We are in the early days of the 2024 second-quarter corporate earnings season. For many of the stocks I follow, earnings results are often the only “real news” I can get about these companies. Earnings results show whether or not a company remains on track, is improving, or is going in the wrong direction.

Small-to-mid-cap companies are not often in the news. The financial news cycle revolves around big-name, big-market-cap companies. A mega-cap company may have news that investors can use every day. News gets pretty scarce once you get away from the 100 largest companies.

For smaller companies, the only news that’s released may be the mandatory quarterly earnings reports and management conference calls. I have been known to remark that anything you read about a smaller company that isn’t part of the earnings report is just someone’s opinion.

My research focuses on dividend-paying stocks, so my initial scan through the income statement pulls out free cash flow and the dividend coverage level. I then look to see if the cash flow per share is stable, growing, or declining. Cash flow stability and growth are my primary metrics for recommending a stock. If cash flow is growing, which is the type of stock I recommend to subscribers, I will try to determine the company’s dividend policy—particularly the plans to increase the dividend rate.

I will also listen to or read the transcript of the management call to discuss the earnings. The earnings calls are for the Wall Street analysts who follow the individual companies, enabling them to ask questions to fine-tune their forecasting models.

When I listen to an earnings conference call, I like to focus on how the CEO talks about his company and what is going on in the industry. There are a few CEOs who are so sharp; listening to them each quarter makes me a little smarter. These tend to be the CEOs of very successful businesses.

Here are three CEOs that I always make sure to listen to during earnings season.

·         Starwood Property Trust (STWD) CEO Barry Sternlicht. He will expound on a range of topics.

·         Rithm Capital (RITM) CEO Michael Nierenberg. His leadership is growing Rithm way beyond its finance REIT roots.

·         Arbor Realty Trust (ABR) CEO Ivan Kaufman. Arbor has been hounded by short sellers. Investors need to hear Arbor’s side of the story.

These are just a few of the conference calls I listen to or read. My point is that for many companies, the quarterly earnings results and management discussion are the only information on which investment decisions about these companies can be made.