Travelers Stock Up Despite Hurricane-Related Losses
is seeing its shares rise this morning, despite an announcement that catastrophe losses climbed to $1.05 billion during the quarter.
The company's loss estimates for Hurricane Ike reflect catastrophe losses in eight states, and they include Travelers' estimated share of assessments from the Texas Windstorm Insurance Association. Management expects these items to reduce third-quarter operating income per diluted share by about 80 cents, and net income per diluted share by about $1.
We have avoided shares of TRV since our coverage began in early June, when shares were trading at the $47 level. We would still avoid the shares here and would like to see shares stabilize a bit before considering any change in our ratings. The company has a 3.80% dividend yield, on the basis of Friday's closing stock price of $30.50.
Travelers is not recommended at this time, holding a Dividend.com rating of 3.3 out of 5 stars.
Waste Management Trashes Bid for Rival
has just announced it is
its $6.73 billion bid to acquire its smaller waste disposal rival
Back in August, Waste Management had raised its buyout offer to $37 a share, after Republic Services Group rejected an earlier $34-per-share bid. RSG had refused the buyout offer so it could move forward in its own deal to acquire Allied Waste Industries, which the company felt was a better match.
We had removed shares of WMI from our "Recommended" list back on Sept. 9, when shares were trading at $35.35. We felt then that the company was becoming unattractive from a risk/reward and dividend yield standpoint. We removed RSG on Sept. 17 when shares were trading at $31.41.
On the basis of today's news, we are upgrading WMI to our "Recommended" list, on what we feel is a smart move on the company's part. The company's dividend yield is now nearly 4%, and we believe the stock is now attractive from a long-term perspective.
Waste Management is a recommended stock, holding a Dividend.com rating of 3.5 out of 5 stars.
Abbott Labs to Purchase up to $5 Billion in Share Buyback
has just announced that its board of directors has authorized the repurchase of up to $5 billion of the corporation's common stock.
The share repurchase authorization has no timetable and can be discontinued at any time. The company bought back more than $1 billion in stock last year.
Our readers know we are not fans of share buybacks. Again, we understand that it takes some of the float out of the system and technically raises EPS levels. However, we would much rather a company reward existing shareholders with a dividend increase, and not try to time stock purchases, which can be a big waste of needed capital. The company has a 2.91% dividend yield, on the basis of Friday's closing stock price of $49.45.
Abbott Labs is not recommended at this time, holding a Dividend.com Rating of 3.4 out of 5 stars.
Companies With a Lot of Cash Aren't Always Great Investments
Many analysts today are trying to find great investment ideas by simply looking at cash on companies' balance sheets.
This mentality can often lead investors to buy stocks of companies that have no strength in their fundamental businesses. Back in the dot-com and tech bubble days, analysts often recommended companies that were trading at cash-to-market-cap ratios of 25-30%. Guess what happened to many of those stocks? They eventually traded to 70%-90% of cash, because their stock prices continued to drop.
The most important thing we look at is the future of a company's business. Investors need to separate stocks that are living on borrowed from those whose stock is now mispriced as a result of the market meltdown. This distinction is extremely important, and we will be focusing on it as we attempt to identify bargains in today's market.
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.