Starting on 15 July 2021, the Internal Revenue Service (IRS) could send $19.5 billion in Child Cash to 39 million American households each month.
To explain, the Democrats’ coronavirus relief bill; or American Rescue Plan, President Joe Biden (D-Delaware) signed in March contained a “Child Tax Credit.” In reality, the Child Tax Credit is a $250 to $300 a month basic income for children.
I consider the Child Tax Credit a basic income because the IRS will deposit the child cash in recipients’ bank accounts with no action required, The Washington Post reports. To elaborate, a basic income is a sum of cash a government pays to all citizens with no strings attached.
$19.5 billion in Child Cash each month
I calculate the IRS could out $19.5 billion in Child Cash each month. The IRS will send the money because the Democrats are disguising the basic income as a Child Tax Credit.
In detail, Biden Administration claims the families of 88% of US children or 65 million kids will receive the child cash. The credit is $250 for each kid over six and $300 for each kid under six. I got the $19.5 billion figure by multiplying $300 by 65 million.
Hence, Uncle Sam could pay $19.5 billion in child cash month. Consequently, many companies will make money from the Child Cash.
What Companies will profit from the Child Tax Credit?
Predictably, investors will ask what companies will make money from the Child Tax Credit?
Here are the companies I think will make money from the Child Tax Credit:
Kroger (NYSE: KR)
America’s largest standalone grocer operates 2,742 supermarkets and supercenters, 35 food production plants, and 45 distribution centers in 35 states. I think tens of millions of Kroger customers will soon have several hundred extra dollars to spend on groceries a month because of the child cash.
Kroger and Ocado Group PLC (LSE: OCDO) plan to build 20 automated grocery warehouses or customer fulfillment centers (CFCs) across the United States. In each CFC robots will pull and pack grocery orders.
The first CFC is up and running in Monroe, Ohio, Supermarket News reports. In the Monroe CFC, Kroger will use over 1,000 robots to fill online grocery orders. Refrigerated Kroger vans will deliver the groceries over a 90 square mile area.
I predict many families will use their Child Cash to pay for online grocery delivery. Kroger made over $10 billion from online grocery delivery and online grocery delivery revenues grew by 116% in 2020, CEO Rodney McMullen claims.
I consider Kroger (KR) a risky value investment because it is cheap and pays a dividend. Mr. Market paid $36.76 for Kroger on 21 May 2021. Additionally, Kroger will pay an 18¢ quarterly dividend on 1 June 2021. Overall, Kroger shares offered a forward annualized dividend yield of 72¢ and a 1.96% dividend yield on 17 May 2021.
However, Kroger had only $2.783 billion in cash and short-term investments on 31 January 2021. In addition, Kroger reported a -$158 million quarterly operating loss on 31 January 2021. Thus, Kroger has a low margin of safety despite its size.
Walmart (NYSE: WMT)
Walmart (WMT) is the world’s largest retailer with 4,743 stores in the United States in 2021, according to Statista.
Walmart is the second-largest online retailer in the United States with $64.62 billion in e-commerce sales in 2020, Fortune estimates. Walmart’s online sales grew by 79% in fiscal 2021 and 69% in the fourth quarter of 2020, DigitalCommerce360 estimates.
Walmart makes enormous amounts of money. It reported quarterly revenues of $152.07 billion, a quarterly gross profit of $36.818 billion, and a quarterly operating income of $5.487 billion on 31 January 2021. Walmart is a growing company, Stockrow estimates it grew by 7.35% in the quarter ending on 31 January 2021.
Walmart will profit from Child Cash with its growing e-commerce platform and 4,743 stores. In addition, Walmart is the largest grocer in the United States. Remember, Walmart is where young families shop in the United States, so it will make money from Child Cash beginning in July.
Walmart will pay a 55¢ quarterly dividend on 1 June 2021. Overall, Walmart offered a $2.20 forward annualized dividend and a 1.59% yield on 17 May 2021.
Moreover, Walmart’s stock is cheap. Mr. Market paid $141.83 for Walmart shares on 21 May 2021.
I consider Walmart a value investment because it has a cheap dividend-paying stock but makes enormous amounts of money. No company is better positioned to cash in on Child Cash than Walmart.
Amazon (NASDAQ: AMZN)
America’s favorite retailer Amazon (AMZN) is in a position to profit from Child Cash.
Amazon will profit because it has 148.6 million Prime Members in the United States, Backlink.info estimates. US Amazon Prime Membership will grow to 153.1 million in 2022.
I think a large percentage of the households that will receive the Child Cash have an Amazon Prime membership. Logically, many parents will use that cash to shop on Amazon Prime. Hence, Amazon will make money from Child Cash.
On the other hand, I think Mr. Market pays too much for Amazon, $3,200.60 on 21 May 2021. Despite that, Amazon is an excellent company that makes enormous amounts of money. For instance, quarterly revenues of $108.518 billion, a quarterly gross profit of $46.115 billion, and a quarterly operating income of $8.865 billion on 31 March 2021.
Costco Wholesale (NASDAQ: COST)
Another place parents will spend the Child Cash is at Costco (COST), America’s favorite club store.
Costco will make money from Child Cash because it is one of the most profitable retailers in America. Costco operates 559 stores in the United States and reported $44.769 billion in quarterly revenues on 28 February 2021. Costco reported a quarterly gross profit of $5.691 billion and a quarterly operating income of $1.34 billion on 28 February 2021.
Costco is an attractive dividend stock. It paid a 79¢ quarterly dividend on 29 April 2021. However, I think Mr. Market paid too much for Costco, $381.34 on 21 May 2021.
The Walt Disney Company (NYSE: DIS)
I think many families will spend their Child Cash on a Disney+ subscription. Parents buy Disney+ because it offers enormous amounts of family-friendly entertainment for $29.99 a month.
For instance, the Disney+ bundle offers access to new movies, Marvel, Hulu, and ESPN+ for $29.99 a month. Disney+ had over 100 million subscribers in March 2021, The Verge estimates. The Disney+ subscriber base grew from 94 million in December 2020.
Families could also spend the Child Cash on Disney merchandise, tickets to Disney movies, and trips to Disneyworld or Disneyland. Thus, Disney could make money from Child Cash.
Disney (DIS) is having a hard time in the pandemic year, its quarterly operating income fell from $2.685 billion on 31 December 2019 to $146 million on 31 December 2020. Similarly, Disney’s quarterly revenues fell from $20.779 billion on 31 December 2019 to $16.098 billion on 31 December 2020.
Disney’s share price, however, is growing because of the popularity of Disney+. Mr. Market paid $116.85 for Disney on 18 May 2020 and $172.78 for Disney on 21 May 2021, for instance. Conversely, Disney has suspended its dividend.
I think Disney is a growing company that could profit from Child Cash. However, Disney faces many problems including the theme parks which have a hard time attracting visitors in the COVID-19 age.
Child Cash is Here to Stay
I think Child Cash will be popular and help many Democrats win elections. Moreover, I think many companies will profit from Child Cash.
Consequently, I predict Child Cash is an entitlement that is here to stay. Although Congress will have to renew it next year. I think Democrats will renew Child Cash because it will help them win elections. Democrats could pass Child Cash and avoid the Filibuster by tacking it onto a Defense Appropriations Bill, something Republicans always vote for.
Child Cash will stay around because many big corporations will make money from it. Those companies will have a powerful incentive to lobby Congress for more Child Cash.
I also think Child Cash could be a template for a Basic Income for all Americans. I believe there will a strong demand for Basic Income once people without children ask why their neighbors are getting cash and they are not. Politicians who want those people’s votes will expand the cash to them.
Investors need to watch Child Cash carefully because many companies will make money from it. Moreover, Child Cash could lead to a retail boom and boost retail stocks because it gives consumers money to spend.
Originally published at https://marketmadhouse.com on May 20, 2021.
