Market watchers were hoping to see a bit of the ol' "Turnaround Tuesday" action that sometimes happens after a weak Monday session, but the bulk of the rally failed to hold by the close. The European markets spent another day in the red.
Looking at today's market movers, retailers Dick's Sporting Goods ( DKS ) ( earnings report here ) and TJX Companies ( TJX ) ( read more ) saw share prices pop on better-than-expected earnings results. Meanwhile, home improvement giant Home Depot ( HD ) ended down following its own tepid earnings numbers.
In the M&A soap opera that is Avon Products ( AVP )/Coty, the latest bit of news is that Coty has withdrawn its takeover offer , less than 24 hours after Avon finally said they would consider it. Talk about bizarre! If you'll remember, Avon rebuffed Coty's first advance back in April, after which Coty sweetened the deal . Nonetheless, Avon shares closed down 10% on the latest news.
JP Morgan ( JPM ) shares squeaked out a gain as financial sector watchers were hoping to see some stability kick in following its recent drubbing. You can bet that the fallout surrounding its recent $2 billion trading loss is far from over.
Elsewhere, Colgate-Palmolive ( CL ) shares traded higher following a Wall Street analyst upgrade this morning. Clorox ( CLX ) shares ended flat despite news of a dividend payout hike. Be sure to check out Dividend.com premium each afternoon when we post our regular "dividend payout changes" post that breaks down all of the day's new payouts.
The Hunger Factor
Sports fans love to examine an athlete's on-field performance after they sign a big-money long-term contract. Much of the time, the player's performance following the deal doesn't live up to their exorbitant salary. This phenomenon is understandable when you really think about it. Once someone gets a huge chunk of guaranteed money in his pocket, what incentive is there for him to give 110% anymore?
The same concept applies to many businesses, as well. For example, this past Sunday (Mother's Day), I visited a fantastic local breakfast place that my family and I regularly patronize. I usually order takeout from the restaurant, since there's normally a wait outside to get a table.
Anyway, I stopped into the restaurant early Sunday morning to place my takeout order in person. Despite getting there early, people were already waiting for tables outside (it was Mother's Day, after all). As I attempted to place my order inside, the owner's daughter scooted by and told me that because it was going to be so incredibly busy, they simply weren't accepting any takeout orders. What a bummer! I went out of my way, stopped in, and was sent away with nothing in hand.
As a former food business owner myself, I learned many retail lessons. The two biggest lessons were 1) never run out of product, and 2) never turn away an order. If I were in charge of the local breakfast place this past Sunday, I would've handled the situation much differently.
I would've informed the customer that it was an extremely busy day, and that his order would take much longer than normal. Then I'd leave it up to the customer if he wanted to wait an hour or more for his food. As a customer, I would've been fine with this option. I would've just gone and run some errands and come back later to pick up my food. Instead, I was simply told "sorry, no takeout orders today."
I love the owner of this local eatery (and the food), so I won't hold a grudge. I know that some people wouldn't have reacted so calmly, however. In the long term, you lose more customers than you gain by turning business away.
After this incident, I began to wonder about the owners of the restaurant. They've enjoyed great success over the past six years of owning it, but have they had enough at this point? Would they have turned away business when they first bought the place?
Everyone encounters a similar point in their own lives. What type of effort are we willing to deliver each and every day? Are we simply content with where we are, or are we still hungry for more success? Being content is fine, but if you turn complacent, your career or business will almost certainly decline. As the old adage goes, there is always going to be someone waiting to take your place.
At Dividend.com, we'll do out best to recognize any companies on the decline and warn investors about them. We refuse to see our investing results hampered by management teams that have turned complacent in their industry. And I certainly hope my favorite breakfast place can avoid the complacency that often strikes businesses over time.
Financial Engineering and the Risk to Investors
Many companies focus on share buybacks, but we wish companies would put more emphasis on dividend hikes. You see, higher dividends legitimately enhance shareholder value, while buybacks simply help a company artificially manage its stock price (and earnings results).
Remember, the fewer shares of stock a company has outstanding, the higher its earnings per share ( EPS ) number swill be. Yet for some reason, Wall Street praises these sort of accounting gimmicks as being good for shareholders. And of course, analysts almost never call out a company for buying back shares at a much higher level than its current stock price. Finally, companies can also use buybacks to pad management's stock options and make its own executives richer.
Are share buybacks automatic red flags? Not necessarily, but when they come too frequently, we begin to wonder if the company is using them to mask a slowdown in earnings. You can count on us at Dividend.com to weigh these factors and more as we examine companies for possible inclusion on our industry-leading Best Dividend Stocks List .
Income, Income, Income
At Dividend.com, we maintain our focus on the best income-producing investments the markets have to offer during time of heightened volatility. We want to make sure we have only the most pullback-resistant names on our Best Dividend Stocks List . Also, if we see the market putting in what looks like a decent bottom, we will be prepared to scale up the list of stocks we like. Stay tuned and be sure to look for Dividend.com Premium member alerts along the way. Don't count on the government or your employer to set you up for a remarkable retirement. Take control, do your own research, and achieve your goals yourself!
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Thanks for reading everybody. I'll see you tomorrow!
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