A perfect dream + a nightmare on Wall Street

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First, Microsoft and Alphabet delivered phenomenal results during their earnings reports. Alphabet topped sales estimates and announced a dividend. Microsoft also beat forecasts — thanks to the demand for its cloud and AI products. As a result, Alphabet’s stock soared by as much as 14% after the report. However, the GDP growth came in devastatingly lower than expected while inflation data showed how stubborn it is. The GDP rose at a 1.6% annualized rate, while inflation jumped 3.7% (which was more than expected). - “This report was the worst of both worlds: economic growth is slowing and inflationary pressures are persisting,” said Chris Zaccarelli at Independent Advisor Alliance. - “The Fed wants to see inflation start coming down in a persistent manner, but the market wants to see economic growth and corporate profits increasing.”. (Source: Bloomberg) Wall Street is starting to utter the word — stagflation. It would mean slower growth with sticky inflation. It’ll make the Fed’s job even tougher. After all, the Federal Reserve’s hands are tied. They cannot cut rates until inflation begins to come down, but the economy is showing signs of slowing down. In order for Fed officials to risk cutting rates even if inflation remains high, they will have to see the economy falling apart so much that it warrants an immediate action. Jeff Roach at LPL Financial said the economy is likely to keep decelerating later in the year. - “Savings rates are falling as sticky inflation puts greater pressure on the consumer. We should expect inflation will ease throughout this year as aggregate demand slows, although the path to the Fed’s 2% target still looks a long ways off,” he said. The next major economic data is today’s PCE number. (Another inflation reading.) The Fed would love to see this number to cool down from the prior reading. It would give them more options to react to any slowdown in the economy. A Defensive Stock with Top-Rated Dividend Growth Rate to Buy Today’s Stock Pick: Kaiser Aluminum Corp. (KALU) We like Kaiser Aluminum as a long-term play because of its exposure in the aerospace industry. Why? There are lots of airplanes that will be manufactured over the next few years. The industry is playing catch-up after the production plummeted during the pandemic era. The production level hasn’t recovered fully due to supply chain troubles and Boeing’s unending woes. So, Kaiser expects the production to soar to more than 2,500 in 2030 (from about 1,250 in the recent year). (Source: Kaiser Aluminum) This means plenty of business for Kaiser for years to come. The company offers wide-ranging aluminum products for aircrafts. In the graphic bellow, you can see how there are about 38 aluminum products required to build a single aircraft. (Source: Kaiser Aluminum) Moreover, the backlog has exploded for Boeing and Airbus. This gives Kaiser plenty of revenue certainty in the next five years for its aerospace segment. (Source: Kaiser Aluminum) The aerospace industry accounts for about 36% of Kaiser’s total revenue. Packaging is the second largest segment with 24%. Kaiser offers aluminum for beverage and food cans. General engineering is another growth segment because of the trend of nearshoring. (Source: Kaiser Aluminum) All in all, Kaiser expects all segments to show at least 2% CAGR. Its top two segments (aerospace and packaging) are projected to grow 3-5% CAGR. Remember that they are growth projections for these markets themselves — not the company itself. (Source: Kaiser Aluminum) Kaiser is well-positioned to profit from these growing markets. It has 14 manufacturing locations in North America. Because it is produced in the USA, it might benefit from the government’s new priority of making products in the country. (Source: Kaiser Aluminum) What about the risk of metal prices? Kaiser passes through the cost of metal for more than 95% of shipment. Meaning? If metal prices jumped, the company will simply pass along the cost to the customers. They are built into contracts and part of the industry practice. Now, the company has a good track record of increasing dividends. Its dividend per share soared by 156% in ten years from 2013 to 2023. It is attractive because the company is now yielding 3.48% in dividends. That yield could rise to more than 6% if a shareholder buys the stock now and holds it for the next decade — assuming that the dividend growth maintains the previous decade’s pace. (Source: Kaiser Aluminum) Bottom line: Kaiser Aluminum is a good dividend stock for those investors who are looking a defensive stock with a track record of boosting dividends per share. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](