|Bid||0.00 x 1800|
|Ask||49.45 x 1200|
|Day's Range||49.01 - 49.62|
|52 Week Range||42.40 - 66.04|
|Beta (3Y Monthly)||0.34|
|PE Ratio (TTM)||15.07|
|Earnings Date||Jul 30, 2019|
|Forward Dividend & Yield||3.20 (6.48%)|
|1y Target Est||58.27|
From a capital appreciation standpoint, Exxon Mobil (NYSE:XOM) stock has been a disappointment. Over the last decade, the XOM stock price has gained 12.5%. During that period, Exxon Mobil stock has badly lagged the S&P 500, which has returned a sizzling 223%.Source: Shutterstock But for investors focused on income, XOM actually hasn't been a terrible play. Exxon Mobil's dividends have more than doubled from a total of $1.66 per share in 2009 to what should be $3.48 in 2019. Investors' total return from Exxon Mobil stock has averaged 4.3% per year. * 8 Penny Stocks That Have Fallen From Grace That's still disappointing, since the S&P 500 has returned almost 15% annually, including dividends. But it's not terrible in an environment in which U.S. Treasuries have yielded less than 3% most of the time.InvestorPlace - Stock Market News, Stock Advice & Trading TipsWe're still in that environment, with the 10-year Treasury yielding just 2.1%.It's true that buying a stock just for its yield can be very dangerous, as previous income darlings like General Electric (NYSE:GE), Kraft Heinz (NASDAQ:KHC), and Anheuser-Busch InBev (NYSE:BUD) all have cut their dividends recently.But Exxon Mobil doesn't have the debt problem those companies did (and still do) have. And while XOM stock has exposure to crude oil prices, it also uses a hedge to protect its profits. As a result, XOM stock price probably won't fall below $70 for long. And that makes XOM stock, currently at $75.50, an interesting play for income-focused investors in general and value-oriented, income-focused investors in particular. Why $70 Is a Key Level for XOM Stock PriceXOM hiked its quarterly dividend to $0.87 in May. That, in turn, suggests that investors are receiving $3.48 per share of XOM stock annually. And so, if the XOM stock price reaches $69.60, the stock would offer a yield of exactly 5%.It's difficult to see Exxon Mobil stock consistently yielding more than 5% for a few reasons. First, that type of yield is noticeable and usually not offered by relatively safe stocks. Of the Dow Jones Industrial Average stocks, only Dow (NYSE:DOW) and IBM (NYSE:IBM) offer higher yields. Both companies have real challenges (Dow is facing cyclical pressure and IBM has long-running growth problems).In the S&P 500, there are 35 components with higher yields. All have warts, among them AT&T (NYSE:T) and its debt load and Altria (NYSE:MO) which is facing concerns about long-term demand for its products.The second reason is that, historically, XOM stock has hardly ever yielded 5%. Its yield peaked at 5.5% during the 1987 market crash and touched 5% a few times through the early 1990s.But that was a very dark time in the crude oil markets, which had crashed after their early 1980s boom. Meanwhile, interest rates were much, much higher; investors could get 7% to 9% yields from10-year Treasuries.Without that alternative, a 5% yield from XOM stock is going to look very attractive. Indeed, in late May, as XOM and other oil stocks sold off, XOM stock bottomed just above $70. A bounce in crude prices helped, but it's likely that at least some investors saw the yield nearing 5% and pounced. Exxon Mobil Stock Is Safer Than It AppearsOf course, the question is whether Exxon Mobil stock really is safe. A 5% yield - or even a 4% yield - is attractive in this market. But what happens when crude prices plunge?The answer is that XOM's earnings will decline, but in a mostly manageable fashion. As I've written before, Exxon Mobil's "downstream'" operations - notably in refining - and its chemicals business provide an internal hedge. That's why XOM stock actually is a poor play on oil prices. But it's also why XOM stock didn't fall that far when the shale bust hit in 2016 - and why the company was relatively unscathed during the fourth quarter of 2018, which was disastrous for many oil and gas companies.If oil prices rise, XOM's upstream business will thrive and its downstream business will take a hit. When oil prices fall, the reverse is (usually) true. Despite this hedge, the XOM stock price is boosted by higher crude prices, as seen in 2014 when XOM stock hit an all-time high. But even amid a plunge in prices two years later, Exxon Mobil's dividend continued to rise,.XOM stock isn't risk-free. But Exxon's earnings easily cover the current dividend of XOM stock. The odds of XOM executing a GE-style dividend cut are slim, even with crude and natural gas prices relatively low. And this is an environment where, as I noted just last week, investors usually have to stretch for yield. If XOM is yielding 5% and 10-year Treasuries have a 2.1% yield, many investors are going to buy XOM stock. The TradeFor income investors, then, XOM looks reasonably attractive at $75.50. Its valuation is reasonable, at 14.4 times analysts' average forward earnings estimate. And XOM still looks poised to deliver further growth, as its CEO, Darren Wood, last year set a target of doubling the company's earnings by 2025.For traders, there's an intriguing option trade to be made as well. A bull put spread at $70 (selling the $70 put and buying a lower-priced put for protection) can offer double-digit returns or better, depending on the expiration date. That's essentially a bet that the XOM stock price won't be under $70 at expiration, which seems a nice bet to make at the moment.But there are some risks facing XOM stock at the moment. The U.S. presidential election could pressure XOM stock if a "green" Democrat was to win or even starts to gain momentum. A plunge in oil prices is another risk: Exxon Mobil does have hedges, but XOM stock still fell when crude collapsed in 2016.But there's risk everywhere when the market is at all-time highs, particularly for income investors. Getting a 4%+ yield from Exxon Mobil stock is one of the better risk-reward options out there at the moment. And that's precisely the point: investors aren't going to let a yield above 4% last for long. XOM stock isn't going to be the biggest gainer in the market over the next six months or the next three years. But, at the right price, it's an attractive dividend play.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Why $70 Looks Like a Floor for Exxon Stock appeared first on InvestorPlace.
What is going on with the cannabis space? Seemingly every stock in the group is getting sold lower, including Cronos Group (NASDAQ:CRON). In fact, what's even more interesting is the way that they're all selling off. CRON stock and others are positioning in a similar bearish setup.Source: Shutterstock It's drawing questions from observers as to why the industry is under such pressure. The inquiry becomes even more pressing as the Dow Jones, S&P 500 and Nasdaq are hitting new highs on a seemingly daily basis.How can equities be at a high while cannabis stocks are scraping multi-month lows?InvestorPlace - Stock Market News, Stock Advice & Trading Tips Breaking Down Cronos Group StockThere are dozens of cannabis stocks investors can consider -- that goes for almost any industry. And like any other sector, there are good companies and not-so-good companies to choose from. Luckily for Cronos stock, it is a good company. But that doesn't seem to matter right now, and that's because of the fundamentals.You see, even though CRON stock runs a good operation, this company has a $4.7 billion market capitalization and had just -- wait for it -- 6.5 million CAD in sales last quarter. This was up an impressive 120% year-over-year, but is a very small revenue number given its valuation. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip The company turned a pretty strong profit for the quarter, earning more than 400 million CAD. How's that possible on 6.5 million CAD in sales? CRON generated a non-cash unrealized gain of 436.4 million CAD on the revaluation of derivative liabilities.The cannabis space is a land grab right now. And the ones with the cash get to grab the most assets. Canopy Growth's (NYSE:CGC) big bank account was infused by Constellation Brands (NYSE:STZ). But now CRON stock can throw its hat into the ring, after it closed a $2.4 billion investment from Altria (NYSE:MO) in the most recent quarter.Now its balance sheet is strong, even if its income statement remains unimpressive. This vault will be important down the road. Earlier this month, Stifel analysts said the cannabis market could hit $200 billion in the next decade. That's up from $8 billion in 2018.The bottom line: you might look at the revenue underlining Cronos stock and question all the hype. But with more than $2.4 billion sitting in cash and making up half the market cap, it commands some respect. Trading CRON StockSo, did CRON stock just become a big-time sell? Not yet, but it could be soon. Aurora Cannabis (NYSE:ACB) is breaking down, while Canopy plunged through support. Both stocks were setting up as a descending triangle, a bearish technical development.Cronos stock isn't looking healthy, either.After falling hard on Friday and closing below the 200-day moving average, shares rebounded 4.5% on Monday. The stock closed just above this key moving average on Monday, but only by a dime. It's not clear whether Cronos stock will reclaim this mark or find it as resistance. Click to EnlargeBut that doesn't really matter because we know two things now. One, $14 support is a must-hold level. Unlike ACB, CGC and other cannabis plays, CRON stock is still clinging to its support level. Below $14 puts the June lows of $13.51 on the table, as well as the 61.8% retracement for the one-year range at $13.06.Below that and there's no immediate support level to lean on.The other thing that's clear? In order for Cronos Group stock to look healthy on the long side, we need to see it clear the $15 to $15.50 area. Over the past few months, $15.50 has been a relevant level, while both the 20-day and 50-day moving averages are trading in this range.It's a bit early to say Cronos Group stock is doomed, but it's not looking healthy as the industry draws in sellers. I'd rather wait for CRON stock to have the wind at its back than buying now and hoping support holds up.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Did Cronos Group Just Become a Big-Time Sell? appeared first on InvestorPlace.
The tobacco giant’s stock has languished this year, on worries about cigarette volumes and the profitability of its e-cigarette investments. Yet Piper Jaffray argues that those worries look overblown given Altria’s growth potential from its stake in vaping startup Juul.
Altria Group, Inc. will host a live audio webcast on Tuesday, July 30, 2019, at 9:00 a.m. Eastern Time to discuss its 2019 second-quarter business results. Altria will issue a press release containing its business results at approximately 7:00 a.m.
Will no one think of the children? Well, Kevin Burns, the CEO of Juul Labs will. Burns recently apologized on behalf of his company, the most popular electronic cigarette on the market, for his product’s popularity with America’s youth. “First of all, I’d tell them that I’m sorry that their child’s using the product,” said Burns. “It’s not intended for them. I hope there was nothing that we did that made it appealing to them....” Run The JUUL JUUL launched in 2015 and quickly began to take over the electronic cigarettes game, controlling 40% of the market. As the popularity of vaping jumped over the past several years, the company has become so big that Altria (which also owns Philip Morris), the top U.S. cigarette company, invested $12.8 billion for a 35% stake. The Teens While those booming numbers are nice for JUUL and their shareholders, they have one big problem. One of the main groups that love to vape is teenagers, as federal data shows that nearly 21% of high school students hit the JUUL (or some other vaping device) last year. It has become so popular that the FDA recently declared teen vaping “an epidemic,” and former FDA Commissioner Scott Gottlieb and health care advocates blame the rise in teen vaping on JUUL, saying that fruit flavors such as mango give the product a youth appeal. The anti-smoking advocacy group Truth found that 15- 17-year-olds are over 16 times likelier odds to be JUUL users compared to those aged 25-34. DIsclosure Some Altria shareholders have been pushing for JUUL to disclose nicotine levels, though a recent proposal was handily voted down. Also, the company has been having difficulties finding scientists willing to research the product on their behalf, which would make issuing any such reports that much more difficult. -Michael Tedder Photo: Mike Segar/Reuters
(Bloomberg Opinion) -- For a company that built its beer-brewing empire on the back of swashbuckling deals, the future for Anheuser-Busch InBev SA looks pretty unexciting.Friday’s decision by the Belgian giant to pull an initial public offering of its Asian unit, which might have raised as much as $10 billion, means it has given up the chance to pay down its $100 billion of debt faster. Perhaps more important, the brewer has lost a valuable source of funding for acquisitions in Asia.AB InBev had set a punchy price range for the listing, as noted by my colleague Chris Hughes. Even so, the decision to pull the IPO – rather than cut the price – is curious. A survey by Bernstein analysts indicated that there was significant interest among investors at HK$38 per share, which was below the HK$40-47 range but not that much lower. This reduced offer would have generated $400 million less than an IPO at the bottom of the price range, Bernstein notes. For the world’s biggest brewer, with a market capitalization of 157 billion euros ($177 billion), that would have seemed a small concession given the IPO’s considerable benefits.Without the prospect of the Asia listing, AB InBev has little choice but to knuckle down and gradually chip away at its mountain of borrowings. Net debt stood at $103 billion on December 31. The IPO would have cut the total by about 10%, according to Bernstein, and allowed the company to hit a key debt reduction target a year early. Now net debt will still be 4.2 times earnings at the end of this year. That’s better than the 4.6 times at the close of 2018, but it’s still too high. It underlines the slow pace of reducing the burden.This doesn’t leave the group much flexibility to do deals. True, the company could gear up further or use AB InBev shares as currency. But neither option is attractive. Investors would be justifiably nervous about borrowings rising even more. The group’s two biggest shareholders, Altria Group Inc. and Colombia’s Santo Domingo family, may not want to be diluted through any deal that was funded by equity.Cutting the dividend again to speed deleveraging is another option. The group should probably have gone further when it halved the payout in October. Still, such a decision wouldn’t be taken lightly.While it’s possible the IPO might return to the agenda, it’s hard to see what might change either the company’s or investors’ contrasting views of the Asian business’s value. With the prospects of the listing gone – at least for now – the king of beers is tasting pretty flat.To contact the author of this story: Andrea Felsted at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Cannabis stocks need to fight their way out of their funk. That's true for names like Canopy Growth (NYSE:CGC) and New Age Beverages (NASDAQ:NBEV), but it's critical for Cronos Group (NASDAQ:CRON). CRON stock is not only down by a third since its March high, but is on the verge of breaking under a crucial technical support level.Source: Shutterstock Some -- perhaps most -- would argue that the shape of a chart is irrelevant. A chart's history shouldn't dictate its future. Rather, a company's results and prospects are reflected in its stock's movement.The fact is, however, the movement of a marijuana stock shapes the rhetoric about that company as much as it's shaped by the rhetoric. If Cronos stock slips any further, it would become alarmingly easy for the masses to view it as a liability.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Charting CRON StockIt's not difficult to see.After an overheated rally in January and February set the stage for significant profit-taking in March and April, the 200-day moving average line (plotted on the white line on the chart below) began to serve as a technical floor. It's not yet become a pushoff point, though, and it doesn't appear it's going to. Just within the past several days the sellers have tested the pivotal 200-day moving average line as support again, and it's failing to even modestly repel the effort.The 200-day moving average line is regarded by some as the most important of all the trend indicators. It's admittedly simplistic, but still has significant psychological implications because so many traders still see it as a make-or-break level. * 7 Retail Stocks to Buy for the Second Half of 2019 There's modest encouragement in the fact that the weakness since March's high has been on relatively low volume. That suggests there's not necessarily a great deal of conviction behind the selling; investors are just biding their time.Conversely, the fact that the other aforementioned names, like most marijuana stocks of late, are falling is a red flag. Group-wide movement tends to indicate longer-lived, philosophical doubt. Analysts Still in DoubtStill, Cronos Group stock is a standout for all the wrong reasons. Chief among them is the fact that among all cannabis stocks, CRON stock remains one of the analyst community's least favorite.As of the most recent look, analysts collectively rate Cronos at a little less than a Hold … tiptoeing into Sell territory. Rivals New Age Beverages and Canopy Growth, for perspective, are considered a Buy and something that's almost a full Buy, respectively. Hexo (NYSEAMERICAN:HEXO) is also closer to a Buy than a Hold. Click to EnlargeReasons for the pessimism range from lack of clear capital spending plans to a sheer lack of story in an environment where a company's story is a powerful marketing tool. Given that the $1.8 billion investment Altria Group (NYSE:MO) made in CRON stock has now been closed for weeks as well, one would have expected a more definitive direction for a partnership than we've seen yet.More than anything though, analysts still take issue with the stock's crazy valuation.Cronos sports a $4.8 billion market cap, and though revenue of $6.5 million was only a fraction of what the company could be driving in just a few quarters, even the most optimistic of plausible output levels will fall short of justifying that sort of price. It's a reality made even more amazing considering analysts have cared little about other similarly frothy valuations among cannabis stocks. Wait and See on CRON StockIt's certainly possible CRON stock could dig its way out of trouble and use its 200-day moving average line as a launchpad rather than a trigger for more trouble. The stock's yet to break below it. * 10 Stocks to Sell for an Economic Slowdown Those hopes are fading fast though, as the broader realities of the legal marijuana business sink in. The most overvalued names in the business also make for the most susceptible targets. That's Cronos, to be sure.Whatever's in the cards, it's certainly not a time to step into the pot name. Newcomers will want to wait for a little more clarity before doing anything.The world will get a big dose of that clarity in the first half of August, when Cronos will be reporting its Q2 numbers.As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy for Less Than Book * 7 Marijuana Stocks With Critical Levels to Watch * The 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond The post Cronos Needs to Show the Market Something to Pull Stock Out of Funk appeared first on InvestorPlace.
On Friday, Goldman Sachs upgraded Altria Group (MO) from a “neutral” to a “buy” while keeping its price target unchanged at $59.
A U.S. federal judge on Friday ordered the Food and Drug Administration to impose a 10-month deadline for the submission of e-cigarette applications, turning the screws on companies like Juul Labs Inc whose products have come under intense scrutiny for their popularity among teenagers. The FDA last month proposed the shorter timeline after the U.S. District Court for Maryland ruled in a lawsuit filed by anti-tobacco groups that the agency had exceeded its authority in allowing e-cigarettes to remain on the market until 2022 before companies applied for regulatory approval. "I will impose a ten-month deadline for submissions and a one-year deadline for approval, as the FDA suggested," U.S. Judge Paul Grimm wrote in a court order on Friday.
Goldman Sachs analyst Judy Hong raised her rating on Altria to Buy from Neutral, leaving her $59 price target unchanged, implying some 20% upside from current levels.
OUTSIDE THE BOX In late June, San Francisco banned e-cigarette sales completely. That means no bricks-and-mortar sales. And no e-cigarette deliveries for online purchases. Many cities already restrict vaping and e-cigarette sales.
Goldman Sachs, seeing value in the tobacco stocks, upgraded Altria to a buy rating from neutral and affirmed Philip Morris International at buy. Altria shares were trading up 1.4% at $49.96, while PMI shares added 0.8% to $81.92. Tobacco valuations are "at a 10-year trough despite a more accommodating market backdrop," analyst Judy Hong wrote in a report.
The former co-CEO of Canopy Growth (NYSE:CGC) has had a lot to say about the cannabis industry since his sudden departure July 8. One of his comments could ultimately benefit Quebec-based Hexo (NYSEAMERICAN:HEXO) and HEXO stock. Here's why.Source: Shutterstock Bruce Linton wasn't shy about his outing from his role of co-CEO at Canada's largest cannabis company. While the company's board attempted to spin the move as a mutual decision, Linton told CNBC that he was in fact fired from the company. InvestorPlace - Stock Market News, Stock Advice & Trading Tips"I think stepping down might not be the right phrase," he told CNBC, referring to the language in the company press release. "I was terminated."Constellation Brands (NYSE:STZ) CEO Bill Newlands suggested that Linton wasn't the right guy to take Canopy Growth to the next phase. Linton's an entrepreneur at heart, so he's probably not wrong to want more of an operational, globally trained business executive, who can take the company to the next level. "Our board was uniform," Newlands said. "We needed a different leader to take us to the next phase of growth."Although Constellation wasn't happy about Canopy's $39 million loss in its most recent quarter, it denies that had anything to do with Linton's ouster. Whatever the reasons, semantics aside, Linton had something interesting to say about the future direction of the global cannabis industry that could really help HEXO stock. * 7 of The Best Schwab ETFs for Low Fees It starts with "United" and ends with "America." Go South Young ManThe fact that Linton quarterbacked the tentative acquisition of Acreage Holdings (OTCMKTS:ACRGF) before he was summarily turfed says all you need to know about where he thinks the big money is in the cannabis industry. He wouldn't have agreed to spend $3.4 billion on a deal for Acreage if he didn't think the U.S. government would legalize cannabis on a federal level within the seven-year limit required by the proposed tie-up between the two companies. Already, Acreage is making plans to buy other U.S. companies in preparation for the eventual merger. Big money lies south of the border and Linton knows it. "Anybody who's dumb enough to launch a new cannabis company in Canada, I don't know what they're doing, they should have been at it six years ago. Canada is done," he told Bloomberg TV. "You're going to end up with a few winners and a whole bunch of people who wonder why they started."You might wonder what this has to do with Hexo and the U.S. market? Cannabis-Infused Drinks a Big Growth AreaThere is absolutely no possible way that Molson Coors (NYSE:TAP) didn't have a plan for south of the border when it entered into a 50/50 joint-venture with Hexo to make cannabis-infused drinks for the Canadian market last August. Hexo's VP of Strategic Development, Jay McMillan, recently stated that Truss, the name of the joint venture, is going to be ready to sell cannabis-infused drinks on Dec. 17, the first day they can be legally sold in Canada. "We'll have a very large supply so we'll be in a good position to be able to meet the demand of the marketplace and at the same time also ensure that we're meeting the variety that the marketplace wants," McMillan said in an interview at the World Cannabis Congress in Saint John, New Brunswick, in June. The joint venture can move production from one type of product to another based on consumer preference. Think of it as the beverage version of "Fast Fashion."More importantly, it's going to give Molson Coors an understanding of consumer preferences in a smaller market before jumping into a much bigger one south of the border. It plans to have CBD-infused beverages in eight states by 2020. However, I wouldn't be surprised if it was readying for the launch of cannabis-infused products the minute the federal government legalizes cannabis. Having worked with Hexo north of the border, I'd be surprised if the joint venture didn't extend to the U.S. over time. * 10 Best ETFs for 2019: The Race for 1 Intensifies With America being a much bigger market, Hexo could be on the precipice of a serious value-enhancement to HEXO stock. The Bottom Line on HEXO StockIf you're unsure about whether HEXO will follow Molson Coors into the U.S. market, you could always buy both stocks to ensure you're capturing any gains both stocks achieve as a result of their participation in cannabis-infused drinks. As an aside, both Canopy Growth and Cronos Group (NASDAQ:CRON) are ideally positioned for the U.S. market given their significant investments from Constellation Brands and Altria (NYSE:MO).Who knows? Molson Coors could end up owning a big piece of Hexo in the future. Only time will tell.At the time of this writing, Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Sell for an Economic Slowdown * 7 Marijuana Penny Stocks That I May Buy * 7 of The Best Schwab ETFs for Low Fees The post Why Hexo Stock Is a Promising Buy Now appeared first on InvestorPlace.
Philip Morris' (PM) Q2 performance to gain from pricing and advancements in RRPs. However, low cigarette sales volumes are a worry.
Cronos Group (NASDAQ:CRON) shares have struggled of late. Since early March highs, Cronos stock is down about 35%.Source: Shutterstock Cronos stock managed to put together a modest rally last month, but it has faded. CRON sits at a one-month low at the moment.To be sure, CRON stock isn't alone. Other cannabis majors are scuffling. Canopy Growth (NYSE:CGC) has dropped steadily since late April, losing about a quarter of its value.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAurora Cannabis (NYSE:ACB) is off almost 30% since mid-March. Tilray (NASDAQ:TLRY) has stabilized, but after a long, steep decline. Hexo (NYSEAMERICAN:HEXO) has slid 41%. * 10 Best ETFs for 2019: The Race for 1 Intensifies For the biggest cannabis stocks, investor patience is drying up. Why that is remains unclear. Valuation could be a concern. It's likely that there's a "OK, what's next?" response after Canadian legalization in October.The problem for Cronos Group stock, however, is that even when sentiment returns, it's not clear what the company can do to spark investor enthusiasm.The near- to mid-term worry is that if cannabis stocks continue following, CRON stock will too. And if they rise, Cronos stock may well underperform peers until the wisdom of its plans become more clear - and Cronos starts showing real success. The Canada Problem for Cronos StockIt's become increasingly clear that the Canadian market isn't big enough and that there are real worries about too much supply in cannabis flower more broadly. As I've noted before, prices have crashed in U.S. regulated markets due to oversupply.In March, Tilray's CEO predicted similar issues in Canada as soon as next year. Aurora's strategy clearly is predicated on the idea that Canada alone isn't enough.Cronos seems to be operating on similar principles. Despite its US$1.8 billion investment from Altria (NYSE:MO), its production capacity might not even make the top ten in Canada, as the Motley Fool has noted. Even with that cash on the books, Cronos isn't racing to build out its production capabilities.That strategy makes some sense, particularly if as feared the Canadian market simply isn't big enough. Oversupply in dried flower is a real concern. But as far as CRON stock goes, it raises the question of what catalyst might arrive any time soon.Cronos might be right in playing the long game. Investors - and particularly cannabis stock investors - haven't shown that same patience in recent months. The StrategyAs CEO Mike Gorenstein put it on the Q1 conference call, "Like Altria, we believe that the best way to create value through the supply chain is by working with contract farmers and not being farmers ourselves."Cronos simply isn't all that interested in producing dried cannabis flower. It would rather let others spend the money to create that supply, assuming it can then buy flower at cheaper rates down the line.Instead, the company is focused on derivatives and R&D. It's working with Ginkgo Biosciences to create new strains of cannabis that can yield purer and easier-to-extract THC and CBD.Its new Cronos Device Labs in Israel will focus on fine-tuning vaporizers for varying customer demands. Production in Colombia is focusing on hemp over cannabis, with Gorenstein predicting on the Q1 call that CBD would outpace THC in terms of growth in the coming years.The Altria partnership should give Cronos an edge in these areas, given that tobacco company's long history with regulators. But there's risk here as well.The efforts with Ginkgo may not pan out. Even if they do, the new strains may not be all that valuable, if 'natural' strains are abundant and cheap as other companies build out capacity. Vaporizer demand may be lower than expected.There's certainly a risk that while Cronos plays around the edges of the market, rivals like Canopy and Aurora simply overpower the market. Canopy has more cash thanks to its deal with Constellation Brands (NYSE:STZ,NYSE:STZ.B).Aurora will give its stock to any company that will take it. If an investor believes that cannabis production will be big business globally, it's tough to believe that Cronos will be the big winner. The Long-Term Case for Cronos StockFrom a long-term standpoint, Cronos' strategy does seem wise. It's a good idea to keep US$1 billion or so in the bank in an industry in upheaval.Canadian suppliers are going to go bust; that's simply the nature of any growing market. Unexpected new markets may emerge elsewhere. Keeping capital on hand enhances flexibility, which seems like a compelling attribute to have as cannabis legalization (both recreational and medical) expands.Similarly, focusing on higher-value-add and higher-margin products makes sense. One need only look at the difference in valuation between Altria and Pyxus International (NYSE:PYX), an Altria grower, to understand what that will be the case in cannabis as well.The issue over the next 1-3 years, however, is that the strategy appeals to those of us (myself included) who think cannabis stocks are too expensive to begin with.Again, Cronos is set up for a future where oversupply hits prices and/or the global cannabis market moves slower than bullish investors expect. In both scenarios, cannabis stocks come down - and it's unlikely, though not impossible, that CRON stock emerges unscathed.In a sense, Cronos stock is the pot stock for investors who question whether pot stocks have rallied too far. If those investors are right, they're betting off staying as patient as Cronos is willing to be. As such, even with CRON stock cheaper, there's seemingly little need to rush in.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Sell for an Economic Slowdown * 7 Marijuana Penny Stocks That I May Buy * 7 of The Best Schwab ETFs for Low Fees The post Cronos Isn't in a Rush. Investors in Cronos Stock Shouldn't Be Either appeared first on InvestorPlace.
At first glance, the dividend yield of CSX (NYSE:CSX) is miserable at just 1.24%. However, when you consider the capital appreciation that has come along with the dividend income paid out over the years to shareholders of CSX stock, it's not nearly as awful as you might think.Source: Shutterstock In fact, it's downright excellent, but not every dividend investor is interested in both income and capital appreciation. Some buy dividend stocks purely for the income. Consider an equity like Altria Group (NYSE:MO), which yields 6.6% and generates a significant amount of free cash flow. MO is far more attractive to someone looking to park their money in a relatively safe place other than bonds.That said, I think most dividend investors ought to consider owning CSX stock. Here's why.InvestorPlace - Stock Market News, Stock Advice & Trading Tips It's Not the Yield That CountsIf all you invest in are dividend aristocrats, you would have missed out on CSX stock. Although the company has paid a dividend since 1922, it has only increased its dividend for 14 consecutive years. That makes it ineligible for aristocrat status, which require 25 years of increases to qualify. * 10 Best Stocks for 2019: A Volatile First Half Investors get caught up in the yield when it is the growth of the dividend payment that truly matters. Consider CSX's dividend history over the past 14 years.In 2005, it paid out $0.43 in dividends. Based on its midpoint share price between its high ($51.60) and low ($36.90) that year, it averaged a 0.97% yield. In 2005, management increased the dividend by 7.5%.In 2018, CSX paid out $0.88 in dividends, 12.8% higher than in 2017. Based on its midpoint share price between its high ($76.24) and low ($48.43), it averaged a yield of 1.4%. That was 44% higher than 14 years earlier.Overall, CSX has increased its annual dividend between 2005 and 2018 by 5.7% compounded annually.And what about earnings growth?In 2005, CSX's continuing operations earned $3.17 a share. In 2018, it earned $3.84 a share from its continuing operations. That's an earnings growth rate of 1.5%, less than a third the growth of its dividend.I must admit, as I look at these numbers, I get a little concerned about recommending CSX stock. After all, it's generally preferable for the earnings growth rate to exceed the dividend growth rate.In this case, one can look to the payout ratio for part of the answer.This past year, CSX paid out 23% of its earnings for dividends. In 2005, it paid out just 14% for dividends. Those are incredibly conservative payout ratios, especially considering how much free cash flow it generates. Free Cash Flow Is GrowingIn the past three fiscal years, CSX has grown its adjusted free cash flow from $847 million in 2016 to $1.7 billion in 2017 and $3.2 billion in 2018. That's good for a compound annual growth rate of 94%.In these three years, CSX's conversion ratio (free cash flow divided by revenue) went from 7.7% in 2016 to 14.9% in 2017. Then, in 2018, the ratio increased to 26.1%. As the company grows its conversion rate, it has more money to reward shareholders through dividends and share repurchases. Additionally, CSX can make acquisitions, repay debt, and invest in the existing business.That should drive the CSX stock price higher.In 2005, CSX converted 12% of its revenue ($8.6 billion) to free cash flow ($1 billion). Over the past 14 years, the railroad has continued to be a strong generator of cash. This is a big reason why its equity has delivered a total return of 569% over the past 10 years. For comparison, that's almost double the S&P 500.Yes, railroads in general have done well over the past decade, but CSX stock has led that pack. The Bottom Line on CSX StockInvestorPlace contributor Thomas Niel recently wrote that a combination of a slowing economy and an excessive valuation makes CSX stock a bad buy for those looking for a quick return.However, he did concede that it's likely still a buy for long-term investors. I couldn't agree more.As long as CSX management continues to control expenses and allocate free cash flow, slower growth shouldn't be as big a problem as you might think.It might not yield a lot, but it sure has delivered for shareholders over the past decade. I expect it to do the same over the next 10 years.At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Best Stocks for 2019: A Volatile First Half * 7 Simple Ways for Young Investors to Invest Their First $1,000 * 6 Stocks to Buy Based on Insider Buying The post Should Dividend Investors Pass on CSX Stock?Â appeared first on InvestorPlace.
Altria and Philip Morris look poised for gains despite headwinds for the tobacco industry, Stife analyst Christopher Growe says.
Altria Group Inc NYSE:MOView full report here! Summary * Perception of the company's creditworthiness is neutral * Bearish sentiment is low * Economic output for the sector is expanding but at a slower rate Bearish sentimentShort interest | PositiveShort interest is extremely low for MO with fewer than 1% of shares on loan. This could indicate that investors who seek to profit from falling equity prices are not currently targeting MO. Money flowETF/Index ownership | NeutralETF activity is neutral. ETFs that hold MO had net inflows of $9.89 billion over the last one-month. While these are not among the highest inflows of the last year, the rate of inflow is increasing. Economic sentimentPMI by IHS Markit | NegativeAccording to the latest IHS Markit Purchasing Managers' Index (PMI) data, output in the Consumer Goods sector is rising. The rate of growth is weak relative to the trend shown over the past year, however, and is easing. Credit worthinessCredit default swap | NeutralThe current level displays a neutral indicator. MO credit default swap spreads are near their highest levels of the last 3 years, which indicates the market's more negative perception of the company's credit worthiness.Please send all inquiries related to the report to email@example.com.Charts and report PDFs will only be available for 30 days after publishing.This document has been produced for information purposes only and is not to be relied upon or as construed as investment advice. To the fullest extent permitted by law, IHS Markit disclaims any responsibility or liability, whether in contract, tort (including, without limitation, negligence), equity or otherwise, for any loss or damage arising from any reliance on or the use of this material in any way. Please view the full legal disclaimer and methodology information on pages 2-3 of the full report.