Stock splits don’t change anything about a company, yet valuations have skyrocketed post split announcements. Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be… Younger people were hit particularly hard by the economic crisis. Whether or not you were greatly affected, here are ways to manage your finances during the pandemic. UAE President Khalifa bin Zayed Al Nahyan issued a decree canceling a law on boycotting Israel and allowing trade and financial agreements between the two countries.
Confusing Market Reaction to Stock Splits
If you asked me that question two months ago, I would have laughed. Stock splits don’t change anything about a company. In theory a stock split does make a stock more accessible, because the lower price after the split, can allow smaller investors to buy it, when they might not have been able to otherwise.
That benefit of a stock split is far less important now with the ability to trade a single stock or even fractional shares on many stock trading platforms (unlike the more traditional 100 lot order). Further reducing that traditional benefit is that many investors participate through ETFs, making the price of any individual stock less of a factor in restricting broad ownership.
FANGMAT – Apple and Tesla noticeable out-performance since their split announcements.
There are many explanations for why Tesla and Apple have outperformed. Both announced market beating earnings calls and potentially positive shifts in their business mix. Tesla could be included in the S&P 500 which would force extremely large buying interest from investors tracking the S&P 500.
While there are many valid reasons, it is difficult to stare at this chart and not ask the question – did announcing splits have a disproportionately large impact on share price? Of the FANGMAT stocks I’ve chose, they are up the most since the middle of July. For both stocks, there is an obvious surge in price since the day they announced the split (there was other news out on those days for both companies, so it might be coincidental).
There are lots of moving parts in this market, but I cannot help but wonder if the share split played a significant roll? Judging by the enthusiasm the splits generated in my social media streams, it seems that investors are excited by the potential for the split and may have invested heavily based on that.
On Monday morning, but stocks will trade reflecting the split. My intuition tells me that we will experience a “sell the news” type of event. Where many investors who positioned themselves for a tidal wave of new buyers, will be disappointed.
If that selling doesn’t occur, it would seem to confirm that either the price gains since the split announcements were a coincidence and any correlation is spurious, or that it is a meaningful event to split a stock from a valuation standpoint. Under either of those scenarios I expect we will see a lot more stock splits, because the cost to split is small relative to the potential gains that are apparently there.
2020 continues to deliver unexpected market behavior and this one is puzzling to me, but unlike much that has occurred in 2020, we should have a definitive answer on what was going on by the end of the week! (it would be nice to get some clarity from Standard and Poors on any S&P 500 inclusion plans).
Author: Peter Tchir
Auswide Bank Ltd (ASX:ABA) Looks Like A Good Stock, And It’s Going Ex-Dividend Soon
Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Auswide Bank Ltd (ASX:ABA) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 3rd of September in order to be eligible for this dividend, which will be paid on the 18th of September.
Auswide Bank’s next dividend payment will be AU$0.11 per share. Last year, in total, the company distributed AU$0.35 to shareholders. Based on the last year’s worth of payments, Auswide Bank has a trailing yield of 7.0% on the current stock price of A$5.1. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! As a result, readers should always check whether Auswide Bank has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Auswide Bank
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Auswide Bank paid out just 2.3% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it’s a relief to see Auswide Bank earnings per share are up 4.5% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Auswide Bank has seen its dividend decline 5.4% per annum on average over the past 10 years, which is not great to see. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Should investors buy Auswide Bank for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Auswide Bank ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we’ve spotted 1 warning sign for Auswide Bank you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Author: Simply Wall St
Staying Afloat: A Pandemic Financial Guide for Millennials
Younger people were hit particularly hard by the economic crisis. Whether or not you were greatly affected, here are ways to manage your finances during the pandemic.
Several months into the coronavirus crisis, millions of Americans are still suffering from the economic fallout. Younger people are in an especially tough spot.
Millennials, or those in their mid-20s to late-30s, have accumulated considerably less wealth than previous generations had at similar stages in life, and many older millennials suffered during the Great Recession only to face the current crisis a decade later. “They already had entered into the job market at somewhat of a disadvantage,” said Kimberly Palmer, a personal finance expert at NerdWallet. “This is like a double whammy.”
Younger Americans also experienced significant losses this year. A Wall Street Journal/NBC News poll conducted in April — a month after the pandemic struck the country in earnest — showed that voters age 18 to 34 were most likely to suffer an economic blow, like losing health insurance or getting a pay cut, because of the crisis.
Whether or not you fall into that category, the uncertainty brought on by the pandemic may leave you worried about your financial stability. Here are some tips to help you manage your finances.
If you recently lost significant income, find out if you are eligible for unemployment benefits and, if so, apply, said Tripp Kelly, a financial adviser and principal of Socium Advisors of Northwestern Mutual, a financial services company.
Then, consider where you can save most. That may be housing: About 2.7 million adults across the country moved in with a parent or grandparent in the early days of the pandemic, according to an analysis of population data from the Census Bureau by the real estate company Zillow. If you can no longer afford rent, talk to your landlord. You may be able to negotiate your rent, start a repayment plan or even break your lease early. If you rent through a management company, find out whether it reports to credit agencies before making any big decisions that might affect your credit score.
If you can’t cut on rent or mortgage costs, revise your budget so that you prioritize those payments and other essentials like groceries and utilities, Ms. Palmer said. If you are still working, she recommends the 50/30/20 budget rule: Allocate 50 percent of your after-tax income toward needs (like rent or mortgage payments), 30 to wants (takeout, entertainment) and 20 for savings or debt payments.
“It’s just a useful way to make sure you’re setting yourself up to be financially secure going forward,” Ms. Palmer said.
If you are pursuing a graduate degree and the tuition has become a significant burden, try negotiating with your college or university. Educational institutions are in a financial bind, Mr. Kelly said, and may be willing to reduce tuition or offer incentives to keep students enrolled.
Many companies and institutions have hardship programs to help debtors during difficult times. If you are struggling to pay off student loans, your mortgage or credit card debt, call your lenders and discuss your payment options. “Financial accommodations are generally readily available right now,” said Amy Thomann, the head of consumer credit education at TransUnion, a credit reporting agency. “Lenders, just like consumers, understand the hardships that are going on in the economy.”
If your lender agrees to defer your payments or lower your interest rates, Mr. Kelly recommends putting the amount you would have owed into an emergency fund.
Speaking of interest rates — they are extremely low right now, so read up on incentives and find out whether this is a good time to refinance your mortgage or private student loan, said Taha Choukhmane, an assistant professor of finance at the Massachusetts Institute of Technology.
Whatever you do, don’t allow your debt to pile up. “The worst thing you can do in a tough financial situation is just to let it accumulate and not face it up front,” Dr. Choukhmane said.
If you are still working but don’t have an emergency fund, start one. The economy remains precarious, so it’s best to plan ahead as much as possible.
“We always talk about saving for a rainy day,” said Ms. Palmer. “This is the rainy day.”
In an ideal world, you should put away three months worth of expenses, she added. If that’s not feasible, save at least $1,000 in the event that you need something to fall back on down the line.
If you are facing dire circumstances and have a retirement account, one option is to make an early withdrawal. Under the Coronavirus Aid, Relief and Economic Security Act, individuals affected by the coronavirus may qualify to withdraw up to $100,000 from their plans through Dec. 30 without the 10-percent penalty that typically applies to those under 59 and a half. You would have to pay income taxes on the amount, but the payments can be spread out over the next three years. You could also pay back the distribution anytime during that period and claim a tax refund on the taxes you’ve already paid.
Normally you should avoid dipping into your savings, but “now we’re in a situation where maybe that’s not clear,” said Dr. Choukhmane.
The most expensive option would be to apply for a graduate degree. If you have been unemployed for some time, you might have less to lose and more to gain by going back to school, Ms. Palmer said. And because of those low interest rates, this is a better time than usual to take out student loans. The investment may be worth it if you previously worked in an industry that has been drastically disrupted by the pandemic and are looking to shift to a career with more promise.
Or you can gain new skills by taking on part-time work through platforms like Upwork or TaskRabbit. “Rather than pay for traditional education, go pound the pavement and get the experience that way,” Mr. Kelly said. No matter what jobs you take on, having that experience will show prospective employers that you remained productive during the crisis and expanded your résumé, Dr. Choukhmane said.
Managing your money can be stressful, especially when the world is reeling from a global health crisis. It may be tempting to ignore your bank statements or credit score when you are in a financial rut — but fight that urge.
“Monitoring your credit is an important foundational principle of managing your financial and credit well being,” said Ms. Thomann. In response to the pandemic, all three of the credit agencies — Equifax, Experian and TransUnion — are offering free weekly access to credit reports through AnnualCreditReport.com.
Not sure how to navigate these decisions? Reach out to a financial counselor or a knowledgeable relative who can help you get your ducks in a row. If you need career advice, search your network for a potential mentor and build that relationship. Millions of Americans are dealing with extreme circumstances, so people may be more likely to empathize and lend a hand.
“All it takes is an ask,” said Mr. Kelly.
Millennials who started out during the Great Recession do have one advantage, said Ms. Palmer, because they have already lived through a crisis.
“They know that it passes, and that it’s not a permanent state, and that you can get through it,” she said.
Author: Sara Aridi
UAE ends boycott of Israel, permits economic and financial deals
A cargo plane operated by Etihad Airways prepares to land at Israel’s Ben Gurion Airport near Tel Aviv on June 9, 2020. The United Arab Emirates flew its first publicly announced flight to Israel on May 20, when Etihad sent medical supplies to help Palestinians cope with the coronavirus.
Jack Guez | AFP | Getty Images
The president of the United Arab Emirates has issued a decree canceling a law on boycotting Israel and allowing trade and financial agreements between the two countries, the UAE official news agency WAM reported on Saturday.
The decree from UAE President Khalifa bin Zayed Al Nahyan aims at “supporting bilateral cooperation in order to arrive at (the establishment) of bilateral relations,” the agency said.
The announcement comes as El Al Airlines plans to operate Israel’s first direct flight between Tel Aviv’s Ben Gurion Airport and the UAE’s capital Abu Dhabi, carrying an Israeli delegation and top aides to U.S. President Donald Trump, who brokered an Aug. 13 accord to normalize Israel-UAE ties.
Trump’s senior adviser Jared Kushner will be among the U.S. officials on the El Al flight departing on Aug. 31 at 10 a.m. (0700 GMT), a U.S official said.
The Israel-UAE deal awaits negotiations on details such as opening embassies, trade and travel links before it is officially signed.
There are no official air links between Israel and the UAE, and it was unclear whether El Al would be able to fly over Saudi Arabia, which has no official ties with Israel, to cut down on flight time.
In May, an Etihad Airways plane flew from the UAE to Tel Aviv to deliver supplies to the Palestinians to use for the novel coronavirus epidemic, marking the first known flight by a UAE carrier to Israel.