Its latest earnings reports have been somewhat disappointing to say the least, with net earnings falling nearly 12%. However, overall annual earnings have increased about 6%, in addition to non-performing assets falling around 40%, as reflected in the decline in loan losses. Overall, despite fewer customers missing payments, I foresee an ongoing struggle to regain market leadership, and certainly no sign of upward revival in the dividend which is currently paid out at an unhealthy 400%, yielding .6%.
Wells Fargo (WFC) is not one of the two big American banks with the maximum exposure to the European debt crisis, namely, JP Morgan Chase and Citigroup. As a bank, Wells Fargo is in an exceptional fundamental position with only about 5% of total assets exposed to the European debt crisis. There is talk of a dividend increase this year, which is already at a payout ratio of 17% and a yield of 1.4%, exceptional for U.S. banks at this time.
The stock is trading at just under $30, with a price earnings multiple of about 10 times, when the industry averages over 100 times, not to mention the return on investment that rates over 12% with the industry managing just about 7%. I don't doubt that a dividend increase could be well on its way, as income has been on the rise since the last eight quarters with the latest earnings report showing a nearly 20% increase in earnings per share, for the latest quarter, year on year.
Halliburton (HAL) may have breathed a sigh of relief after the ruling that it does not need to pay any part of the cleanup costs and damages, valued at about $40 billion. The oilfield services company is paying a dividend of $0.09, amounting to about 12% of earnings, with a yield of 0.1%. Interestingly, the forward yield is nearly 10 times at 1.1%, and with a strong record of not missing estimates for the last four quarters.
The stock is currently at almost $37, with a price earnings ratio of almost 12 times, and a forward multiple of just 8 times. Price expectation aside, the dividend having been last raised in 2007, it may or may not go up this year. However, it is unlikely due to the oil spill issues that it will increase any payouts this year, particularly as the management faces transition to demand from high oil to gas plays.
Chesapeake Energy Corporation (CHK) is a leading natural gas producer in the United States that was initially founded for only $50,000 worth of investment and 10 employees. The company today is worth an enterprise value of over $26 billion. The stock currently trades at just over $20 with a price earnings multiple of 10 times. Chesapeake Energy pays out dividend at 17% with a yield of 1.6%.
The price of the stock has fallen substantially, over 20% in the fiscal year 2011. This is alongside a reported decline of 40% in natural gas prices, and a downgrade by J.P. Morgan on concerns of funding issues. It is thus not surprising that the company wants to shift attention to higher oil ratio fields and reduction in dry gas drilling for the remainder of the year. A dividend increase is out of the question.
Petrobras Petroleo Brasileiro (PBR), the oil major wholly state owned until 2000, is now one of the largest oil companies in the world, if not only South America. The company, which is headquartered in Brazil, has been cashing in on Brazil's lightning growth of 7.5% in 2010, albeit far slower in 2011. The stock is currently trading at just over the $30 levels, with a price earnings multiple of 9 times. In addition, Petrobras offers a dividend payout of $0.16 at a 37% ratio with a yield of .5%.
Next to Russia's Gazprom, Petrobras is touted as the next big oil major with solid capital expansion plans of about $45 billion per year through 2015. The company, eighth-largest in the world by market capitalization of over $200 billion, has huge plans going forward, in part for constructing refineries to feed the rising energy demand in Brazil, and in part for funding deep and ultra-deep-water exploration activities. With rising production and safe demand, dividends could be in for a healthy increase on an annual basis, of at least 15% if one goes by the dividend five-year growth rate.