BlackRock's profit report showed a gain of 23%, credited to an increase in assets under management, which now total $1.43 trillion. The company's report also stated that the cloud of Merrill Lynch possibly selling its 49% stake in BLK is gone -- or now.
BlackRock is the gold standard in the asset management business, and we are putting this company back on our "Recommended" list with these recent clouds being lifted. This is a company that investors may want to look to purchase on future dips. Blackrock's dividend yield is 1.74%, (based on last night's close of $178.95), but we feel it will continue to outperform its competition and be the asset management play investors should want to own.
JPMorgan Chase Gaining Fans
earnings may have proved our recent removal of the name from our "Recommended" list wrong. The company's revenue was higher than forecast, helped by market share gains it made in its investment banking division as well as growth in retail financial services. JPMorgan may be starting to take market share during this market swoon period.
That said, management is concerned about more damage to come. CEO Jamie Dimon indicated that the company will not be raising its dividend until it sees a permanent break in the clouds. JPMorgan will not be afraid to pay for and keep talent, as it that its compensation level is still high.
We are going to watch the stock very closely here to be sure the storm clouds are moving away from this company faster than its peers. But for now, JPMorgan is making us think about adding it back to the list of recommendations.
Comerica: Check Out the Ballpark, Not the Stock
just delivered news that its quarterly profit dropped 71%. Despite beating earnings estimates, the company had a $177 million provision for credit losses, up from $163 million in the first quarter. Credit-related charge-offs added up to $113 million, and looking ahead, the company sees charge-offs totaling $425 million to $450 million.
Shares may experience a temporary bounce, but we would still not recommend buying this stock. Comerica made no mention of its double-digit dividend yield (which was around 11% based on last night's closing price of $23.99), but we feel it's only a matter of time before the company needs to cut its dividend in order to secure additional capital. If you need to be in the financial space, there are other plays that should come out of the storm in better shape -- think Wells Fargo.
Textron Flying Low After Cautious Earnings Guidance
Shares of aircraft producer
are tumbling Thursday, after the company delivered an earnings report that saw net earnings rise 23%. The culprits of today's price dip? Weaker-than-expected guidance and trouble in the company's financial arm.
Textron's net income rose from $210 million, or 83 cents a share, a year earlier, to $258 million, or $1.02 cents a share. However, these numbers missed the company's estimated earnings guidance of 93 cents to 98 cents per share. The maker of Bell Helicopters and Cessna Airplanes also delivered guidance lower than what analysts had expected, with quarter predictions in the 80-90 cents per share range (analyst estimates were around 99 cents per share).
Textron has recently benefited from increased overseas demand for its commercial aircraft, but the demand from emerging markets will almost surely slow, as the rest of the world is beginning to feel the effects of the economic slowdown we're experiencing in the U.S.
The company, like many others, is battling shrinking profit margins due to rising commodity costs. Textron's financial arm is also experiencing weakening credit performance.
Unfortunately, we don't see a catalyst on the horizon that could push Textron's stock price back up, which is currently seeing new 52-week lows. Its dividend yield is an uninspiring 2% (based on last night's close of $45.98). If dividend investors are looking for some measure of aerospace exposure, we would recommend
(with its potential spinoff catalysts) instead of the currently troubled Textron.
Bank of New York Mellon: Heading Lower
Bank of New York Mellon
gave us an earnings dud Thursday, when the company reported a 31% drop in earnings. BK blamed the drop on securities losses in the second quarter that totaled $152 million, and the bank took a pre-tax charge of $22 million for credit monitoring related to lost tapes in its Issuer and Treasury units. (Lost customer records? How does this happen?)
Given the backdrop of yesterday's rally in the financials, investors would be wise to use any further rallies here to lighten up on their holdings. BK's report was unimpressive at best, and the company's 2.51% dividend yield does not excite us enough to want to own the name at its current levels. Look for lower, sustained pricing as an entry point for owning this stock. Until this name sees any sort of sustained bottom, we do not feel comfortable recommending it.
Illinois Tool Works, But the Stock Doesn't
Industrial products and equipment manufacturer
Illinois Tool Works
gave investors a somewhat weaker outlook than some had hoped for. The company is seeing earnings per share of $3.40-$3.52, lower than analyst estimates of $3.64.
Currency gains and an acquisition helped the company make the current quarter's estimated earnings number. These two growth factors, however, are not the sort of catalysts that you want to bank on.
ITW shares are down 20% in the past year. This price action combined with their 2.5% dividend yield (based on last night's closing price of $46.55), does not make Illinois Tool Works an attractive dividend investment at this point. Without any short-term catalysts in sight, dividend investors should look elsewhere for better dividend stocks.
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At the time of publication, the authors had no positions in stocks mentioned, although positions may change at any time.
Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.