Stock Thoughts
AN INVESTMENT IN KNOWLEDGE PAYS THE BEST INTEREST ~ Benjamin Franklin
Citigroup’s Big Dividend Finally Set to Grow
• 4.2% dividend yield.
• Repositioning toward a consumer-centric model, investing money into digital banking and improving customer experience.
• Divesting from most legacy banking outside of North America, ICG (Institutional Clients Group) will stay international.
• Strong labor markets drove fewer credit losses.
• Investment banking losses offset by strength in commercial/customer banking.
Video: Bank Stocks with Over 4% Yield: Us Bank (USB) and Citigroup (C)
US Bank (USB):
• 4.2% Dividend Yield.
• Higher interest rate environment increased interest income by 21%.
• Expanding payments business through the acquisition of Talech.
• West-coast expansion with Union Bank acquisition.
• Strategic Partnership with State Farm to expand customer base.
Citigroup (C):
• 4.2% dividend yield.
• Repositioning toward consumer-centric model, investing money into digital banking and improving customer experience.
• Divesting from most legacy banking outside of North America, ICG will stay international.
• Strong labor markets and high rates have allowed for fewer credit losses.
• Investment banking losses offset by strength in commercial/customer banking.
Video: 5.6% Dividend for Lincoln National’s (LNC). Stock Poised to Recover After COVID Expense Shock.
Lincoln National Corp (LNC):
• 5.6% Dividend Yield. Stock pullback is an attractive entry at E23 PE of 3.3.
• COVID-19 claims are decreasing, and earnings hit now behind the company.
• Record of steady growth in earnings and dividends. Secure $1.80 dividend payment is easily covered by E23 EPS of $9.10.
• Portfolio yield increases will have a positive impact on earned interest and allow for more favorable product pricing.
• New CEO, renewed management direction.
USB: Strong Acquisitions and Partnerships Grow Core Business
• 4.2% Dividend Yield.
• Higher interest rate environment increased interest income by 21%.
• Expanding payments business through the acquisition of Talech.
• West-coast expansion with Union Bank acquisition.
• Strategic Partnership with State Farm to expand customer base.
BDN: 12% Yield and Steep Discount to $9.48 BV
• 12.2% Distribution Yield from Brandywine Realty Trust (REIT).
• 61% Funds from Operations Distribution Coverage for
• Occupancy is improving with a 1.2% quarter-over-quarter increase to 90.8%.
• 8.1-year average lease term assures rent durability.
• 9.4% average increase in cash rents since 1Q22.
• 70% tenant retention for FY22 10% higher than expected.
• Risk is persistent softness in commercial real estate market that cannot be offset by superior execution.
LPI: Midland Basin Pure Play Prints Free Cash
• Low valuation should expand.
• Estimated Fair Value of $150 per share at a 5.0x PE.
• Free cash being used to delever and derisk the balance sheet.
• The roll off of lower priced hedges will boost earnings.
• Growing production.
• SPR (Strategic Petroleum Reserve) depletion cessation and a recovery in Chinese demand will in our opinion drive oil prices higher into 2023.
• High free cash being returned to shareholders with stock repurchase.
ROCC: Growth Consolidator Prints Free Cash
• Company is expected to get an FY22 EPS of $10, which could increase to $15 by FY24.
• Eagle Ford consolidator has a history of a high rate of return (60% ROE) by streamlining small operators.
• Growth Company in exploration and production.
• Growth Characteristics should demand at least a 10x PE.
• Oil pricing is expected to get a boost in 2023 from post COVID lockdown recovery in China and SPR (Strategic Petroleum Reserve) ending its release and possibly reversing to refilling.
Video: Laredo (LPI): Cheap Earnings with High Guidance Could Skyrocket With Oil Demand Increases
• Exiting cheap hedges, should see earnings boost as low price hedges roll off
• Increased production targets, oil prices are poised to reset higher as SPR repurchases lost reserves and Chinese demand increases.
• High earnings for the price, we estimated around 5.0x PE, delevering balance sheet quickly.
Video: Ranger Oil (ROCC): Strong Return on Equity For Eagle Ford Consolidator
• Company is expected to get a FY22 EPS of $10, which could increase to $15 by FY24.
• Eagle Ford consolidator, history of high rate of return (60% ROE) on streamlining small operators.
• No dividend, but the stock is undervalued at its present moment. We believe a 10x PE is a reasonable figure.
• Energy business getting a boost from Chinese oil demand rebound and SPR refill.
Video: Ring Energy: Looks Poised to Double with Short Squeeze and Free Cash
• Large short interest of float could create short squeeze.
• Low valuation could double to a 5.0x P/E and a $5.00 stock.
• Strong year over year performance driven by 100% increase in production and 243% in cashflow.
• Committed to improving leveraged balance sheet. Currently 1.4x with goal of under 1.0x.
• Stronghold acquisition is driving efficiencies and production growth.
• Biggest risk is commodity price exposure could crush REI’s cashflow and further strain its highly levered balance sheet.,
• Our view, is commodity prices should improve into 2023 as Strategic Petroleum Reserve (SPR) depletion is stopped, and Chinese demand comes back online as strict COVID shutdown policies eased.