In this episode, we dive into the second quarter earnings reports of several notable dividend stocks, discuss current market trends, and share our stock picks for the week. Join your co-hosts, European Dgi and Engineer My Freedom, along with special guest John, known as The Money Pursuit.
John, based in Cape Town, South Africa, has been on a journey of dividend growth investing since 2013. He started with mutual funds, transitioned to ETFs, and eventually began investing in individual stocks. His focus is primarily on the U.S. market, where he finds ample opportunities for growth.
Current Market News
Chevron Acquires Noble Energy
One of the significant news items discussed was Chevron’s acquisition of Noble Energy. This move is indicative of a trend where energy companies are looking to acquire undervalued assets during these challenging times.
American Express Earnings Drop
Another noteworthy mention was American Express, which reported an 85% drop in earnings compared to last year. This raises questions about how other companies in the sector, like Visa, will perform in the upcoming earnings reports.
European Union Budget Agreement
In European news, leaders have agreed on a budget of 1.8 billion euros, with 750 billion earmarked for coronavirus relief. This agreement is seen as a positive step towards economic recovery in the region.
Tesla’s Potential S&P 500 Inclusion
John highlighted the speculation around Tesla potentially being included in the S&P 500. This could lead to significant price movements as ETFs and funds that track the index would be required to purchase Tesla shares, potentially driving up its stock price.
Q2 Earnings Reflections
IBM Earnings Review
Engineer My Freedom shared insights on IBM’s recent earnings report. While the cloud business and Red Hat showed promising growth, overall performance was mixed. The consulting segment struggled, and concerns were raised about the new CEO’s ability to drive change during such a challenging time.
Microsoft and Intel Performance
John discussed Microsoft, which reported strong earnings but saw its stock price drop despite beating expectations. The growth of its cloud business is noteworthy, as it has become the largest revenue driver for the company. In contrast, Intel faced a significant drop in stock price due to delays in chip production, highlighting the competitive nature of the semiconductor industry.
Unilever’s Steady Performance
European DGI provided insights on Unilever, which maintained its dividend despite flat sales. The company is looking to separate its tea business, which could lead to strategic acquisitions. Notably, Unilever’s online sales surged during the pandemic, indicating a shift in consumer behavior.
Listener Questions
Tesla’s Carbon Credits
A listener inquired about Tesla’s sale of carbon and environmental credits. The hosts agreed that while they are not experts in this area, they see no issue with companies capitalizing on carbon credits as part of their business strategy.
Taxation on U.S. Stocks for Europeans
Another question addressed the complexities of taxation for European investors buying U.S. stocks. The hosts suggested consulting a tax advisor to navigate the intricacies of double taxation treaties and withholding taxes.
Market Timing and Liquidity
A listener asked whether the hosts would sell stocks to increase liquidity in anticipation of a recession. John emphasized that he does not attempt to time the market and prefers to rely on dividends for reinvestment.
Stock Picks of the Week
John’s Pick: Broadcom (AVGO)
John’s stock pick is Broadcom, a semiconductor manufacturer with a strong dividend growth history. He believes the company is well-positioned to benefit from the 5G rollout and offers a reasonable price-to-earnings ratio.
Engineer My Freedom’s Pick: Realty Income (O)
Engineer My Freedom chose Realty Income, a REIT known for its monthly dividends. He plans to accumulate shares if the price dips below $55, viewing it as a solid long-term investment.
Conclusion
As we wrap up this episode, we reflect on the extraordinary nature of this earnings season and the resilience of dividend stocks. We appreciate our listeners for their questions and engagement. Don’t forget to like and subscribe for more insights in future episodes!
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