Many Americans would rather count on modest paying jobs than have high paying jobs which might face jeopardy. This is based on a new study from the Federal Reserve.
According to the Report on the Economic Well-Being of U.S. Households in 2017:
For many, stability of income is valued highly. Three-fifths of workers would prefer a hypothetical job with stable pay over one with varying but somewhat higher pay. Those who work an irregular schedule in their actual job are somewhat more likely to prefer varying pay in the hypothetical choice than those who work a set schedule.
This is despite the impression among many Americans that they are much better off financially than at anytime since the report was launched in 2013. The reason may be that many Americans still do not have a financial cushion The reports shows:
• Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing
money. This is an improvement from half of adults in 2013 being ill-prepared for such an expense.
• Over one-fifth of adults are not able to pay all of their current month’s bills in full.
• Over one-fourth of adults skipped necessary medical care in 2017 due to being unable to afford the cost.
While most Americans believe they are much better off than four years ago, the effects of the recession may have lingered. People may own homes, and have other assets, but clearly they are not liquid. While wages may be higher, Americans are either not at all frugal, or have base expenses which they have badly managed, at least in comparison to their incomes.
Many Americans have enjoyed a recovery which is now approaching seven years, but they have little to show for it in terms of a financial buffer. Maybe that is why they want to have stable jobs.
It looked like a clear road to $80 a barrel, and if you believe the financial press, that is exactly where Saudi Arabia and many of the OPEC nations want the price of oil to go. However, President Trump has backed out of the Iran deal and once again imposed sanctions that curtail the oil exports from that country. In addition, Venezuela’s situation is a mess, and its output has dropped to the lowest levels in 28 years.
With OPEC countries promising to replace that missing production, and a huge stockpile build last week, the price of oil dropped a whopping 4% last Friday to under $70. In addition, oil stocks, which had been on a roll, got hammered as trigger-happy investors were happy to take some of the big gains they have posted this year.
The good news for those looking to add energy is that some of the safest and biggest dividend-paying mega-cap integrated companies got hammered last week, offering some of the best entry points in a while. Toss in that the busy summer driving and vacation season is here, and now may be the time to scoop up some top players.
We screened the Merrill Lynch energy universe research database and found five Buy-rated plays that pay solid dividends and look like solid selections now.
This top company’s stock is still down a stunning 30% from highs printed in 2014, the last time oil traded at $70. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids (NGLs). The other segments are Midstream and Marketing.
The company reported impressive first-quarter results, and Merrill Lynch said this when covering the earnings:
Adjusted earnings per share of $0.52 beat consensus of $0.40 on lower DD&A and strong oil production that topped guidance led by the US onshore. Half of Permian production is exposed to basis in 2018, but Enterprise and Cactus 2 should leave the company fully covered by 2019. With oil prices at current levels we believe Anadarko can reload share buybacks after the program concludes by mid year.
Anadarko shareholders receive a 1.48% dividend. Merrill Lynch recently raised its price target to $95 from $87. The Wall Street consensus price objective is $79.97, and shares were up marginally early Tuesday at $67.45.
This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corporation (NYSE: CVX) is a US-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.
The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas. Some on Wall Street estimate that the company will have a compound annual growth rate of over 5% for the next five years.
With Permian production and asset disposals targets reset, the company can raise the dividend 20% and buyback 15% of shares. Many analysts view the strategy update as appropriately conservative for one of the more oil-levered majors. The Chevron strategy through 2020 is focused on discipline, enabled by step change in capital efficiency driven by doubling Permian production.
Shareholders receive a 3.67% dividend. The Merrill Lynch price target for the shares is $150, and the consensus target is $144.89. Shares traded at $120.95 Tuesday morning.
This one may offer investors solid upside potential and could start growing the dividend again. ConocoPhillips (NYSE: COP) explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and NGLs worldwide.
Conoco’s portfolio includes resource-rich North American tight oil and oil sands assets; lower-risk legacy assets in North America, Europe, Asia and Australia; various international developments; and an inventory of conventional and unconventional exploration prospects. Many Wall Street analysts feel the company can accelerate growth from a reloaded portfolio depth in the Bakken and Eagle Ford, and with visibility on future growth from a sizable position in the Permian.
Merrill Lynch has grown progressively more positive on the shares and recently noted this:
Based on updated cash flow sensitivities we suggest operating operating cash flow could top $11 billion at $64 Brent, drawing more buybacks. With advantaged leverage to Brent and little production sharing contracts entitlement effects, we view Conoco as a strong free cash ‘yield’ name.
Investors are paid a 1.92% dividend. Merrill Lynch has an $80 price target, and the consensus target is $73.45. Conoco traded at $64.60.
This remains a top Wall Street energy pick and is on the US 1 list at Merrill Lynch. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
Recently, Exxon announced estimated first-quarter 2018 earnings of $4.7 billion, or $1.09 per share assuming dilution, compared with $4.0 billion a year earlier. Cash flow from operations and asset sales was $10 billion, including proceeds associated with asset sales of $1.4 billion.
During the quarter, the corporation distributed $3.3 billion in dividends to shareholders. Capital and exploration expenditures were $4.9 billion, up 17 percent from the prior year.
In addition, the company recently raised its dividend by a nickel to $0.82 per share, which now translates to a nifty 4.2% dividend.
The $110 Merrill Lynch price objective is well above the $87.26 consensus estimate. The stock was last seen trading at $78.65.24/7 Wall St.
Crude Oil Pipeline Capacity Out of the Permian Basin Is Vanishing
Royal Dutch Shell
This company has survived the seesaw in oil pricing as good as or better than any other major integrated. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide through its Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas and NGLs.
Royal Dutch Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy.
In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.
Shell’s fourth consecutive quarter of dividend coverage at lower oil prices helps reaffirm the positive investment case for the company. Earnings have continued to surprise Wall Street to the upside, and analysts are bullish on the company’s cost reduction targets.
Investors receive a 5.51% dividend. Merrill Lynch has set its price objective at $82. The consensus figure is $78.51, and shares traded at $67.55.
Boeing Co. (NYSE: BA) held on to its place last week as the top-performing Dow Jones industrial average stock for the year to date. The company’s shares added about 2.5% during the past week to post a 22.1% gain since the beginning of the year.
The second-best performer among the Dow industrials so far this year is Intel Corp. (NASDAQ: INTC), which is up about 20.1%. That is followed by Nike Inc. (NYSE: NKE), up 15.5%, Visa Inc. (NYSE: V), up 15.1%, and Microsoft Corp. (NASDAQ: MSFT), up 15%. Of the 30 stocks comprising the Dow index, only 11 have posted year-to-date gains as of Friday’s close.
The Dow added just 38 points over the course of last week to close at 24,753.09, essentially flat for the week. For the year to date, the tech sector has added 10.5%, best among the 10 market sectors.
Boeing’s week got off to a rocky start with a crash in Cuba that claimed 111 lives. The cause of the crash of the chartered Boeing 737 is being investigated. The aircraft, a 737-200, was built in 1979 and was owned by a Mexico-based charter company that operates an aging fleet of planes, and questions arose almost at once over the company’s operations and attention to safety requirements.
In the week ahead the company faces another vote at its North Charleston, South Carolina, plant for union representation. More than a year ago, 74% of the plant’s 2,700 workers rejected union representation. Boeing has strenuously resisted efforts to unionize the plant, efforts that have paid off so far.
The company also received Federal Aviation Administration certification for the folding wing the company uses on its new 777X aircraft, the 777-8 and 777-9. The company claims the 777X is on track for its first test flight next year and first delivery to a customer in mid-2020.
Boeing’s shares closed up about 0.3% Friday to $360.09, in a 52-week range of $184.53 to $371.60. The consensus 12-month price target on the stock is $396.67, up more than $9 week over week, and the forward price-earnings ratio is 21.02.
Activist investor Carl Icahn and Icahn Enterprises Inc. (NASDAQ: IEP) tendered up to 11.4 million shares in Herbalife Nutrition Ltd. (NYSE: HLF) in response to a $600 million tender offer from the company to repurchase shares of its common stock at no more than $54 and no less than $49 per share. The announcement sent Herbalife shares down sharply.
Icahn was and will remain Herbalife’s largest shareholder, even if all 11.4 million shares are repurchased by the company. The activist investor holds a total of 45.7 million shares and would retain a stake of at least 34.3 million if his tender is accepted.
Herbalife split its stock two for one on May 16, and the original tender offer to pay no more than $108 and no less than $98 for each tendered share was adjusted at the same time. Friday morning the company said it would pay $52.50 in cash for a total of 11.4 million shares and fund the purchase from term loans, credit facilities or cash on hand.
In a statement filed with the U.S. Securities and Exchange Commission, Icahn said:
For almost six years, we have been one of Herbalife’s strongest, most loyal supporters; we stood by the Company through a half-decade long short-selling campaign; and we never sold a share, even after our investment doubled. But, given that our Herbalife investment has become an outsized position, representing approximately 24% exposure to total NAV, it is only prudent for IEP to reduce its exposure.
Before noting that Icahn Enterprises had created nearly $7 billion in value shared by all Herbalife shareholders, Icahn took a thinly veiled shot at nemesis and short-seller Bill Ackman:
In late 2012 and early 2013, when Herbalife was under attack and the stock was out of favor, we studied the business and assessed the risks. At that time, we concluded the risk/reward ratio was very favorable. … We believe Herbalife’s business is stable, the short-sellers have largely exited, and the Company is well-positioned for the future.
Icahn first took a position in Herbalife in 2012, shortly after Ackman called Herbalife a pyramid scheme and took a massive short position in the stock. Four years later Herbalife was made to pay a fine of $200 million and make changes to its business practices, but the company survived Ackman’s attack. In March, Icahn told CNBC that he had a billion dollar profit on Herbalife stock.
Herbalife stock traded down about 10% shortly before noon Friday to $48.45, in a split-adjusted 52-week range of $20.36 to $56.74.
Procter & Gamble Co. (NYSE: PG) added about 1.2% to its share price last week, but that was not enough to shake off the company’s ranking as the worst-performing Dow Jones industrial average stock of this year. So far in 2018, the shares have lost 19.1%. This is P&G’s sixth consecutive week as the Dow’s worst stock for the year.
The second-worst Dow stock so far this year is Walmart Inc. (NYSE: WMT), with shares down 16.5%. That is followed by General Electric Co. (NYSE: GE), down 16.2%, 3M Co. (NYSE: MMM), down 15.4%, and Johnson & Johnson (NYSE: JNJ), down 13.1%. Losers outnumber winners for the year to date on the Dow by a score of 19 to 11.
The Dow added just 38 points over the course of the past week to close at 24,753.09, essentially flat for the week. For the year to date, the consumer staples sector has dropped about 13.1%, worst among the 10 market sectors.
The company now discloses the ingredients in most of its more than 3,500 brands on the SmartLabel website. P&G is trying to dispel the belief that its products contain all sorts of nasty chemicals that can cause harm or are unsafe. This is more difficult than it may sound, according to the company’s chief R&D and innovation officer, Kathy Fish, who told The Wall Street Journal:
Fragrances in general have captured both consumers’ and advocacy groups’ attentions, largely because the ingredients in fragrances aren’t disclosed. And in reality, some consumers have sensitivities to fragrances. We plan to disclose fragrance ingredients by the end of next year. It is a work in progress.
Within each fragrance, this means nearly 100 ingredients could be disclosed.
P&G also priced its previously disclosed tender offer for 11 different debt securities. The company will pay $1.404 billion to purchase 100% of tendered amounts of nine securities. P&G will not purchase any of the other two.
Procter & Gamble stock closed at $74.31 on Friday, up about 0.7% for the day and in a 52-week range of $70.73 to $94.67. The 12-month consensus price target on the stock is $81.55, down 24 cents from the prior week, and the forward price-earnings ratio is 16.62.
JUNE NEWSLETTER 1
SHELL ADDS ANOTHER RIG
Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778
2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778
Copyright © Daniel Cullinane CPA.
United Continental Holdings Inc. (NYSE: UAL) has named Jane Garvey as its board chair. She is a former head of the FAA and a United board member since 2009. CEO Oscar Munoz did not get the job, although it had been his to lose.
Munoz officially lost out last April. Even his employment agreement stipulated he get the job. However, a series of public relations disasters and poor corporate performance undermined his opportunity.
It is not worthwhile to repeat all the mistakes United made as it repeatedly undermined its brand. The most famous was when an elderly man was physically pulled off a flight. United has been in the headlines too many times for the wrong reasons.
A more damning view of Munoz is that United has been crushed by its rivals, as the stock price and its financial performance show. In the past year, the share price has dropped 13%. For most of the past several years, both Delta and American Air have outperformed it.
Finally, in an industry in which customer service is a key to success, a recent survey showed United at the bottom among large carriers. In the American Customer Satisfaction Index report on airlines for 2018, United’s score had fallen to 67. Southwest had an 80 rating, and American and Delta each rated 74.
Munoz lost out on the chairperson’s job. He has to contend with whether he can hold on as chief executive. Another year of poor performance may mean an end to his position at the top of the carrier.
United Continental’s description of itself:
World’s most comprehensive global route network, including world-class international gateways to Asia and Australia, Europe, Latin America, and the Middle East with non-stop or one-stop service from virtually anywhere in the United States.
A modern fleet which is the most fuel-efficient among U.S. network carriers (when adjusted for cabin size)
Industry-leading loyalty program that provides more opportunities to earn and redeem miles worldwide
Optimal hub locations, including hubs in the four largest cities in the United States.
Approximately 88,000 employees reside in every U.S. state and in countries around the world.
BOEING TOP STOCK
Oil supermajor Royal Dutch Shell PLC (NYSE: RDS-A) announced Friday morning that it had made a sixth oil discovery in its Norphlet play in the Gulf of Mexico. The Dover well is 100% owned by Shell and is located about 170 miles southeast of New Orleans.
Last month the company launched its multibillion Appomattox platform into the Gulf, and the newly discovered well is about 13 miles south of the platform’s location. That’s good luck for the company because it foreshadows a tieback connection from Dover to Appomattox, saving the billions in costs for building another platform. Appomattox is partially owned (21%) by Nexen, the North American subsidiary of China National Offshore Oil Co. Ltd. (NYSE: CEO) or Cnooc, and is expected to be producing oil by the end of next year.
Shell said the well was drilled in 7,500 feet of water to a depth of 29,000 feet below the seafloor. The net pay area of the well is 800 vertical feet, and the company gave no estimate of the number of barrels in the discovery. The Dover well is expected to begin production before the end of next year.
Andy Brown, Shell’s upstream director, said:
Dover showcases our expertise in discovering new, commercial resources in a heartland helping deliver our deep water growth priority. By focusing on near-field exploration opportunities in the Norphlet, we are adding to our resource base in a prolific basin that will be anchored by the Appomattox development.
Shell provided the following map of its leases and wells in the Norphlet. The inset shows the location of the play relative to the Gulf Coast.
The Appomattox project was authorized by Shell in 2015 and was the first major deepwater project announced after the 2014 crash in oil prices. West Texas Intermediate (WTI) crude oil prices above $70 a barrel are expected to encourage more of these super-expensive deepwater projects in the Gulf of Mexico and elsewhere.
WTI crude for July delivery has dropped more than 4% by the noon hour Friday to $67.70, after closing last night at $70.71. That’s more than $5 a barrel off the highest price in nearly four years set earlier this week. Brent crude for August delivery has dropped about 2.6% to trade at $76.16.
WORST PERFORMING STOCK