Dividends and buybacks are restored.

 

At the end of the first quarter, there were serious concerns that the levels of dividends and share buybacks would be drastically reduced. There have been cuts, but there is also good news against the background of bad ones.

 

Good and bad dividend news

 

For dividend enthusiasts, the end of the first and the beginning of the second quarter looked rather depressing. Forty-two companies from the SP 500 - almost 10% - have completely suspended dividend payments, and 25 have reduced them, in some cases significantly.

 

"It was unprecedented," said Howard Silverblatt of the Dow Jones Indices. "No company has suspended dividend payments in 2018 or 2019."

 

But when the economy reopened, the situation began to change. Five of the 42 companies that suspended dividend payments have recovered their dividends, at least in part.

 

Even as some companies recovered dividends, many more companies continued what they had been doing for years: increasing dividends.

 

This year, 216 companies increased their dividends.

 

The total figure: Silverblatt estimates that in 2020, the S'P 500 will pay $479.1 billion. dividends, which is only 1.3% lower than the 2019 record of $485.5 billion.

 

The bad news is that the yield of the SP is only 1.6%, which is one of the lowest dividend yields in decades.

 

Buyback rebounded from second-quarter lows, but companies issued far more shares

 

The second quarter started badly as companies sought to maintain liquidity by reducing buybacks. how much? In the first quarter, the companies from the SP 500 bought 199 billion dollars of their own shares. That figure fell to $89 billion in the second quarter, more than 50 percent less, according to Goldman Sachs.

 

But then a funny thing happened. Like profit, which bottomed out in the second quarter, buybacks also fell.

 

Goldman estimated that $112 billion was bought in the third quarter, up 26 percent from the second quarter, and Goldman estimates $125 billion will be repurchased in the fourth quarter.

 

That's good news. The bad news: According to Brian Reynolds, who tracks buybacks at Reynolds Strategy, while gross buybacks are rising, companies are also releasing many more new shares. Result: Net buyback volume - as many buybacks increase or decrease the total number of shares - were unchanged in the second quarter and is likely to remain unchanged until the end of the year: "The average company reported a 0.1% increase in the number of shares in the quarter compared to a 0.6% decrease a year ago," Reynolds said in a recent note.

 

The increase in the number of shares means that corporations cannot expect a buyback to increase their earnings. Reynolds noted that the buyout index of the S.P., which consists of 100 companies from the S.P., which most actively buy back their shares, has also moved from a reduction to an increase in the number of its shares. The ratings leaders include MGM, Best Buy, zualcomm, Kansas City Southern, Lennar, Cummins and Xerox.

 

"A year ago, less than 20% of the companies in this group increased their shareholding. Now it's 44%. It's an amazing shift," he said.

 

What does all this mean for investors? This year's index of S'P Buyback Index showed shortcomings, as investors bought out companies that in 2019 had a high level of buybacks for other segments of the market.

 

Reynolds concludes that perhaps it's time for those companies that can still aggressively buy back shares to outperform in terms of growth: "In terms of momentum, it looks like the shares of companies that can still buy back their shares are approaching the point where we want to buy them out on weakness."

 

On the increase in buybacks, Microsoft announced that it sharply increased buybacks in the third quarter from $5.8 billion in the second quarter to $6.74 billion.

On Monday, July 13, U.S. stock markets showed significant growth. The share price of the companies in the technology sector, which are part of the NASDA's Composite index, has reached its maximum figures. The situation with the COVID-19 epidemic in the United States leaves much to be desired, as the number of infected is growing exponentially.

 

The general situation looks like this on the stock markets:

• The Dow Jones Industrial Average rose to 26.279 points, or 1.42 percent.
• The Nasdaq Composite climbed 10,745 points, or 1.2 percent.
• The SP 500 rose to 3.208 points (0.69%).

 

Particular attention should be paid to shares of Elon Musk's company Tesla, which again showed an increase of 11.3% in one trading day. Now the company has received significant demand from investors, as if the indicators continue to grow, Tesla will join the technology companies of the S'P 500. It is not surprising, because the experts of the S'P 500 quarterly balance the composition of the index, and one of the conditions of entry - is profitability for four quarters.

 

Tesla shares have risen 83% since mid-June to today, the most surprising thing the company makes from the options market. Equally interesting is the fact that Musk had to reduce the cost of the new Model Y electric car by 6%, which entered the market 3 months ago.

 

Other companies continue to grow. For example, the value of Maxim Integrated Products securities rose by a record 13.4%. The reason for the growth is the news about the company's merger with Analog Devices. According to preliminary estimates of experts, the merger of the companies will result in an approximate capitalization of 70 billion USD.

 

The leader of the fall was United Airlines, where the value of securities fell by 5.0%. At the same time, American Airlines shares fell 2.9 percent. The reason for the fall is news about the new wave of COVID-19 around the world. As for the United States, johns Hopkins University published data that showed that the number of people infected with coronavirus has increased to sixty thousand in the last few days.

 

Despite the negative news, the U.S. stock market has received support from Goldman Sachs, whose goal is to stimulate companies before the earnings reporting season. It is worth noting that the reporting for July will go down in history exactly the same as for June 2020.

U.S. stock markets opened higher amid news of looming progress in the development of the COVID-19 vaccine, not looking at the fact that as early as Friday the U.S. stock market suffered significant losses amid a number of pessimistic statistics and a new conflict between America and China.

 

The growth of quotations was also provoked by optimism about the restart of the world's largest economies and the statement of Jerome Powell that the current quarter will be extremely unsuccessful for the labor market and the economy as a whole. The expected unemployment rate in the United States is 25%, and GDP could fall by 20-30% due to the suspension of economic activity caused by the spread of coronavirus. Powell said- "I think there's a good chance that there will be growth in the third quarter. There should be a shorter recession."

 

FXTM chief market strategist Hussain Syed says that "the good news is that economies around the world are starting to reopen, indicating that economic activity will begin to partially recover from the full lockdown seen in April."

 

At the moment, the Dow Jones Industrial Average rose by 693.91 points (2.93%) to 24,379.33 points by 17:23 Moscow time, and the Standard and Poor's 500 rose by 73.64 points (2.57%) to 24,379.33 points. and the Nasdaq Composite rose 176.73 points, or 1.96, to 9,191.29.

 

In the U.S., there are those companies that have become more expensive from the restart of economies. The cost of securities from Walt Disney Co (NYSE:DIS). up 7.2%, MGM Resorts International by 5.8% and Carnival Corp (LON:CCL). 10.6%. Delta Air Lines (NYSE:DAL) and United Airlines added 8.2 percent and 11.4 percent, respectively.

 

The value of Wells Fargo securities (NYSE:WFC) and Co. jumped more than 6%, shares of Bank of America (NYSE:BAC) and Citigroup (NYSE:C) are adding about 5%, JPMorgan Chase securities are growing by 3.9%.

 

Tesla Inc.'s shares rose 2.9 percent. As authorities in Alameda County, California, approve a plan by the U.S. electric car maker to reopen the Fremont plant

 

Market Value of American Express Co (NYSE:AXP). (AmEx) rose 5.1 percent, but the volume of loans on AmEx cards, one of the leaders of the U.S. plastic card market, in the U.S. fell 8.8 percent in April compared to March, the company said in a statement posted on the U.S. Securities and Exchange Commission(SEC) website.

Russian company Yandex announced the release of a new analytical product that will assess the creditworthiness of Russians. The new system has already entered the market and is being tested by several Russian banks at once, but the press service of Yandex said that analytical analysis does not yet affect the issuance of a loan.

 

Currently Yandex is working with OKB and Equifax, which are large credit bureaus. Cooperation is mutually beneficial, since Yandex has anonymous statistical data of users, and organizations have information about the credit burden of Russians. The analysis scheme is simple: the client's identity is identified by e-mail and phone number, then the data is encrypted and transferred to the aggregator for processing.

 

A new analytical tool from Yandex assesses the creditworthiness of customers, it is added to the scoring score, after which the final result goes directly to the bank. Yandex employees say that all data is confidential and is located exclusively in a closed company circuit, and data processing is carried out using automatic algorithms.

 

The press service of Yandex says - “Based on the results of the analysis, the partner receives only one number - the result of the assessment. This result is not a guide to action and does not affect the assessment provided by our partners in the framework of credit scoring. It is for guidance only and is provided for marketing use only. ”

 

It should be noted that the aggregator uses about a thousand factors in its analysis. Developers are silent on what exactly is meant by “factors”, because Yandex has an electronic wallet, browser, mail, taxi aggregator, job search service and many other services.

 

“Predictive models have long been an integral part of business from different areas: retail, logistics, finance and others. Most Internet companies provide such solutions. They help, for example, optimize marketing campaigns, reduce user churn, improve recommendation systems and reduce the risks of making a variety of decisions, ”Yandex noted.

 

Director General of the National Rating Agency Alexei Bogomolov said that based on new analytics that work with aggregated and impersonal data, the scoring score increases the ability of banks to assess potential borrowers.

Despite the fabulous forecasts from analysts, in mid-September the price of Bitcoin fell below the figure of 10,000 USD. If you analyze Bitcoin from September to August, the price is traded in the range of 9,500 USD to 11,000 USD, at the moment the price for Bitcoin is trading within 9 743 USD, however, in the last 5 days the price goes down. Unfortunately, the launch of the Bakkt platform did not affect the rate hike, the market is on the decline.

 

ICE (New York Stock Exchange) recorded a surprisingly low contracting rate for Bakkt. A total of 72 monthly contracts and 2 day contracts were signed, the sum for one contract was 1 Bitcoin. This indicates that investors consider investing in Bitcoin irrational and are waiting for a depreciation of the rate.

 

Well-known trader Anatoly Radchenko said - "there is a conspiracy theory that institutional investors, who operate large volumes in the regulated market of bitcoin futures, artificially understate the price. In November and December last year, CME had a spike in open positions when the price of Bitcoin fell below $4000. Accordingly, the launch of Bakkt will lead to a new wave of declines of several months before contract holders begin to close contracts."

 

And if Radchenko believes that the launch of Bakkt is a unique phenomenon and the market will soon feel it, then Dmitry Alexandrov (managing director of Ivolga Capital) holds a very different opinion.

 

Alexandrov says- "I believe that the cryptocurrency has already passed its highs and will not be able to return to them. Bitcoin is not a means of accumulation, it is still a means of calculation. While Bitcoin was a pioneer, it was the only way to meet the market demand for the currency of such a plan. Now every day there are new cryptocurrencies, which at least do not differ in nature from BTC, and as much as possible exceed it in their technical characteristics (such as the speed of confirmation of transactions)."