IB Net Payout Yields Model

Why This Isn't 2008 FCX Style

Most people either love or hate Jim Cramer, but they're making a mistake to just ignore his research. Last night Cramer had a great example of why 2011 will not be a repeat of 2008. Corporate balance sheets are much stronger now. For the most part, companies have shored up their balance sheets with the massive profits in 2010 and so far in 2011.

Freeport McMoRan (FCX) is no exception to that common thought process. In the video below, he highlights the massive shift from a large net debt position in 2008 to a positive cash position now. So while FCX was forced to cut the dividend in the midst of the 2008 market crash now it might just increase the payout as it keeps earning loads of cash.

Naturally this is just one focus point in a market with thousands of data points, but the vast majority of companies are in the same position. Record profits combined with tepid spending and hiring leaves companies in positions where they don't have to cut back spending, fire employees, or cut dividends. The opposite is actually happening where firms are increasing buybacks contrary to vast drop off in buybacks during 2008/09.

Disclosure: Long FCX. Please review the disclaimer page for more details. 


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