Dividend.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.
Energy companies have again made it to the top of the list, as a recovery in oil prices has kept readers curious about their performance. British oil and gas giant BP has taken the first spot in the list, as the company is facing pressure from an activist shareholder to set climate targets. Oil and gas pipeline operator Energy Transfer is second in the list, thanks in part to a strong recovery in the stock and good dividend yield. Invesco Mortgage Capital is third, as the real estate investment firm’s stock has failed to recover since it was hit by the coronavirus pandemic. Tobacco group Altria closes the list.
Don’t forget to read our previous edition of trends here.
British oil and gas company BP (BP) has taken the first place in the list this week with an advance in viewership of 13%.
BP is currently facing pressure from an activist investor to set climate change targets that are in line with the Paris Agreement from 2015 and report on progress. BP, which recently reiterated its commitment to renewables by promising to become a net-zero emissions company by 2050, called on shareholders to reject the resolution. It argued that setting targets could hamper its strategic goal of becoming a net-zero company by the promised deadline.
BP has said greenhouse gas emissions declined by 16% in 2020, partly due to some divestments that contributed to pollution and lower demand for fossil fuel from motorists. BP has also been investing heavily in renewable energy. It aims to create 20 gigawatts of renewable capacity by 2025 and another 30 by 2030.
Yet the company’s stock price performance still remains heavily connected to the price of oil.
Since the start of the year, BP shares have risen by 21%, as oil prices recovered. BP pays an annual dividend of $1.58 per share, amounting to a yield of 6.41%.
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Oil and gas pipeline operator Energy Transfer (ET) is second in the list with an advance in traffic of 9%. Energy Transfer shares have been boosted by the recovery in oil prices, rising by 28% since the start of the year. The shares are up by more than 70% over the past 12 months.
The recovery in oil prices is not the only catalyst for Energy Transfer’s performance. The company agreed to buy Enable Midstream for $7.2 billion from utility companies OGE Energy and CenterPoint Energy. The deal was stock for stock and implied no premium. The company expects at least $100 million in cost savings on an annual basis.
The deal will expand Energy Transfer’s clout in the mid-country and increase its natural gas capacity, as the acquisition adds gas gathering and processing assets in the Anadarko Basis in Oklahoma and other regions.
With a forward payout ratio of 54%, Energy Transfer’s dividend yields 6.3%. The company’s 2020 revenues declined by 28% to $39 billion. As a result, it reported a loss of $647 million compared with a profit of $3.5 billion a year ago.
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Invesco Mortgage Capital
Invesco Mortgage Capital (IVR) has taken the third spot in the list this week, seeing its viewership advance by 8%. IVR, which invests in mortgage-backed securities, suffered a severe blow from the market dislocation caused by the coronavirus pandemic, prompting it to sell down assets and shift its portfolio toward Agency mortgage-backed securities, which are more secure as they are backed by the government.
As of the end of the fourth quarter ended December 31, around 98% of Invesco’s investment portfolio was in Agency RMBS (residential mortgage-backed securities), which was valued at $8.2 billion. The firm also kept a sizable cash balance of $745 million.
IVR, which has a market capitalization of $934 million, saw 82% of its value disappear in the market sell-off in March. Since then, it has largely failed to recover losses. As a result, Invesco currently yields nearly 10%, although it might not be sustainable.
Tobacco products maker Altria (MO) is last in the list with a rise in viewership of 3%. Altria, a manufacturer of traditional cigarettes, was in the news after a report from Citigroup said traditional cigarettes could disappear by 2050.
This means incumbent players like Altria could suffer and they should shift away from traditional cigarettes to alternatives like electronic cigarettes and vapes. Altria, a $95 billion market capitalization company, derives more than 80% of its revenues from traditional cigarettes, and has been steadily increasing revenues over the past five years to $20.8 billion.
The company is looking ahead with a 2018 investment in e-cigarette maker Juul. However, it was forced to write down its initial $12.8 billion investment following heightened scrutiny from the Food and Drug Administration on e-cigarettes.
Altria still pays a strong dividend of $3.40 per share, amounting to a yield of 6.5%. Altria pays out more than 75% of its earnings in dividends.
The Bottom Line
BP is facing pressure from an activist shareholder over climate change disclosures, despite the company’s commitment to becoming a “net-zero” company by 2050. Pipeline company Energy Transfer is poised to benefit from a recovery in oil prices. Invesco Mortgage has failed to recover from a market sell-off in March, while Altria is facing extinction by 2050 if it fails to move from traditional cigarettes to vapes and other alternatives.
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