3 S&P 500 Dividend Stocks with High Insider Selling
High insider selling is generally an indicator that the company is going through tough times. Normal insider buying and selling is a routine affair, but if the owners and the top line executives began to shed off substantial amount of their shares that could be a warning sign for investors. Discussed below are three companies, which have stable dividend models but are currently going through greater insider selling.
*as on 26th April
Source: Yahoo! Finance and Finviz.com
Microsoft (NASDAQ:MSFT) is an American multinational software company with its headquarters in Redmond, Washington. The software giant is putting its efforts along with manufacturers to come up with a small touch screen device for Windows, to compete with 7-inch tablets like the iPad Mini from Apple (NASDAQ:AAPL) and Amazon's (NASDAQ:AMZN) Kindle Fire.
The company has been toiling hard to power the phones and tablets with its software as an increasing number of customers are shifting towards smaller devices and losing interest in personal computers, which has been the life blood of the Microsoft all these years. The company rolled over two larger tablets branded under surface and acquired a stake in Barnes & Noble's (NYSE:BKS) digital unit in October last year.
The company reported it 3Q2013 earnings in which the net income came in at $6.1 billion or 72 cents per share, an increase of 18% from $5.1 billion or 60 cents in the corresponding quarter of 2012. Sales were affected by the slowdown in PC sales, causing concern in investors as they expect some more slowdown.
According to the research firm IDC, Windows 8, which is entirely different from previous versions of Windows, is, to some extent, the reason behind the declining sales of the PC. Buyers are not impressed with the new version, according to the research firm.
Microsoft has been investing heavily in cloud technology, earning some positive response in return. The Office 365 software of the company is becoming popular and successful amongst organizations, offices and enterprise customers.
While we recently wrote an article, explaining why we think Microsoft is a buy, insiders have sold shares worth more than $1.1B since January. Most of this value comes from Bill Gates who reduced his position close to 6.5%. Other big sellers included Chief Accounting Officer, Frank Brod, who reduced his position 7.7% and President of Server and Tools, Satya Nadella who reduced his position 6.4%
McDonald's (NYSE:MCD), the largest fast food chain in the world, has been a consistent performer for many years; however, shares are tumbling lately in the wake of the economic slowdown, which has discouraged people from eating out. Investors are increasingly cautious about the performance of the company after it reported a decline in same-store sales after nine years.
What could be a blow to investors is the acceptance that previously weak competitors are now becoming a threat. According to some, McDonald's stumbled from its dominant position due to some new products, which backfired last year. The fast food giant has been trying hard to attract customers by launching new products such as a new fish offering, and is also testing chicken wings in Chicago.
In the first quarter of 2013, sales declined 1% globally and profits also decreased. McDonald's revenue came in at $6.60 billion, an increase of 1% over the last year's $6.59 billion. Net income was posted at $1.27 billion, around 1% more than $1.26 billion in the corresponding quarter of 2012. The world's biggest fast food chain announced that restaurant sales will not increase this spring season unlike in April last year.
Shares held by company insiders have declined 5% over the past six months. Both officers and directors of the company have been selling shares worth more than $20 million after CEO Donald Thompson sold $3.7 million worth of his own shares.
The Clorox Company (NYSE:CLX) has been a dominant player in the household product category and has various products in its portfolio. The most popular labels from Clorox include Brita, Glad bags, Hidden Valley Ranch, Kingsford charcoal, Pine Sol, Clorox bleach, in addition to other cleaners.
The company has promoted and marketed the household cleaning products Green Works to digitally savvy mothers between the ages 18 to 49 who spend much of their free time on the internet. Clorox mainly tries to improve the customer experience and brings in innovation constantly to make the products match the expectations of customers.
The company reported its 2Q2013 earnings, which were posted at $123 million, or 93 cents per diluted EPS compared to $105 million or 79 cents per diluted EPS in 2Q2012.
Clorox has been successfully saving $15 million annually by reducing consumption of energy and water. Moreover, the company has been able to garner the lifelong loyalty of the customers because of its attractive marketing strategies and dazzling product performance. Clorox is also a dividend aristocrat and a favorite of investors for producing excellent return on capital. Clorox has surged its dividend every year over the past 35 years.
There are certain concerns over the increasing price of raw materials, however, which would affect Clorox's revenue, along with potential threats of currency. However, the company is taking new initiatives on profit enhancing and cost saving in 2013, which would probably surge operating as well as gross margin.
The Clorox Company had the highest level of insider sales with a 25% reduction in insider ownership in the last six months. The biggest sellers included Executive Vice Presidents Larry Peiros and Frank Tataseo, selling $6.4M and $2.8M worth of shares respectively in February alone.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Black Coral Research is a team of writers who provide unique perspective to help inspire investors. This article was written Aman Jain, one of our Senior Analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Black Coral Research is not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.