Trust in Dividends: Air Products
Earnings are no longer a trustworthy way of valuing stocks. Not in this market. Companies are either suspending the guidance they offer or taking a hit when their outlook is off the mark. Estimates still have to come way down before we trust them, but we don’t yet know how far. Investors, therefore, need another metric by which to judge.
Dividends might fill the gap. Companies don’t raise their payouts if they’re not performing well enough to do so. And firms capable of boosting their dividend, whether they do or not, should be just as strong. Actually, Cramer probably wouldn’t recommend any other kind of stock right now. So to highlight these rare market winners, he plans to cover one such name every night this week.
First up: Air Products . The stock has plummeted to $55.90 from its 52-week high of $106, but just last Thursday Air Products bumped its dividend up a penny. Nothing grand, for sure. However, few companies these days are in position to do even that. The mere 3.2% yield? No matter. It’s a sign of strength for APD to pull off an increase at all. And, yes, the dividend is safe. The earnings more than double the payout.
What’s behind the strength? Well, Air Products’ January and February gases sales may have been down, but the decline slowed considerably from month to month. So a bottom might not be far off.
There’s also an electronics division here that looks finally to be turning up. Air Products supplies semiconductor companies as well as the LCD industry, and we know that both those areas have been doing better recently. See: Corning’s increased guidance as well as that from Xilinx and Taiwan Semi .
What Cramer likes most, though, is how the weak dollar will benefit Air Products. The company earns 53% of sales from outside the U.S., which will translate overseas revenues into more at-home profits.
Taken all together and you have a company that’s in much better shape than many others in the market. That’s why Cramer’ bullish on Air Products.
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