Word of progress in ceasefire talks between Russian and Ukrainian negotiators in Turkey on March 29 led to a positive reaction among investors. But even an immediate end to the hostilities wouldn’t change the fact that the U.S. is in a cycle of rising interest rates as the Federal Reserve fights high inflation.
The bond market’s recession signal Investors and analysts are growing more concerned that the inverted yield curve for U.S. Treasury securities is pointing to a recession and possibly even stagflation — a combination of high inflation and shrinking demand. Focusing on value stocks with high dividend yields might help you make the most of what could be a difficult environment over the next two years.
So the timing of the next recession is in question. Getting back to the value/dividends theme from the Jefferies analysts, this is a good time to screen for both. A company’s free cash flow is its remaining cash flow after capital expenditures. It is money that can be used to pay dividends or to expand, make acquisitions, repurchase shares or for other corporate purposes. If we divide a company’s expected annual free cash flow per share by the current share price, we have an estimated free cash flow yield, which can be compared to the current yield to see if there is “headroom” for higher dividends.
For most companies in the financial sector, free cash flow figures aren’t available. For these, we have used consensus earnings-per-share estimates for headroom estimates, as EPS is used by regulators to set caps on dividend payments for the largest banks.