Dividend Stock Thoughts
An Investment in Knowledge Pays the Best Interest
Benjamin Franklin
EXPE and BKNG: Travel Titans Poised for Record-Breaking Year
• Booking Holdings (BKNG) and Expedia Group (EXPE) are leading players in the Online Travel Agency (OTA) market, with BKNG dominating the European market and EXPE holding a larger share in the US.
• Both BKNG and EXPE are investing in AI to drive personalization of offerings and new large-scale rewards offerings.
• Travel spending is on the rise, with consumers prioritizing travel over other expenses, indicating a strong rebound in the travel industry.
• The alternative accommodation market is a key growth area for both companies, with EXPE’s Vrbo and BKNG’s expansion in non-hotel offerings.
REPX: Sustainable Growth with Strong Free Cash Flow
• 5.22% dividend yield, maintained even at $40/bbl WTI.
• Strong free cash flow, at $75/bbl WTI REPX expects $100 million in FCF for 2024.
• Estimated 18.3% production gowth for 2024 without a meaningful increase in costs.
• REPX is actively deleveraging its balance sheet, targeting 60% of free cash to debt reduction.
• Strong geographic position, operating in a lower-cost and lower-decline rate location compared to the median Permian field.
Himax Positioned for Jump into AI and IoT
• 4.2% Expected Dividend Yield for 2024.
• HIMX is expanding its product portfolio into non-display technologies, catering to emerging markets like AR/VR, AI, and IoT.
• HIMX’s strong partnerships with major automotive OEMs and its 40% market share in automotive displays position it well to capitalize on further digitization of car displays.
• While there are short-term challenges, the display and optical semiconductor market remains one with high margins and high barriers to entry.
Suncor Digs Out Strong Total Return with 6% Production Growth
• 4.6% dividend yield, share repurchases tied to net debt.
• 745.7 mboe/d in aggregate production in 2023, the highest in firm history.
• Targeting a 6% increase in production in 2024 without per bbl cost increases or accelerating depletion.
• Refinery utilization rates in 2023 averaged 90%, with a projected increase to 94% in 2024.
• Fortress balance sheet, with a debt to EBITDA of under 1.0x and $4.6 billion in free cash flow.
• Significant tailwinds with OPEC+ cuts and additional transport capacity to the West Coast coming online in 2024.
Ecopetrol Pays Out 18% Yield with Successful Permian Play And Gas Exploration
• Dividend Yield estimated at 17.7% for 2024.
• A 3.3% increase in production to an 8-year high of 737 mboe/d and a strong production profile.
• Successful Permian basin development program, outputting 66.3 mboe/d. We expect a secular increase to 100 mboe/d through 2025.
• Strong gas development profile, significant domestic supply shortfall over the next decade.
• Political considerations will likely be resolved during the next Colombian election in 2026.
RTX Capitalizes on Secular Trends to Drive Dividend Growth
• 2.6% Dividend Yield should grow with earnings.
• Increased military spending by the US and NATO allies, driven by geopolitical tensions, is expected to fuel sustained growth in RTX’s defense segment.
• As commercial aviation recovers and aircraft average age ticks up, RTX stands to benefit from both new equipment and overhaul services.
• $5.5 billion in free cash flow generated in 2023 and an estimated 16.7% CAGR in free cash flow to 2025 provide a solid foundation for returns and expansion.
• A 12% year-over-year growth in backlog, now at $196 billion, and a book-to-bill ratio of 1.28x for 2023 indicate strong future revenue potential across all segments.
Everest Reaches Peak Performance with Rising Premiums and Business Expansion
• 1.9% dividend yield, EG is targeting >17% shareholder return.
• Gross written premium growth of 20.9% year over year, with a combined ratio of 90.9%.
• EG expects to invest more in reinsurance underwriting opportunities in 2024, aiming for a combined ratio target of 89-91%.
• Strong earnings growth, with a continued hard market in reinsurance and new specialty lines in the primary insurance business.
• Sustaining catastrophe reinsurance share at 7% of business, realizing 45% increase in catastrophe reinsurance rates.
Foot Locker Laces Up for Off-Mall Move
• Foot Locker is shifting from mall-based to off-mall ‘new format’ stores to attract a broader customer base.
• It has started partnerships with leading brands like Puma and Reebok and a renewed Nike partnership.
• NBA sponsorship to boost brand loyalty and engagement, tapping into the massive global basketball fanbase.
• Eyeing growth in the Asia-Pacific region and India, targeting the burgeoning middle-class population and their increasing purchasing power.
• The current economic environment has decreased earnings and margins, but the foundation is set for recovery as the consumer spending upcycle takes hold.
Video: CVS Offers Recession-Resistant Growth with Acquisitions, Single Digit P/E, 3.6% Dividend Yield
• 3.6% Dividend Yield, single digit P/E.
• M&A period over, now focusing on integrating new businesses and strengthening the balance sheet.
• Healthcare as a sector is recession-resistant.
• Cost recovery on the horizon, with the conclusion of a cost optimization program expected to yield $700-800 million in savings.
• The expected addition of $2 billion to EBITDA by FY26 from Oak Street and a significant internal referral network from Signify Health.
• This could grow earnings by 10% or more.
Barrick Taps into Existing Asset Base for Expansion
• 2.3% dividend yield.
• Competitive cost profile, with $1,300/oz breakeven for gold and $3.2/lb for copper.
• Gold prices should benefit from economic instability, persistent inflation, deficit spending, high debt, and a global move away from the dollar.
• Copper prices should benefit significantly from the push toward a green economy and increased demand for electronics.
• Targeting 25% increase in gold equivalent production by the end of the decade, with a significant medium-term organic expansion strategy utilizing existing property.
• Virtually zero debt, with $4.2 billion in cash on hand for expansion, acquisition, or increasing dividends.
Global Leader in Gold Seeks To Dig Out Copper Niche
• 4% projected dividend yield for 2024.
• Gold prices should benefit from economic instability, persistent inflation, deficit spending, high debt, and a global move away from the dollar.
• Newmont is the world’s top gold producer, annually outputting 5.3 million ounces of gold and significant quantities of silver, copper, zinc, and lead.
• NEM’s main production assets are strategically located in politically stable regions.
• NEM benefits significantly from gold price increases, adding $400 million in annual free cash flow for every $100/oz rise in gold prices.
• The major acquisition of Newcrest closed in November, significantly expanding the gold and copper asset base.
GFI Poised to Grow Its 3% Dividend with Expansion and Optimization
• 3% projected dividend yield for 2025.
• Gold prices should benefit from economic instability, persistent inflation, deficit spending, high debt, and a global move away from the dollar.
• Production is concentrated in geopolitically stable areas like Australia and the Americas, with limited geopolitical risk compared to competitors.
• Low-cost greenfield expansion and disposal of older mines should drive down company-wide all-in-sustaining costs.
• The Salares Norte project will open in April 2024 and add 600k ounces by 2025 at only $700/oz in all-in sustaining costs.
• Salares Norte will drive double-digit low-cost growth in production.
