*Hancock Whitney Corporation – 6 (HWCPZ)
Hancock Whitney Corp.; 6.25% Fixed Rate Subordinated Notes (PET Bonds), due 06/15/2060; Par $25.00; Annual Cash Interest Payment $1.5625; Call Date 06/15/25; Yield to Call 3.86%; Pay Cycle 3m; Ratings, Moody’s Baa3, S&P BBB-; CUSIP 410120406
Hancock Whitney Corp. (HWC) operates bank offices and financial centers in Mississippi, Alabama, Florida, Louisiana, and Texas. With total assets of over $33.0 billion on 06/30/20, HWC ranks as a small regional banking company.
The company’s fixed rate, preferred exchange traded notes (PET Notes) may be redeemed on 06/15/25 or on any interest payment date thereafter. HWC reported a 2Q 2020 net loss of $117.1 million or $(1.36) per share, in line with analysts’ estimates. The loss reflects a provision for credit losses of $306.9 million that included both a special provision tied to the sale of almost $500 million in energy loans and an additional reserve build of $146.8 million for potential losses tied to COVID-19.
The company’s capital metrics remain solid, while reserve coverage of problem loans is strong. This issue is suitable for low- to medium-risk taxable portfolios. Dividend distributions are qualified and taxed at the 15%-20% rate. Buy up to $28.00 for a current yield of 5.58% and a 3.49% yield to call.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, October 202011
Principal Financial Group, Inc. (PFG) | Daily Alert September 22
Principal Financial Group operates several businesses including insurance, primarily life insurance, and investment management, retirement solutions and asset management.
For its second quarter, Principal Financial Group recorded revenues of $460 million for its retirement and income solutions fee business, up 19% from the previous year’s second quarter. Assets under management (AUM) grew to $702 billion, based on the global equity market recovery during the quarter.
Over the last five years, 80% of the company’s AUM outperformed its peer average over the last five years, while 77% of AUM holds a Morningstar rating of 4 or 5 stars.
Earnings-per-share were $1.46, which easily beat the consensus estimate. Full-year profits will likely be down versus 2019 due to the coronavirus, but we do not see this as reflective of the underlying earnings power of Principal Financial.
Principal stock trades for a P/E ratio of 8.6, below our fair value estimate of 11. Expansion of the P/E multiple could fuel 5% annual returns through 2025. The combination of 5% expected EPS growth, the dividend yield, and an expanding P/E multiple leads to expected total returns of 15.5% per year over the next five years.
Ben Reynolds & Bob Ciura, Sure Dividend Newsletter, suredividend.com, firstname.lastname@example.org, 800-531-0465, September 14, 2020
B&G Foods, Inc. (BGS) | Daily Alert September 30
The stock of packaged food company B&G Foods has been on a ride recently. After soaring about 70% for the year, BGS pulled back over 15% from the high during the recent market selloff. It is rebounding and has moved up over 5% from the recent low. Operationally, things are terrific. Volume sales were up 34.5% in the second quarter. And the eat-at-home trend is widely expected to continue beyond the pandemic. The stock is also still relatively cheap despite the big YTD move. Currently under 30 per share, this was a 50 stock a few years ago. And things are vastly improved since then. An under 30 price makes BGS a buying opportunity. BUY
Tom Hutchinson, Cabot Dividend Investor, cabotwealth.com, 978-745-5532, September 23, 2020
Valero Energy Corporation (VLO) | Daily Alert October 7
Valero Energy has been maintaining the dividend. However, such a high yield reveals that the market believes the dividend will be reduced and current cash flows do not support the dividend. If, and more likely when, the company reduces the dividend, it is not likely to cause a substantial adverse reaction in the stock price because it is already expected.
Valero has the flexibility to refine substantial quantities of a variety of crude oil types. The company also has access to the US pipeline network for delivery to its gulf coast locations. This flexibility and access allows Valero to capture the highest margins among its competitors because it can take advantage of the temporary local gluts of crude, whether it’s low or high-quality crude, or light sweet (low sulfur) or heavy sour (high sulfur), and receive the best discounts for its feedstocks.
Declining oil prices adds profits to petroleum-based products because profits come from the “crack-spread”, the difference between the cost of oil as a feedstock and the price of refined products, predominantly gasoline and jet fuel.
Valero is in a joint-venture partner with Diamond Green Diesel, which is producing renewable diesel at large profitable margins even during the COVID-19 pandemic. Renewable diesel does not gel at low temperatures which means it can be easily transported through pipelines. Use for sustainable aviation fuel is expected to be a primary escalating demand factor.
Gray Cardiff, Sound Advice, soundadvice-newsletter.com, 800-825-7007, September 30, 2020
The Kraft Heinz Company (KHC) | Daily Alert October 8
Kraft Heinz makes and markets food and beverage products that include condiments and sauces, cheese and dairy, and complete meals.
The company reported second-quarter earnings that topped analysts’ forecasts, as pandemic-fueled buying buoyed profits. Earlier this month, it announced plans to cut $2 billion of costs and to focus on its premier brands. Warren Buffett’s Berkshire Hathaway is a big shareholder. Revenue this year is expected to grow 3% to $25.74 billion, with earnings down 6.6% to $2.66 per share, giving the stock a price-earnings ratio of 10.9.
With a debt-to-equity ratio of 0.58, Kraft Heinz is much less leveraged than many of its food peers like Campbell Soup, which sports a debt-to-equity ratio of 2.4. Kraft Heinz pays a quarterly dividend of $0.40 per share. Free cash flow per 12 share of $3.15 is nearly double the $1.60 in annual dividends. Technically, the stock is oversold and the MACD is turning positive.
John Dobosz, Forbes Dividend Investor, newsletters.forbes.com, 212-367-3388, September 25, 2020
*Artisan Partners Asset Management Inc. (APAM)
Artisan Partners Asset Management is an investment manager primarily serving pension and profit sharing plans, trusts, endowments, foundations, charitable organizations and government agencies.
Analysts are forecasting Artisan’s 2021 earnings at $3.27 per share, up 22% over its 2019 total.
Artisan pays quarterly dividends approximating 80% of each quarter’s “cash flow,” and also pays a special dividend in February based on excess cash generated in the previous year and other factors.
Harry Domash, Dividend Detective, www.dividenddetective.com, 866-632-1593, October 5, 2020