Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Harshu Vyas who wrote (76652)	12/8/2024 9:06:57 AM
From: E_K_S	Read Replies (1) \| Respond to of 78565

When it comes to discounting, I think discounting dividends is the best way of doing it. Maybe in general this works, but I think it is management and that is difficult to quantify. Most everybody I discuss KSS with says their dividend will be cut and/or eliminated. KSS has continued to pay it's 10% dividend especially as it is at/near an all time low, revenues have been falling, and last 2 years there has been an interim CEO. So will the new CEO coming in in 2025, cut their dividend and/or eliminate it? If that occurs, then will the stock move higher because of higher FCF? I doubt it. So now check out Dillard's (DDS). How can this retailer be +over 540% from 2020? Annual FCF positive every year from 2015. Revenues/Sales pretty much flat since 2015, Shareholder Returns: The company has been proactive in returning value to shareholders through share repurchases and dividends. In 2023 alone, Dillard's returned $620 million to shareholders while maintaining a robust balance sheet 6 . Such actions not only reflect confidence in future profitability but also help support stock prices even during periods of revenue stagnation. 2021: Dillard's repurchased approximately 1.3 million shares. (7% of total shares) 2022: The company increased its buybacks, acquiring around 1.7 million shares. (9.8% of total shares) 2023: Dillard's bought back about 900,000 shares, totaling approximately $281.4 million in repurchases. (5.8% of total shares) Dillard's ongoing share repurchase programs demonstrate its strategy to boost shareholder value and manage equity effectively amidst fluctuating market conditions. The latest program announced in May 2023 allows for up to $500 million in additional buybacks, indicating continued confidence in its financial position and future prospects 1 2 3. So management's dedication to buy back shares over the last 4 years has significantly benefited the shareholders (and employees) resulting in a more than +543% increase in the stock price since 2020!

To: Harshu Vyas who wrote (76652)	12/8/2024 9:56:23 AM
From: E_K_S	1 Recommendation Recommended By Harshu Vyas Read Replies (1) \| Respond to of 78565

Chevron Plans to Cut Billions in Spending to Boost its Already Robust Free Cash Flow and Cash Returns in 2025 Chevron (NYSE: CVX) is already a free cash flow machine. The oil company aims to produce even more cash next year, which would give it more money to return ... Chevron plans to cut its capital spending by $2 billion in 2025, allocating $13 billion to upstream projects, with a focus on its U.S. resource portfolio. The company aims to reduce costs and increase free cash flow, with a goal of achieving $2-3 billion in cost savings by 2026. Chevron's strong balance sheet and free cash flow have enabled it to return a record $7.7 billion to shareholders via dividends and repurchases, and it expects to return even more cash in 2025. The company's pending deal to buy Hess could provide a significant upside catalyst and enhance its production and free cash flow growth outlook into the 2030s. FCF Margin: As of the latest data, Chevron reported a trailing-12-month levered FCF margin of 7.66%, which is notably higher than the industry average of 6.12% 2 5. ------------------------------------------------------------ Looks like CVX's management has focused on their FCF generation to determine their CAP X for 2025 rather than looking to Sales/Revenue growth. Again a management decision. Chevron produced approximately $10.7 billion after capital expenditures in the first nine months of 2024, demonstrating robust cash generation capabilities 3 . This positions Chevron favorably against its peers in terms of financial health and shareholder returns. Capital Expenditure Plans: Chevron's capital expenditure plans reflect a focus on reducing spending while enhancing cash flow. The company aims for organic capital expenditures to fall between $145 billion and $155 billion in 2025, indicating a strategic shift towards maximizing FCF rather than merely increasing production levels 3. ---------------------------------------------------------------------------- So is this strategy the best way to bring value to it's shareholder's? Is the strategy unique to integrated oil companies or specific sectors? Should the 'Value' investor be screening for this (growing FCF) and/or is it only important to companies that are dividend payers (CVX is a dividend "King" increasing dividends for 37 consecutive years). You can use the metric Price/FCF to screen for companies selling at a discount to their FCF. CVX Price/FCF = 15.9x. Just more things to consider when looking at and/or determining Value. I think analysis of company's FCF may be more important during times of stagnate growth and/or recessions. Hard to say what is the best strategy but being able to manage future FCF does help management maintain dividends & stock buy backs. Could be seen as a 'defensive' way for management to continue to bring value to it's shareholders.