Call it a tale of two stocks.
Real Money Columnist Jonathan Heller is taking a long look at the stock market, and he sees opportunities for dividend lovers and for market grizzlies.
In the first case, “Small, sum-of-the parts story NL Industries (NL) – Get NL Industries Inc Report quietly did it again last week,” Heller wrote on Real Money. “By that I mean the diversified maker of engineered parts once again raised its dividend, this time by 16.7%, from six cents a share to seven cents. That equates to a 4.1% indicated yield. It was around this time last year that NL doubled the dividend to six cents a share.”
According to Heller, NL can afford to raise the dividend. As of its latest quarter-end the company had $142 million, or $2.91 per share, in cash on its balance sheet.
“In addition, NL owns pieces of three publicly traded companies, including 1.2 million shares of Valhi Inc. (VHI) – Get Valhi, Inc. Report valued at about $30 million, 30% of Kronos Worldwide (KRO) – Get Kronos Worldwide, Inc. Report valued at $509 million, and 86% of CompX International (CIX) – Get CompX International Inc. Class A Report valued at $242 million,” Heller said. “NL’s current market cap is just $336 million, while its interests in VHI, KRO and CIX total $875 million.”
“The thing that complicates matters for NL is the specter of litigation that goes back to the days when NL was known by its former name, National Lead,” he added.
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The company settled one case in California in 2019 and is fighting others filed in Pennsylvania. “New cases may continue to be filed against us,” NL said in a recent SEC filing. “We cannot assure you that we will not incur liability in the future in respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings.”
On the Grill
Meanwhile, a potentially interesting situation is developing with higher-end grill maker Weber Inc. (WEBR) – Get Weber, Inc. Class A Report.
Some of Heller’s position in the stock is loaned out through a securities lending program, presumably borrowed by bearish investors in order to short the shares.
“I’ve been noticing that the lending rate continues to increase,” Heller noted. “Last week, it went from 19.5% to 21%. Just two weeks ago, the lending rate was 14%; in early February it was 12.5%. The bears are paying a hefty price to short WEBR, the current short interest ratio of which is 32.3%.
The last time Heller saw lending rates this high was with GameStop (GME) – Get GameStop Corp. Class A Report , which was a member of his 2019 Tax Loss Selling Recovery Portfolio.
“The highest lending rate I saw in that situation was 19% in late September 2020,” he said. “However, keep in mind that along with the other names in my annual Tax Loss Selling Portfolio, I closed that position in early November before all the fun started with GME.”
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