EPS loss of $0.78 on revenues of $35.17 billion in 2011. The first-quarter 2012 results include a charge of $1.09 per share related to the closure of the company’s Aruba refinery. The consensus estimate called for EPS of $0.98 on revenues of $30.41 billion.

Like Marathon, Valero’s refinery throughput rose. Unlike Marathon, Valero’s gross margins also rose. Refining margins rose from $7.71 a barrel in the year-ago quarter to $10.59 this year. Total input volume rose by about 11,000 barrels a day year-over-year and total yield rose by 16,000 barrels a day.

Valero’s CEO said…”

Full report

Full report

SOURCE 
NYSE

NASDAQ

AMEX

Full report– BBY, BWP, BWLD, CNP, DB, P, PHM, ROSE, SINA, SPN

In Play ,

On the Wires 

“While many investors see nothing but blue skies for stocks, economic performance around the world continues to sag, creating a “grand disconnect,” according to economist Gary Shilling.

“The reality is that investors are only enamored with what the [Federal Reserve] and other central banks are doing,” he told Yahoo, referring to easing programs.

“Their attitude is don’t fight the Fed. As long as the money is there, I’ve got to own stocks. They couldn’t care less about what’s happening to economies on the ground.

And what is happening to economies on the ground?

“They’re limping along at best,” Shilling, president of A. Shilling & Co., explained. “Europe is in recession, Japan is barely growing and China’s growth is slowing. The U.S. economy is certainly underperforming.”

When you add in investors’ hunger for yield and willingness to ignore major risks to achieve it, “you really have an unsustainable situation,” he said.

So what’s the ultimate outcome of this?

“Nobody will stop a party like this voluntarily,” Shilling noted. “It will only come to a grinding halt when there’s some big shock,” like a blow-up in North Korea or the failure of a European bank….”

Full article

“ZURICH—UBS AG UBSN.VX +7.00% posted a better-than-expected first-quarter profit Tuesday as Switzerland’s biggest bank pushes through an extended restructuring program in the wake of the financial crisis.

The Zurich-based bank still recorded a fall in net profit, to 988 million Swiss francs ($1.05 billion) from 1.04 billion francs a year earlier, though analysts had expected the figure to come in at 496 million francs. The result compares with a loss of 1.89 billion francs in the fourth quarter of 2012, when UBS agreed to pay $1.5 billion to various authorities to settle investigations into the bank’s role in rigging key interest rates….”

Full report 

“University of Wyoming researchers found the lithium while studying the idea of storing carbon dioxide underground in the Rock Springs Uplift, a geologic formation in southwest Wyoming. University of Wyoming Carbon Management Institute director Ron Surdam stated that the lithium was found in underground brine. Surdam estimated the located deposit at roughly 228,000 tons in a 25-square-mile area. Extrapolating the data, Surdam said as the uplift covered roughly 2,000 square miles, there could be up to 18 million tons of lithium there, worth up to roughly $500 billion at current market prices.

As a yardstick, the lithium reserves at Silver Peak, Nevada, the largest domestic producer of lithium total 118,000 tons in a 20-square-mile area. The University of Wyoming stated that in a best-case scenario, the Rock Springs Uplift’s 18 million tons of potential lithium reserves is equivalent to roughly 720 years of current global lithium production. UW researchers suggest that the lithium mining could be part of a carbon dioxide sequestrationoperation, since the lithium-bearing brine must be pumped to the surface from the underground rock formation to extract the lithium, creating space to store the CO2 in its place. Surdam highlighted the economic advantages to the combined lithium-CO2 storage operation, commenting, “You get paid to put the carbon in the subsurface and that’ll pay for the wells to remove the lithium.” …”

Full article

“Herbalife on Monday delivered its 17th straight earnings beat and raised its full-year outlook, but its second-quarter guidance fell short of expectations.

Shares in the multilevel marketer of weight-loss shakes and skin lotions wavered after the report. 

Net income rose to $118.9 million, or $1.10 a share, from $108.2 million, or 88 cents a share, a year ago.

Excluding items, earnings rose to $1.27 per share from 88 cents a share in the year-earlier period, while revenue improved 14 percent to $1.10 billion from $964 million a year ago.

Analysts had expected the company to report earnings excluding items of $1.06 a share on $1.12 billion in revenue, according to a consensus estimate from Thomson Reuters.

The company raised its full-year outlook to $4.60 a share to $4.80 a share vs. the current consensus estimate of $4.66 a share….”

Full report

“The consumer economy may look weak. But the affluent and wealthy consumers are ramping up their spending – and that could help drive the broader economy this year.

Two new studies show that wealthier consumers plan to increase their spending despite higher taxes and a generally skeptical view of economic growth and government.

A study from the American Affluence Research Center looked at the top 10 percent of consumers by income who account for more than half of consumer spending. It found that the majority of them plan to spend the same or more in 2013 as they did in 2012….”

Full article

“Virgin Galactic’s passenger spaceplane, which is designed to take tourists to the edge of space, flew its first rocket-powered test flight, breaking the sound barrier at high altitude.

SpaceShipTwo ignited its engine Monday after being released by WhiteKnightTwo, a plane that carried it to 47,000 feet (14,000 meters) above California’s Mojave desert, British billionaire Richard Branson‘s firm said.

The rocket burned, as planned, for 16 seconds — enough to propel the spacecraft to 55,000 feet at 1.2 times the speed of sound, the statement said.

“For the first time, we were able to prove the key components of the system, fully integrated and in flight,” said Branson, who observed from the ground.

He predicted the successful test would pave the way to “full space flight by the year’s end.”

Next time, the company plans to keep the rocket going longer, to bring SpaceShipTwo to an altitude of more than 328,000 feet (100 kilometers), on the edge of space….”

Full article

“LONDON (Reuters) – BP Plc has been hit by over 2,200 new lawsuits seeking payback for the 2010Gulf of Mexico oil spill in the past few weeks as individuals, companies and government bodies rushed to stake their claim before their right to do so expired.

The British oil company, whose deepwater Macondo well ruptured on April 20, 2010, killing 11 men and spilling crude into the sea for weeks, revealed the number of new claims made since March 6 in its first-quarter results on Tuesday.

The United States Oil Pollution Act of 1990, under which most of the new lawsuits were registered, has a three year statute of limitations which could make bringing further legal action difficult after the third anniversary of the disaster.

BP said it would be applying to have the new legal challenges consolidated into a trial that is already under way in New Orleans.

The first phase of the trial of BP and its partners in the well, Transocean and Halliburton , ended earlier in April, but the judge, Carl Barbier, has yet to rule on the degree of blame that will be apportioned to each party and on the level of negligence that will be applied.

Both decisions could have a big impact on the size of BP’s final liability, already measured in tens of billions of dollars. His ruling, to be made without a jury as is traditional under U.S. maritime law, could come this summer…”

Full report

“NEW YORK/LONDON (Reuters) – U.S. retailer Best Buy Co Inc retreated from its ill-fated European expansion on Tuesday by selling its stake in a joint venture to Carphone Warehouse Group for less than half what it paid five years ago.

The 500 million pounds ($775 million) sale is the latest sign the world’s largest consumer electronics chain is scaling back its overseas ambitions to focus on its mainstay U.S. business, which faces cut-throat competition from the likes of Wal-Mart Stores Inc and Amazon.com Inc .

The deal will strengthen Best Buy’s balance sheet, simplify its business and improve its return on invested capital, CEO Hubert Joly said in a statement, adding that the timing and economics felt right for the deal.

But allowing for currency fluctuations, the price is less than half the roughly $2.1 billion Best Buy paid in 2008 for 50 percent of the independent mobile seller’s retail operations.

“(Best Buy) basically paid 1.1 billion (pounds) for the same half they are selling back to us today for a lot less,” Carphone Chief Executive Roger Taylor said.

“When they bought in they had aspirations to put Best Buy stores across Europe, and they probably paid a premium for that, and in the end that strategy didn’t work for many reasons.”

Europe’s economic prospects continue to worsen on the back of searing budget cutbacks to deal with a crisis of government debt in several southern countries, while the U.S. economic recovery increasingly looks firmly on track….”

Full report

“(Reuters) – Avon Products Inc (AVP.N) on Tuesday reported a better-than-expected first-quarter profit in the latest sign the beauty products company’s business continues to improve, helped by higher sales in key markets Brazil and Russia and cost cuts.

Overall, revenue in the quarter fell 3.5 percent to $2.48 billion, but was flat when stripping away the impact of currency fluctuations. Avon’s growth in Latin America and Eastern Europe contrasted with a poor showing in North America, where sales again slid, falling 15 percent.

Avon reported a net loss of $13.7 million, or 3 cents per share, compared with net income of $26.5 million, or 6 cents per share a year earlier.

Excluding items such as a charge related to the recent currency devaluation in Venezuela, a big market for Avon, the company reported adjusted net income was $112 million, or 26 cents per share, helped in large part by cost cutting efforts.

That was well above the 14 cents per share Wall Street analysts were projection, according to Thomson Reuters I/B/E/S….”

Full report 

“Pfizer Inc. (PFE), the world’s biggest drugmaker, lowered its 2013 profit forecast after first-quarter sales and earnings missed analyst estimates.

Full-year earnings excluding one-time items may be $2.14 to $2.24 a share, New York-based Pfizer said in a statement today. The company’s gave a previous 2013 forecast of $2.20 to $2.30 in January. First-quarter profit missed analyst estimates by 1 cent, the average of 17 analysts’ estimates compiled by Bloomberg.

First-quarter sales were $13.5 billion, less than analyst estimates of $13.94 billion, as revenue for Prevnar, a vaccine for pneumococcal diseases, and erectile dysfunction drug Viagra fell short of expectations. Investors are focused on whether Pfizer will split apart after shedding two non-drug units. Chief Executive Officer Ian Read has been floating the idea of cleaving the company into a brand-name drug unit and a generics business, as a move to raise the total value of two companies….”

Full report 

“Surging demand for gold from Dubai to Istanbul has pushed physical premiums in the region to levels not seen in years as the biggest price slump in three decades lures consumers, according to MKS (Switzerland) SA.

Premiums paid by wholesalers and bulk buyers in Dubai to secure a 1 kilogram bar of bullion are being quoted between $6 an ounce and $9 an ounce over the London cash price, said Frederic Panizzutti, global head of marketing and sales at the Swiss-based bullion refiner. That compares with about 50 cents before the rout, Panizzutti, also chief executive officer of MKS Precious Metals DMCC, said in an interview from Dubai.

Gold fell to the lowest in more than two years this month on speculation that the global economy is recovering, unleashing a purchasing frenzy among coin and jewelry buyers from China to the U.S. Consumer demand for jewelry, bars and coins inTurkey and the Middle East represented about 9.4 percent of the global total last year, according to the World Gold Council. Bars have been cleared from display in the souks, according to Gerry Schubert, head of precious metals at Emirates NBD PJSC.

“Physical demand has been tremendous in a way I haven’t seen for a number of years,” said Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc., who’s worked in the industry for more than three decades. “The price collapse prompted a physical gold rush and the evidence of the extent of that is the prolonged period of high premiums that we’ve seen. Reports from the gold souks are that business is good,” Rhodes said from Dubai.

Bear Market….”

Full article