Insider activity refers to corporate insiders buying or selling stocks of their own companies, which provides general investors an insight into how well-positioned a company is, in the eyes of its directors, executives, and other insiders. The direction of insider action at times gets reflected in the stock price, so investors consider this as an indicator for buying or selling a stock.
Insider buying indicates that an executive of the company feels good about the company’s future. Legendary investor, Peter Lynch said, “insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
Hence, it makes a lot of sense to take cues from insider buying. Another factor that you must consider during these uncertain times is stable dividend payouts. Companies that have been paying dividends consistently and even raising them during this pandemic have been the bankable ones.
From a long-term perspective, investors can now consider a combination of these elements to select stocks. FedEx Corporation (FDX), Keurig Dr Pepper Inc. (KDP), and Dow, Inc. (DOW) are the three companies that have witnessed high levels of insider buying recently and have rewarded shareholders with solid dividends.
FedEx Corporation (FDX)
FDX is a global freight and shipping services company with a wide range of e-commerce, transportation, and business services. Its Express services offer shipping services for delivering packages and freight, while its Ground services deliver money-back guaranteed ground packages, which aren’t too time-sensitive and are low-weight. FDX also has a services and mobile segment.
In addition, the company offers global trade advisory services, which includes assistance with customs-trade partnership against terrorism program. It also publishes customs duty and tax information. The company has nearly 30,000 vehicles and over 300 service centers. Over the last six months, insiders have purchased 464,057 shares in FDX through 48 transactions.
For the first quarter that ended August 2020, FDX delivered 13.5% year-over-year growth in its revenue to $19.3 billion. The company attributes the upbeat result to volume growth in FedEx International Priority and US domestic residential package services. Moreover, yield improvement at FedEx Ground and FedEx Freight, and one additional operating weekday also led to higher revenue. The company’s EPS rose 66.2% year-over-year to $4.72 for the quarter. The company’s result for the first quarter has been adjusted for TNT Express integration expenses.
FDX has been consistently paying quarterly dividends since 2012. On August 14th, the company declared a dividend of $0.65, which cumulated to an annual dividend of $2.60, and yielded 0.97%. The company’s 3-year and 5-year divided CAGRs stand at 21.5% and 28.2%, respectively. Over the past 6 years, FDX has returned more capital to shareholders through its dividend issuances than 85.3% of other dividend-paying US stocks in the StockNews.com universe.
The consensus estimate for FDX’s revenue for the second quarter indicates an 11% increase year-over-year to $19.2 billion. EPS for the quarter is expected to grow 48.2% to $3.72. FDX has raised its capital spending forecast for the full year by $200 million to $5.1 billion. FDX surged 76.6% year-to-date to close at $274.48 yesterday. Over the past six months, the stock has rallied 125.9%.
How does FDX stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #2 out of 9 stocks in the Air Freight & Shipping Services industry.
Keurig Dr Pepper Inc. (KDP)
KDP is one of the leading coffee and beverage companies in North America. The company conducts its business through four segments — Packaged Beverages, Coffee Systems, Latin America Beverages, and Beverage Concentrates. Snapple, Hawaiian Punch, Vita Coco Coconut water, Evian, Forto Coffee, Dr Pepper, 7UP, RC Cola, Crush, Schweppes, and SunDrop are some of the flagship brands offered by the company. During the last six months, nearly 7.5 million shares were bought by insiders in KDP through 6 transactions.
KDP is positioned to benefit from its recent agreement with The Honickman Companies that allows it to sell and distribute its brands to over 18 counties in New York and New Jersey.
KDP started paying dividends in 2009. The company declared a dividend of $0.15 per share on September 15th. This results in an annual dividend of $0.60 and a yield of 2.22%. KDP generated more trailing-twelve-month cash flow over the 12 months than 87.7% of US dividend stocks in the stockNews.com universe. The company’s 3-year and 5-year divided CAGRs stand at 20.7% and 17.8%, respectively.
KDP’s revenue during the third quarter that ended September 2020 jumped 5.2% year-over-year to $3 billion. While there was a weakness in the office coffee channel because of the pandemic, KDP saw a double-digit dollar growth in K-Cup coffee pods for at-home consumption. The company’s EPS for the quarter increased 40.9% year-over-year to $0.31.
The EPS estimate for the fourth quarter indicates a 14.3% increase to $0.40, while the street estimates revenue to rise 3.4% year-over-year to $3 billion. On a year-to-date basis, KDP declined 6.6% to close yesterday’s trading session at $27.80. During the past six months, the stock gained 4.4%.
KDP’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with a grade of “B” in Trade Grade, Buy & Hold Grade, Industry Rank, and Peer Grade. Among the 29 stocks in the Beverages industry, it’s ranked #5.
Dow, Inc. (DOW)
DOW is the leading diversified chemical manufacturing company. It manufactures and supplies products primarily used as raw materials in the manufacture of customer, infrastructure, and packaging products. Besides the United States, the company operated across Canada, Latin America, Europe, Africa, the Middle East, India, and the Asia Pacific. DOW was spun off from DowDuPont on April 1, 2019. Over the past six months, insiders bought approximately 198,322 shares through 9 transactions.
The company has been paying dividends since 2019. On October 15th, DOW declared a cash dividend of $0.70 per share. The company will pay this dividend on December 15, 2020 to stockholders of record as of November 30, 2020. This cumulates to an annual dividend of $2.80 and yields 5.86%. DOW generated more cash flow over the past 12 months than 92.4% of US dividend stocks in the stockNews.com universe.
For the third quarter that ended September 2020, DOW witnessed a 10% year-over-year decline in its revenue to $9.7 billion due to lower energy prices. However, it saw a 16% sequential increase in its revenue driven by improved industry demand in furniture & bedding, appliances, packaging, construction and automotive end markets. Total cash and available committed liquidity at the end of the quarter was more than $13.5 billion. DOW’s loss per share for the quarter was $0.04, compared to $0.45 profit posted in the prior-year period.
Analysts estimate DOW’s fourth quarter revenue to be $9.7 billion, down 4.7% year-over-year. The EPS estimate for the quarter ending December 2020 is likely to be $0.59. The company’s Chief Financial Officer, Howard Ungerleider, said that he expects a moderate pace of demand recovery in the fourth quarter, excluding any significant impact from the second wave of COVID-19.
On a year-to-date basis, DOW slumped 12.6% to end yesterday’s session at $48.73. However, during the past six months, the stock has soared 40.9%.
DOW’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with a grade of “B” in Trade Grade, Buy & Hold Grade, and Peer Grade.
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FDX shares were trading at $277.14 per share on Wednesday morning, up $2.66 (+0.97%). Year-to-date, FDX has gained 85.62%, versus a 8.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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