Tag: paid

How China’s Stimulus Could Affect Tech Stocks Globally

Posted on by The INO.com Team

After months of sluggish economic growth and fears of missing its growth targets, China has unveiled a sweeping set of stimulus measures aimed at reviving its economy. These policies included cuts to interest rates, loans to investors and companies for stock buybacks, and promises of substantial fiscal support. The People’s Bank of China’s (PBOC) coordinated efforts are aimed at reducing borrowing costs and boosting confidence in an economy struggling with issues like the ongoing property crisis and high youth unemployment.

Despite some analysts questioning the long-term sustainability of the stimulus, the market has responded with enthusiasm. Mainland China's CSI 300 Index surged 8.5%, marking its best performance since 2008, while Hong Kong's Hang Seng Index rose by 4.2%.

As these aggressive policies aim to jump-start the struggling economy, the impact could reach far beyond China's borders, with global tech stocks poised to benefit significantly. Companies like Apple Inc. (AAPL), NVIDIA Corporation (NVDA), Taiwan Semiconductor Manufacturing Company Limited (TSM), and QUALCOMM Incorporated (QCOM) rely on China not only for manufacturing but also as a major consumer market. With lower interest rates and improved liquidity in China, demand for tech products could surge, directly benefiting these tech giants.

Furthermore, the PBOC’s promise of potential fiscal stimulus adds another layer of optimism. If China follows through on its hints of trillion yuan-level spending, particularly in infrastructure and technology sectors, it could further boost global tech companies that provide critical components for these developments.

Many are drawing parallels to 2008 when China’s swift and massive stimulus response to the global financial crisis jump-started not only its economy but also helped boost global demand. However, that stimulus left China with long-term challenges, including local government debt, overcapacity, and excess housing.

While some investors remain cautious after past false starts, the current stimulus package has injected new optimism into the market. Tech stocks, in particular, offer an attractive opportunity as lower interest rates make them more appealing for investors seeking higher returns. Therefore, fundamentally sound stocks like AAPL, NVDA, TSM, and QCOM could be worth considering for those looking to tap into the potential upside driven by China’s recovery efforts.

Stock to Hold:

Apple Inc. (AAPL)

With China being one of Apple's largest markets for premium tech products, the country’s economic recovery could stimulate demand for iPhones, MacBooks, and other high-end devices. Lower interest rates and improved liquidity might encourage consumers to invest in Apple’s premium offerings, further driving the company's revenue in this region.

For the third quarter of fiscal 2024, which ended June 29, 2024, AAPL’s total net sales increased 4.9% year-over-year to $85.78 billion, with $14.73 billion in sales from Greater China. Its gross margin rose 8.9% from the year-ago value to $39.68 billion, while its operating income came in at $25.35 billion, up 10.2% year-over-year. On the bottom line, AAPL’s net income and EPS amounted to $21.45 billion and $1.40, representing increases of 7.9% and 11.1%, respectively, from the prior year’s quarter.

Street expects AAPL’s revenue for the current year (ended September 2024) to increase marginally from the prior year to $390.52 billion, while its EPS is expected to grow by 9.2% year-over-year to $6.69. For the fiscal year 2025, both revenue and EPS are anticipated to reach $419.84 billion and $7.41, indicating a 7.5% and 10.7% year-over-year growth, respectively.

Shares of the dominant tech player have surged more than 36% over the past year and approximately 21% year-to-date. Also, its 12-month price target of $248.07 reflects a 6.5% potential upside.

However, while the outlook is promising, investors should remain cautious of geopolitical tensions that could affect production and sales. Ongoing U.S.-China trade disputes may disrupt Apple’s supply chain, leading to increased costs or delays. As Apple relies heavily on Chinese manufacturing, any escalation in tensions could pose risks to its market performance.

Stocks to Buy:

NVIDIA Corporation (NVDA)

With the frenzy around Artificial intelligence (AI) in the stock market, the AI darling Nvidia has been on an impressive run this year. The stock has surged over 145% year-to-date and nearly 179% in the past 12 months, thanks to the robust demand for its graphics processing units (GPUs), which help run and train AI algorithms.

Nvidia’s revenue for the second quarter that ended July 28, 2024, increased 122% year-over-year to $30.04 billion and exceeded the analysts’ expectations of $28.75 billion. The company's bottom line also remained buoyant, with operating income surging 174% from the year-ago value to $18.64 billion. NVDA’s non-GAAP net income amounted to $16.95 billion or $0.68 per share, compared to $6.74 billion or $0.27 per share in the previous year’s quarter, respectively.

Moreover, analysts remain bullish on the chipmaker’s long-term prospects. For the fiscal year ending January 2025, NVDA’s revenue and EPS are expected to grow by 106.1% and 119.2% from the prior year to $125.54 billion and $2.84, respectively.

Furthermore, out of 42 analysts that rated NVDA, 39 rated it Buy, while three rated it Hold. The 12-month median price target of $152.44 indicates a 25.5% upside potential from the last closing price. As China accelerates its focus on artificial intelligence (AI) and high-performance computing, this stock could boost your portfolio returns significantly.

Taiwan Semiconductor Manufacturing Company Limited (TSM)

As China's tech sector surges, demand for semiconductors is set to soar, potentially contributing nearly 19% to the country’s GDP by 2026. Headquartered in Hsinchu City, Taiwan, TSM manufactures, tests, and markets integrated circuits and other semiconductor products globally. Its products are used in automotive electronics, high-performance computing, and mobile device markets.

TSM’s net sales increased 40.1% year-over-year to NT$673.51 billion ($21.25 billion) in the second quarter that ended June 30, 2024. Its gross profit grew 37.6% from the prior year’s quarter to NT$358.13 billion ($11.29 billion), while its income from operations came in at NT$286.56 billion ($9.04 billion), up 41.9% year-over-year. In addition, the company’s net income and EPS increased 36.3% year-over-year to NT$247.85 billion ($7.82 billion) and NT$9.56, respectively.

The consensus EPS estimate of $6.60 for the current year ending December 2024 represents a 27.4% improvement year-over-year. The consensus revenue estimate of $88.40 billion for the same period indicates a 29.1% increase from the prior year.

Moreover, the stock has gained more than 99% over the past year, which is impressive. Its 12-month price target of $205 reflects an 18.4% potential upside.

QUALCOMM Incorporated (QCOM)

QCOM specializes in foundational technologies for the wireless industry. The company operates through three segments: Qualcomm CDMA Technologies; Qualcomm Technology Licensing; and Qualcomm Strategic Initiatives.

QCOM’s revenue increased marginally year-over-year to $9.39 billion in the fiscal second quarter (ended March 24, 2024). Its non-GAAP net income grew 14.1% from the year-ago value to $2.76 billion, while its EBIT rose 31.8% year-over-year to $2.49 billion over the period. The company’s non-GAAP EPS increased 13.5% from the year-ago value to $2.44.

Buoyed by its strong financial performance, the company paid a quarterly dividend of $0.85 per common share to its shareholders on September 26, 2024. QCOM pays an annual dividend of $3.40, which translates to a 2% yield on the current price. Plus, it has a payout ratio of 34.1%.

Street expects QCOM’s revenue for the fourth quarter (ended September 2024) to increase 13.8% from the prior year to $9.86 billion. Its EPS for the same period is expected to grow by 26.1% year-over-year to $2.55. It is no surprise that the company has topped the revenue and EPS estimates in each of the trailing four quarters.

Over the past year, the stock has returned nearly 50%. Moreover, out of 21 analysts that rated QCOM, 13 rated it Buy, while seven rated it Hold. The 12-month median price target of $218.25 indicates a 31.3% upside potential from the last closing price.

Copper's Role in the Clean Energy Boom: Stocks to Watch

Posted on by The INO.com Team

Copper has been a hot commodity, driving the transition to a cleaner, greener future. Its unique properties, like high conductivity and durability, make it indispensable in everything from renewable energy projects and drinking water infrastructure to advanced electronics and data centers. From wind turbines harnessing nature's power to electric vehicles (EVs) transforming transportation, copper is at the core of it all.

The red metal's importance is so pronounced that it's often called "Doctor Copper,” a barometer of economic health due to its close ties with industrial production. As of writing, copper's spot price is $3.95 per pound, up from $3.86 per pound at the start of the year. Analysts expect the price to climb even further, reaching between $4.30 to $4.80 per pound by the end of 2025.

According to S&P Global, the global push for electrification and clean energy is set to double U.S. copper demand by 2035. This ‘metal of electrification’ is essential for reaching net-zero carbon emissions by 2050, needed for everything from wind and solar power to electric vehicles and data centers. Moreover, an extra 1.5 million metric tons of copper will be required by 2035 for energy transition alone, bringing total U.S. consumption to 3.5 million tons, a 112% increase from 2023.

Globally, copper mine production was approximately 22 million metric tons in 2023, up from 16 million metric tons in 2010. Projections suggest that production will reach 30 million metric tons by 2036, but this increase may fall short of the anticipated surge in demand.

Despite this, more copper is available today than ever, thanks to recycling efforts. Over 30% of global copper demand in the past decade has been met through recycled copper. Future policies and technologies will continue to improve resource efficiency in mining and recycling, ensuring copper's role in sustainable development.

Moreover, the global copper market is expected to reach around $548.20 billion by 2034, expanding at a CAGR of 5.1% from 2024 to 2034.

So, we believe there could be no wiser move than investing in copper to ride on this rising demand. Here are three copper stocks that could be worthy of adding to your watchlist: Southern Copper Corporation (SCCO), Freeport-McMoRan Inc. (FCX), and Teck Resources Limited (TECK).

Southern Copper Corporation (SCCO)

Southern Copper Corporation (SCCO) is a leading mining giant based in Phoenix, renowned for having the world’s largest copper reserves. While copper is its core business, Southern Copper extracts valuable by-products like silver, zinc, and molybdenum.

This diversification, while significant, doesn’t overshadow its primary reliance on copper, which accounted for aboutc in the second quarter of 2024. The company reported a 6.6% rise in copper production to 242,474 tons during the same quarter. For 2024, SCCO aims to produce 963,000 tons of copper, a 6% increase from the previous year.

In the second quarter (ended June 30, 2024), the company’s net sales increased 35.5% year-over-year to $3.12 billion. Also, its net income attributable to SCCO came in at $950.20 million or $1.22 per share, reflecting an increase of 73.6% and 71.8% from the prior year, respectively.

Street expects SCCO’s revenue and EPS for the current year ending December 31, 2024, to increase 19.3% and 47.2% year-over-year to $11.80 billion and $4.57, respectively. Shares of SCCO have gained over 37% over the past nine months and nearly 14% year-to-date.

The recent uptick in copper prices has not only bolstered the company’s market performance but also enabled it to reward its shareholders. Last month, the company announced a dividend of $0.60 per share, payable on August 26, 2024. At its current share price, the stock offers an attractive dividend yield of 2.4%, appealing to income-focused investors.

Freeport-McMoRan Inc. (FCX)

Next up is Freeport-McMoRan Inc. (FCX), a leading international mining company with a diverse portfolio of assets and some of the world’s largest copper, gold, and molybdenum reserves. Headquartered in Phoenix, Arizona, Freeport-McMoRan operates major sites like the Grasberg minerals district in Indonesia and mining operations in North and South America, including Morenci and Cerro Verde.

Last month, the company achieved a significant milestone with its Indonesian subsidiary, PT Freeport Indonesia, by commissioning a new copper smelter, crucial for expanding Grasberg’s operations. FCX is on track to ramp up to full capacity by the year’s end.

For the second quarter (ended June 30, 2024), FCX’s net sales grew 15.5% from the year-ago value to $6.62 billion. The company’s net income amounted to $616 million and $0.42 per share, indicating a 79.6% and 82.6% year-over-year increase, respectively.

It produced 931 million pounds of copper in the second quarter and expects total production of about 4.1 billion pounds for 2024, including 1.0 billion pounds in the third quarter alone.

Thanks to its strong cash flows, the company paid its shareholders a dividend of $0.15 per share on August 1, 2024. With a payout ratio of 41.7% and a forward dividend yield of 1.52%, Freeport offers investors a compelling mix of income and growth potential. FCX has a four-year average yield of 1.05%, and its dividend payouts have grown at a CAGR of 25.9% over the past three years.

With strong copper prices and a solid demand outlook, analysts predict a 14.6% increase in revenue and a 9.6% rise in EPS for the fiscal year ending December 31, 2024. FCX’s stock has surged more than 16% over the past nine months, reflecting its strong market position.

Teck Resources Limited (TECK)

Teck Resources Limited (TECK) is a leading Canadian resource company that supplies metals essential for global development and the energy transition. With top-tier copper and zinc operations and an industry-leading copper growth portfolio, the company is committed to responsible growth, delivering value, and ensuring long-term business resiliency.

In early July, TECK completed the sale of its remaining 77% interest in its steelmaking coal business to Glencore plc. This strategic move positions Teck Resources as a pure-play energy transition metals company with a strong focus on copper.

TECK’s revenue for the second quarter ended June 30, 2024, came in at CAD$3.87 billion ($2.82 billion), up 10.1% year-over-year. The company achieved a record quarterly copper production of 110,400 tonnes, with 51,300 tonnes from Quebrada Blanca (QB).

Its adjusted EBITDA grew 12.9% from the year-ago value to CAD$1.67 billion ($1.21 billion), driven by robust copper production and surging prices. Further, its adjusted profit from continuing operations attributable to shareholders was CAD$413 million ($300.22 million), or $0.79 per share.

For the current year ending December 31, 2024, TECK’s revenue and EPS are projected to reach $9.98 billion and $1.89, respectively. Over the past nine months, the stock has gained 23.2%.

With proceeds from the coal business sale, TECK’s Board authorized up to a $2.75 billion share buyback and approved a dividend payment of $0.625 per share, including a $0.50 supplemental dividend, payable on September 27, 2024. This, along with a $500 million buyback announced in February, brings total shareholder returns to $3.5 billion from the sale.

Teck offers an attractive proposition for income-oriented investors, with a four-year average dividend yield of 1.34%. Additionally, its dividend payouts have grown at CAGRs of 32.6% over the past three years and 19.6% over the past five years, making it a compelling choice for those seeking exposure to the copper sector.

Bottom Line

As the world pushes for a greener future, copper's pivotal role in renewable energy, EVs, and advanced electronics makes it a vital commodity to watch. Companies like SCCO, FCX, and TECK are well-positioned to benefit from this surging copper demand. These dividend-paying stocks offer stable returns and are poised to power a sustainable future, making them worthy of your portfolio's attention.

Chevron vs. NextEra Energy: Which Dividend Stock is the Better Buy?

Posted on by The INO.com Team

Despite the industry challenges, Chevron Corporation (CVX) and NextEra Energy, Inc. (NEE) are both gaining significant traction and rewarding shareholders with reliable dividends. But if you had to choose between them, which would be the better buy?

Chevron's Dividend Strength Over 37 Years

Chevron is one of the largest integrated energy majors globally, with operations spanning oil production, transportation, and processing. This strategic spread helps cushion the inherent volatility in oil and gas markets, ensuring stability and sustained growth.

Recently, oil prices dipped after hitting seven-week highs. Brent crude futures slipped to $85.27 a barrel, while U.S. West Texas Intermediate crude dropped to $81.47 per barrel. Despite the cyclical nature of the oil sector, Chevron’s solid operational and financial performance continues to shine through.

In its latest earnings release, the company reported a double-digit increase in worldwide production and returned $6 billion in cash to shareholders. CVX beat first-quarter earnings estimates, with an adjusted EPS of $2.93, surpassing analysts' expectations of $2.87. U.S. production surged to 1.57 million barrels of oil and gas per day, a 35% increase from a year ago, thanks to strong output from the Permian and Denver-Julesburg basins.

What truly sets Chevron apart is its financial muscle. The company’s debt-to-equity ratio is a mere 0.12, the lowest among its peers. This low leverage gives CVX the flexibility to support its operations and sustain its dividends even during downturns, providing a significant competitive advantage.

In the first quarter of 2024, Chevron’s return on capital employed exceeded 12%, reflecting efficient management and strategic investments. The company increased its quarterly dividend by 8% sequentially to $1.63 per share and repurchased nearly $3 billion worth of its shares.

With 36 consecutive years of dividend growth and a forward dividend yield of 4.16%, Chevron offers investors a compelling mix of income and growth potential. CVX has a four-year average yield of 4.35%, and its dividend payouts have grown at a CAGR of 6.4% over the past three years.

Moreover, the company aims to grow its annual free cash flow (FCF) by nearly 10% through 2027, even if Brent crude prices fall to $60 per barrel. With Brent crude currently around $83 per barrel, Chevron has ample room for growth. CVX’s strategy focuses on improving ROCE by investing in high-return areas like the Permian Basin, expected to drive substantial cash flow growth.

Increasing cash flow and robust dividend growth make CVX an attractive long-term investment. The company’s ability to navigate market fluctuations and maintain financial stability positions it as a top choice for investors seeking security and growth in the energy sector. Shares of CVX have gained over 4% over the past six months and nearly 5% year-to-date.

How Is NEE Positioned to Reward Shareholders?

NextEra Energy is a dual force in the energy sector, uniquely positioned with substantial operations in regulated utilities and renewable energy. As one of the largest regulated utility companies in the U.S., NEE enjoys stable earnings through its main subsidiary, Florida Power & Light (FPL).

FPL's recent expansion efforts, including the addition of 1,640 megawatts of new solar capacity, underscore its commitment to clean energy and meeting the growing electricity demands. In the first quarter that ended March 31, 2024, FPL reported a net income of $1.17 billion or $0.57 per share, reflecting an increase of 9.5% and 7.5% year-over-year, respectively.

Simultaneously, NextEra Energy Resources, the company's renewable energy arm, continues to advance in sustainable energy production. The segment had a record quarter, adding approximately 2,765 megawatts of new renewables and storage projects to its backlog. Its adjusted earnings for the quarter were $828 million and $0.40 per share, up from $732 million and $0.36 per share in the first quarter of 2023.

Financially, NEE's performance remains robust. During the quarter, the company’s adjusted earnings amounted to $1.87 billion or $0.91 per share, reflecting an increase of 11.6% and 8.3%, respectively. Its adjusted EBITDA was $462 million, and $164 million cash was available for distribution. Moreover, its revenue and EPS have grown at respective CAGRs of 16.6% and 20.2 over the past three years.

Looking forward, NEE sees significant growth potential in the U.S. renewables and storage market, expecting it to triple over the next seven years from 140 gigawatts to around 375-450 gigawatts. With an existing 74-gigawatt operating fleet, split between FPL and Energy Resources, the company aims to expand to over 100 gigawatts by 2026, further strengthening its operational scale and creating additional value for its stakeholders.

On June 17, NEE paid its shareholders a quarterly dividend of $0.52 per share. With 28 consecutive years of dividend growth and a forward dividend yield of 2.84%, NEE offers an attractive proposition for income-oriented investors seeking exposure to the clean energy sector. Also, it has a four-year average dividend yield of 2.23% and has grown its dividend payouts at a CAGR of 10.2% over the past three years.

All said, NEE stands at the forefront of the energy transition, leveraging its dual strengths in regulated utilities and renewable energy to drive sustainable growth and value creation. The stock has gained over 21% over the past six months and over 19% year-to-date.

Should You Buy Chevron or NextEra Energy?

Analysts are bullish on these dividend-paying giants, each presenting significant upside potential. So, how do these two stack up?

Mizuho gave Chevron a Buy rating and raised the price target from $200 to $205, implying a substantial 23.59% upside from the current price of $156.64. This sentiment is echoed by other prominent analysts, with HSBC and Scotiabank setting price targets of $178 and $195, respectively. This results in an average price target of $186.95, suggesting a potential 16% upside.

On the other hand, NextEra Energy has also caught the eye of analysts. BMO Capital recently maintained an Overperform rating on the stock and raised the price target from $78 to $79, suggesting an 8.3% upside from the current price of $72.46.

In terms of dividend yield as a rough measure of value, CVX's 4.2% yield is far more attractive compared to NEE's modest 2.8%. While both stocks historically offered higher yields during oil downturns, NextEra Energy's current yield is comparatively lower. This positions CVX as a stronger income play and suggests it may be the more attractive stock between the two.