As we are moving to a bear market, some companies are down lately. Does it bring some deals for investors? Looking for a few good picks on the market? Here are 5 dividend deals ideas for you to start your Thanksgiving Weekend! Enjoy your time with family and friends!
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00:01 Mike Heroux: Hey everyone, this is Mike Heroux from Dividend Stocks Rocks. I hope you’re doing well today. I decided this morning to do a quick video. Mostly because the market has being acting some kind of crazy for the past three months. Monday and Tuesday this week, the market was down again, and then I thought, You know what? Now the market is going back up slightly this morning, on November 21st, were about to hit Black Friday deals. And I think that there are some Dividend growers that are down double digits, at least down by 10%, since the past three months, thought of going through a few of those Stocks and give you that small video in advance. Since we are celebrating our 5th anniversary at Dividend Stocks Rocks, I decided to keep with the thematic and select five Stocks.
01:00 MH: So, first one is Texas Instrument. The company has been doing very well in the past five years, they have changed their business model a lot. Mostly driven by industrial and the automotive industry, as you can see on the chart, they went from, in 2013, 30% and 12% for both sectors, now it represent 35% and 19%. The problem with Texas Instrument, and I could have picked pretty much like 50 tech stocks right now. They’re all suffering from first being too popular in the past three years, so a lot of those stocks have sky-rocketed, Texas Instruments is one of them. And the second thing is, in the semiconductors, analog chip makers, they’re all facing down investment cycle, so this sector is usually goes through trends, so at one point, most industries are spending lots of money into those semiconductors products. And then when we reach the end of the cycle, now you have a bunch of CEO’s telling you that their guidance must be revised, they’re posting weaker revenue growth and they expect basically 12 to 18 months of flat revenue or struggling a little bit.
02:28 MH: On the other side of things, Texas Instrument is a very strong company, it’s a leader in its market, it has shown impressive growth. One of its key success is that they have a lot of money invested in their R&D. Obviously to keep their competitive edge, but they also have built an amazing sales team. So instead of having just a bunch of geeks selling their analog chips, they also have sales rep, like a whole marketing team that are going inside industries and talking to businesses to know what they need and they are able to sell more chips with this strategy. I really think that going forward, this company will continue to do well. In the mean time, it’s still a strong Dividend grower, so you don’t have to worry about it.
03:18 MH: Second company I wanna discuss this morning is Apple. Obviously a lot has been written about Apple in the past three months, mostly after their latest earnings report. This is exactly what you see right now. Basically analysts are never happy about the number of sales of iPhones and expected sales, in this case, Apple disappointed for their forecast for the holiday season. So now their stock is down 17% over the past three months. It looks like a catastrophe. But keep in mind that… And I’ve been telling that to investors for the past three years, Apple is not the iPhone company anymore. If you look at the bottom of the graph, the chart, you’ll see that services are growing to almost making 10 billions of dollars in revenue per quarter. This is huge. We’re talking about year over year, 17% change, sequential change of 5%, so this business is growing very fast. It’s a business by itself. I know it’s a lot smaller than the iPhones, but at one point in time, I think that Apple has the cash, the will and the strategy to expand their services because they have built such a great ecosystem. They have so many people that are in love with their iPhones, and now they’re just adding services and applications around the phone itself.
04:50 MH: One point in time the iPhone is just going to be like the first product of a series of several services. They are still dominant player in the smartphone industry. You have Samsung and Huawei that are making very good smart phone as well, and their sales are improving. But at the same time, they don’t have this ecosystem, they don’t have this service. So those companies really depend on the production of their smartphones, where Apple will eventually shift over from that and become something else. So it used to be the Mac company, it used to be the iPhone, the iPad company. Now it’s the iPhone, but at one point in time, it will be a service company. So don’t drop the towel yet on Apple. I think that it will be a great deal for the next coming years.
05:38 MH: Another sector that has been hit was the financial sector. If you’ve been following me, you already know that I’ve discussed about Lazard or Invesco or Moelis, [05:48] ____ MC. Those companies are down double digit, actually more than 20% loss over the past few months. This time I wanna discuss about a company that is a little bit more solid, a little bit more diversified, doesn’t relate on like one aspect. It’s BlackRock, BlackRock is the largest assets manager. I think it has the potential to reach 600 bucks per share within the next 18 months. Right now, trading around 400, so it seems like a very good deal. The key point with BlackRock is they have 62% of their assets invested with institutional clients. This means that they will not… Those type of clients they will not shift over in a heartbeat, they will stay for a long time, they will stick with BlackRock, they love their products. BlackRock can offer anything from fixed income to equity, and they also have a huge ETF business, because they’re producing… They’re the producer of iShares, which is the largest ETF’s business on the market.
07:00 MH: So basically, regardless where the market is going right now, BlackRock is the asset manager to control the market. It is well diversified, and right now, investors are worried about the lack of assets under management growth. Lots of investors are sitting in the sideline. So obviously revenue growth are smaller right now, but the company now pays close to a 3% yield. I think it’s a great opportunity for you to pick some shares at this time.
07:32 MH: Going on the Canadian side, this time I wanna discuss TD, Canadian banks are always like super strong dividend growers, dividend payers. Most people love them because they work in oligopoly. It’s protected by the federal government, so they have not too much competition. And TD made a very smart move, in the past 10 years. They have developed the US banking side of their business. So now over 30% of their business is coming from the US market. So if you’re looking for a bank that is being able to play on both sides, like getting a lot of revenue from their core business in Canada, and then expanding in the US, and benefiting from a strong economy over there, I think that TD is definitely a great pick. Right now all Canadian banks are on a slope, are on a down. TD bank is down double digits, same as Scotiabank. I prefer TD at this time, because it’s a more conventional bank, they have their operation both in Canada and in the US, while Scotiabank has developed Latin America markets, they are even more volatile than what we have right now in North America. So this is why I’d rather pick TD Bank.
08:54 MH: As you know, the oil market is not doing so well. So for that reason both the energy and financial sector in Canada is down. If you look at the Canadian Western bank, it’s down like by 20% now, over the past three months, mostly because they’re based in Alberta and it’s not doing very well. So, I’d rather go with a bank that is a little more general, a little bit more diversified, I think that TD Bank right now down 10% is definitely a good deal as well.
09:25 MH: The final deal of this presentation is Home Depot. Both Home Depot and Lowe’s are doing… They’re battling against each other for home improvement products. Home Depot has been beating down Lowe’s on many aspect for the past five years. At one point Lowe’s was doing well, they’re still doing well, but Home Depot is doing even better. Right now, there are concerns about rising interest rates, slowing down families from purchasing new households or just to renovate them. So they think that companies like Home Depot will have a hard time at posting strong revenue going forward. At the same time over their past quarter, they have boasted comparable sales increase by 4.8%. So it’s almost 5% this quarter only. They have developed a strong brand, lots of people are going there, they are able to count on heavy tickers, like high tickers for growing their market as well. And the fact that they’re selling a lot of like larger items protect them away from Amazon and other online companies. So if you wanna keep a strong company that will be increasing their dividend for several years, even though we’re entering into a slower market right now for the housing department. I think that Home Depot will do some good for your portfolio over the long run.
10:57 MH: A few other companies that have been down over the past three months, and many investors are wondering if it’s a good deal or if it’s not a good deal. I’m gonna start with L Brands, the famous maker of Victoria Secrets. The company had cut their dividend. They were rated as a sell at DSR for a while back. They cut their dividend, they changed their CEO. Over the past few years they have used a strategy towards the retail business, and I really don’t think it’s a good idea. Right now, L Brand is just good for the dump, the dividend has been cut. Their strategy is still unclear about what they’re going to do next, so I don’t think this one is a good deal.
11:50 MH: IBM is still down right now, minus 17% over the past three months. The problem with IBM is that they have a strong core business, they’re generating lots of cash flow, it’s a long time dividend payer in the tech industry, everybody loves IBM. But the problem is they have a hard time switching their business towards the Cloud. So in comparison, I’ll rather invest my money into Microsoft, for example, that have successfully switched over to Cloud and shows strong growth. IBM keep disappointing investors quarter after quarter. They have posted like five years of continual revenue decrease, before posting finally two quarters in a row with some revenue growth. So I’m not ready to invest in that 4% yield. I just think that there are other businesses that are a lot more interesting, such as Microsoft.
12:45 MH: For AT&T, a little bit same problem, everybody keeps telling, “Well, they are like the largest wireless company, they’re well established, they’re a leader in their market, they’re a dividend aristocrat, they have an impressive yield.” Everything seems to be there but for me, it sounds like a value trap. Stock is down double digit again. The problem with AT&T is that they have lots of projects on their plate and they all require lots of cash flow. We’re talking about 5G deployment, we’re talking about finding a way to promote DIRECTV and make it something a little bit more marketable and profitable. We’re talking about including and then integrating Time Warner assets into the business, making something even better and bigger. So they need to spend lots of money and they have a huge dividend as well. So they need to spend a lot of money. Growth will be difficult in the upcoming year. So I rather put this one aside. I’m not too convinced about the investment thesis here.
13:53 MH: On the Canadian market we had two bad surprises, two companies that I actually like and I’m still not too sure what to do with them. First one, High Liner Foods, they are producing fish and sea food products, packaged products. The problem with High Liner Foods, they have several of them, they recently bought Rubicon and they have problem integrating it. They are facing several headwinds on the US market, lots of competitions. So sales are going down, it’s very difficult for the cash flows as well. So the last earnings report, were quite deceiving, stock plummeted by 30%. It’s a very tough call right now. I’m not too sure I would put money into this one. They changed a new CEO not a few months ago, now, they’re waiting for this new strategy. Obviously the guy seems very optimistic for the future, but also realistic that there’s a lot of work to be done in the upcoming quarter. So this one is more on my watch list right now. I’m trying to see which direction they’re going to go. So we’re going to wait a little bit more on this one.
15:13 MH: And the last company I wanna discuss is Cineplex. That’s the leader in movie theatres in Canada. They own about 90% of the market across the country, strong business leader in its market. But then again, they have recorded impairments and they have disappointed the market in term of earnings. Right now, cash payout ratio is at a 100%. The pay out ratio also is very high, triple digits as well. We’re talking about a company that pays a very nice dividend on a monthly basis, but still right now, things were going well this year because the movie industry was going well. There’s a lot of great movies in the pipeline. I think it’s gonna continue with Star Wars and Frozen next year coming up in 2019.
16:08 MH: It will be difficult for them to generate more profit. So then again, I’m not too sure. I mean, all the revenue part is very good. They’re increasing the revenue for people. They’re increasing their concessions. So all the food and drinks, they’re selling more of that. But they made less money. They had to invest also into premium experiences, like VIP theatres and stuff like that. Right now, I’m not too sure what’s going to go next for Cineplex either. Those are the two companies that could either jump by 20% in the next six month, or either call it a day and then drop. Interesting enough, management increased their dividend a few months ago right before summer time. So it shows more confidence. Now it’s going to be a story of what’s gonna happen over the holidays.
17:05 MH: I hope that you have enjoyed this small video. I know it was rushing a lot of stocks, but I wanna make sure that I publish this before the end of the morning, so you have some times to take a look at it before you enter into your Thanksgiving weekend, and then you’re Black Friday deals hunt shopping. I want also to tell you that I’m very happy that you are following me, that you’re watching those videos, or if you are a member of DSR, it’s even better. I just wanna thank you. Thanksgiving is very important for me. I’ve celebrated it in Canada, in October. [chuckle] We’re not doing it again this weekend as it’s the US Thanksgiving, but it’s the same idea for that holiday. It’s my favorite holiday of the year, because it’s the moment where I feel grateful for everything that I have. And right now, I have the opportunity to build a great life around this business.
18:03 MH: So thank you for following me. I hope that you have a few good interesting picks from this webinar. Then again, everything that has been discussed cannot be be taken as a buy or sell recommendation. Do your own due diligence. I am not responsible if you’re making or losing money after this small video. So make sure that you do your own research. And you make sure that you know why you invest or you sell your stocks before trading. Talk to you later and I hope that you’ll have a good Thanksgiving day. Cheers.
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