Stock Thoughts
An Investment in Knowledge Pays the Best Interest
Benjamin Franklin
PotlatchDeltic’s Strong Roots Amidst Headwinds
• 4.2% Dividend Yield
• Trading at substantial discount to our $53 per share estimate of asset value.
• Timberland is good inflation hedge.
• Share repurchases demonstrate management’s belief in the underlying asset values.
• Strong real estate performance has offset the weak performance in the wood products segment.
• Lumber market appears to have bottomed out with expectations of a recovery in the spring.
PepsiCo Occupies Sweet Spot With Dividend Growth
• 3.1% Dividend Yield
• More than 500 brands globally, with 23 flagships earning more than $1 billion in revenue.
• Consumer staples giant, owning Quaker Foods, Frito-Lay, and Pepsi.
• Pepsi is trading at a discount compared to peers and its own historical valuation.
• Elevated capex for improving resilience in the supply chain and efficiency improvements.
• Expects long-term revenue growth between 4-6%, with high single digit earnings growth.
Volkswagen’s High Yield Backed By Undervalued Brand Portfolio
• 8.9% Dividend Yield.
• Powerful brands including Audi, Lamborghini, Bentley, and majority ownership in Porsche.
• New EV JVs to reduce capital costs, with Rivian for global EVs and Xpeng for Chinese-made EVs.
• Cost savings program targeting $11 billion in total savings by 2026.
• 11% market share, second in the world with 9.4 million vehicles delivered in 2023.
• Low valuation relative to peers, trading at just 3.1x earnings.
Enbridge 6.9% Dividend Yield Transported by Strong Expansion
• 6.9% Dividend Yield
• Strong acquisition and expansion profile, focusing on building out utility and Gulf Coast capacity.
• Secular tailwinds in liquids from 500 Mbbl/d in expansion in the WCSB.
• Strong LNG and WCSB export demand driving expansionary footing.
• Expects continued capital deployment of $4-7 billion per year over the medium-term.
ADYEY Continues to Ride Secular Payments Growth with Land-and-Expand Strategy
• Adyen is increasing market share through new customers and greater wallet share per customer.
• Expected sales growth of 22% to 26% and earnings growth of 20% to 25% over the medium term.
• Long-term revenue growth driven by increased wallet share on existing customers, enhanced by very low 1% quarterly churn.
• 10% buyback authorized of outstanding stock by the end of November 2025.
• $1.7 billion in free cash flow in 2023 and $9 billion of cash on hand with no debt.
Camping World Ready for Strong Upcycle
• 2.44% Yield.
• Strong market share growth, moving from 18% to 25% in a single quarter.
• Aggressive expansion campaign, hoping to add just over 100 locations by 2028, largely through acquisitions.
• Largely finished with inventory management ahead of the market, with 90% of inventory now containing the cheaper 2024 models.
• Internal actions to move SG&A expenses back from 80% of gross profit back down to 70%, which should provide incremental net income margin gains.
AHR Set to Grow 6.5% Yield with Demographic Tailwinds and Expansion
• 6.5% Distribution Yield.
• Strong demographic tailwinds in the US, with the over 80 population increasing by more than 50% by the end of the decade.
• Occupancy rates are trending above pre-COVID average, with AHR reporting 91% weighted average occupancy.
• Seeking to offload an additional $50 million in non-core assets to fund expansion and purchasing the remaining interest in its largest operator.
• Strengthened balance sheet by going public. Debt now has a 4.89% weighted average interest and a 9.7-year average term.
Exxon’s Growing Dividend Supported by Great Assets and Prodigious Free Cashflow
• 3.3% Dividend Yield.
• Free cash flow machine that will repurchase 8.7% of outstanding shares by 2025.
• Permian acquisition will expand US footprint by double, targeting 2 million barrels per day by 2027.
• Large Guyana development plans in one of the lowest cost basins in the world, with more than 1.5 million barrels per day in planned capacity.
• Free cash machine with little debt, Guyanese development could make up as much as 20% of FCF to 2040.
Video: Alerian MLP ETF Provides Energy-Backed 7.7% Yield Without a K-1 Filing Headaches
• 7.7% distribution yield (not tax advantaged) for MLPA.
• Pipelines are experiencing substantial tailwinds from increased natural gas for electricity.
• Limited natural gas pipeline expansions due to regulatory constraints allow existing pipelines to operate at or near full capacity.
• Existing pipelines are able to have some pricing power as pipelines are the bottleneck with substantial gas at the wellhead needing transportation to end markets.
• MLPA’s structure allows it to avoid annoying additional tax paperwork. You get the underlying LPs distributions but without a form K-1.
Video: Strong 11% Yield for LexinFintech Emerging Market Opportunity
• 11% dividend yield.
• Provides consumer and small business loans to the Chinese market.
• New risk officer implementing improved pricing and credit metrics, high tech loan selection process.
• Trading at a massive discount to tangible book value, with tangible book value sitting at $7.59, compared to a stock price of $1.66.
• We expect earnings to be $0.95 this year, with $1.10 in earnings next year. This less than a 2.0x P/E which would make it an incredibly cheap stock.
• However, there are risks such as the Chinese regulatory system and increasing US-China Tensions.
Video: TC Energy (TRP) Has 7.2% Yield With Strong Natural Gas Demand Tailwinds
• 7.2% Dividend Yield.
• We expect earnings growth of around 3-4% for the foreseeable future, making it an attractive dividend grower.
• Primarily in natural gas pipelines, spinning off its liquids pipelines.
• Natural gas pipelines are volume based shielding them from the volatility of natural gas prices thus lower business risk.
• On a secular basis we expect strong growth in natural gas demand powered by increased electricity consumption propelled by data centers with artificial intelligence and electric vehicles.
• Green energy sources like solar and wind still need backup natural gas generation to generate power when weather is not permitting or there is a surge in grid demand.
TC Energy: Running Leaner with Same Great 7% Yield
• 7.19% dividend Yield.
• High returns on regulated assets, a favorable asset structure combines the stability of a utility with the opportunity of a midstream.
• Currently, 80% of its business is rate-regulated, 17% are long-term contracts, and only 3% are variable.
• Secular tailwinds for LNG demand globally, with Coastal GasLink expected to make its first export in 2025.
• Taking a lean operational footing, spinning off liquids segment, and divesting from assets to reduce debt burden.
