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Market Analysis 08 July 2021

Philip Morris International

Stocks based on dividends

1. Philip Morris International

  • Dividend Yield: 4.79%
  • Market Cap: $153.7 Billion
  • Year-To-Date Performance: +19.1%

Philip Morris International (NYSE:PM), which was spun off from Altria (NYSE:MO) in 2008, is an American-Swiss multinational cigarette and tobacco manufacturing company. Its most recognized and best-selling product—which is sold in over 180 countries around the world—is the Marlboro brand.

The New York City-based company has capitalized on its recent shift to reduced-risk tobacco products, most notably its iQOS smoke-free heated tobacco device, which releases nicotine by heating, instead of burning, tobacco.

PM stock—which has gained about 19% year-to-date—closed at $98.65 on Tuesday, within sight of a recent three-year high of $100.94 reached on June 16. At current levels, the Big Tobacco company has a market value of $153.7 billion.

PM Daily Chart

PM Daily Chart

Good quality blue-chip dividend stocks tend to perform well in an environment of low bond yields. The tobacco company currently offers a quarterly dividend of $1.20 per share, which implies an annualized dividend of $4.80 per share, at a yield of 4.79%.

For comparison, the yield on the benchmark U.S. 10-year Treasury stood at around 1.36% late Tuesday.

Philip Morris, which posted upbeat financial results in the last quarter and raised its full-year guidance, is slated to next report earnings before the U.S. market opens on July 20.

Consensus calls for earnings per share of $1.55 for its second quarter, improving from EPS of $1.29 in the year-ago period. Revenue is expected to increase roughly 15% year-over-year to $7.68 billion, driven by the continued strength of IQOS, as well as further progress with operating cost efficiencies.

Additionally, shareholders will pay close attention to PM’s plans to return more cash to investors. The company approved a new stock buyback plan of up to $7 billion in the last quarter.

2. Kinder Morgan

  • Dividend Yield: 5.82%
  • Market Cap: $41.7 Billion
  • Year-To-Date Performance: +34.9%

Kinder Morgan (NYSE:KMI) is one of the biggest energy infrastructure companies in North America. Its core business operations involve transporting oil, natural gas, and related products through its vast network of pipelines and terminals.

The Houston, Texas-based petroleum firm—which operates approximately 85,000 miles of pipelines and 152 terminals—is the largest U.S. independent transporter of refined petroleum products and of carbon dioxide.

KMI stock, which is up around 35% in 2021, ended at $18.44 yesterday, not far from its recent 13-month peak of $19.29 reached on June 11. At current levels, the energy pipeline giant has a market cap of $41.7 billion.

KMI Daily Chart

KMI Daily Chart

High-dividend stocks tend to react well in a low-rate environment as the hunt for yield intensifies. Kinder Morgan raised its quarterly dividend by 3% in April to $0.27 per share. This represents an annualized dividend of $1.08 and a yield of 5.82%, one of the highest in the midstream energy sector.

In addition, lower rates usually lead to a weaker dollar, which in turn boosts the value of dollar-denominated oil futures contracts, as this makes ‘black gold’ cheaper for buyers in other currencies. This tends to help stocks of energy-related firms.

Kinder, which reported earnings and revenue that easily topped expectations in in the previous quarter, next reports financial results after the U.S. market closes on July 21.

Analysts call for EPS of $0.18 for the second quarter on revenue of $2.87 billion. Beyond the top- and bottom-line figures, investors will be eager to hear if the pipeline company plans to return more cash to shareholders in the form of higher dividend payouts and share buybacks.

3. Realty Income

  • Dividend Yield: 4.19%
  • Market Cap: $26.5 Billion
  • Year-To-Date Performance: +9.8%

Realty Income (NYSE:O) is a real estate investment trust (REIT) that specializes in freestanding retail and commercial properties in the U.S., Puerto Rico, and the UK.

The company, which owns 6,662 properties totaling more than 115 million rentable square feet, focuses on businesses that are less threatened by e-commerce or recessions, such as convenience store chains, like Walgreens Boots Alliance (NASDAQ:WBA) and 7-Eleven, as well as discount retailers, like Dollar Tree (NASDAQ:DLTR) and Dollar General (NYSE:DG).

It also concentrates on non-discretionary businesses that have a service component, such as fitness gyms and movie theaters, like LA Fitness and AMC Entertainment Holdings (NYSE:AMC).

O Daily Chart

O Daily Chart

Up roughly 10% year-to-date, O stock ended Tuesday’s session at $68.25, earning the San Diego, California-based REIT a valuation of $26.5 billion.

The company’s substantial dividend payouts and attractive yield make Realty Income a likely candidate to outperform in the months ahead as Treasury yields languish near multi-month lows.

Realty is one of just a few REITs that pays dividends monthly, rather than quarterly, and has trademarked the phrase ‘The Monthly Dividend Company’ as its official nickname.

The real estate company—which has increased its dividend for 94 consecutive quarters—currently offers a monthly payout of $0.235 per share. This represents an annualized dividend of $2.82 per share and a yield of 4.19%, making it an extremely attractive play in the current environment of declining rates.

FOREX: USD/JPY

After reaching a local high at 111.67, UsdJpy has corrected 100 pips and now is trading at strong confluence support.
I expect a new leg up from this pair and only a drop under support would negate this scenario

FOREX: EUR/USD

We took some few longs on EURUSD and then after some reason again we shorted EURUSD in previous analysis and now price hit daily strong support, so we are looking for a long position near this support zone

General Market

1. The ECB’s Big Reveal

The European Central Bank will unveil its new monetary policy strategy after over a year of head-scratching, aiming to convince markets that it can still deliver price stability after a decade of consistently undershooting its target.

Advance leaks suggest that the bank will change its inflation target to a more explicit 2%, removing the asymmetric bias implicit in its current mantra of “close to, but below, 2% over the medium term.” Analysts say that will give it more leeway to allow temporary overshooting of its target, akin to the Fed’s now-explicit tolerance of temporary overshooting.

Whether the ECB can generate 2% inflation in a currency union still hobbled by the lack of permanent solutions to chronic low growth, national bankruptcy risks and a weakened banking system is another question.

Almost as an aside, the bank will keep its current policy stance unchanged, although President Christine Lagarde’s comments at her press conference will be parsed as usual for changes to the outlook.

2. Jobless claims to hit new low

U.S. initial jobless claims are expected to have fallen to a new post-pandemic low of 350,000, from 364,000 last week.

The numbers are due for release at 8:30 AM ET. They come a day after the Labor Department’s monthly job openings survey for May showed that layoffs had already reached a record low as a newly-reopened service sector scrambled for workers.

The claims numbers will be substantially more up to date than the JOLTs survey, but may still struggle to reinforce confidence in a recovery that appears to be flattening out, not least due to the slowdown in vaccinations that has left midwestern states in particular vulnerable to the fast-spreading delta strain of Covid-19.

3. Stocks set to open sharply lower after tapering hint

U.S. stock markets and bond yields are set to open sharply lower as investors unwind previous bets on strong growth and relatively high inflation continuing into the medium term.

The yield on the U.S. 10-Year note has plummeted to 1.26%, its lowest since February, while the dollar has strengthened to a three-month high as the global safe-haven bid strengthens. The dollar strengthened after the minutes from the last Federal Reserve meeting bolstered expectations that it will may start reducing its asset purchases later this year.

By 6:15 AM ET, Dow Jones futures were down some 541 points, or 1.6%, while S&P 500 futures were also down 1.6% and Nasdaq 100 futures were down 1.5%, as the latest antitrust onslaught against Google owner Alphabet weighed on tech giants. News of an executive order being prepared to break the market power of major railroad companies may also hit those stocks later in the session.

4. The pandemic strikes back – at the Olympics

The delayed 2020 Summer Olympic Games will take place without spectators, after Prime Minister Yoshihide Suga declared a state of emergency for the prefecture of Tokyo due to rising cases of Covid-19.

The decision had been widely expected, as new infections in the Tokyo prefecture have been rising for nearly a month and hit their highest level since mid-May on Wednesday. Japan has been slow to vaccinate its population so far, with barely a quarter of the population receiving even one jab.

The decision still represents a setback to confidence that the world has the pandemic under control. Much of the developing world which, like Japan, has low vaccination rates, is facing an even sharper surge in case numbers: Indonesia, the world’s most populous Muslim country, new infections and deaths have multiplied some sevenfold in less than a month.

Johns Hopkins data suggest that the global death toll from the virus topped 4 million this week although, given structural reporting problems in lower income countries, the likelihood is that this milestone was passed long ago.

5. Oil tumbles despite another big inventory draw; EIA data eyed

Crude oil prices slumped on global growth concerns, notwithstanding the prospect of a tighter physical market in the near term due to disagreements over output policy at OPEC.

U.S. crude futures were down by more than 1% during the overnight session but pared their gains to be down only 0.9% at $71.58 a barrel by 6:15 AM ET. Brent futures were down 0.7% at $72.95 a barrel.

The U.S. government releases official inventory numbers at 10:30 AM ET, a day later than usual due to the Independence Day holiday. American Petroleum Institute numbers released on Tuesday again showed a bigger draw on crude stocks than expected, at nearly 8 million barrels. They’ve fallen by 32 million barrels in the last four weeks thanks to the ongoing recovery in U.S. mobility.

Written by Editor

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tesla jul7

Market Analysis 07 July 2021

jul9

Market Analysis 09 July 2021