Saturday, April 1, 2017

Buy Facebook Inc (FB) Stock and Don’t Look Back

The world's biggest social network looks to boost ad revenue even more

Facebook Inc (NASDAQ:FB) is up nearly 25% in 2017. And the crazy thing is, that isn’t surprising. For a company with 1.86 billion monthly users that continues to log a compounded annual growth rate (CAGR) around 17% even at these levels, it’s hard to know what can slow it down.

For a long time, its one Achilles’ Heel was its ad revenue. When you see that at least 90% of FB’s revenue is derived from advertising it’s a pretty scary concept. The company with a $410 billion market cap and a price-earnings ratio of 40 only has one source of income.
But don’t worry. It’s not the first company to rely on one revenue source for its success. Clorox Co (NYSE:CLX) only sold bleach for most of the 20th Century and remains a great company today.
While these are two wildly different markets, the one commonality is the fact that both companies’ leadership knows how to adapt and grow as economic cycles come and go. A company like CLX that has been doing it for over a century and FB hasn’t logged that kind of history, but the fact is, both were the only game in town for quite a while.
Yes, there were challengers, but branding was key and the name became synonymous with quality and performance. These days, FB continues to expand that advertising base with new, innovative ideas. One of the most recent ones is testing ads in the “Related Articles” section of “Instant Articles.” It has also bumped up advertising to every 250 words from every 350 words.
These moves may seem trivial, and they should for a company with such a massive base of users. But the implications are significant for that very reason — it means billions of more ads seen every month.
It also shows that the people at 1 Hacker Way understand the advantages to its fast-growing ad revenue as well as its risks. If you go too heavy-handed with ads, users will stop using the service as regularly. This subtle move will give FB a good measure of how it can best expand ad revenue without harming its reputation or using more aggressive personalized advertising.

Bottom Line on FB Stock

The big daddy of online ad revenue remains Alphabet Inc’s (NASDAQ: GOOG) Google division. And even there, Facebook is looking to gain some ground with its recent addition of Facebook Video that is trying to get at some of GOOG’s YouTube lunch.
But the thing I like most about FB right now isn’t the fact that it’s looking ahead and staying competitive in a very dynamic and dog-eat-dog space, it’s that Mark Zuckerberg & Co. is executing, quarter after quarter.
User growth is up across its product lines. And most important, average revenue per user continues to rise. That means it’s finding new ways to get users to say “yes” to advertisers. This number gives FB pricing power with advertisers, which will help grow revenue as well as margins.

Dividend Smackdown: IBM Stock vs. MSFT Stock

We look at dividend yield, income growth and prospects for big tech juggernauts IBM and MSFT

Ring the bell because it’s that time again. We’re putting two iconic dividend payers in the ring for an old-school dividend smackdown. The fighters: Two old-school tech giants, Microsoft Corporation (NASDAQ:MSFT) and International Business Machines Corp. (NYSE:IBM).

At first this might seem like a bout between two washed up has-beens. Both of these companies are ancient by tech company standards, and neither gets the headlines they used to. Yet longevity in the tech space is something to take seriously. If you’re able to survive decades in an industry known for rapid upheaval, you’re clearly doing something right.
Yet no fighter’s streak lasts forever. Even Mike Tyson eventually got knocked out, by underdog Buster Douglas. And in our match today, one company is well into a bona fide comeback, whereas the other is at risk of getting knocked out … permanently.
So with that, let’s go ringside in this battle between IBM stock and MSFT stock starting with the current dividend yield.

Dividend Yield

In a world where the S&P 500 yields just 1.9%, both Microsoft and IBM have to be considered relatively high-yield stocks. Microsoft stock sports a dividend yield of 2.4% and IBM 3.2%. So, in a head-to-head match up, IBM is clearly the higher yielder.
Furthermore, at first glance, IBM’s dividend would appear to be more sustainable. IBM stock is only paying out 44% of current earnings per share, whereas MSFT is payout out a much higher 69%.
So, in round one of this dividend smackdown, we have a clear winner: Big Blue.
Dividend Yield Winner: IBM

Dividend Growth

For round two, let’s take a look at dividend growth. After all, the current dividend yield only gets you so far, as a dividend stock without a growing dividend is essentially just a riskier version of a bond. A good dividend stock should have both a respectable current yield and a dividend growth rate well in excess of inflation.
Well, both of our fighters qualify here. Microsoft has raised its dividend for 13 consecutive years, and IBM has raised its dividend for 17.
Over the past 10 years, both stocks have been aggressive dividend raisers, but one has clearly taken the lead. Microsoft has raised its payout by a cumulative 300%, which would crush nearly any competitor other than IBM. Big Blue has managed to raise its dividend a cumulative 400%.
Over the past five years, MSFT stock has the edge, beating out IBM stock by a cumulative 125% to 87%. But in round two, I’m going to have to give the edge to IBM.
Dividend Growth Winner: IBM

Future Prospects

Thus far, it has been a lopsided contest, with IBM taking the first two rounds. So is the match over? Or is Microsoft about to mount a comeback worthy of Rocky Balboa?
Let’s take a look.

3 Blue-Chip Technology Stocks That Will Break Through the Ceiling

Nothing will stop these technology stocks anytime soon

U.S. equities are trading mixed on Friday on light volume, with the Dow Jones Industrial Average stalling in the doldrums between its 20-day and 50-day moving averages.
Source: Shutterstock
The Federal Reserve remains in focus, with the PCE inflation rate topping 2% for the first time in almost five years, increasing the odds of an aggressive pace of rate hikes through the end of the year.
And the political headwinds remained focused on the gridlock in Washington threatening to stall any tax reform efforts.
But after a relatively subdued March, by many measures, stocks have worked off some of the speculative excess seen at the end of February. As a result, a number of stocks in key leading sector groups like industries, financials and technology are pushing higher.
Here are three big technology stocks on the move: