Odds ‘n Ends – Income Portfolio (Part 2)
McDonald’s Corp. reported weaker-than-expected global sales at established restaurants for November, hurt by a sharp drop in comparable-store sales in the United States. The world’s largest hamburger chain said worldwide sales at restaurants open at least 13 months rose 0.5 percent last month, missing consensus estimates of a rise of 0.6 percent. Same store sales fell 0.8% in the United States, widely missing the expected 0.3% gain by analysts following the stock. The company said high competition and relatively weak customer traffic hurt sales in the U.S., its second biggest market after Europe. McDonald’s had previously signaled that weakness would continue in the fourth quarter amid stiff competition and halting global economic growth. While near-term operations will remain challenging, the high-quality shares can be held for its generous and growing dividend payout yielding 3.4%.
- Canada will introduce legislation to cap roaming rates that big telecom providers such as Rogers Communications charge their smaller rivals, aiming to breathe life into its sputtering drive to foster competition in the wireless industry. RCI, as the main provider of roaming services for such providers, brings in around C$50 million from such fees, compared with the company’s C$6.8 billion in network revenue this year. The fight up north between wireless carriers and Canada’s industry Minister will continue putting a crimp on Rogers’ ability to reap hefty profits, but on balance the shares of the more diversified of the “Big Three” telecom providers should do well in 2014, baring any major negative developments from the Ministry and entry by foreign competition. Rogers’ yield equals 3.7% at current levels.
- Good things seem to be in store for Royal Bank of Canada over the next few years as Canada’s largest bank as measured by assets also has operations in 50 other countries, including the U.S., United Kingdom and China. Given its healthy finances, RBC should continue to strengthen its market position, especially in its wealth management business. Acquisitions are not out of the picture either. The good quality shares had a very favorable 2013, closing the year ended October with earnings of $5.58 per share. The company announced it regular dividend on December 5th, which is up 6% to $0.67 per quarter from last year, yielding 3.9% annualy. Earnings can come close to $5.80 next year and another dividend hike is likely to be announced over the summer. The shares are reasonably price and is a worthwhile income holding.
- Verizon Communications is on track to complete its acquisition of the wireless business it does not own from Vodafone, which will benefit the company in the years to come despite its steep purchase price. The company is also close to completion of talks to buy Intel’s Internet TV business in a deal that could be valued at around $350 million. In November, Intel purchased UpLynk, a service that makes it easier to upload or stream videos and said it would buy EdgeCast, a customer-tailored ad-delivery network that could boost the company’s ad revenues. These acquisitions will then go to Verizon if the deal closes. Internet TV is still in a start-up phase of development, but about 350 staff members have been working on a variety of television upgrades, including work on set-top boxes and on television-Internet interface programming. Verizon should do well marketwise in 2014, has a favorable outlook for long-term price appreciation and the yield, currently 4.5%, should make for a nice combination of above average total returns for income investors through late decade.
My next updates later in the week will center on stocks in the Aggressive Portfolio.