Monsanto Nails it. Dividend Increase Maybe. Management Needs to Confirm Earnings $MON

Monsanto (Photo credit: arbyreed)

Monsanto (NYSE:MON) came out charging with an unexpected blockbuster quarter. US farmers flush with last years crop failure insurance money have bought premium seeds and setting themselves up for success this summer.

Pity the investor who did not buy this stock in Aug when it was around $70. You would look very astute with the current $98 per share. So here are the issues. Dividend yield at about 1.5%. If earnings are truly up then management needs to confirm with a dividend increase.

Money flow is mildly negative at 0.92. Short interest has recently risen by 7% but is still only a snick over the 1% of public float mark. Shorts have to be covered. Increasing the dividend makes short positions more expensive. Managements usually hate short positions.

So we need a dividen hike or the market starts to belive management does not believe their own words. In that case the shorts take over.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or his evil twin who is writing a Wall Street Murder Thriller twitter@georgegutowski .

Apple Declares Golden Apple Dividend But it’s Not a Dividend Stock $AAPL

Image via CrunchBase

The long-awaited dividend announcement came down from the Apple Tree. Apple (Nasdaq:AAPL) will skim a little bit of cash and line the pockets of investors. The dividend yield at the currently stratospheric price point is just under 2%. If you are a true dividend oriented investor this will not turn your head. Yield hounds who must surely know rising interest rates and probably inflation are just around the corner will not be truly impressed with a 2% yield.

Coupled with the cash dividend will be a share buy back to fund employee share purchase plans. A nice touch of financial engineering. Can you blame them everyone else is doing it? This allows them the flexibility of manufacturing EPS.

The market is applauding for now. But this is not the Golden Apple as everyone contemplates. True dividend paying stocks return capital to their shareholders in a defined and systemic manner.   Dividend levels while not contractual obligations become matters of trust. When dividends are reduced or cancelled share values erode deeply reflecting the drastically eroded business model. Dividend payout ratios are usually established in advance. Apple has done of these things. The dividend is being justified as something that will not erode the pile of cash that Apple has accumulated. No one is looking at dividend coverage ratio’s and assessing business risk. So therefore Apple is still not a dividend stock.

You would not set your stock selection screens for a 2% dividend  yield and then hit the buy button.

Microsoft (Nasdaq:MSFT) with 50% of Apple’s market cap has a dividend yield of approximately 2.5%. Microsoft’s cash balance is around $52 Billion. Yet Microsoft is starting to be viewed as a senior with an established cash flow base from its Office Product and enterprises services. There is real pressure on Microsoft to act more like a utility and pay up. Microsoft has made a few acquisitions and is probably glad the Yahoo thing (Nasdaq:YHOO) didn’t real work.

Apple has had to eat its own babies to develop new compelling products. Microsoft has eaten the neighbours children several times over and can point to a more entrenched product line. Apple is one marketing failure away from disturbing their slavish clientale. Microsoft can launch Vista and shrug off the problem.

The real comparison is IBM (NYSE:IBM) Big Blue currently has a dividend of under 1.5%. The market cap is just behind Microsoft and the cash balances are nowhere near what Apple or Microsoft have to offer. In short they are a dividend stock. The CFO   needs to watch earnings and cash flow to ensure he can cover the dividend. Apple simply is not in that category.

Which is why Apple has Golden Apples but not Golden Dividends.

George Gutowski writes from a caveat emptor perspective.

Gannett Double Dividend Gamble $GCI #newspapers #dividends

Image via Wikipedia

Gannett Co. Inc. (NYSE:GCI) doubles its dividend. But makes less money. Oxymoronic moment for traditional dividend investors. Print is still in trouble and while digital seems to be improving it still is not doing any heavy lifting.

Dividend coverage ratio must be laughable.

Media is driven by political cycles. This is an off-year. Next year the presidential race is on and so are the big ad buys. The wary investor may conclude a long-term play to turn dividend players into believers when the dividend coverage ratio improves and Gannett can claim improving fundamentals. Or the board senses a coming takeover bid and wants to juice the value with some old school fundamentals.

In any event doubling the dividend on decreasing revenues is a gamblers move. The stock is down in a down market today. Gannett is not a true candidate for dividend aristocrats. Yield investors beware.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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