Where Is the Cash Going?
Posted on July 18, 2014 | Dividend Investing
Ned Davis Research sent out a chart this week breaking down how S&P 500 companies spent their cash for the four quarters ending March 31, 2014. The largest amount was spent on net investments ($690.2 billion). Capital expenditures came in second at a record $666.4 billion. Share repurchases ranked third at $554.1 billion, which Ned Davis Research says is the largest four-quarter amount since the period ending December 31, 2007. Dividends ranked fourth at a record $344.3 billion.
Keeping Things in Perspective
Posted on July 11, 2014 | Dividend Investing
This morning’s headlines proclaimed things like “S&P Suffers Worse Week in Months.” The large-cap index did incur its worst weekly performance since April, but this week’s loss was only 0.9%. A weekly decline of 1% or 2% is pretty normal. It just feels worse because of the market’s upward march.
Mergers, One Deletion and the July Monthly Report
Posted on July 3, 2014 | Dividend Investing
The July monthly report, Dial “M” for Merger, is now available. In it, we discuss the five pending mergers DI stocks are involved with…
Wheeling and Dealing
Posted on June 27, 2014 | Dividend Investing
Mergers and acquisitions seem to be the market theme this year. Corporations flush with cash are opening their wallets in hopes of gaining market share and enhancing their competitive position. According to Forbes, global mergers and acquisitions activity deals have surpassed $1.75 trillion year-to-date, the highest level since the first half of 2007, before the Great Recession.
DI Companies Are Playing ‘Let’s Make a Deal’
Posted on June 20, 2014 | Dividend Investing
We have news of another potential merger in the DI portfolio. At the start of this week, Medtronic Inc. (MDT) reached an agreement to purchase Covidien Plc (COV). Details about the merger can be found in the News and Notes section below. The announcement has made headlines less for the merger itself, however, and more for Medtronic’s move of its corporate headquarters to Ireland.
Ireland is known for its low corporate tax rate and this fact has been brought up in articles about the merger. Due to the higher scrutiny being given to corporate tax issues lately, we don’t know if this will present a hurdle for Medtronic or not. There are business reasons to justify the merger as well. Nonetheless, Ireland’s tax rate is what is making the headlines right now.
If the merger is completed, the tax status of the dividend would change. Medtronic’s dividend would go from being domestic to foreign. We are waiting for Medtronic to give guidance on the tax treatment of the dividend before explaining how the change will impact U.S. investors. We can tell you, however, that the United States does a have a tax treaty with Ireland.
A Spin-Off Is Forthcoming
Posted on June 13, 2014 | Dividend Investing
This type of transaction involves selling the assets to a smaller company, then creating a subsidiary that in turn merges with the smaller company to create a new company. This complicated type of transaction allows the parent company to avoid incurring taxes on the transaction.
A New Stock and the June Monthly Report
Posted on June 6, 2014 | Dividend Investing
Details about our stock change and a thorough introduction to our latest addition can be found in the June Monthly Report, but we’ll give you an overview here…
Corporate Revenues Are Going to Change
Posted on May 30, 2014 | Dividend Investing
The manner in which many corporations report sales is going to change. This week, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) agreed on a proposal for when companies should recognize revenues. The change resolves what had been a mix of various rules. Here is how the IASB and FASB described it:
A Year Makes a Big Difference for Bonds
Posted on May 23, 2014 | Dividend Investing
This morning, the yield on the benchmark 10-year Treasury note was 2.53%. The last time we saw bond yields fluctuate around this level was in October 2013.
The return of calm to the bond markets is notable, because this time last year a storm was tearing through fixed-income holdings.
Tug of War
Posted on May 16, 2014 | Dividend Investing
The bulls and the bears continued their tug-of-war during the week. Shortly after the S&P 500 hit an all-time high, breaking the 1,900 barrier, stocks retreated on Wednesday and Thursday as investors piled into safer government bonds. The stock market being near all-time highs, coupled with lower bond yields, seems to point to the fact that investors are hesitant about sitting on the sides. They want to put their money to work but are simply not sure how long the current bull market has to run.