Did the bull market cycle end on September 2? The NASDAQ lost 7% from its peak above 12,000, while the S&P saw smaller losses of 4.5%. Of course, there have been positive trading sessions – and a look at the year-to-date chart suggests that stock markets simply experienced a temporary correction, one of several that have occurred so far, since the bull run began in March.
Still, the market activity of the past two weeks reminds us that every investor should take steps to defend his portfolio, in good times as well as bad. Banking giant Goldman Sachs has taken that reminder to heart, and pointed out three high-yielding dividend stocks with upside potentials starting at 25%.
Turning to the TipRanks database, we’ve pulled up the latest information on the Goldman Sachs picks. Combined with the analyst comments, the data will tell us what else makes these stocks compelling buys.
MPLX LP (MPLX)
Unsurprisingly, all three stocks that Goldman checked are in the energy industry. Oil – and other hydrocarbons – is vital in the modern economy, and the companies that drill it, move it, and sell it generally have the cash available to pay out high dividends. MPLX, which spun off of Marathon Petroleum eight years ago as a separate midstream entity, generates its income from a series of pipelines and oil transport assets, also including river shipping, terminals, and refineries. The company’s operations are focused in the MidWest and Gulf Coast.
MPLX has shown a clear ability to generate cash through its operations. The company’s cash position last year allowed it to return $2.8 billion to shareholders, through a combination of buybacks and dividend payments. In 1H20, MPLX reduced its capital spending in response to lower income, and despite posting a net loss in the first quarter it generated $1 billion in net cash.
In the second quarter, as earnings returned to a strong net profit, the company saw net cash from operations of $1.105 billion. Distributable cash flow in the quarter was almost $1.03 billion, and the company paid out its usual high dividend: 68.75 cents per common share. At $2.75 annualized, this dividend yields well over 15%, and importantly for investors, the company has been gradually growing the dividend for the past 8 years.
Goldman Sachs analyst Michael Lapides writes of this stock, “MPLX is a large diversified MLP with a portfolio of crude and refined products assets … as well as gathering and processing (G&P) assets across various basins, notably the Marcellus/Utica… we see a clear path to improvement: new strategic initiatives for the complex…, a stronger Marcellus/Utica macro outlook, and a clear path to deleveraging…”
With that background in mind, Lapides initiated coverage on MPLX with a Buy rating. His $24 price target suggests that MPLX has a 33% upside potential for the coming year. (To watch Lapides’ track record, click here)
Overall, MPLX gets a Moderate Buy analyst consensus rating, based on 7 Buys and 3 Holds. The shares are selling for $18, and the $22.86 average price target implies an upside of 27%. (See MPLX stock analysis on TipRanks)
Suncor Energy, Inc. (SU)
Next up is Suncor, a Calgary-based company and a major operator in Alberta’s oil patch. Suncor works the tar sand oil deposits that put Alberta on the oil map, producing synthetic crude oil from the semi-solid bitumen. The oil sands are estimated to contain nearly 180 billion barrels of economically viable recoverable reserves, and Suncor is one of the biggest producers in the region.
Suncor has faced serious headwinds so far in 2020. The COVID-19 pandemic has impacted demand and imposed supply, distribution, and labor disruptions, while competition from OPEC and other international producers has pushed prices lower. SU’s earnings turned negative in Q1, and the EPS loss deepened in Q2. At the top line, revenues have slipped from C$9.5 billion in Q4 to C$7.4 billion in Q1 to C$4.2 billion in the second quarter.
With revenues and earnings slipping, and the share price down 57% year-to-date, it only makes sense that Suncor has reduced the quarterly dividend payment in 2020. The dividend was increased steadily from 2017 through the end of 2019, but in 2020, the payment was reduced to 15 cents per common share. It’s been kept at this level for two quarters, and even at the reduced level the dividend yields 4.5%, well above the average found among S&P 500.
Reviewing this stock for Goldman Sachs, analyst Neil Mehta wrote, “Our positive view is predicated on: (1) balance sheet strength, with 1.0x ND/EBITDA versus peers at 1.4x in 2021; (2) strong FCF generation despite some negative earnings revisions; (3) potential for C$2 bn of cash flow growth from debottlenecking and margin enhancing projects through 2025; and (4) attractive valuation after recent underperformance versus peers.”
Mehta sets an $18 price target on SU, representing a 32% upside for the coming year and supporting his Buy rating on the stock. (To watch Mehta’s track record, click here)
Overall, Suncor has a Strong Buy rating from the analyst consensus, after receiving 12 Buy reviews and 2 Holds in recent months. The stock has an average price target of $22.07, even more bullish than Mehta’s and giving it a 62% upside potential from the $13.63 trading price. (See SU stock analysis on TipRanks)
Canadian Natural Resources (CNQ)
The last stock on our list is another large company from the Canadian energy industry. Canadian Natural Resources operates in the heavy crude region of Alberta, and in the natural gas plays of adjacent British Columbia. Canadian Natural’s assets include light, medium, and heavy crude oil, along with oil sands mining rights and both conventional and unconventional natural gas wells. The company is the largest landholder in the Western Canadian Sedimentary Basin. Supplementing its North American assets, CNQ also has offshore operations in the North Sea and on the West African coast.
The company’s stock took a hard hit in February, when the coronavirus pandemic sparked a sharp economic downturn. Shares fell 74%, and have still not fully recovered. Fortunately, the company met the crisis after a strong finish to 2019, a year that saw total production reach almost 1.1 billion barrels of oil equivalent and free cash flow hit $4.6 billion.
In recent months, even as the economy has begun to come back, CNQ has found that its own headwinds have not diminished. Supply and demand are still not in balance in the oil industry, and recessionary pressures are pushing oil prices down.
Despite those headwinds, CNQ has kept up its dividend payment. The most recent dividend, declared in August and set for payment on September 18, is for C$0.425 cents (US$0.32). At this rate, the dividend annualizes to C$1.70 (US$1.29), and gives a robust yield of 7.1%. The company has been raising the dividend steadily for the past several years.
This stock was, like SU, reviewed by Neil Mehta, who notes three important factors behind his Buy rating: “Positive capital intensity surprises, including positive commentary around 2021; sufficient liquidity to navigate the downturn and expectations of deleveraging in 2021-2022; and CNQ’s potential to benefit from an oil price recovery.”
Mehta accompanies his Buy rating on CNQ with a $23 price target, implying a 25% one-year upside potential.
All in all, Canadian Natural has 12 recent Buy reviews, making the Strong Buy analyst consensus rating unanimous. Shares are selling for $18.37 and have an average price target of $24.19, suggesting an upside of 32% for the coming year. (See CNQ stock analysis on TipRanks)
To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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Shell to Cut Up to 9,000 Jobs as Virus Accelerates Overhaul
(Bloomberg) — Royal Dutch Shell Plc will cut as many as 9,000 jobs as Covid-19 accelerates a companywide restructuring into low-carbon energy.The move reflects the challenge facing Big Oil as the pandemic persists, with some in the industry believing the era of demand growth is already over. As the crisis hastens the shift to cleaner energy, oil majors are axing jobs, taking multibillion-dollar writedowns and even slashing once-sacrosanct dividends.At Shell, job reductions of 7,000 to 9,000 are expected by the end of 2022, including around 1,500 people taking voluntary redundancy this year, the company said Wednesday. It currently has about 83,000 employees. Sustainable annual cost savings of $2 billion to $2.5 billion are predicted by that time.“We have to be a simpler, more streamlined, more competitive organization,” Chief Executive Officer Ben van Beurden said in a statement. “In many places, we have too many layers in the company: too many levels between me, as the CEO, and the operators and technicians at our locations.”Shell also warned of lower sales in the third quarter, saying oil-product volumes were around 4 million to 5 million barrels a day, down from 6.7 million a day a year earlier. Oil-product trading results will fall short of the historical average and will be “significantly lower” than in the second quarter.That shows the oil-trading bonanza that saved Shell’s last set of results won’t be repeated. The company also expects refining margins to be much lower than in the second quarter. Its full third-quarter financials, scheduled for Oct. 29, will include impairment charges of $1 billion to $1.5 billion.Shell’s B shares slipped 0.7% to 950.2 pence as of 8:04 a.m. in London.Oil’s coronavirus-induced plunge has seen Shell’s peers also take drastic steps to shore up the balance sheet. BP Plc said in June it planned to cut 10,000 jobs, Chevron Corp. intends to trim 10% to 15% of its global workforce, while Exxon Mobil Corp. is reviewing staffing country by country.Shell began the process in May, when Van Beurden told staff in a memo that it was reshaping the company to make it leaner and more resilient and that there could be redundancies in the second half of the year, according to people with knowledge of the matter. The Anglo-Dutch major offered voluntary severance, scaled back recruitment and reviewed expatriate staff contracts.The reorganization is also designed to further Shell’s expanded green ambitions. The company said in April it planned to eliminate all net emissions from its own operations and the bulk of greenhouse gases from fuel it sells to its customers by 2050. Shell also said that ultimately, it would only do business with emission-free companies.Read more: How Peak Oil’s Outlook Is Changing Under the Pandemic: QuickTake(Updates with trading in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Despite hopeful speculation, Biden campaign says remaining debates are still on
The Daily Beast
‘Fox & Friends’ Hosts Look On in Horror as Rudy Giuliani Blurts Out Biden Dementia Conspiracy Theory
Everyone knows that live television isn’t easy. Anything can go wrong—from a faulty connection, a verbal slip-up, or, as was the case on Tuesday morning’s Fox & Friends, Rudy Giuliani bellowing insane conspiracy theories at the nation with no obvious way to stop him.It’s always a risk to allow Giuliani to share his wildly unpredictable stream of consciousness live. The man who was named Time magazine’s Person of the Year for 2001 has long since been reduced to sharing the latest Trumpist conspiracy theories on any cable news channel that has the budget to cover any possible subsequent defamation lawsuits.This time, his F&F hosts looked on with visible horror in their eyes as Giuliani shared his completely baseless belief that Joe Biden is suffering from dementia. If you have the time, it’s worth watching the clip at least three times so you can see each of the hosts panicking in their own unique way as the former New York City mayor rambles on and on.> On Fox & Friends, Rudy Giuliani says Joe Biden “has dementia. There’s no doubt about it. I’ve talked to doctors. … The president’s quite right to say maybe he’s taken adderall.” The hosts get visibly uncomfortable. pic.twitter.com/2Ma7DKNBpS> > — Bobby Lewis (@revrrlewis) September 29, 2020With a mischievous cackle, Giuliani began: “The man [Biden] has dementia. There’s no doubt about it. I’ve talked to doctors. I’ve had them look at a hundred different tapes of his five years ago and today.” Trying his very best to shut Giuliani down, host Steve Doocy interjected that Biden’s team has said the Democrat has no serious medical problems.Giuliani then made an extraordinary noise at Doocy that can best be typed as “Oowughawughawugh,” before continuing: “He can’t recite the Pledge of Allegiance and he’s fine? He was in the Senate for 160 years? I mean, he can’t do the prologue to the… to the… con… to the… uh… Constitution of the United States or the Declaration of Independence, any of them.”Getting louder and increasingly excited about his armchair diagnosis, Giuliani went on: “He can’t do NUMBERS. Wow, are the numbers screwed up. He actually displays symptoms that two gerontologists told me are classic symptoms of middle level dementia.” Doocy and co-host Ainsley Earhardt both responded to that claim by softly saying, “Right.” The third host, Brian Kilmeade, can just be seen blinking rapidly.Fox News Lobotomizes Its ‘Brain Room,’ Cuts Fact-Based JournalismNevertheless, Giuliani persisted. “That’s when [Biden] does that ‘I pledge allegiance to the United States… uh… uh… um… I think,’ he’s done that twice,” said the ex mayor. “That’s a classic symptom in the DSM-V, it’s the fifth symptom, of dementia, he’s got eight of the 10.”Then, seemingly remembering that he was on the show to talk about tonight’s presidential debate, he went on: “Look, that isn’t the debate. He can get through it. I think the president is quite right to say maybe he’s taken Adderall or some kind of attention deficit disorder thing.”As Giuliani began pulling prescription medicine brands out of the air, Doocy had finally had enough and told him firmly, “None of us are doctors, that is your opinion.” Giuliani fought back, saying it was actually the opinion of some very professional-sounding doctors that he knows.But the game was up. Kilmeade, in his first verbal interjection of the entire exchange, said with exasperation, “We can stay away from that.” Earhardt then moved on to pick Giuliani’s brain on the Supreme Court.This particular line of attack is one that Giuliani—whose work as President Trump’s lawyer and top dirt-digger on Hunter and Joe Biden kicked off a chain of events that got his client impeached last year—has enthusiastically embraced as one of his primary functions now for Team Trump.Shortly before midnight on Monday night, Giuliani started texting The Daily Beast to say that Trump did “great” in recent White House debate prep (for which the president said on Sunday that Giuliani and former New Jersey governor Chris Christie took part), and to rail against Biden as a “senile,” “broken down old crook” who’s supposedly suffering from “dementia” and needs “ADD drugs” to get through the Tuesday debate. The Trump attorney also claimed that someone had told him how stupid Biden was in law school.Giuliani also mentioned late Monday evening that he’d be flying with Trump on Air Force One on Tuesday and would be at the Cleveland debate. Asked about what kinds of questions he peppered the president with during the prep, the former New York City mayor replied, “It really doesn’t work like that with him. It’s much more of a discussion rather than a rehearsal. Plus you are dealing with a very smart, very alert human being, not a senile old man.”Read more at The Daily Beast.Get our top stories in your inbox every day. Sign up now!Daily Beast Membership: Beast Inside goes deeper on the stories that matter to you. Learn more.
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