Internationally managed real estate investment trust, Uniti Group Inc., engages in the acquisition and construction of mission-critical communications industry in the United States and Mexico. With its 15.49 dividend yield, would Uniti Group Inc Stock be a safe dividend? Read on to find out if the stock of this Leasing, Fiber Infrastructure, Towers, and Consumer CLEC business is a good buy for long-term growth and income.
Opinions on Uniti Are Not United
Dear Mr. Berko:
What can you tell me about a company called Uniti Group, which has a 15.49 percent dividend yield? Do you think the dividend is safe, and would you buy the stock for long-term growth and income?
My stockbroker — who lives in Little Rock, Arkansas, where the company is based — is aggressively recommending the stock, and his enthusiasm is very catching, especially with the high-yielding dividend. He occasionally has coffee with some of the company’s employees. So, would you recommend that I buy 1,000 shares?
— KK, Jonesboro, Ark.
Maybe! Read on, but keep in mind that your broker may be a little too close to the company to give the best advice.
Uniti Group Inc Stock
Uniti Group (UNIT-$16.07) is an internally managed real estate investment trust that intends to prosper via the acquisition and construction of mission-critical infrastructure for the communications industry in the U.S. and a very dangerous country (for tourists) called Mexico. Formerly known as Communications Sales & Leasing, its name was changed to Uniti Group in February 2017. UNIT runs four business divisions: leasing, fiber infrastructure, consumer competitive local exchange carrier and those countries’ 80-foot towers for the wireless industry that scorch the landscape with huge, ugly partitions of steel that look like scary next-century gamma ray weapons. UNIT also acquires and leases data centers and consumer broadband, and it provides infrastructure solutions such as cell site backhaul for wireless carriers. Its fiber network consists of 610,000 strand miles of fiber, with 6,000 customer connections, plus 470 wireless communication towers. And Kenny Gunderman, who is president and CEO, owns 272,000 shares of UNIT’s 163 million-share float. Some 73 percent is held by institutions.
UNIT’s quarterly 60-cent dividend yields, as you said, a sweet 15.49 percent, and of the 11 analysts who follow the company, seven have “buy” rankings, while the remaining four rate UNIT as a “hold.” But I’m not impressed with UNIT’s slow-growing revenues and its projected loss for 2018, and I have a sneaking suspicion that UNIT management will lower the $2.40 dividend this year by as much as a couple of dimes a share to pay the interest on the company’s growing debt and to bolster its shrinking funds from operations. There is a 7.6 million-share short position (represents about four days of trading), which I suspect began to build when UNIT’s shares began trading in the $30s. That was in February 2017, when traders realized that UNIT would not meet the previous year’s revenue goal. Ned Davis Research, Zacks and Charles Schwab don’t care a hoot for UNIT. However, Vanguard, BlackRock, Bank of New York Mellon, State Street, Oppenheimer and Ameriprise have not been sellers and own significant blocks of UNIT.
Even with UNIT’s revenues stuck between $700 million and $800 million and seemingly little future growth, some observers believe that UNIT has various interesting assets in its portfolio that may be worth considerably more than the values posted on its balance sheet. They believe that UNIT may be undervalued by as much as $10 a share. Now, if your mental health is stable, if you’re not hooked on alcohol or any hard drugs (pot is OK) and if you can emotionally handle a loss of 20 percent or more, then go for those 1,000 shares. But I’d hedge this bet and spend the next dozen Sundays in the amen corner of your church. I’d say you would have a 40 percent chance of making a 60 percent profit and a 60 percent chance of losing 20 percent or more in the next three months. And there’s also a 35 percent chance that UNIT’s board of directors will lower the dividend to $2 a share. Still, even with a $2 dividend, the yield on today’s price would be 13.3 percent, and that’s much higher than what most junk bonds could earn you.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected] To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
COPYRIGHT 2018 CREATORS.COM
Ackman’s Hot Streak Continues, Dumps Berkshire, Says ‘We Can Be More Nimble’
Bill Ackman’s hot streak continues. This comes after he announced that his Pershing Square hedge fund has returned an average of 25% this year. It also trounces the average hedge fund return of -7%. Additionally, this reveals that it sold its $1 billion stake in Warren Buffett’s Berkshire Hathaway. The fund first invested in Berkshire less than a year ago and only weeks took a larger stake in the conglomerate.
Completely exiting the Berkshire position surprised many on Wall Street, as Ackman has long admired Buffett as a mentor. He recently said that Buffett had built Berkshire “to withstand a global economic shock like this one.”
It appears that Ackman, like many, may have felt frustrated by the lack of activity from Berkshire during the recent market downswing. Berkshire’s cash balance has ballooned to $137 billion. Many, including Ackman, had likely expected a portion of that cash to be used to scoop up bargains during the late-February selloff. The said selloff took markets down nearly 30%.
Instead, Berkshire stood pat, and that appears to have been enough for Ackman to pull the plug on his investment. While discussing the exit, Ackman said that due to Pershing’s smaller size compared to Berkshire, “we can be much more nimble… and so our view was generally we should take advantage of that nimbleness, preserve some extra liquidity in the event that prices get more attractive again.”
Pershing Square’s success over the last two years had thrust Ackman back into the spotlight. This, perhaps, turned the chapter on a period where he became more famous for his misses than his home runs.
He was invested in Valeant Pharmaceuticals as it collapsed. He also famously squabbled on live TV with fellow billionaire Carl Icahn over Herbalife. Then, he gave a nearly 3-hour-long presentation explaining why he thought the company runs as a pyramid scheme. He finally exited his $1 billion short position at a loss.
Ackman’s current hot streak started last year, when Pershing Square returned 58.1%. This is its best annual return since the hedge fund was founded in 2004. After years of letting others make the firm’s investment decisions, Ackman took back the reins in 2018 with a back-to-basics strategy he learned from Buffett.
He returned the fund to a strategy that invests in simple, predictable, cash flow positive companies. He said, “It’s very hard to lose money by buying great businesses if you pay a fair price. For a while there, we forgot that our main job was to make money, so we woke up, and now we’re back in the money making business.”
Making money is exactly what Ackman did earlier this year. He did so with “the single best trade of all-time,” as what many calls it. He correctly predicted that the coronavirus would wreak havoc on our economy. Because of this, Ackman made a $27 million bet that netted his firm a $2.6 billion profit in less than two months as the markets crashed.
Now, his war chest is full again. It appears that Ackman is ready to buy should asset prices come down again.
As Airlines Suffer, American Most Likely To File Bankruptcy
A few weeks ago, Boeing CEO Dave Calhoun startled the airline sector when he said a major airline would go bankrupt by Halloween.
“I don’t want to get too predictive on that subject. But yes, most likely,” Calhoun said. “Something will happen when September comes around.”
Airline stocks plunged as investors and analysts scrambled to determine which airline became most vulnerable.
RapidRatings, a risk assessment firm, recently completed a comprehensive stress test on the major U.S. airlines. They used dozens of variables including debt loads, cash flow analysis, and a loss of at least 15% of revenue.
American Airlines To Suffer The Most?
We may never know which airline that Calhoun was alluding to. Although, RapidRatings’ analysis says that American Airlines is the most likely to go bankrupt in the coming months.
The company also looked at Delta, United and Southwest, but none of them are in such dire circumstances as American.
In an interview with Yahoo Finance, RapidRatings CEO James Gellert said, “American is the most at risk and that’s it in every way you look at it. American stands out as the weakest of this cohort.”
The stress tests run by RapidRatings produce both a short term financial health rating (FHR) and long term core health score (CHS). According to RapidRatings, the FHR measures a company’s short-term resiliency and default risk. Meanwhile the CHS analyzes risk and company efficiency over a three year period. A score lower than 40 means a company is at risk of failing.
Gellert says the analysis has more than a decade of proven results. Also, “over 90% of companies that failed have been rated 40 and below on our scales.”
The stress tests found that American was the weakest U.S. airline going into the recent pandemic. It has a financial health rating of 59 and core health score of 66.
As the pandemic unfolded and air travel plunged 90%, American’s FHR score plunged to 29. Meanwhile, its CHS score fell to 27.
Gellert added that “I would be quite certain that is the airline in the crosshairs of the Boeing comment.”
The Future Of American
American, in response to the sub-40 stress test scores, said in a statement that it was “focused on rightsizing the airline for the current environment, and plan to reduce our 2020 operating and capital expenditures by more than $12 billion.”
Analysts, however, are starting to smell blood in the water. Cowen equity research analyst Helane Becker recently told Yahoo Finance, “American’s liquidity position is dependent on government aid, bucking the trends we’ve seen from other airlines. The company is receiving a total of $10.6 billion … [and] we expect another capital raise” in the 3rd quarter.”
Savanthi Syth, an equity analyst at Raymond James, also agrees American will need more capital to weather the storm. “I mean, if you look at the cash on hand that’s definitely the case,” Syth said. American has six months of cash on hand, United has 10 months, Delta has 12, and Southwest has almost 19 months, according to Raymond James.
Syth added, “I don’t think bankruptcy is a foregone conclusion… it’s just going to take longer for American to kind of dig themselves out of this kind of debt burden, and therefore equity could be challenged in the near term.”
- Warren Buffett Dumps All Airline Stocks, Berkshire Takes $50M Loss
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Sorry AOC, Billionaires Haven’t Made $434B During Pandemic
Nation’s Billionaire’s See Net Worth Jump $434B in First Two Months of Pandemic
It was an eye-opening headline, and fairly drew the frustrations of a lot of us. This is especially true for the 38+ million Americans who have lost their jobs since the coronavirus pandemic shut down. Our country has been at it a little more than two months ago.
How dare they get richer while we suffer?
Chuck Collins, director of the Institute for Policy Studies Program on Inequality, the co-author of the report, expressed his piece. He said, “The surge in billionaire wealth during a global pandemic underscores the grotesque nature of unequal sacrifice.”
Meanwhile, Frank Clemente, the executive director of Americans for Tax Fairness which co-authored the study, also shared his opinion. He said, “The pandemic has revealed the deadly consequences of America’s yawning wealth gap, and billionaires are the glaring symbol of that economic inequality.”
Democrat Alexandria Ocasio-Cortez didn’t want to miss the opportunity to inject her brand of socialism into the public discourse. “Really great system we got here. Can’t imagine why anyone would question how beneficial or sustainable it is for the working class,” she tweeted. This is in response to CNBC running the headline.
The Study’s Flaws
The top five US billionaires explicitly mentioned in the article are all Democrats. These include Warren Buffett, Bill Gates, Jeff Bezos, Mark Zuckerberg, and Larry Ellison. But setting that irony aside, the problem is that the article is simply dishonest, points out MarketWatch columnist Steve Goldstein.
“The study… examines billionaires’ wealth between March 18 — the rough start date of the pandemic shutdown, when most federal and state economic restrictions were in place — and May 19. It relied on the Forbes’ billionaire list, which itself is built around stock-market performance.”
The flaw, as Goldstein points out, is that the beginning and end dates used for the study are incorrect.
“Think about that in the market context. The pandemic did not start March 18 (nor, of course, had it ended on May 19), and certainly market concerns about the pandemic did not start March 18. Far from it.”
He says that to see a true picture of how much money the billionaires made – or lost – during the pandemic, they need to expand the date range.
“A more logical way to think about whether billionaires got richer, or not, is to think about the performance from the Feb. 19 peak in the market, after which more investors began to get concerned by the novel virus. You then get to see who got richer even in the face of the crippling economic blow.”
If you use this revised date range, Goldstein says the truth is that billionaires have actually lost money since the market peaked and the pandemic began
“Cumulatively, the top 50 billionaires lost $232 billion between the market’s peak and this Tuesday. If the remaining billionaires on the Forbes list lost wealth at the same roughly 12.5% rate that the top 50 experienced, that’s another $200 billion–plus wiped out.”
So while it’s easy to run a headline that bashes billionaires, the truth lies somewhere in the middle.
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