Interview: Statoil
>> welcome back. as we continue our discussion about dividend investing with don schreiber. we talked generally about why it makes sense to invest in dividend paying stocks. statoil is a name you electric. you mention cash flow is important. did that leave you to this name?
>> yes, this company has four times more cash flow from earnings and operations than it’s paying in dividends. so we think that’s a really healthy amount of cash flow. they have room to increase the dividend. their earnings are growing rapidly. in the last 12 months, they had 60% earnings growth. we like the oil sector because we think oil will remain stubbornly high and these companies will continue to earn a lot of money.
>> even though these energy companies have had tremendous runs and statoil up over 50% in the past 12 month.
>> and yettrating at a 9% price-to-earnings multiple, half the average on the s&p 500. we don’t understand how come companies generating two or three times the average earnings are selling at half the price-to-earnings pult mel.
>> how closely do you watch things like the price of oil? if oil dipped back substantially, would that change your thoughts on this company
>> we don’t buy and hold or buy and forget anything. we look on an active basis to make sure the companies we’re buying are still good story, the reasons why we bought them are there. we would say if the price of oil went into a trend that was below $45 for a significant. period of time, we might not earn as much, the company may not earn as much and we would be looking at that. every time we buy a stock, we put a stop under it so if the stock would fall precipitously, we’re not going to take a big hit, maybe a small hit.
>> pfizer was down in the last session, news out about vying remarks reports the drug linked to brinedness and―blindness
在线播报
Listen Briefing --- Carol (slow)
Currency --- Mike (slow)
French reject the constitution --- Jim (slow)
Currency trade --- Firas (slow)
Maytag --- Mike (slow)
>> i’m carol massar and u.s. equity and bond markets are closed for the memorial day holiday but the big story on this day concerns currencies. mike?
>> carol, we’ll begin with the dollar climbing against the euro after french voters rejected the european union constitution. 55% of the french voters said no. dealing a serious blow to hopes for a stronger e.u. and to the french president, jacques chirac. the constitution would have created a more unified europe politically and economically. the vote casts doubt on more expansion of the euro and the e.u. itself. chirac campaigned heavily for approval of the constitution and his re-election could be in jeopardy.% with this result, plans for the constitution are effectively dead. it would take a yes vote by all 25 e.u. member nations for it to be adopted.
>> joining us for more on the vote is bloomberg’s jim hertling from our bureau in paris. why did the french reject the constitution?
>> largely they wanted to give president jacques smawrk a black eye. the opposition was from across the political spectrum, from right to left, from nationalists to communists. the socialist party was split. they all have extreme dispaevs with chirac. unemployment here is 10.2%. they were also concerned that competition, with lower cost countries in eastern europe, would worsen their unemployment problems.
>> maybe a black eye for chirac. what’s the fallout for france, the country?
>> that’s what we’re all waiting to find out. there’s almost certainly going to be a change of government. the prime minister is likely going to resign in the next couple of days. in terms of policy, though, not much is going to happen. there’s a presidential election in 2007. the government in place now really doesn’t have much of a mandate. so to the extent that new economic policies are needed to get unemployment down and to get growth moving again. people aren’t too optimistic about anything happening in the near term.
>> jim, obviously, members of the e.u. watching the vote closely. have we heard anything from the other e.u. members?
>> the other e.u. members across the board are certainly disappointed. from german chancellor schroeder to officials in brussels, they’re disappointed but not surprised but have all put on a happy face and have said they will keep the ratification process of the constitution on track. they haven’t been long on specifics but they’re going to obviously try to get france to reconsider it in the next 18 months to two years.
>> we saw reaction in the euro following the vote. what more can we expect in terms of market reaction in days to come?
>> the interesting thing that might happen, you might see stock markets move higher. the euro weakening will improve the situation for european exporters. german stock markets are moving higher. so that might be one move. and currency markets , we have some currency analysts saying the euro could lose 5% to 10% on this constitution vote. so the stock and currency markets might be moving in opposite directions.
>> we appreciate the update, jim hertling from our paris bureau.
>> more reaction, now, on that french vote, joined by firas askari, head of currency trading at the bank of montreal, joining us from toronto. what were you seeing as far as surprises in currency trade?
>> not really. the extent of the rejection vote, the market basically priced a no vote, by the middle of last week, that was guaranteed it would happen. we saw a little retracement friday afternoon with small position squaring. the euro slipped off here. it gapped down a quick 40 points in asian trading. we expect it to continue to grind lower. the surprise out of the vote for me, personally, was the extent of the voter turnout. it was 70% and really takes away chirac’s mandate.
>> can you explain why the euro itself should be damaged by this vote? the euro will still be the currency of the region. the country and the e.u. will still exist, trichet will be there. why should the euro be hurt?
>> the long-term prospects for the european union have been dealt a serious blow in my opinion. you have a lot of countries eagerly waiting to join the euro. what we consider new europe -- czech, poland and hungary―and the likelihood of that happening in a smooth process is lessened. we’re back to dealing under the treaty of nice, a more cumbersome process. whenever you have political unstability, a political vacuum, you might see currency traders not liking that prospect. i think the general prospect for the rest of the emerging markets in europe is not good. i agree that the euro will probably take a hit in the near future.
>> you mentioned turkey and romania, how will they currencies be affected by this?
>> not good. especially in the instance of turkey where it has seen a little more stability because of the prospect of talks. nobody thought it would be a simple process but basically this has put that on hold much longer. when you have a pillar of the european union such as france unable to vote for what was basically a french-written constitution, you know, it just opens up the door to a lot of uncertainty and on the other side of the equation with the euro being the anti-dollar and u.s. federal reserve stating they’ll continue on their measured pace for the foreseeable future, tell make things harder for europe as a whole. we’ve been trying to fit round peg into square holes in europe with many economies and this brings to the forefront the dichotomy that exists between old and new europe and growth rates. the euro is taking a hit off the stability pact basically rendered irrelevant, being made toothless with all the sluggish growth exceptions and what-not and italy and france and germany can’t make the stability pact, it doesn’t bode well.
>> how many of your clients believe the dollar bear market is over?
>> about half. we’ve shifted from everybody selling the u.s. dollar in the fall of last year to basically saying, well, it’s just the u.s. dollar looks good in comparison. the growth rates are still there. manufacturing is weak but we’re probably seeing a structural shift out of manufacturing in the u.s. economy that will be pronounced long term but it’s probably still the best place for money in the long term as things currently stand because the alternatives don’t look nearly as good. japan and europe have serious difficulties.
>> firas askari of bank of montreal, thank you very much.
>> this week’s big economic number comes on friday when the may jobs report is released. economists we surveyed predict an increase of 185,000 jobs for the month, less than the 273,000 jobs added in april. but that number was probably inflated by good weather and the easter holiday. ahead of the jobs report, we’ll get a fresh read on manufacturing. the institute for supply management’s manufacturing index may have fallen to a reading of 52.2 in may, the slowest pace of expansion since june of 2002. we’ll find out more when we get the numbers on wednesday. mike?
>> china is taking a hard line ahead of trade talks with the united states. it has abruptly scrapped tariffs aimed at slowing clothing exports. the move comes before u.s. trade secretary arrives in beijing for talks on on the issues. china has accused the u.s. and european union of violating trade rules by imposing protectionist quotas on imports of chinese textiles.
>> a top maytag shareholder is calling the takeover offer inadequate. for more, we’ll head to matt nesto.
>> it’s interesting because brandes investment partners, san diego-based value asset manager, out with a report saying the $14 a share is inadequate and touting that they may exercise their appraisal rights, assert appraisal rights, allowing them to get a 30-party―third-party opinion on fair value. ripplewood partners have put forth a bid for $1.3 billion, or $14 a share. it’s interesting because that chart shows the 31% year-to-date decline but almost after that deal crossed the wire, that was a floor or basement if you will in the negotiating and the stock has been trading above it ever since, indicating essentially that the market thinks that this is only the initial round of offering but certainly maytag having its problems. this has had a terrible first-quarter result, much worse than expected. it was lowered to junk status by standard & poor’s and its debt-to-equity ratios, almost even. and market cap-to-debt ratio one to one and market cap, 1.1 billion and debt 970 million. so brandes with an 11% stake saying inadequate, they want to see a higher number. metlife receives a subpoena from the attorney general in connecticut concerning finite insurance contracts. that’s a type of reinsurance used to smooth out earnings. metlife says it believes it has preparedly―appropriate leed accounted for als -- appropriately accounted for awful its transactions and will cooperate with connecticut and other regulators. metlife, $32 billion market cap, stock up 10% today. another legal notice, the department of justice gives a subpoena to alcoa. alcoa facing probes from regulators in canada and australia having to do with an ongoing probe of alumina fluoride, the chemical used to make aluminum. $24 billion company, down 12% year to date.
>> thank you very much. time for a break. still to come, more u.s. reaction to the french referendum results.
>> and how to let the companies you invest in pay you. dividend investing strategies.
