Three Stocks to Watch in the U.S. Cannabis Market
According to Timothy Sykes, now is the time to look closer at the opportunities in smallcap cannabis stocks. Alaska, Colorado, Washington, Oregon, and the District of Columbia have all legalized the sale of recreational marijuana, and many more jurisdictions are about to follow suit. Canada has also changed medical marijuana laws starting on April 1, 2014, creating a $3.4 billion opportunity.
With these aforementioned factors, Sykes sees big potential for investors.
He cites three companies as being interesting to watch on the US cannabis market specifically: GW Pharmaceuticals (GWPH), American Green Inc. (ERBB), and Cannabis Science (CBIS). The market caps are $1.5 billion, $33 million, and $57 million respectively.
With more states legalizing recreational use and the new medical marijuana scheme in Canada, the industry is set to continue legitimizing, gaining more blue chip companies. However, in the interim, there are still some illegitimate companies on the horizon that are worth keeping a close eye on to avoid.
Original graphic from: Timothy Sykes
Uncovering Income: Dividend Stocks With Strong Yields
Some companies are cutting or suspending dividends. Which dividend stocks can investors consider for stable distributions and strong yields?
Uncovering Income: Dividend Stocks with Strong Yields
Amid the current market volatility, attractive income-generating investments can be hard to find.
Treasury bond yields hover near record lows, and U.S. companies face restrictions on issuing dividends if they accept COVID-19 stimulus funds. Moreover, Goldman Sachs estimates dividends for S&P 500 stocks will decline by 25% this year.
Which stocks can investors turn to for stable distributions and relatively high dividend yields? Today’s visualization shows 35 stocks that may meet this criteria, leveraging Goldman Sachs data as published by Forbes.
The Dividend Stocks to Watch
To compile the list, Goldman Sachs identified stocks from the Russell 1000 index that met a number of requirements:
- A minimum annualized dividend yield of 3%
- An S&P credit rating of at least BBB+
- Ample cash on hand
- Strong balance sheets
- ”Reasonable” payout ratios
- At least average performance since the market peak
Dividend yields, which measure dividend income in relation to the share price, were initially calculated March 27. We have updated them as of market close on April 8. Here’s the full breakdown, sorted from highest to lowest dividend yield:
|Rank||Company||Ticker||Annual Dividend Yield||Sector|
|1||CenterPoint Energy, Inc.||NYSE: CNP||6.90%||Utilities|
|2||Wells Fargo & Company||NYSE: WFC||6.74%||Financials|
|3||People's United Financial, Inc.||NASDAQGS: PBCT||6.34%||Financials|
|4||Franklin Resources, Inc.||NYSE: BEN||6.28%||Financials|
|5||Regency Centers||NASDAQGS: REG||5.82%||Real estate|
|6||Truist Financial||NYSE: TFC||5.50%||Financials|
|7||International Business Machines||NYSE: IBM||5.43%||Tech|
|8||Omnicom Group Inc.||NYSE: OMC||4.76%||Communication services|
|9||U.S. Bancorp||NYSE: USB||4.71%||Financials|
|10||Raytheon Technologies (merger of Raytheon and United Tech.)||NYSE: RTX||4.69%||Industrials|
|11||NetApp, Inc.||NASDAQGS: NTAP||4.69%||Information Technology|
|12||The PNC Financial Services Group, Inc.||NYSE: PNC||4.62%||Financials|
|13||Eaton Vance Corp.||NYSE: EV||4.34%||Financials|
|14||Nucor Corporation||NYSE: NUE||4.12%||Materials|
|15||United Parcel Service, Inc.||NYSE: UPS||4.09%||Industrials|
|16||M&T Bank Corporation||NYSE: MTB||4.09%||Financials|
|17||Exelon Corporation||NASDAQGS: EXC||4.07%||Utilities|
|18||Archer-Daniels-Midland Company||NYSE: ADM||3.95%||Consumer staples|
|19||3M Company||NYSE: MMM||3.95%||Industrials|
|20||Emerson Electric Co.||NYSE: EMR||3.84%||Industrials|
|21||Sysco Corp.||NYSE: SYY||3.81%||Consumer staples|
|22||Mid-America Apartment Communities||NYSE: MAA||3.61%||Real Estate|
|23||Essex Property Trust, Inc.||NYSE: ESS||3.55%||Real Estate|
|24||MDU Resources Group||NYSE: MDU||3.53%||Utilities|
|25||Cummins Inc.||NYSE: CMI||3.51%||Industrials|
|26||Sonoco Products Co.||NYSE: SON||3.50%||Materials|
|27||Cisco Systems, Inc.||NASDAQGS: CSCO||3.45%||Information Technology|
|28||American Electric Power Company, Inc.||NYSE: AEP||3.36%||Utilities|
|29||The Hartford Financial Services Group, Inc.||NYSE: HIG||3.36%||Financials|
|30||NiSource Inc.||NYSE: NI||3.30%||Utilities|
|31||Caterpillar Inc.||NYSE: CAT||3.23%||Industrials|
|32||Everest Re Group, Ltd.||NYSE: RE||3.13%||Financials|
|33||Bristol-Myers Squibb Company||NYSE: BMY||3.09%||Health care, pharmaceuticals|
|34||The Home Depot, Inc.||NYSE: HD||3.08%||Consumer discretionary|
|35||Bank of America Corporation||NYSE: BAC||3.07%||Financials|
Note: From the original list, 5 stocks have been excluded as they no longer meet the 3% annualized yield threshold.
Centerpoint Energy, an electric and natural gas utility company, is at the top of the list. Since utility stocks are generally considered to be recession-resistant, investors may benefit from both the company’s yield and its defensive qualities.
Financials are the most-represented sector, with 11 companies on the list. Although regulators have pressured European banks to suspend dividend payments, U.S. banks will likely be able to continue their distributions. Top banking executives have argued they have sufficient capital to weather the COVID-19 crisis, and that halting payments would be “destabilizing to investors.”
There are also a number of well-known names on the list, including Home Depot, IBM, and 3M. The latter is the largest maker of respirator masks worldwide, and has been providing critical supplies to the U.S., Canada, and Latin America.
Caution: Volatility Ahead
As the pandemic’s financial impact continues, it’s likely many companies will delay or suspend their dividends. To avoid falling into “yield traps”—a trap in which an attractive yield could be due to a fundamental business problem—investors can screen for the qualities laid out above.
A strong balance sheet, good credit rating, and average or better performance since the downturn can all help point towards stability.
The Hardest Hit Companies of the COVID-19 Downturn: The ‘BEACH’ Stocks
As investor confidence across the travel industry slumps amid COVID-19, market capitalizations across ‘BEACH’ stocks shrink to unprecedented levels.
BEACH Stocks: $332B in Value Washed Away
The market’s latest storm has plunged the global travel industry into uncharted territory.
Since the S&P 500 market high on February 19, 2020, market capitalizations across BEACH industries—booking, entertainment, airlines, cruises, and hotels—have tumbled. The global airline industry alone has seen $157B wiped off valuations across 116 publicly traded airlines.
Investor confidence in cruise lines has also dropped. Between Carnival, Royal Caribbean, and Norwegian Cruise Line Holdings, over half of their market value has evaporated—equal to at least $42B in combined market capitalization.
Today’s infographic profiles the steep losses across BEACH companies. It looks at the ripple effects across individual companies and industries from the February 19 peak to date*.
*All numbers as of market close on March 24, 2020
Falling Off A Cliff
As the COVID-19 pandemic has spread to over 100 countries, many governments have implemented sweeping travel restrictions.
The impact across BEACH industries is far-reaching, with some valuations declining to nearly a quarter of their previous total.
|Company||Ticker||Category||Market Cap: 02/19/2020||Market Cap: 03/24/2020||% Change|
|Live Nation||LYV||Entertainment & Live Events||$16.3B||$9.1B||-44%|
|Six Flags||SIX||Entertainment & Live Events||$3.2B||$1.1B||-66%|
|Cedar Fair||FUN||Entertainment & Live Events||$3.1B||$1.3B||-58%|
|The Walt Disney Co||DIS||Entertainment & Live Events||$255.1B||$177B||-31%|
|Penn National Gaming||PENN||Entertainment & Live Events||$4.3B||$1.6B||-63%|
|Delta Air Lines||DAL||Airlines||$37.5B||$17.8B||-52%|
|Alaska Air Group||ALK||Airlines||$8B||$3.7B||-54%|
|Air Canada (in USD)||AC||Airlines||$8.3B||$2.8B||-67%|
|Carnival||CCL||Cruise & Casino||$30.8B||$10B||-67%|
|Royal Caribbean Cruises||RCL||Cruise & Casino||$23.2B||$7.5B||-68%|
|Norwegian Cruise Lines||NCLH||Cruise & Casino||$11.1B||$3.1B||-72%|
|Las Vegas Sands||LVS||Cruise & Casino||$52.8B||$35.1B||-34%|
|MGM Resorts International||MGM||Cruise & Casino||$16.2B||$6.2B||-68%|
|Wynn Resorts||WYNN||Cruise & Casino||$14.6B||$7.2B||-51%|
|Caesars Entertainment||CZR||Cruise & Casino||$10B||$4.2B||-58%|
|Eldorado Resorts||ERI||Cruise & Casino||$5.4B||$1.3B||-76%|
|Marriott International||MAR||Hotels & Resorts||$48.3B||$25.7B||-48%|
|Hilton||HLT||Hotels & Resorts||$31.3B||$19.4B||-38%|
|Hyatt Hotels||H||Hotels & Resorts||$9.1B||$4.9B||-46%|
|Choice Hotels International||CHH||Hotels & Resorts||$6B||$3.2B||-46%|
|Wyndham Hotels & Resorts||WH||Hotels & Resorts||$5.6B||$2.9B||-48%|
|Park Hotels||PK||Hotels & Resorts||$5.5B||$1.9B||-66%|
|Vail Resorts||MTN||Hotels & Resorts||$9.98B||$5.8B||-41%|
|Marriott Vacations Worldwide||VAC||Hotels & Resorts||$5.3B||$2.2B||-59%|
For instance, the consequences on various travel bookings brands have been severe. Booking Holdings, the parent company to Booking.com, Priceline, Kayak and OpenTable, witnessed share price declines of over 35% since the peak.
Across the entertainment industry, ticket sales for concerts, movies, and other events are falling precipitously due to cancellations or postponements.
Upwards of $5B in global film industry losses could result from the COVID-19 pandemic.
Chilling footage of the Las Vegas strip, as well as other tourist epicenters around the world, shows deserted streets as visitors opt to stay home instead.Bracing For Impact
Meanwhile, worldwide airline revenue is estimated to fall by as much as $113B in 2020.
In under two months, the share price of Delta Airlines has fallen over 50% as the company anticipates a capacity reduction of 40%, the largest in its history.
|Company||Ticker||Feb 19 2020 Share Price||Mar 24 2020 Share Price|
|Delta Air Lines||NYSE:DAL||$58.5||$26.9|
|Alaska Air Group||NYSE:ALK||$65.2||$28.9|
|Air Canada (in CAD)||TSX:AC||$45.3||$15.1|
The global airline industry—which employs over 10M people—supports $2.7T in global economic activity across an average of 12M passengers per day.
Aruba, Jamaica No More
As for the cruise line industry, global operations came to a 30-day standstill in mid-March. Over 800 COVID-19 cases and 10 deaths across three cruise ships have been discovered.
“COVID-19 on cruise ships poses a risk for rapid spread of disease, causing outbreaks in a vulnerable population, and aggressive efforts are required to contain spread.”
Carnival, a Miami-based company, has witnessed its share price fall to around one third of its February 19 value. Similarly, Royal Caribbean Cruises, which has seen its market cap plummet almost 70%, announced that it will suspend trips until mid-May.
As the hotel industry is impacted by the global outbreak, share prices have also realized a significant slump. In the U.S., an estimated $1.4B in revenue is vanishing each week. If occupancy levels fall by just 30% this year, the U.S. hotel industry could see approximately 4 million jobs wiped out.
The Baird/STR Hotel Stock Index, which serves as a benchmark for the sector’s overall health, has declined over 47% year-to-date.
Global Stimulus Response
A number of travel industries around the world are calling for stimulus packages.
On March 25, the U.S. Congress finalized a historic $2T deal, which includes $25B in grants for the airline industry. In the UK, officials are providing small businesses in hospitality and leisure grants that are worth up to $30,000 as part of its $400B bailout plan.
China, Germany, Italy, and Spain have outlined multibillion dollar proposals in response to COVID-19. Overall, at least eleven countries have announced stimulus plans along with the European Commission and the IMF.
When Will the Travel Wave Hit Again?
Amid the COVID-19 pandemic one thing is clear: the impact on the travel industry will have a marked effect on the broader economy.
Travel is closely linked with oil, as transportation accounts for over 60% of global demand. In Q2 2020, global oil consumption is projected to fall by 25M barrels per day.
Along with this, discretionary consumer spending makes up over one third of America’s GDP. The impact of the pandemic across this sector is expected to contribute to a 10% decline or more in U.S. GDP for the second quarter.
As conditions materially improve around the world—with China beginning to open up flights—positive signs are emerging from under the surface. Will BEACH industries quickly bounce back as infection rates drop, or will a slow and painful recovery unfold in the months ahead?
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