Whole Foods Suspends Its Dividend
Today is a tough day for dividend investors in
, as the company announced a halt in dividend payouts.
Whole Foods' dividend suspension may have come as a bit of a surprise, but the company is being hurt badly by the price-conscious consumer. The organic food store company's latest results showed its net income had dropped more than 30%. The company is lowering its outlook and limiting the number of stores it will open next year.
This situation is an example of how "bottom fishing" can be dangerous. WFMI shares were not on our "Recommended" list, for good reason. As a result of the dividend suspension, we will no longer be covering the stock.
El Paso Earnings a Yawner
Natural gas company
just reported its latest quarter, in which sales dropped 4% to $1.15 billion. The company did match the earnings per share consensus, as its exploration and production business performed well during the quarter.
Shares are down nearly 25% in the last month, as many energy plays have come under pressure. We are not excited by EP shares at this price level. We prefer to see the shares pull back more and consolidate a bit. There's no reason to buy what may effectively be a "dead money" stock.
El Paso's dividend yield is 1.20%, based on last night's closing stock price of $16.69. There are better areas to be invested in at this point, and we will monitor the stock for any changes that would compel us to upgrade it to our "Recommended" list.
News Corp. Becoming a Value Play
just reported a solid 17% gain in revenue in its last quarter. The company was able to generate increased advertising rates and fees from cable and satellite operators for its Fox News Channel, FX, and the Fox Sports channels. These gains helped offset the launch costs at Fox Business Network.
Management was raving about performance from MySpace, which is seeing "dramatic increases" in branded display ads in the current quarter. As far as further acquisitions, the company said that some of the Rainbow Media channels currently owned by
would be attractive (at the right price, of course). There is apparently no interest on News Corp'.s part in acquiring AOL or Yahoo at this point.
At current levels, News Corp. is too inviting to pass up. We are upgrading the shares here, as investors with a long-term time horizon can buy a top media brand at prices near the lows of its five-year range. The risk/reward for this stock is strong, despite a low dividend yield of 0.81% (based on last night's closing stock price of $14.74). Investors need to make sure to look at the "A" shares, since there are two types (NWS-A and plain old NWS). Make sure the class you're considering are the ones that pay a dividend.
Agrium Blows Out Earnings, Offers Bullish Outlook
just reported a huge beat in its latest quarter. Earnings per share came in 85 cents ahead of consensus estimates. Revenue was up 90%, as demand its products and services skyrocketed once again.
Management is bullish on the rest of the year, but that is based on prices for corn, wheat and soybean prices remaining at historic levels. The downward movement in those commodities lately may not support such a positive outlook. We have recently removed names like
from our "Recommended" list, as there is too much "hot money" that may hammer those stocks.
We are still recommending Agrium, but we would not be adding to shares at their current level. If the stock falls a bit further, we may decide to downgrade the stock. Unfortunately, some dividend stocks become momentum trading vehicles, and that alters what our usual holding period may be -- that's something to consider if you are looking to buy and hold for a specific period of time.
Devon Energy Reports Big Earnings, but Now What?
delivered a solid second-quarter report. Revenue jumped 21%, to $3.55 billion. The simple equation of increased oil and gas production plus higher oil, natural gas, and natural gas liquids prices led to the company's EPS coming in 29 cents ahead of consensus estimates.
The dilemma with names like Devon Energy is that energy prices have started to retreat. There is no question that demand from nations like India and China will be stronger than ever, but as in any economic model, there comes a point where price breaks the consumer and the supplies will build.
The global economic slowdown does not make us bullish on the energy names. If mergers and acquisitions come into the picture, then we can see a possible floor for shares in the energy sector. Today's commodity deal news has us re-thinking some of copper stocks -- stocks have come down in that area quite a bit from when we removed the names from our "Recommended" list. Until we see deals in the energy sector, or much lower prices, we would avoid names like Devon Energy.
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.