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Cramer’s Investing Club: Consider stocks that return money to shareholders in this volatile market

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Jim Cramer on CNBC’s Halftime Report.

Scott Mlyn | CNBC

In a market that is struggling to find its footing, a group of stocks that investors may put more focus on are ones with strong free cash flow generation and shareholder friendly capital return programs. As we said last Friday, companies with strong balance sheets, healthy dividend payments, and consistent share repurchase programs are typically ones that can withstand and find support in volatile markets. We think this has largely played out this week, with the case in point being Apple, who bought back $20 billion worth of stock in its last reported quarter, viewed as a “safe-haven” as the reason for the stock’s notable outperformance.

Many companies in our portfolio routinely repurchase stock and increase their dividend payments year after year. These are traits we look for in many of our investment decisions. Below we have highlighted three names who have all announced new and improved capital return programs just in the past week.

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Even in today’s ugly tape, Nucor shares are on the rise after the company announced Thursday night a 23% increase to its quarterly cash dividend. The announcement marked the 49th consecutive year that Nucor has increased its regular, or base, dividend. Nucor’s updated annual dividend payment is now $2 per share, putting the yield at about 1.8%. On top of the dividend announcement, Nucor said its Board approved a repurchase program of up to $4 billion. The new authorization replaces the previously authorized $3 billion program, under which $2.33 billion of stock had been repurchased from May through Dec. 1.

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Nucor isn’t the only company in the Charitable Trust who announced new repurchase programs this week. Mastercard boosted its dividend by 11% and announced a new share repurchase program of up to $8 billion on Tuesday. The market didn’t seem to care for this news as concerns about the omicron Covid variant disrupting cross-border has taken precedent, but we don’t think the company would plan to buy back all that stock if they didn’t see the recent weakness as a long-term buying opportunity.

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On Wednesday, the newest initiation in the Charitable Trust Chevron raised its share buyback guidance range to $3 billion to $5 billion per year from prior guidance of $2 billion to $3 billion per year. We can’t say we were completely surprised by this news. In our initiation post, we mentioned that it was only a matter of time until management increased its buyback activity. Remember, Chevron’s focus on capital and cost discipline means that the majority of the excess cash they generate will be returned to shareholders via dividends and buybacks. And how can you not appreciate that fat 4.67% dividend yield as something investors can fall back on if the market remains volatile?

The CNBC Investing Club is now the official home to my Charitable Trust. It’s the place where you can see every move we make for the portfolio and get my market insight before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way.

As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Typically, Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If the trade alert is sent pre-market, Jim waits 5 minutes after the market opens before executing the trade. If the trade alert is issued with less than 45 minutes in the trading day, Jim executes the trade 5 minutes before the market closes. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. See here for the investing disclaimer.

(Jim Cramer’s Charitable Trust is long AAPL, NUE, MA and CVX.)

All of the stocks in Cathie Wood’s Ark Innovation fund are in a bear market except 2

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