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6 – 10 Sept | Interest rates, big dividends and yoga

In this issue, we take a look at the burning topic of inflation in Europe. We’ll also put a spotlight on dividend stocks and highlight a promising earnings report from a US sports company.

Decision time for the European Central Bank

The European Central Bank has kept the benchmark interest rate at zero for what feels like an eternity. What’s more, some banks are even paying to park money at the ECB. The whole point of this strategy is to support the economy, and thus the stock markets. But how much ‘support’ is enough? And is it becoming a crutch?

At the Jackson Hole event last week, the Federal Reserve (the US central bank) announced that bond purchases would be scaled back slowly. But what is the ECB’s plan?

We will find out on Thursday, September 9th when the interest rate decision will be announced. It will probably stay at zero again, but investors will be listening closely to the press conference that follows. At least one journalist is bound to ask Christine Lagarde, the head of the ECB, what she thinks about Fed Chairman Jerome Powell’s strategy. Be careful, this could get volatile.

Dividends: the bonus for investors

Dividends are an extra little bonus that investors can get. It’s part of a company’s profits, paid out to shareholders. Not every company pays dividends, but when they do it’s paid per share, and the amounts can vary widely. 

Some pay their dividends quarterly, others only once a year. For some investors, it’s the most important aspect of choosing an investment. So it’s not uncommon for stocks to move higher when they increase their dividend, and punished when they reduce or cancel their dividend.

Companies use the dividend to reward shareholders for their loyalty. On the other hand, it’s also a profit sharing mechanism for all those who made their capital available.

With BUX Zero, you will also receive the dividend for any shares you hold. HP will come on Tuesday, September 7th, but they’ll “only” pay $0.19 per share. However, you have to keep in mind that some stocks are cheaper than others. So, of course, you can put more of them in your portfolio and receive more dividends. On Thursday, September 9th, Harley Davidson will follow, giving investors $0.15 per share.

Please also note the ex-dividend date of a stock, as you may notice that a stock trades lower on this day. Stocks often decline on the ex-dividend date, equivalent to the value of the dividend. Don’t worry, it usually recovers. If you want to know more about dividends, check out this article.

You can find all the companies on BUX Zero that pay dividends, and the date they’ll pay out, on our dividend calendar.

A little yoga?

On Wednesday, September 8th, athleisure company Lululemon Athletica will publish its latest figures. Last Monday, the stock hit a new all-time high. Analysts have already issued a ‘strong buy’ rating and the numbers are rumoured to be promising. Analysts are forecasting profits to increase by almost 50%.

The meteoritic rise is partly due to the pandemic, because online sales went through the roof. Finally, there’s also the takeover of Mirror, a fitness equipment manufacturer. The downward-facing dog will quickly turn into a happy stockbroker if things continue like this.

Economic and results calendar

Monday – A public holiday in the USA for Labor Day.

Tuesday – Trade balance from China, industrial production from Germany and the current ZEW index from Germany and the eurozone.

Wednesday – Trade balance from France, data from the FED on the US economic situation (Beige Book). Quarterly figures for Lululemon.

Thursday – Consumer prices from China, GDP from the eurozone, ECB interest rate decision followed by a press conference.

Friday – GDP from Japan, industrial production from UK and Italy, EcoFin meeting – the meeting of all finance ministers from all 27 EU member states.

We’ll be back next week with another edition of the BUX Breakdown. In the meantime, have a great week on the markets.

The BUX Breakdown was written by Marvin Engel.

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All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.