Commercial Property Market Officially Joins the Downturn
CB Richard Ellis
, the world's No. 1 provider of commercial-real-estate services, has filed to sell 50 million shares of common stock.
The stock is down over 25% today as the amount of shares it is selling is nearly 25% of the company's share float. Management said it plans to use the offering's net proceeds for general corporate purposes.
Investors in the stock and in commercial real estate are seeing the fallout from the residential downturn that started 18 months ago. Historically, the commercial real estate markets are usually the last part of the market to get hit and have been the first one to rebound as well.
We'll see if this will be the case once again. But investors should be wary getting into the names before we see any signs that prices are beginning to hold firm. Even though the stock does not currently pay a dividend, we feel it is a name that investors may want to watch to check the temperature of the commercial space. Another name we watch is
Jones Lang Lasalle
, which does currently pay a dividend.
Second Largest Mall Owner in the U.S. Drops Below $1 a Share
General Growth Properties
has broken below $1 a share this morning after the second largest U.S. mall owner expressed doubts that it could continue operating due to its looming near-term debt.
The company is facing a payment of $1.13 billion in debt coming due, including $900 million in secured mortgage debt on the two of its Las Vegas shopping centers due on Nov. 28 and $58 million of corporate debt due on Dec. 1. Next year will not get any easier with another $3.07 billion that is due.
The amount of debt that a company has is now becoming a major focus for investors. Unfortunately, companies that have historically carried lots of debt and have successfully been able to run their business are seeing that playbook being thrown in the trash. The story with General Growth Properties is also littered with margin calls to insiders who had been too aggressive in buying company shares as well. Another lesson learned there for investors is recognizing that drawing lines in the sand and buying too much of one stock can have disastrous results. We would avoid the shares and the daytrading arena that it has now entered.
TJX Will Carry Leaner Inventory to Combat Consumer Slowdown
just reported a 6% decline in third-quarter profit to $235.8 million for the three-month period ended Oct. 25, which is slightly below the $249.5 million in the year-ago period.
Sales increased slightly to $4.76 billion from $4.66 billion, but the EPS did come in one penny below. Management said it is extremely focused on buying right and running with leaner-than-usual inventory levels, which has led to faster inventory turns and strong merchandise margins.
As far as the outlook, the company is trimming its 2009 forecast to a range of $2.07 to $2.11 per share, below last month's revised guidance of $2.26 to $2.31 per share.
We had removed shares of TJX from our "Recommended" list on Sept. 17, when the stock was trading at $34.22. The company has a 1.86% dividend yield, based on last night's closing stock price of $23.70. We are cautious on the retail sector and especially the clothing-related names here. There are some other companies that we are watching that may be better plays as prices come down. We'll keep investors posted on which they may be as we get more retail earnings reports later this week.
TJX is not recommended at this time, holding a Dividend.com Rating of 3.2 out of 5 stars.
Vodafone Sees Some Positive Cash Flow
just reported that its first half profit dropped 35% to 2.14 billion pounds ($3.33 billion), down from 3.29 billion pounds ($5.08 billion) earned in the year-earlier period.
The company is lowering its sales to a range of 38.8 billion pounds ($59.7 billion) to 39.7 billion pounds ($61.1 billion) -- below an earlier forecast of about 39.8 billion pounds ($61.2 billion). Management is citing challenging operating conditions in Europe and ongoing competitive and regulatory pressures.
The company is however raising its forecast for free cash flow to a range of 5.2 billion pounds ($8 billion) to 5.7 billion pounds ($8.8 billion), boosted by lower capital spending and tax payments.
We have avoided shares of Vodafone since our early June coverage began and the stock was trading at $31.63. We are updating our dividend payout information for the stock and will put that on the site as we receive any new changes. The company does have support at the high $12 range, which it last hit in 2002. We would be cautious here and not jump the gun. It's a big company, a strong brand, and we just need to see the shares stabilize now.
Vodafone is not recommended at this time, holding a Dividend.com Rating of 3.3 out of 5 stars.
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At the time of publication, the author 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.