Tag Archives: KGC

Top 5 Cheap Stocks To Buy Right Now

Dividend stocks, in general, are the best kinds of investments to have in retirement. They provide both the supplemental income when it’s time to rely on one’s nest egg while also allowing retirees to keep growing wealth through stock appreciation and higher dividend payments over time. That isn’t something you are going to get from cash under a mattress or from bonds.

Making the most of dividends in retirement means picking great dividend stocks that will be able to provide a steady stream of income for years to come, and it’s helpful if said stocks pay a high yield today. So we asked three Motley Fool investors to each highlight a stock they think is a perfect fit in a retirement portfolio. Here’s why they picked the following stocks:

Top 5 Cheap Stocks To Buy Right Now: Orange(ORAN)

The company formerly known as France Telecom offers a somewhat unusual dividend policy. The payouts don’t always rise year over year, the way you might expect from an American dividend hero. Instead, the company adjusts its payouts up and down as needed, responding to cash flow trends and upcoming expenses.

Over the last five years, Orange’s trailing dividend payouts have bounced around between $1.3 billion and $1.8 billion.

What’s more, the normal cadence of quarterly dividend checks is replaced by a biannual schedule — Orange sends out those dividends once every six months.

European investors are used to these things, even if Americans aren’t.

Either way, Orange’s current dividend yield stands at a fantastic 5.6%. The stock has been lagging the overall market in recent years, hampered by the rise of low-cost rivals in France and other major European markets. In the long run, Orange’s growth strategy hinges on high-speed broadband services and expansion in underdeveloped markets such as Poland and Romania. That’s the one service consumers in western Europe are still willing to pay a premium for.

The company is also exploring Africa in a big way with mobile networks in 21 countries on that continent. Thirteen of these markets have fast and reliable 4G networks already and the rest will follow.

So Orange’s dividend payments may be a little bumpy and unpredictable, but the business foundation is strong and I expect healthy growth for many years to come. The dividends will follow suit, and it’s hard to complain about a nearly 6% payout based on an undervalued stock.

Top 5 Cheap Stocks To Buy Right Now: NVR Inc.(NVR)

The fact that inventory turnover is incredibly low in this business is part of the reason why NVR is one of the more attractive stocks in this industry. Typically, a homebuilder will buy large plots of land, divided it up into lots, lay the initial groundwork like roads and utilities, build a couple display homes, get a customer to sign a contract to have a home built, then build the home before it can recognize revenue. 

With all of those steps, it can be an incredibly speculative business. Are land purchases today going to be favorable locations two to three years from now? Is the housing market going to remain strong? How much leverage can a company take on to develop these lots before it needs to have revenue coming in the door? These sorts of questions are the ones that will keep a homebuilding management team awake at night.

Instead of sweating the more speculative aspects of the business, NVR agrees to land purchase agreements with land developers. Think of it as a futures contract: NVR pays a small amount of cash to a developer up front, which gives it the right to purchase completed lots at deep discounts. This drastically reduces the amount of capital the company needs to commit to a development before it can start to recognize revenue, and the company doesn’t have to take on an immense amount of speculative risk or leverage.

Another attractive aspect of NVR’s business model is that it focuses on performing exceptionally well in its limited geographic markets rather than have operations thinly spread across the country. By concentrating its efforts into the Mid-Atlantic and Great Lakes region, it can squeeze out operational efficiencies and generate the highest rates of return in the business. By remaining a regional player, it also means the company generates excess cash, which management uses to buy back stock at a high rate.

If there is one thing that concerns me about NVR, it’s that management may be a little too generous with its stock grants such that it impacts shareholder returns. A lot of NVR’s value creation comes from a consistently lower share count, but stock grants to management have more than offset share repurchases over the past 18 months. If that issue is just a short-term blip, then NVR looks like a great investment.

Top 5 Cheap Stocks To Buy Right Now: Party City Holdco Inc.(PRTY)

Shares of Party City have surged 68% from their 52-week low, and are up 31% over the last six months as Wall Street comes to celebrate the retailer’s partylike atmosphere. While no business is completely immune from the impact of Amazon.com, Party City is one of a handful of businesses that look Amazon-resistant.

It operates some 880 stores. But the big kick are the 250 to 300 Halloween-themed outlets like Halloween City that spring up nationwide every fall and end up contributing about 20% to total revenue. It’s the biggest holiday of the year for the specialty retailer.

But beyond its own stores, it is less well known that Party City also distributes party items to over 40,000 retail outlets worldwide. Third-party wholesale revenue amounted to $629 million in 2017, or 26.5% of its total of $2.37 billion.

Despite all the gains it’s made, there is still plenty of opportunity for growth and expansion, especially since Party City is trading as if it were a broken business. Its stock is valued at only 14 times trailing earnings and seven times next year’s estimates, while also going for a deeply discounted eight times free cash flow. So investors who pick up Party City stock now may have a reason to celebrate later on.

Top 5 Cheap Stocks To Buy Right Now: Copa Holdings, S.A.(CPA)

In her just-released updated edition of How to Retire Overseas (Everything you need to know to live well (for less) abroad), travel writer Kathleen Peddicord speaks glowingly of Panama City, Panama, as a perfect destination for retirement — so much so that she recently moved to the city as her own business’s new home base.

Panama City has a little bit of everything that retirees might want, starting with a low cost of living, and running through first-world infrastructure and a first-rate healthcare system, tax benefits for retirees and ease of opening a business in retirement, and ending with easy access to "home" in the U.S.

One of the reasons American retirees in Panama City have such easy access to U.S. cities is Copa Holdings, parent company of Copa Air, which services 75 destinations in 31 countries (the U.S. included) out of its hub and headquarters in Panama City.

Copa is growing like a weed — and I’m not just talking about its flight plans. Copa pays its shareholders a big 3.7% dividend yield, but it’s so profitable that this consumes barely 30% of its profits. Copa reported $404 million in GAAP profit over the past year, giving it a P/E ratio of 10. That compares favorably to analysts’ projected 13% growth rate for the stock — and Copa is even cheaper when valued on free cash flow.

If you’re a retiree, and perhaps considering Panama City as a place to retire, I think Copa Holdings is a fine dividend stock to consider investing in as well.

Top 5 Cheap Stocks To Buy Right Now: Kinross Gold Corporation(KGC)

Kinross Gold wouldn’t have made it to this list if not for the stock’s drop in recent months. Kinross was, in fact, one of the top-performing gold-mining stocks in 2017, but the market hasn’t found a reason to pump more money into the stock so far this year.

Kinross shares took a deep dive earlier in the year after the miner reported fiscal 2017 numbers. Here’s how it fared.

Metric FY 2016 FY 2017
Gold production (in ounces) 2.67 million 2.79 million
Revenue $3.3 billion $3.47 billion
Net profit/loss $445.4 million ($104 million)
Adjusted net profit $178.7 million $93 million
All-in sustaining cost (AISC) per gold equivalent ounce $954 $984

DATA SOURCE: KINROSS GOLD.

For fiscal 2018, Kinross expects:

  • Gold production of 2.5 million ounces
  • AISC of $975 per ounce
  • Capital expenditure of $1.1 billion compared with $897 million in 2017

While asset impairments reversal and sale proceeds helped Kinross earn a big profit last year, lower production and higher cost estimates for 2018 didn’t go down well with the market. Higher capital expenditures could also mean lower free cash flow (FCF) — Kinross generated $54 million in FCF last year.

A businessman looking at buy and sell graphs.

NOT EVERY GOLD STOCK THAT’S ON SALE IS A BUY. IMAGE SOURCE: GETTY IMAGES.

In May, the market pummeled Kinross again for lower first-quarter profit. In reality, Q1 was a strong quarter, with revenue climbing 13% and AISC dipping to a record low of $846 per gold-equivalent ounce. Kinross’ key phase one expansion at Tasiast is near completion and expected to boost throughput capacity to 12,000 tons per day during the latter half of the year. Other projects, including Round Mountain and Bald Mountain in Nevada and Fort Know Gilmore in Alaska, are also on schedule and budget. 

I don’t see anything wrong with Kinross: It has a strong pipeline of projects that should boost production and lower costs over time, has ample liquidity at hand, strong cash flows, and no debt maturing until 2021. Gold investors might want to put Kinross’ ill-timed investments in the rearview mirror and put the stock on their radar. 

Top Bank Stocks To Watch Right Now

Two key goals in retirement are to generate safe income and preserve capital. No one wants to outlive their nest egg.

Dividend-paying stocks are a popular asset class used to generate predictable, growing income. However, unlike the interest income paid by government-backed Treasury bonds, a common stock dividend can be far more discretionary in nature. When times get tough, a business will typically opt to reduce its dividend before jeopardizing its ability to meet its debt obligations, preserve its credit rating or invest in its long-term growth projects.

Unfortunately, a number of businesses are facing the tough decision to reduce their dividend at any one moment.

To alert investors of stocks that have the highest risk of reducing their current dividend in the future, Simply Safe Dividends created a Dividend Safety Score system that analyzes a company’s payout ratios, debt levels, recession performance, cash flow generation, recent earnings performance, dividend longevity and more.

Dividend Safety Scores are available for thousands of stocks, and scores range from 0 to 100. A score of 50 represents a borderline safe payout, but conservative investors are best off sticking with companies that score over 60 for Dividend Safety.

Investors can learn more about Dividend Safety Scores and view their real-time track record here(since inception they have flagged 99% of dividend cuts in advance).

I used Dividend Safety Scores to identify seven companies that have either recently cut their dividend and remain in trouble, or that could be facing a dividend cut in the near future. Owning companies like these can hurt a conservative retirement portfolio.

Top Bank Stocks To Watch Right Now: Pfizer, Inc.(PFE)

Investors have been waiting for Pfizer’s new drugs to finally offset declining demand for Lipitor, and this could be the year in which their patience is rewarded.

Pfizer finished 2017 with solid momentum that includes a return to organic growth and full-year EPS of $2.65, up 11% from 2016. The company’s forecast for 2018 is for revenue growth of 4% and EPS growth that matches last year’s 11% improvement. If it can hit those targets, it will be the first year of non-organic revenue growth at the company since Lipitor lost patent protection in 2011.

Driving the company’s improving outlook is a slate of important drugs, including the breast cancer drug Ibrance, the autoimmune-disease drug Xeljanz, the prostate cancer drug Xtandi, and the anticoagulant, Eliquis. In 2017, increasing demand for those drugs resulted in an 8% increase in sales at Pfizer’s innovative-health segment.

A return to growth would be great news for income investors because Pfizer already yields a market-beating 3.8%. If its sales growth accelerates, then operating leverage will give it additional wiggle room to boost its dividend payout. 

Top Bank Stocks To Watch Right Now: Enbridge Inc(ENB)

Canadian energy infrastructure giant Enbridge (NYSE:ENB) has lost nearly a quarter of its value over the past year, and currently sells for just nine times cash flow, well below the peer group average of nearly 12 times 2018 cash flow. That sell-off also pushed its fast-growing dividend up to a 6.7% yield, which is the highest it has been since the early 1990’s.

The plunge doesn’t make much sense because Enbridge recently completed a needle-moving merger and has a massive backlog of expansion projects underway. These growth initiatives should enable the company to grow cash flow per share at a 10% annual pace through 2020, which positions it to raise its payout at a similar rate. That combination of a high current yield that Enbridge expects to grow at a high rate could fuel top-tier total returns for investors in the coming years as its valuation reverts closer to the peer group average.

Top Bank Stocks To Watch Right Now: Apple Inc.(AAPL)

Some investors claim that Apple’s high-growth days are over. Yet the tech giant posted accelerating double-digit sales growth over the past three quarters, and analysts expect its revenue to rise 14% this year. Apple’s earnings are also expected to climb 24% this year.

Those are remarkable growth figures for a stock that trades at less than 16 times this year’s earnings. Moreover, Apple pays a forward dividend yield of 1.4%, and it has hiked that payout annually for five straight years. It also recently announced a new $100 billion buyback — which is enough to repurchase over 10% of its outstanding shares at current prices.

Apple still depends heavily on the iPhone, which generated 62% of its sales last quarter. But its services revenue — from Apple Pay, Apple Music, iTunes, its App Store, and other services — also jumped 31% annually during the quarter and accounted for 15% of its top line. Apple also stated that its paid subscriber base grew by 100 million in the last year to 270 million.

Millennials sitting on a floor using their smartphones and tablets.

IMAGE SOURCE: GETTY IMAGES.

That massive user base gives Apple the foundation to launch a wide variety of new services for adjacent markets — like streaming video, online news, and healthcare — to lock in users and reduce its dependence on hardware sales. That’s an advantage none of its smartphone rivals can match.

As I’ve said before, investors should think of Apple as a consumer goods company instead of a tech one. By comparing Apple’s valuations to other consumer goods companies, it’s easy to see how undervalued this stellar growth stock is.

Top Bank Stocks To Watch Right Now: Kinross Gold Corporation(KGC)

Despite 2018 setting up as the year to acquire gold stocks, no sector is immune from market irrationality. Case in point is Kinross Gold Corporation (USA) (NYSE:KGC). Just recently, KGC stock absorbed a painful body blow thanks to the White House imposing new Russian sanctions. Kinross will receive 20% of its precious metals production from Russia.

On surface level, KGC volatility appears to make sense. Like every other gold miner, Kinross is fighting back after several frustrating years. It simply can’t afford a 20% production disruption.

However, we shouldn’t forget that KGC is a Canadian company. Yes, Canada has sometimes earned a reputation as the U.S. lackey. However, it’s obvious that Russia’s Vladimir Putin has an issue with American dominance in geopolitical affairs.

Kinross disputes that the fresh sanctions have negatively impacted the company. They report that Russian operations are running as previously scheduled. Of course, they would say that, but I don’t see an upside for the Russians to punish a Canadian miner. Russia’s economy isn’t exactly a shining beacon, and they’ll be hurting themselves unnecessarily.

Thus, I think the extreme selloff in KGC stock is a contrarian opportunity. Furthermore, management has really cleaned out their cost of goods sold, as well as their operating expenses. The end result is a company that is finally profitable.

This latest news is nothing more than irrational drama. Feel free to put KGC in your gold stocks to buy list.