Death Of The Dividend Dinosaurs?

While the media and Wall Street are obsessed with tech unicorns, there appears to be trouble in dinosaur land. Let’s take a look. ๐Ÿ‘€

It’s no secret that telecom companies have been struggling over the last few years. Driving the weakness is a slowdown in its core business as U.S. telecom growth slows and competition heats up. And on the cost side, expensive up-front investments in nationwide 5G service weighed on profits. Meanwhile, their legacy media businesses, meant to diversify their business, face increased competition, content costs, and reduced demand. ๐Ÿ”ป

As a result, stocks like Verizon and AT&T have suffered significant drawdowns. And losses continued today after an investigation from The Wall Street Journal revealed that U.S. phone companies have abandoned networks of cables covered in toxic lead.

The extent of this issue is not fully understood, nor are the financial ramifications, leaving a lot of uncertainty for investors. And with these stocks already underperforming the broader market in a big way, many are using this as another reason to sell and allocate capital elsewhere.

With today’s declines, it’s become a “lost decade” for these stocks as both of their total returns fall into negative territory. On a price basis, Verizon shares hit their lowest level in 13 years, while AT&T made new 30-year lows. Yikes. ๐Ÿ˜ฌ

While most investors acknowledge the industry’s challenges, some can’t help but eye the juicy dividend yields. Verizon’s indicative dividend yield for the next twelve months soared to new all-time highs above 8%, while AT&T’s reached heights only seen last year before its WarnerMedia spinoff led to a roughly 50% dividend cut. ๐Ÿ˜ฎ

Soaring dividend yields are great when growing profits and shareholder payouts drive them. They’re not so great when driven by sharp declines in share price. As a result, many investors will be digging into the numbers to identify whether these dividends can truly be maintained or if they’re one giant bull trap. ๐Ÿ•ต๏ธโ€โ™‚๏ธ

Time will tell. But for now, service is definitely spotty in telecom stock land. And with so many other stocks working in the current environment, many market participants are looking elsewhere for opportunities. ๐Ÿคท

Investors Are Losing Trust

It’s been a rough eighteen months or so for real estate investment trusts (REITs), with higher interest rates giving investors alternative sources of yield and pressuring commercial real estate’s asset values. Unfortunately for Medical Properties Trust (MPT), that pain continuesย today, with its shares falling back to their Great-Financial-Crisis lows. ๐Ÿ˜ฌ

The medical-related real estate property operator revealed to investors that one of its tenants, Steward Health Care System, is roughly $50 million behind in rent payments. As a result, MPT will take a $225 million noncash charge to write off rent receivables and other items.ย 

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Musk Threatens Tesla’s AI Ambitions

The primary bull case for Tesla is that it’s not an automobile company but a technology one. Part of the reason it’s able to command such a high valuation relative to its peers is because of that technology’s potential business impact way down the line, especially as it introduces newer developments like artificial intelligence (AI).

However, that bull case is facing an unlikely opposition…from Elon Musk himself. ๐Ÿคฆ

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Japan’s Nippon Takes Over U.S. Steel

After months of bidding, U.S. Steel finally has a buyer. However, the auction’s winner has some parties concerned. ๐Ÿค”

Japan’s Nippon Steel emerged as the top bidder for the 122-year-old steelmaker, beating out offers from Cleveland-Cliffs, ArcelorMittal, and Nucor. Its $55 per share price represents a 142% premium to where $X shares were trading before Cleveland-Cliffs’ $35-per-share offer kicked off the bidding war.

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Biotech Buyout Spree Continues

It may be the last week of the year, but many companies are rushing to get deals done before year-end. Two significant transactions in the biotech space were announced today, so let’s dive in. ๐Ÿ‘‡

The first deal involves RayzeBio, which raised $358 million via an initial public offering (IPO) just three months ago. However, its time as a public company is being cut short by Bristol Myers Squibb, which is acquiring the radiopharmaceutical therapeutics company for $62.50 per share in cash. ๐Ÿ’ฐ

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