by Charley Blaine
Perhaps lost in the hustle and bustle over the handsome earnings from the stock market so far this year, and the boost of more than 20% since the low date on December 24, is how long fixed-income, defensive stocks can continue to rally.
Procter & Gamble (NYSE 🙂 and similar stocks have had quite a run. The shares of P & G have risen by more than 16% since Christmas and more than 40% since reaching their low point in May 2018. The shares have hit 14, 52-week high since February 1 after a bullish in January. The consumer pile stocks are not currently near the top of their range, closed yesterday at $ 101.51.
Rival Colgate-Palmolive (NYSE 🙂 and utilities see similar benefits. The completed Friday at a height of 52 weeks. Consolidated Edison (NYSE 🙂 hit 52 high during the week on Thursday.
These shares are not rising due to fantastic revenue growth; in general their performance was modest but stable. On the contrary, investors indicate that they will be satisfied if they see a growth in earnings per share that supports and expands dividend payments, partly because they do not see the Federal Reserve quickly.
The annual dividend of P & G for $ 2.87 per share represents a yield of 2.80% and can be increased in April. The annual dividend of $ 1.72 from Colgate-Palmolive yields 2.6%, while the annual $ 2.96 dividend from Con Ed yields 3.49%.
But at some point these shares will at least show a hitch and the prices will fall, which offers some good buying opportunities for attention. Investors must now be on the lookout for warning signs. Four are especially critical:
1. Price
P&G shares now sell at a rich 24.9x backlog of 12 months and outperformed Colgate-Palmolive last year. Colgate-Palmolive, which makes consumer items such as oral care products, soaps and pet food, is exactly behind a 24.4x multiple. Both are ahead of the current multiple of 21x. Con Ed & # 39; s multiple stands at 19.4x.
Prices for all three stocks anticipate consensus estimates from analysts, indicating that they have gone too far. And remember that a share such as P&G or a utility will nowhere grow as close as Cisco Systems (NASDAQ 🙂 that continues to reach new heights this year and reach more than 20% this year.
2. Business Basics
Two years ago, P & G was in an existential crisis. Many of its largest brands lost market share – and it holds a number of globally recognized names, including Tide, Dawn, Pampers, Crest and Charmin.
At the same time that Staples Giant consumer undertook an expensive proxy fight with activist investor Nelson Peltz, it tried to cut costs, reduce weight, blow up a heavy infrastructure and bring back some fire into those brands.
P&G begins to see results of a turnaround plan that included the sale of about 100 companies. The revenues and revenues of the first and second quarter of the year 201 beat the estimates. The results of the second quarter, issued on January 23, caused P&G shares to increase by 4.9%.
Yet a stumbling block can skip a share on relatively strong results. But at least there is the dividend for fixed-income shares.
3. Trade
The trade dispute between the US and China remains uncertain, with some sources characterizing the current stalemate as the head in overtime. If trade negotiations fail, such as those with North Korea, that could lead to a new round of market volatility and currency movements, which could affect revenues.
4. The Fed
The value of a dividend to an investor is a function of the dollar amount paid and the interest rates. Currently, the Fed is the friend of all companies that use their dividends to attract investors. The rates are low and will probably stay that way for a few months. This is good for P & G, Colgate-Palmolive or Con Ed, who also need low rates to finance improvements to their systems.
So far, the competition is probably the biggest problem for a P&G or Colgate. How the companies perform and the trade demand are the following wildcards. And it always pays, just in case.
