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>>> Essential Utilities : For many investors, market downturns like the one we are currently experiencing can be disconcerting, leading them to fortify their holdings by buying less-volatile stocks. During boon times, these conservative stocks are hardly stealing the spotlight from innovative market disruptors that represent ample growth potential, but it's times like these when less-sexy, conservative stocks like Essential Utilities -- which offers a 2.3% forward dividend yield -- take center stage. Providing water, wastewater, and natural gas services to 5 million customers in 10 states, Essential Utilities offers indispensable services that are in demand regardless of market conditions.
Because it operates in regulated markets, Essential Utilities doesn't have the luxury of arbitrarily raising prices when the mood strikes. In 2021, for example, 98% of the company's $1.9 billion in operating revenue came from the company's business in regulated water and natural gas markets. On the other hand, the company does have excellent foresight regarding future finances. Management, for example, projects growing its water assets (excluding acquisitions) at a compound annual growth rate (CAGR) of 6% to 7% from 2021 to 2024; similarly, it forecasts growing natural gas assets at an 8% to 10% CAGR during the same period. These projections, furthermore, lead management to believe that the company will grow its earnings per share at a 5% to 7% CAGR to 2024, from the $1.67 it reported in 2021.
Besides the EPS outlook, passive income aficionados will appreciate management's approach to dividend growth over the next few years. Essential Utilities aims to raise the dividend at a similar pace to the EPS growth -- similar to what the company has done in the past. From 2016 through 2021, the dividend grew at a CAGR of 7% while the company's EPS grew about 5%. And it's not as if management expects to place the company in hot water, in terms of its financial health, solely to placate investors. Management plans on keeping its payout ratio below 65% -- a welcome sight for investors on the lookout for conservative dividend stocks.
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https://finance.yahoo.com/m/6fdbd562-0fa2-3994-9ed0-573b059e3701/nasdaq-bear-market%3A-3-safe.html?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article&yptr=yahoo
>>> 3 Reasons to Buy PepsiCo Stock
Motley Fool
By Kody Kester
Mar 17, 2022
https://www.fool.com/investing/2022/03/17/3-reasons-to-buy-pepsico-stock/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
KEY POINTS
PepsiCo's timeless brands helped it generate double-digit revenue and earnings growth in 2021.
The stock's dividend is primed to keep growing in the high single digits annually.
PepsiCo appears to be rationally valued by the market at this time.
There's a lot to like about the food and beverage giant besides its market-topping 2.9% dividend yield.
Since hitting an all-time high last November, the Nasdaq Composite has plunged as much as 20% in value and is currently down about 17.1%. Several popular stocks in the index have fallen even further, but some Nasdaq-traded stocks have not been hit nearly as hard.
For instance, consumer staples giant PepsiCo is trading down only about 9.9% from its peak $177 share price reached in January. The recent correction in PepsiCo's stock seems to be a temporary issue related to its most recent earnings report and actually just created a buying opportunity for some investors. The price drop is one rather obvious reason to buy this value stock, but there are at least three other reasons to consider. Let's dive into the stock's fundamentals and valuation and find out why PepsiCo is a buy right now.
1. PepsiCo has brand power and it flexed it in 2021
PepsiCo reported its earnings for the fiscal year ended 2021 in mid-February, and the earnings results for the year were arguably very positive for shareholders.
PepsiCo produced $79.5 billion in net revenue in 2021, equivalent to a 12.9% growth rate. So how did the $220 billion (by market capitalization) snack and beverage company pull off double-digit net sales growth last year?
The answer lies within PepsiCo's leading portfolio of brands, including the eponymous Pepsi, Lay's, Gatorade, Mountain Dew, SodaStream, and Quaker Oats, that each generates $1 billion-plus in annual revenue. As a result of these leading brands, PepsiCo's products are consumed more than 1 billion times every day by people in over 200 countries and territories throughout the world.
PepsiCo recorded a 2.5% increase in its convenient food volumes in 2021, while the company posted an even better 10% bump in beverage volumes. The company's total organic volumes were 4% higher in 2021 than the year-ago period. And the effective 5% net price hikes that PepsiCo passed along to consumers were another piece of how the company logged double-digit net revenue growth in 2021. PepsiCo's acquisitions of Pioneer Foods and Be & Cheery chipped in another 2% to net revenue growth, and favorable currency translations were responsible for the remaining 1% of net sales growth.
PepsiCo's non-GAAP (adjusted or core) diluted earnings per share (EPS) surged 13.4% higher to $6.26 in 2021. How did the company accomplish this? Two factors led to this earnings growth. Aside from PepsiCo's higher net revenue base, the company's non-GAAP net margin edged a single basis point higher to just over 10.9% in 2021. The other reason for the company's earnings growth was a 0.2% reduction in PepsiCo's weighted average outstanding share count to 1.39 billion, which was due to share buybacks executed during the year.
Analysts anticipate that PepsiCo's momentum will continue but to a lesser extent in the medium term. This is reflected by the fact that analysts are forecasting 8% annual core EPS growth over the next five years.
2. PepsiCo will soon qualify as a Dividend King
PepsiCo had a strong showing in 2021 and has an encouraging outlook for the foreseeable future. That makes it clear why the company's board of directors announced a 7% raise in the annualized dividend per share to $4.60. The dividend increase will begin with the quarterly dividend that is expected to be paid in June. Once paid, this will mark the stock's 50th consecutive year of dividend raises, which will make it a Dividend King.
PepsiCo's dividend payout ratio of 67% for 2021 is only a tad high, but still quite manageable. That's why dividend growth will probably slightly lag earnings growth over the next several years. But even so, I believe the company can keep handing out 7% annual dividend increases to get that payout ratio just below 65% by the end of 2026.
Along with PepsiCo's market-beating 2.9% dividend yield, this is an enticing blend of yield and growth prospects.
3. The stock is reasonably valued
The third reason to consider buying PepsiCo is that the inflation-proof stock looks to be sensibly priced.
PepsiCo is trading at a forward price-to-earnings ratio of 21.9, slightly below the nonalcoholic beverages industry average of 22.7. Even considering that PepsiCo's 8% annual earnings growth potential is a bit lower than the industry average of 9%, the steady nature of the stock arguably deserves a premium. PepsiCo's trailing-12 months dividend yield of 2.7% is also essentially in line with the 13-year median of 2.8%, which is further confirmation that the stock is a buy for dividend growth investors.
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Lancaster Colony - >>> Check Out This Dividend King You've Probably Never Heard Of
Motley Fool
By Justin Pope
Mar 17, 2022
https://www.fool.com/investing/2022/03/17/check-out-this-dividend-king-youve-probably-never/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
KEY POINTS
Lancaster Colony sells niche food products with strong brands.
The company's strong finances power ongoing dividend growth.
The stock is a bit expensive today but poised for continued success.
Let's take a trip to the grocery store to find this underrated dividend gem.
Consumer staple companies make great dividend stocks because people buy things like food and beverages regardless of the economy. Food conglomerate Lancaster Colony may not have the name recognition of a company like Coca-Cola. Still, it's been growing its payout for the same 59 years that Coca-Cola has!
What's more, Lancaster Colony has handily delivered better investment returns than Coca-Cola over the past decade, so it's time to get to know this little-known Dividend King. Here's why investors should consider Lancaster Colony for their long-term portfolio.
About Lancaster Colony
Lancaster Colony produces and sells various food products, including frozen bread, refrigerated dips, dressings, sauces, and croutons. Some popular brands include New York Bakery, Flatout, and Marzetti. The company also produces sauces under licensing deals with brands like Buffalo Wild Wings, Olive Garden, and Chick-Fil-A.
The company specializes in niche food product categories, maintaining strong brand positioning with less competition from generic brands. Frozen bread, for example, commands freezer space in a grocery store, which is premium real estate. It's usually easier to develop additional shelf space in an aisle than to install more freezers in a store.
Approximately 64% of Lancaster Colony's sales are products requiring climate control, and its licensed products in the shelf-stable side of the business carry significant brand power of their own. Most people probably want the actual Olive Garden salad dressing instead of a generic one.
Superb fundamentals drive dividend growth
The differentiated products that Lancaster Colony sells help protect its "turf" within sales channels, but the company certainly isn't a hyper-growth company. Its revenue has risen an average of 3% annually over the past decade.
However, management runs a very tight ship financially, which has helped the company maximize its resources. Lancaster Colony holds no debt, giving it flexibility with every dollar of profit it generates.
This includes acquisitions of new brands to drive growth; Lancaster Colony has acquired many of its top brands over the years, including:
New York Bakery in 1978
Reames in 1989
Chatham Village in 1997
Sister Schubert's in 2000
Warren Frozen Foods in 2003
Flatout in 2015
Bantam Bagels in 2018
Omni Baking Company in 2021
It seems clear from the long time frame and years between deals that management isn't ever in a hurry, waiting instead for the right deal to come together. Management that doesn't put the balance sheet in danger to boost short-term growth numbers is an underrated trait in a company.
After investing in its factories and equipment, the dividend is the company's most prominent use of cash and the primary vehicle for delivering profits back to investors. In addition to raising the payout for 59 years, Lancaster Colony also issues a special dividend on occasion, the last one coming in 2015.
The regular dividend yields 2%, so investors probably have better options if they're looking for more income. Still, all those annual raises and the occasional special payout add up over a multi-year holding period.
Is Lancaster Colony a buy today?
It might be fair to call Lancaster Colony a "boring" company, but that isn't bad. It's poised to continue doing what it's been doing for decades. The balance sheet is still debt-free, and management has $114 million in cash to use as it pleases, so more acquisitions will likely occur at some point.
Furthermore, growth has picked up in recent years; revenue has grown more than 6% annually over the past three years, so investors will want to see how that continues moving forward.
The stock's one major problem is its valuation, which currently stands at a price-to-earnings (P/E) ratio of 34, a hefty amount for a company that grows at the pace that Lancaster Colony does.
The market's current sentiment toward growth stocks may push investors toward more defensive companies like Lancaster Colony. Still, it's hard to call the stock a "table-pounding" buy when the valuation probably needs to continue cooling off for a while longer.
Still, Lancaster Colony is a simple yet effective business with a multi-decade track record of success. If investors get the opportunity to buy shares at a more reasonable valuation, it could prove to be a long-term winner in any dividend portfolio. For now, the stock may be best as a name on your watchlist.
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Crown Castle Intl - >>> 4 Dividend Stocks to Supplement Your Social Security in 2022
Income-minded investors have plenty of good options still available as we move into the new year.
Motley Fool
by James Brumley
Dec 29, 2021
https://www.fool.com/investing/2021/12/29/dividend-stocks-supplement-social-security-2022/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
Crown Castle
Dividend yield: 3%
Crown Castle International (NYSE:CCI) isn't a household name. But there's a good chance you or someone in your household relies on Crown Castle's service without even knowing it.
This company owns more than 40,000 cellphone towers and around 80,000 miles worth of fiberoptic cable, leasing access to its infrastructure to more familiar outfits like AT&T and Verizon. As long as you and other consumers need to remain connected to the rest of the world, the telco industry will need a means of keeping those connections in place. This makes for very reliable recurring revenue for Crown Castle.
That reliable revenue has allowed Crown Castle to dish out a dividend in every quarter since 2014 and to raise its annual payout every year since 2018. The yield of 3% may not be thrilling, but given its relatively low risk and secure future, that's a fair payout.
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>>> Why American Tower Can Continue Its Rapid Growth
GuruFocus
by Nathan Parsh
December 27, 2021
https://finance.yahoo.com/news/why-american-tower-continue-rapid-194211064.html
Many investors own real estate investment trusts, or REITs, for their generous dividend yields. There are some REITs that offer a lower yield, and though they might not meet the objectives of an income-focused investor, this doesn't mean that low yielding REITs should be avoided. While some might have low yields due to business problems, there are others that have low yields due to faster growth and higher valuation multiples, and these can sometimes prove to be extremely profitable in the long run.
Take American Tower Corporation (NYSE:AMT), for example. This company's dividend has compounded at a rate of more than 20% since becoming a REIT. Despite this level of dividend growth, American Tower yields just 2% today as the strength in the business has caused the stock to rise more than 166% over the last five years. For context, the S&P 500 Index has returned a cumulative 111% over this period of time. Lets take a closer look into American Tower to see why I believe it will remain a high growth REIT.
Business overview and recent earnings highlights
American Tower began as a subsidiary of a radio systems company in the mid-1990s. It was spun off from its parent company in 1998 and converted to a REIT in 2012. American Tower is valued at $127 billion today and generated annual revenue of slightly more than $8 billion last year.
The REIT has an incredible size and scale as the largest independent operator of wireless telecom and broadcast towers in the world. It is also one of the largest REITs in the world regardless of type of real estate.
American Tower has approximately 43,000 towers in the U.S., giving it a leadership position in what has become an incredibly important industry over the years. This same infrastructure will be vitally important as the rollout of 5G service continues.
American Towers most recent quarter, for which it announced earnings results on Oct. 28, shows that the company continues to capitalize on tailwinds in its business. Revenue for the quarter grew almost 22% to $2.45 billion, topping Wall Street analysts estimates by $40 million. Adjusted funds from operation of $2.49 per share was a 26 cent, or 10.3%, improvement from the prior year and was 17 cents ahead of expectations.
Property revenue surged 19.2%. Organic tenant billings growth, which reflects just properties that the trust has owned since the beginning of the prior year period, was up 4.9%. International was the real driver during the quarter as organic tenant billings growth was 5.9% for the period. The best performing region was Africa, up more than 9%, but Latin American wasn't far behind at 7%.
Prospects for growth
American Tower has expanded from just a U.S.-based business into international markets. As of the end of last year, American Tower had nearly 76,000 towers in the Asia/Pacific region, 41,500 in Latin America, 20,000 in Africa and 5,330 in Europe. American Tower has just begun entry into certain markets such as Australia, Canada, France, Niger and Spain, all of which occurred within the past five years.
Outside of the U.S., most of American Tower's markets haven't completed 4G networks yet. Regardless, data consumption is surging, with some international markets seeing 100% growth year-over-year. The demand for additional towers will mean higher capital spending budgets on the part of carriers in order to improve infrastructure, putting the REIT in a sweet spot to benefit from higher global demand for its properties.
As a result, American Tower expects nearly all of its regions to see organic growth in the coming years. In total, the REIT expects organic billings growth of 4.5%. The U.S. and Canada are projected to return as much as 4%, primarily due to 5G rollout. International markets should grow at a rate of 5% to 6%. These markets are led by Africa, with expected growth of at least 8%; Latin America, which is projected to be higher by more than 7%; and Europe, up at least 5%. Asia is expected to be flat, as other companies are dominant in this region.
International regions haven't experienced as much development as its domestic market, which should provide American Tower a long runway for growth as these markets should see increased demand for wireless telecom and broadcast service going forward.
The REIT has long-term contracts with most carriers that provide automatic rent escalators. In the U.S., the typical yearly increase is close to 3% with many international markets tied to inflation, giving some visibility to future revenue totals.
American Tower hasnt been shy about acquiring additional businesses to augment its core portfolio. For example, the REIT announced on Nov. 15 that it was acquiring CoreSite, which owns 25 data centers and more than 32,000 interconnections in the U.S., for $10 billion in cash. This will grant American Tower entrance into new markets that it doesn't already touch. The transaction will add $655 million in annual revenues to American Towers business, which would have represented more than 8% of last years total.
The REIT has been very successful as adjusted funds from operation (AFFO) have a compound annual growth rate (CAGR) of 15% over the last 10 years. This growth rate would have been higher if the share count had not increased by 13% over the same time frame.
Dividend analysis
Business results have enabled American Tower to grow its dividend at a level rarely seen amongst REITs. Unlike most in the real estate sector, the trust increases its dividend almost every quarter instead of once per year. Shareholders received 20% more in dividends per share this year than they did in 2020. The trust raised its dividend 6.1% for the Jan. 14, 2022 payment date. American Tower has a nine-year dividend growth streak while the dividend has a CAGR of 22.3% since 2012.
With an annualized dividend of $5.56, American Tower has a forward dividend yield of 2%. As REITs go, this is a low dividend yield, but this tops the stocks historical average yield of 1.8%. It is also superior to the 1.25% average yield for the S&P 500 Index.
The REIT distributed $4.33 of dividends per share in 2021. Wall Street analysts expect American Tower to earn $10.25 per share in adjusted funds from operation this year, resulting in a projected payout ratio of 42%. Adjusted funds from operation are predicted to rise to $10.30 for the next fiscal year. Using the new annualized dividend, the payout ratio is 54%. American Tower has averaged a payout ratio of 44% over the past five years. Both the average and projected payout ratios are very low for a REIT, putting American Tower in a good position to continue to raise its dividend moving forward.
Valuation analysis
Shares of American Tower trade close to $279. Using analysts estimates for 2021 and 2022, the stock has a forward price-to-funds-from-operation ratio of just over 27 for both years. This is a premium to the stocks five-year average price-to-funds-from-operation ratio of 23.4.
Shares are also trading ahead of their GuruFocus Value, but not overly so.
Why American Tower Can Continue Its Rapid Growth
American Tower has a GF Value of $269.72, equating to a price-to-GF-Value ratio of 1.03. The stock is rated as fairly valued by GuruFocus.
Final thoughts
American Tower might not offer the type of yield that REIT investors are accustomed to seeing from this sector of the economy, but this isn't due to a lack of raising dividends on the company's part. The dividend has compounded at an extremely high rate since the REIT was formed. Shareholders of the REIT have benefited from incredible share price returns over the medium-term, easily outperforming the broad market.
American Tower is set to benefit from several catalysts for growth, especially 5G rollout in the U.S. and growing demand in developing markets, which should position the REIT to continue its streak of strong earnings results.. In turn, dividend growth will likely remain elevated.
The stock isn't cheap, either on a historical basis or compared to the GF Value, but quality names with excellent fundamentals and high expectations for future growth rarely are.
The long-term track record for adjusted funds from operation and dividend growth suggests that American Tower could be a solid investment for those looking for more than just yields from a REIT investment.
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Chevron - >>> My Top Picks To Play A Weakening US Dollar Entering 2022
Zacks
by Daniel Laboe
December 22, 2021
https://finance.yahoo.com/news/top-picks-play-weakening-us-204308136.html
Chevron (CVX) and its best-in-class operations provide the perfect way to buy the dip in this momentum-charged sector with the highest return potential.
Chevron is an energy powerhouse with LNG operations that position it for the future of (lower emission) energy. With its savvy purchases across the Permian and Marcellus basins, the enterprise has established itself as a leader in the US oil industry (2nd largest US energy company behind ExxonMobil). I dare to call CVX an oil growth stock, but it has all the makings of a long-term winner.
Despite what oil critics say, I can assure you that the world economy is far from kicking its addiction to fossil fuels. Analysts project that natural gas and oil demand will continue to rise over the next decade with revving energy needs (LNG is expected to be a winner). CVX is poised to drive substantial profits throughout the roaring 20s.
I deem that Chevron's 4.7% dividend yield is almost as safe as US Treasury Note. The oil industry's commitment to maintaining its dividend regardless of financial adversity (short of bankruptcy) is unprecedented. Chevron has proven to have the liquidity to support its endlessly growing yield in even the most devastating economic environments. Chevron maintained its dividend through the past 18-months of economic shutdowns and actually raised its quarterly payout in Q2, which none of its major competitors can boast of.
The firm has already returned to pre-pandemic profitability levels, remarkably faster than most of its competitors, yet its share price remained below its pre-COVID high in January 2020. I expect that currency tailwind will further fuel CVX's upside potential.
Sell-side analysts have been getting increasingly optimistic about CVX, with 13 out of 17 analysts calling this a buy today and a consensus price target of nearly $130 (more bullish targets above $150).
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>>> You could be a landlord for Amazon, FedEx and Walmart with these REITs that net up to a 4.4% yield — you can even collect on a monthly basis
Money Wise
by Jing Pan
December 18, 2021
https://finance.yahoo.com/news/could-landlord-amazon-fedex-walmart-180000530.html
You could be a landlord for Amazon, FedEx and Walmart with these REITs that net up to a 4.4% yield — you can even collect on a monthly basis
Being a landlord is one of the oldest ways to earn a passive income. And these days, you don’t have to buy a house to get a piece of the action.
Check out real estate investment trusts, which are publicly traded companies that own income-producing real estate.
REITs collect rent from their properties and pass it along to shareholders in the form of dividends. That means investors don’t have to worry about screening tenants, fixing damages or chasing down late payments. Instead, they simply sit back and enjoy the dividend checks rolling in when they pick a winning REIT.
Of course, the COVID-19 pandemic did impact some commercial real estate. And not all REITs are the same. If you are a landlord for e-commerce giant Amazon, for instance, you should have no problem collecting a steady stream of rental income.
With that in mind, let’s take a look at two REITs paying oversized dividends to investors — one could be worth pouncing on with some of your extra cash.
Amazon’s landlord
The first one is STAG Industrial (STAG), a REIT that owns and operates single-tenant industrial properties throughout the U.S. Its biggest tenant is Amazon.
The company’s portfolio consists of 517 buildings totaling approximately 103 million rentable square feet across 40 states.
Note that 434 of the 517 properties are warehouses, which happen to be an essential part of e-commerce.
Moreover, a tenant survey in 2020 revealed that around 40% of the REIT’s portfolio handles e-commerce activity.
To see how solid STAG Industrial is, take a look at its dividend history.
Since the company went public in 2011, it has paid a higher dividend every single year.
While most dividend-paying companies follow a quarterly distribution schedule, STAG Industrial pays shareholders every month. The monthly dividend rate stands at 12.08 cents per share, which translates to an annual yield of 3.2%.
STAG Industrial shares are up 50% year to date. If you don’t feel comfortable picking individual stocks in this elevated market, you can always build a diversified passive income portfolio automatically just by investing your spare change.
Walmart’s landlord
When it comes to paying monthly dividends, one company stands out above all — Realty Income (O).
Realty Income has been paying uninterrupted monthly dividends since its founding in 1969. That’s 616 consecutive monthly dividends paid.
Better yet, since the company went public in 1994, it has announced 114 dividend increases.
Realty Income has a diverse portfolio of nearly 11,000 commercial properties located in all 50 states, Puerto Rico, the UK and Spain. It leases them to around 650 tenants operating across 60 industries.
This means even if one tenant or industry enters a downturn, the impact on company-level financials will likely be limited.
For instance, while Realty Income rents some properties to AMC Theaters — whose business was hurt by COVID-19 — it also has Walgreens, FedEx and Walmart as some of its top tenants. And these businesses turned out to be largely pandemic-proof.
Earlier this week, the REIT increased its monthly cash dividend to 24.65 cents per share, giving the stock an annual dividend yield of 4.4%.
To put things in perspective, the average dividend yield of S&P 500 companies is just 1.3% today.
Looking beyond REITs
Of course, stocks are volatile. And even the best REITs are not immune to the market’s ups and downs.
Diversification is key — and you don’t have to stay in the stock market to get it.
If you want to invest in something insulated from stock market swings, take a look at some lesser-known alternative assets.
Traditionally, investing in sectors like exotic vehicles or multifamily apartment buildings or even litigation finance have only been options for the ultrarich.
But with the help of new platforms, these kinds of opportunities are available to retail investors, too.
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Gladstone Land - >>> 2 Stocks That Cut You a Check Each Month
These two very successful niche operators have been handing out monthly dividends for many years running.
Motley Fool
by Eric Volkman
Dec 17, 2021
In this current era, where change often moves with lightning speed, who wants to wait three months to receive a dividend? Is it because the decades-old standard quarterly dividend is still very much the norm? Why can't it be the exception?
Well for a select group of dividend-paying companies, distributing a chunk of profits in the form of a regular monthly dividend is the norm. Let's take a closer look at two of them -- Realty Income (NYSE:O) and Gladstone Land (NASDAQ:LAND) -- and see if getting paid each month by these dividend stocks is right for you.
1. Realty Income
Realty Income, a real estate investment trust (REIT) that focuses on retail properties, is the standard-bearer for monthly dividend payers. There's a reason it has trademarked its descriptor as "The Monthly Dividend Company." It's been doling out a steadily increasing payout every turn of the calendar since its shares were listed on the New York Stock Exchange way back in 1994.
The company has thousands of sources of revenue. At the end of its most recently reported quarter, its massive portfolio comprised 7,018 properties. Nearly all of these were located in the U.S., but the company is branching out; in September, it closed its first transaction on the European continent -- a 93 million euro ($105 million) sale/leaseback deal with French supermarket operator Carrefour on seven properties in Spain.
Given this financial commitment, and the obvious enthusiasm with which the company announced it, we can expect much greater expansion in this huge new market for the REIT.
Meanwhile, Realty Income continues to grow its fundamentals at admirable rates. In the third quarter, it managed to lift its total revenue by almost 22% on a year-over-year basis. Growth in the company's adjusted funds from operations (AFFO), the most important profitability metric for REITs, soared even higher at 26%.
Nearly all of those 7,000-plus properties are home to active businesses, as Realty Income's occupancy rate is just under 99%. The company rents its spaces out on triple-net leases that have very long terms (the average is nearly nine years). This provides a very solid tenant base for the REIT and effectively locks in years of sturdy cash flow. No wonder the company is willing to share its wealth so frequently.
Realty Income's latest monthly dividend was a shade under $0.25 per share. At the latest closing share price, this yields 4.4%.
2. Gladstone Land
Elsewhere in the REIT sector, we have Gladstone Land. This company's focus is on farmland and assets related to the same, i.e., properties that are rented under triple-net leases to their tenants. Gladstone owned 160 farms covering more than 108,000 acres across 14 U.S. states as of November. All of its properties are under lease.
Are you saying you've never heard of an agricultural properties REIT? That's not surprising. There are only very few on the market and of that small group, Gladstone is far and away the largest and most significant.
Gladstone tends to favor farms that grow fresh produce and select "permanent" crops like nuts and blueberries. It believes these are more profitable and can thus produce higher rental income. These crops also tend to require lower storage expenses and are less volatile in price than commodity crops such as wheat and corn.
This focus makes for a good business strategy. Thanks to organic growth (no pun intended) and net additions to its property portfolio (33, to be exact), Gladstone posted a robust 40% year-over-year increase in revenue in its Q3 (to just under $19.6 million). AFFO saw an even higher leap, bounding 66% upwards to nearly $5.3 million.
That's entirely in character for Gladstone, which over the past few years has seen dramatic improvements in both revenue and AFFO.
All this means Gladstone has plenty in its financial tank for a dividend that gets distributed 12 times per year. The dividend has been paid without fail since the company listed on the stock market in 2013.
The payout isn't immense in either absolute terms (the latest one was less than $0.05 per share) or yield, which these days is 1.8%. However, the regularity of this reliable monthly dividend, Gladstone's strong position in its very limited niche, and its vast scope for expansion make it a compelling stock worth considering. After all, this is a huge country that still has plenty of agricultural lands available to develop.
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Gladstone Land - >>> 10 Monthly Dividend Stocks to Buy in December
Insider Monkey
by Fatima Farooq
December 7, 2021
https://finance.yahoo.com/news/10-monthly-dividend-stocks-buy-140107425.html
Gladstone Land Corporation (NASDAQ:LAND)
Number of Hedge Fund Holders: 7
Dividend Yield: 1.87%
Gladstone Land Corporation (NASDAQ:LAND) is a real estate investment trust based in Virginia. The company was founded in 1997 and has raised its dividend for seven years so far.
B. Riley's Craig Kucera just this November raised the price target on shares of Gladstone Land Corporation (NASDAQ:LAND). The analyst also holds a Buy rating on the stock.
The FFO for Gladstone Land Corporation (NASDAQ:LAND) in the third quarter was $0.17, beating estimates by $0.02. The revenue for the company was $19.59 million, up 40.05% year over year and beating estimates by $1.64 million. Gladstone Land Corporation (NASDAQ:LAND) has gained 18.92% in the past six months and 98.05% year to date.
Insider Monkey's data shows that seven hedge funds held stakes in Gladstone Land Corporation (NASDAQ:LAND) in the third quarter of 2021, worth $7.9 million. In the previous quarter, six hedge funds held stakes in the company worth $5.4 million.
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>>> Warren Buffett is holding these stocks for the huge free cash flow — with inflation at a 31-year high, you should too
MoneyWise
by Brian Pacampara, CFA
December 7, 2021
https://finance.yahoo.com/news/warren-buffett-holding-stocks-huge-175400129.html
Warren Buffett is holding these stocks for the huge free cash flow — with inflation at a 31-year high, you should too
Wall Street pays a ton of attention to company earnings.
But reported earnings are often manipulated through aggressive or even fraudulent accounting methods.
That’s why risk-averse investors need to focus on companies that generate gobs of free cash flow.
Cold, hard cash is real, and can be used by shareholder-friendly management teams to:
Pay inflation-fighting dividends.
Repurchase shares.
Grow the business organically.
Investing legend and Berkshire Hathaway CEO Warren Buffett is famous for his love of cash flow-producing businesses.
Let’s take a look at three stocks in Berkshire’s portfolio that boast double-digit free cash flow margins (free cash flow as a percentage of sales).
Chevron (CVX)
Leading off our list is oil and gas giant Chevron, which has generated $13.9 billion in free cash flow over the past 12 months and consistently posts free cash flow margins in the ballpark of 10%.
The shares have been hot in recent months on the strong rebound in energy prices, but with inflation continuing to heat up, there might be plenty of room left to run.
Management’s recent initiatives to cut costs and improve efficiency are starting to take hold and should be able to fuel shareholder-friendly actions for the foreseeable future.
Just last week, Chevron announced that it would boost its buyback program to as much as $5 billion a year, about 60% higher than previous guidance.
The stock still offers an attractive dividend yield of 4.7%, which investors can pounce on using some extra cash.
Moody’s (MCO)
With whopping free cash flow margins above 30%, credit ratings leader Moody’s is next up on our list.
Moody’s shares held up incredibly well during the height of the pandemic and are up nearly 290% over the past five years, suggesting that it’s a recession-proof business worth betting on.
Specifically, the company’s well-entrenched leadership position in credit ratings, which leads to outsized cash flow and returns on capital, should continue to limit Moody’s long-term downside
Moody’s has generated about $2.4 billion in trailing twelve-month free cash flow. And over the first nine months of 2021, the company has returned $975 million to shareholders through share repurchases and dividends.
Moody’s has a dividend yield of 0.6%.
Coca-Cola (KO)
Rounding out our list is beverage giant Coca-Cola, which has produced $8.1 billion in trailing twelve-month free cash flow and habitually delivers free cash flow margins above 20%.
The stock has had plenty of ups and downs in recent months, but patient investors should look to take advantage of the short-term uncertainty. Coca-Cola’s long-term investment case continues to be backed by an unrivaled brand presence, massive scale efficiencies, and still-attractive geographic growth tailwinds.
And the company is back to operating at pre-pandemic levels.
In the most recent quarter, Coca-Cola posted revenue of $10 billion, up 16% from the year-ago period, driven largely by a 6% increase in unit case volume.
Coca-Cola shares offer a dividend yield of 3.1%.
Generate income outside of the shaky stock market
Even if you don't like these specific stock picks, you should still look to implement Buffett's time-tested strategy of investing in real assets that produce cold, hard cash.
And you don't have to limit yourself to the stock market.
For instance, some popular investing services make it possible to lock in a passive income stream by investing in a wide variety of alternative assets — including fine art, commercial real estate, and even luxury vehicle finance.
You’ll gain diversified exposure to alternative asset classes that big-time investment moguls usually have access to, and you’ll receive regular payouts in the form of monthly or quarterly dividend distributions.
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>>> Bill Gates is using these dividend stocks to generate a giant inflation-fighting income stream ?— you might want to do the same
MoneyWise
by Clayton Jarvis
December 8, 2021
https://finance.yahoo.com/news/bill-gates-using-dividend-stocks-194300892.html
With elite investors like Michael Burry and Jeremy Grantham predicting a reckoning for today’s overheated stock market, it might be time to look at dividend stocks.
Dividend stocks are a way to diversify a portfolio that may be chasing growth a little too obsessively. They generate income in good times, bad times and, particularly important today, times of high inflation.
They also tend to outdo the S&P 500 over the long run.
One prominent portfolio that’s heavy on dividend stocks belongs to The Bill & Melinda Gates Foundation Trust. With the trust being used to pay for so many initiatives, income needs to keep flowing into it.
Dividend stocks help make this happen.
Here are three dividend stocks that occupy significant space in the foundation’s holdings. You may even be able to follow in its footsteps with some of your spare change.
Waste Management (WM)
Waste Management Inc, is an American waste management & environmental services company. It’s not the most glamorous of industries, but waste management is an essential one.
No matter what happens with the economy, municipalities have little choice but to pay companies to get rid of our mountains of garbage, even if those costs increase.
As one of the biggest players in the space, Waste Management remains in an entrenched position.
The shares have more than doubled over the past five years and are up about 42% year to date. Management is projecting 15% revenue growth this year.
Currently offering a yield of 1.4%, Waste Management’s dividend has increased 18 years in a row.
The company has paid out almost $1 billion in dividends over the last year, and its roughly $2.5 billion in free cash flow for 2021 means investors shouldn’t have to worry about receiving their checks.
Caterpillar (CAT)
As a company whose fortunes typically follow that of the larger economy — that’ll happen when your equipment is a fixture on building sites the world over — Caterpillar is in an intriguing post-pandemic position.
The company’s revenues are feeling the effects of a paralyzed global supply chain, but still-historically low interest rates and President Joe Biden’s recently passed $1.2 trillion infrastructure bill mean there could be an awful lot of building going on in the U.S. in the near future.
Caterpillar’s mining and energy businesses also provide exposure to commodities, which tend to do well during times of high inflation.
The company’s stock has ridden higher raw material and petroleum prices to an almost 15% increase this year.
After announcing an 8% increase in June, Caterpillar’s quarterly dividend is currently at $1.11 per share and offers a yield of 2.2%. The company has increased its annual dividend 27 years straight.
Walmart (WMT)
With grocery stores deemed essential businesses, Walmart was able to keep its more than 1,700 stores in the U.S. open throughout the pandemic.
Not only has the company increased both profits and market share since COVID coughed its way across the planet, but its reputation as a low-cost haven makes Walmart many consumers’ go-to retailer when prices are rising.
Walmart has steadily increased its dividends over the past 45 years. Its annual payout is currently $2.20 per share, translating into a dividend yield of 1.6%.
After trending slightly downward over the past month, Walmart currently trades at roughly $136 per share. If that's still too steep, you can get a smaller piece of the company using a popular app that lets you to buy fractions of shares with as much money as you are willing to spend.
Look beyond the stock market
Aerial side view head of cargo ship carrying container and running near international sea port for export.
At the end of the day, stocks are inherently volatile — even those that provide dividends. And not everyone feels comfortable holding assets that swing wildly every week.
If you want to invest in something that has little correlation with the ups and downs of the stock market, take a look at some unique alternative assets.
Traditionally, investing in fine art or commercial real estate or even marine finance have only been options for the ultra rich, like Gates.
But with the help of new platforms, these kinds of opportunities are now available to retail investors, too.
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>>> AT&T Stock Hits 10-Year Low As Dividend Cut, Media Exit Test Bulls Ahead of Q3 Earnings
AT&T shares hit a fresh 10-year low Wednesday as investors re-set their expectations for the group's shift away from media assets in 2022.
The Street
Oct 13, 2021
by MARTIN BACCARDAX
https://www.thestreet.com/markets/at-t-stock-at-10-year-low-as-dividend-cut-media-exit-test-bulls?puc=yahoo&cm_ven=YAHOO
AT&T shares slumped to the lowest level in more than a decade Wednesday as investors continue to re-price the group's shift in focus from media assets to telecoms while adjusting to lower payout ratios ahead of its third quarter earnings.
AT&T has shed key assets, including DirecTV, from its balance sheet and planned the $43 billion merger of its media division with Discovery (DISCA) in a move towards its goal of becoming a so-called 'pure play' telecoms group that leverages off of 5G network growth.
While reducing debt and boosting free-cash flow prospects, the moves have come at a cost to shareholders, with AT&T noting this spring that its dividend payout ratio, which was around 63% in the first quarter, will be "re-sized" to account for the distribution of WarnerMedia assets into a new company.
The remaining AT&T assets will aim to give shareholders a dividend payout ratio of between 40% and 43%, the company said, based on anticipated free cash flow of around $20 billion, the company said.
"Bulls see the telco pure-play, lower debt leverage and a healthier dividend payout cushion using the management team’s $20 billion free-cash-flow (FCF) guidance," said Credit Suisse analyst Douglas Mitchelson in a recent client note. "Bears see profitless growth (stronger revenue/subscriber growth offset by capital investments), risks to the 2023+ FCF guidance, significant infrastructure and spectrum investment needs, and further shareholder rotation when the lower dividend kicks in, requiring a substantial yield premium."
AT&T shares closed 0.5% lower Wednesday at $25.30. The stock hit a trough of $25.01 earlier in the session, the lowest since 2010.
The stock has fallen 7.6% since trading 'ex-dividend' on October 7 ahead of cash payout of 52 cents per share expected on November 1.
AT&T will publish its third quarter earnings on October 21, with analysts currently looking for adjusted EPS of 78 cents on revenues of $39.45 billion.
"Other than cost-cutting, the company is primarily relying on Mobility revenue growth, but doing so at the expense of margins with aggressive handset subsidies (ex. iPhone 13)," Oppenheimer analyst Timothy Horan said last month. "Competition with cable/wireless is reaching a tipping point, as both are bundling the other sector's service at a discount, setting up an industry market share war probably starting earnestly in a year."
AT&T said in July that it sees consolidated revenues rising by between 2% and 3% from 2020 levels for the full year, up from its earlier forecast of 1%, with adjusted earnings rising in the "low to mid-single digits".
For the three months ending in June, AT&T posted adjusted earnings of 89 cents per share, up 7.2% from the same period last year, and stronger-than-expected group revenues of $44 billion.
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>>> Bill Gates is hanging on to these stocks for steady income — you can too
MoneyWise
by Brian Pacampara
September 23, 2021
https://finance.yahoo.com/news/bill-gates-hanging-stocks-steady-205400370.html
In a world of historically low interest rates, investors would be wise to look out for dividend stocks offering solid — but stable — dividend yields.
Bill Gates is hanging on to these stocks for steady income — you can too
Healthy dividend stocks have the potential to:
Offer a plump income stream in both good times and bad times.
Provide much-needed diversification to growth-oriented portfolios.
Outperform the S&P 500 over the long haul.
Today, let’s take a look at three dividend plays that represent sizeable positions in the Bill & Melinda Gates Foundation Trust.
After all, investment legend and BIll’s good pal Warren Buffett is a trustee of the foundation, so it might make sense to follow along — maybe with some of your spare change.
1. Caterpillar (CAT)
With a healthy dividend yield of 2.3%, Caterpillar leads off our list.
According to its most recent 13F filing with the Securities and Exchange Commission, the Gates Foundation owns more than 18.6 million shares of the construction equipment giant representing 9.3% of the portfolio.
Caterpillar shares have slumped in recent months, down more than 25% from their 52-week highs, but now might be an opportune time for bargain hunters to jump in. Competitors like John Deere and Cummins have also been punished.
Despite the bearish sentiment surrounding heavy machinery stocks, Caterpillar’s dividend continues to be backed by unmatched brand credibility, scale advantages, and massive free cash flow generation.
In the most recent quarter, Caterpillar’s revenue jumped 29% to $12.9 billion. More importantly, management returned $800 million to shareholders through dividends and share repurchases.
2. United Parcel Service (UPS)
Next up, we have UPS, which currently offers a dividend yield of 2.2%.
The Gates Foundation owns about 2.8 million shares of the small-parcel delivery leader, accounting for 2.4% of its total portfolio. Gates also owns 1.5 million shares of rival FedEx, so it’s clear that he’s fond of the space.
UPS’ dividend, in particular, is supported by a massive air and delivery fleet that allows the company to earn above-average margins. In fiscal 2020, UPS handled 21.1 million average parcels daily.
More recently, operating profit spiked 47% in Q2 to $3.3 billion as revenue increased 14.5%. And year-to-date, free cash flow clocked in at $6.8 billion representing a jump of 75% from the year-ago period.
With e-commerce tailwinds continuing to blow heavily in UPS’ favor, the stock’s forward P/E of 15 seems reasonable.
To be sure, UPS trades at $187 per share. But you can get a piece of UPS using a popular stock trading app that allows you to buy fractions of shares with as much money as you’re willing to spend.
3. Crown Castle International (CCI)
Rounding out our list is cell tower REIT Crown Castle International, which currently offers a solid dividend yield of 2.8%.
Crown Castle leases its more than 40,000 cell towers to major wireless carriers including Verizon, AT&T, and T-Mobile, so its dividend is backed by a highly reliable revenue stream and still-very attractive mobile data usage trends.
In the company’s latest quarter, management saw its “highest level of tower activity in history” fueled by a robust 5G leasing environment. Adjusted funds from operations — a key metric in the real estate industry — increased 18%.
Thanks to that momentum, Crown Castle paid common stock dividends of roughly $575 million, an increase of 11% over the year-ago period.
Crown Castle shares are down 6% in September.
Bill's preferred personal investment
There you have it: three attractive dividend stocks sitting in the Gates Foundation portfolio.
While growth stocks make most of the financial headlines, generating steady returns with stable assets should be a top priority for risk-averse investors.
Of course, you don’t have to limit yourself to the stock market to do that.
In fact, Bill Gates is partial to investing in U.S. farmland with his own personal money.
Gates is America's largest private owner of farmland and for good reason: Over the years, agriculture has been shown to offer higher risk-adjusted returns than both stocks and real estate.
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P+G, Pepsico, Garmin - >>> 3 Shockingly Cheap Dividend Stocks
They pay cash to investors, and have trailed the market in recent months.
Motley Fool
by Demitri Kalogeropoulos
Aug 19, 2021
https://www.fool.com/investing/2021/08/19/3-shockingly-cheap-dividend-stocks/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
Values can be hard to find on the stock market, especially after the rally we've had since early 2020. But a few niches have been left out of that surge as Wall Street chases seemingly more exciting growth in areas like cloud computing and e-commerce.
That preference has created some surprising deals for income investors willing to buy an unloved, but still impressive, dividend stock. And a few of the best discounts in that arena today are Procter & Gamble (NYSE:PG), PepsiCo (NASDAQ:PEP), and Garmin (NASDAQ:GRMN).
1. Procter & Gamble
Procter & Gamble was a strong business before the pandemic struck, and it has only boosted its value since then. The owner of several blockbuster consumer staples brands added billions to its sales footprint in 2020 by extending its market share lead in niches like laundry care, skin care, and baby care. And P&G's early 2021 has been a softer landing than that of rivals like Kimberly Clark (NYSE: KMB), with sales rising 6% through late June. Kimberly Clark's fell 3% in the same period.
Despite industry-leading growth and profitability, plus a dividend yield currently over 2.3%, P&G's stock has dramatically underperformed the market over the last year. Income investors might consider capitalizing on that (likely temporary) situation by adding the blue-chip giant to their watch lists.
2. PepsiCo
You wouldn't know it by looking at its stock price chart, but PepsiCo is stronger than it has ever been. Organic sales were up by double digits in its most recent report, which trounced expectations thanks to booming demand across its snack food and beverage portfolio. Profitability is steady, and gushing cash flow is allowing CEO Ramon Laguarta and his team to direct resources into high-return areas like the supply and manufacturing chains, advertising, and innovation.
That elevated spending has many investors looking elsewhere for growth, but that's a mistake. Capital investments Pepsi is making now should lay the groundwork for even faster gains than the roughly 4.5% annual sales uptick it has managed in each of the past two years. Toss in dividend reinvestments and expanding margins, and you have a recipe for market-beating returns over time.
3. Garmin
Garmin's stock has almost doubled the market's performance so far in 2021, but it has more room to run. The GPS navigation device giant just hiked its annual outlook across the board, with sales on track to reach $4.9 billion compared to $4.2 billion in 2020. Garmin's latest product introductions demonstrate a knack for wowing customers, whether it's with consumer fitness trackers, smartwatches, aviation, or boat navigation platforms.
Unlike other companies on this list, Garmin hasn't been left out of the recent stock market rally. Its dividend yield is relatively low for that reason, at below 2%. But investors who want to add more growth into their dividend-heavy portfolios might want to consider this stellar business.
Operating margins have been expanding for several years and should continue climbing thanks to growth in areas like aviation and boating. Its wider portfolio, meanwhile, protects against the types of sales slumps that have plagued less diversified consumer tech peers. These factors make Garmin seem cheap, considering its expanding earnings power.
You might want to watch this stock in hopes of scoring a discount as part of a wider market correction. Or you could establish a smaller position now and simply look to dollar-cost-average into the stock over time.
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>>> Warren Buffett is hanging on to these stocks for stable income — you could too
MoneyWise
Brian Pacampara, CFA
August 31, 2021
https://finance.yahoo.com/news/warren-buffett-hanging-stocks-stable-190000112.html
In a world of historically low interest rates, investors would be wise to look out for dividend stocks offering attractive — but stable — dividend yields.
High-yield dividend stocks have the potential to -
Offer a plump income stream in both good times and bad times.
Provide much-needed diversification to growth-oriented portfolios.
Outperform the S&P 500 over the long haul.
Of course, there’s no better place for investors to find solid high-yield stock picks than the portfolio of Berkshire Hathaway CEO Warren Buffett.
So with that in mind, let’s take a look at three stocks in Berkshire’s portfolio with an annual dividend yield of at least 3%.
1. Organon
With a solid dividend yield of 3.3%, biosimilars (copies of drugs used to treat diseases) and women’s health drugs specialist Organon leads off our list.
Organon became a part of Berkshire’s portfolio when drug giant Merck spun off the shares in June, but given the company’s competitive advantages and tailwinds in the women’s health space, Organon could easily become a long-term holding for Buffett.
In the most recent quarter, Organon said women’s health and biosimilars revenue increased 19% and 43%, respectively.
“Looking beyond 2021, we remain confident in our ability to organically grow revenue in the low to mid-single digit range, as LOE risk will largely be behind us and Women’s Health and Biosimilars are positioned to deliver double digit growth,” said CEO Kevin Ali.
Organon shares are flat since being spun off and currently trade at a cheapish price-to-earnings ratio of 4.9.
2. Store Capital
Next up, we have retail-oriented REIT Store Capital, which boasts a healthy dividend yield of 4.0%.
It’s no secret that retailers were hit hard during the COVID-19 pandemic, but Store’s dividend continues to be supported by healthy cash flows and a stable roster of large corporate tenants (more than 70% of its tenant base generates annual revenue of over $50 million).
In the most recent quarter, the company’s adjusted funds from operations — a key metric in the real estate space — clocked in at a solid $135.6 million.
“Collectively, our strong portfolio performance, origination activity and financial results have enabled us to raise our 2021 AFFO guidance from $1.90 to $1.96 per share to a range of $1.94 to $1.97,” said President and CEO Mary Fedewa.
Store Capital shares trade at a price-to-book of 1.7 versus 4.4 for the S&P 500.
3. The Kraft Heinz Company
Rounding out our list is packaged food giant Kraft Heinz Company, which currently offers a tasty dividend yield of 4.4%.
Kraft Heinz’s dividend is backed by massive scale advantages and a portfolio of well-known brands — including Heinz ketchup, Jell-O and Philadelphia cream cheese. And with the top-line continuing to benefit from the trend of consumers eating at home, Kraft Heinz looks well-positioned for the next few years.
In Kraft’s latest quarter, the company topped analyst estimates even amid inflationary pressures as demand for its packaged meals remained strong.
“Our second quarter results serve as a strong indicator that our Kraft Heinz team will not only deliver a stronger 2021 than we initially anticipated, but will come out of the global pandemic much stronger than we entered,” said CEO Miguel Patricio.
Kraft shares have fallen 17% over the past three months, making it an especially delicious-looking value opportunity.
Cash is king
There you have it: three attractive high-yield dividend stocks sitting in Berkshire Hathaway’s portfolio.
While growth stocks make most of the financial headlines, generating regular income should be a top priority for risk-averse investors.
Of course, you don’t have to limit yourself to the stock market to do that.
For instance, this investing service makes it possible to lock in a steady rental income stream by investing in premium real estate properties — from commercial developments in LA to residential buildings in NYC.
You’ll gain exposure to high-end properties that big-time real estate moguls usually have access to, and you’ll receive regular payouts in the form of quarterly dividend distributions.
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Johnson & Johnson - >>> 4 Top Stocks to Buy and Hold for the Next Decade
These stocks could grow exponentially in coming years.
Motley Fool
by Neha Chamaria
Aug 28, 2021
https://www.fool.com/investing/2021/08/28/4-top-stocks-to-buy-and-hold-for-the-next-decade/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
Key Points
Investing in high-growth industries is the key to making money.
Utilities are safe investments, but some are also tremendous growth stocks.
Healthcare and clean energy offer mind-boggling investing opportunities right now.
COVID-19 vaccine could be a shot in the arm for this Dividend King
Johnson & Johnson (NYSE:JNJ) stock has proven to be a stellar performer for patient investors over the years, and that's unlikely to change.
Johnson & Johnson is a leader in the healthcare space with an exemplary mix of businesses -- while its globally renowned consumer health brands generate steady cash flows, its larger pharmaceuticals and medical devices businesses offer unending growth opportunities.
Just to give you some examples, several of Johnson & Johnson's products received regulatory approvals last quarter, including drugs for lung cancer, sclerosis, and myeloma, and a next-generation treatment procedure for cataract.
Johnson & Johnson's growth strategy has clicked so far because it has always prioritized organic growth via consistent spending on research and development (R&D), and spent remaining free cash flows on acquisitions, dividends, and share repurchases. So in 2020, it invested $12.2 billion in R&D, and paid out $10.5 billion in dividends.
In fact, Johnson & Johnson mainly lures investors with its dividends -- it's one of the best Dividend Kings to own, having increased dividends every year for 59 consecutive years. The stock yields a respectable 2.4%.
Now that Johnson & Johnson's single-shot COVID-19 vaccine could also potentially generate big sales, it's a stock you'd want to own for decades.
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>>> 3 Dividend Stocks You Probably Will Never Regret Buying
They offer more than just great dividends.
Motley Fool
Keith Speights
Aug 29, 2021
https://www.fool.com/investing/2021/08/29/3-dividend-stocks-you-probably-will-never-regret-b/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
Key Points
One of these dividend stocks has an impeccable track record of dividend increases and stability.
Another is one of only a handful of companies poised to benefit from an unstoppable trend.
The third is the leader in a fast-growing market and has quadrupled its dividend payout over the last three years.
Most investors can identify with the opening lyrics to Frank Sinatra's (and Elvis Presley's) hit song "My Way," where he says, "Regrets, I've had a few." Many, if not all, of us have bought stocks that we later wished we hadn't.
There are some investments, though, that are highly unlikely to lead to buyer's remorse later. Here are three dividend stocks that you'll probably never regret buying.
1. Johnson & Johnson
Johnson & Johnson (NYSE:JNJ) ranks as a Dividend King, an elite group of S&P 500 members that have increased their dividends for at least 50 consecutive years. The healthcare-giant's streak of dividend hikes stands at 59 years. Only nine other stocks have longer records of dividend increases.
Few companies offer the stability that Johnson & Johnson does. The company has survived and thrived for 135 years. It generates tremendous cash flow from a diversified group of businesses that span across the healthcare sector. Probably the only way that J&J's current dividend yield of 2.45% will fall is if its stock appreciates at a faster rate than its dividend grows.
There's a good chance that scenario could happen. Johnson & Johnson's pharmaceuticals unit boasts several blockbuster drugs with fast-growing sales, notably including cancer drug Darzalex and immunology drugs Stelara and Tremfya. The company's pipeline features 53 programs in late-stage development -- more than most drugmakers have in their entire pipelines.
Johnson & Johnson's other business segments could also fuel the company's growth. In particular, its medical-device unit has significant opportunities in robotic surgical systems.
2. Brookfield Renewable
I can think of several trends that are practically unstoppable. One of them is the increased adoption of renewable energy. Costs of renewable energy sources, especially wind and solar, continue to fall. Meanwhile, countries and major corporations are scrambling to reduce carbon emissions.
Brookfield Renewable (NYSE:BEP) (NYSE:BEPC) CEO Connor Teskey summarized his company's position quite well in its Q2 conference call: "As one of the few businesses with the scale, track record and global capabilities to both partner with governments and businesses and also invest to help them achieve their decarbonization goals, we believe we have a great runway ahead of us." I agree with that assessment.
The company currently operates hydroelectric, wind, solar, and storage facilities spread across four continents. Brookfield Renewable's capacity tops 20,000 megawatts. Its development pipeline is even bigger -- 31,000 megawatts.
What about the dividend? Since 2000, Brookfield Renewable has increased its distribution by a compound annual growth rate of around 6%. Its dividend yield now stands at a little under 3%, but the company expects to increase the distribution by 5% to 9% per year
.
3. Innovative Industrial Properties
Innovative Industrial Properties (NYSE:IIPR) is my favorite dividend stock of all to buy right now. I'll admit that its dividend yield of 2.3% doesn't seem overly impressive at first glance. However, IIP has increased its dividend payout by four times over the last three years. That is impressive.
You might wonder if IIP's dividend is risky because of the nature of its business. The company provides real estate capital to medical-cannabis operators. My view is that the dividend is actually quite safe.
Thirty-six states and counting have legalized medical cannabis. They're not about to turn their backs on an increasingly important source of revenue. IIP does a great job evaluating the risks of the medical-cannabis operators that it signs on as tenants. And as a real estate investment trust (REIT), the company must distribute at least 90% of its taxable income to shareholders in the form of dividends.
As much as I like its dividend, though, it's not the main reason why IIP ranks so high on my list. I think this stock has tremendous growth prospects. The company currently owns and leases properties in only half of the states where it could operate.
If federal cannabis reform is enacted, the cannabis market could expand even more. I don't think investors will include buying IIP as one of their regrets 10 years from now.
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Procter & Gamble - >>> What Investors Missed in Procter & Gamble's Latest Earnings
P&G is looking even more attractive as growth slows following the pandemic spike.
Motley Fool
by Demitri Kalogeropoulos
Aug 11, 2021
https://www.fool.com/investing/2021/08/11/what-investors-missed-in-procter-gambles-latest-ea/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
Key Points
Sales growth is staying elevated despite earlier pantry-stocking.
Margins are up, and cash flow is surging.
P&G sees a few big risks ahead, including spiking raw material costs.
Shares of Procter & Gamble (NYSE:PG) have been shunned during the market rally despite impressive operating results from the consumer staples titan. But P&G just keeps on getting stronger, even if Wall Street hasn't noticed.
The company just closed out another great fiscal year of market share growth coupled with solid financial metrics like cash flow and profitability. Let's look at three highlights from that performance.
1. It's not done growing
Investors have been worried about a growth pullback, and that's happening today. Sales gains slowed to 4% in the fiscal fourth quarter, which ended in June, compared to 7% for the wider fiscal year. P&G also posted some of its weakest volume growth since the pandemic started.
But the company is still growing compared to a booming prior-year period. It didn't suffer from as much of a demand hangover as rivals, either. While Kimberly Clark (NYSE: KMB) reported falling sales and declining volumes, P&G is winning share and attracting more customers in key niches like fabric care, skin care, and home cleaning supplies.
"Growth was broad-based across business units," CFO Andre Schulten said in a call with Wall Street analysts, "with each of our 10 product categories growing or holding organic sales [in fiscal 2021]." Sure, sales fell 1% in the U.S. market. But that's compared to a 19% spike a year ago as pantry stocking hit an unprecedented level.
2. Innovation matters
P&G's ability to consistently raise the bar on its products allows it to deliver faster growth and stronger profitability than its peers. While margins shrank this quarter due to inflation, those drops were smaller than what Kimberly Clark suffered. Average prices rose, too, in part thanks to a consumer trade-up to popular, premium offerings across the portfolio.
CEO David Taylor said a new NyQuil launch was a prime example of that process at work. "NyQuil Honey is the No. 1 new item in the U.S. respiratory market, and our Vicks share is up 90 basis points over the past 12 months despite the soft market due to the very weak cough-cold season."
Investors can see evidence of that innovation leadership mainly in P&G's market-thumping profitability. The company is careful to compete only in the most attractive niches that can lift margins through product improvements.
3. The risks ahead
P&G sees several major risks ahead that might make fiscal 2022 just as difficult as 2021 was in many ways. "Raw material and transport costs have risen sharply," Taylor said, and "increased social unrest and economic distress in many parts of the world are putting pressure on local GDP growth." The pandemic is still limiting consumer mobility and retailing and supply chains, too.
The company is still confident that it can grow sales by between 2% and 4% this year after last year's 7% spike. Kimberly Clark, for context, recently projected flat organic sales in 2021.
Executives see an enduring post-pandemic lift for several key categories like health and hygiene and home maintenance, which should help P&G outgrow the industry even after the COVID-19 threat ends. Investor returns will be further amplified by a rising dividend and stock repurchase spending, which together should land at about $16 billion in fiscal 2022.
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Pepsico - >>> Questor: it may not be Tesla or Amazon but Pepsi is quietly delivering for shareholders
Telegraph
by Richard Evans
August 24, 2021
https://finance.yahoo.com/news/questor-may-not-tesla-amazon-140613993.html
The recent history of corporate America has been dominated by a small group of charismatic, noisy “big men”: Jeff Bezos of Amazon, Tesla’s Elon Musk, Mark Zuckerberg of Facebook. But some of its stock market champions take a quieter approach to generating profits for their shareholders.
Questor doubts, for example, that many readers are familiar with the name of Pepsi’s chief executive, Ramon Laguarta. This is because Pepsi lacks a “big man culture – it is not the creation of one man, a Musk or a Bezos”, says Rob Burgeman of Brewin Dolphin, the wealth manager, which holds the stock of behalf of some of its clients.
“Laguarta is not someone who comes in and shakes everything up,” Burgeman adds. “Pepsi hasn’t suddenly got a new team at the top. For us, this illustrates good governance, good corporate culture, which has always been important at Pepsi.”
The company’s great rival is of course Coca-Cola, which is perhaps more firmly anchored in the public’s mind and can count Warren Buffett’s Berkshire Hathaway as a major shareholder. Buffett has said he will never sell a single share in Coca-Cola. But Burgeman says Pepsi offers investors the better opportunity.
“Right now the business case for Pepsi is stronger because it sells a greater variety of products,” he says. “Coca-Cola is pretty much beverages, whereas Pepsi offers a range of soft drinks, bottled waters and foods.” Its products include Gatorade, SodaStream and Quaker Oats and it can boast 23 brands that generate annual sales of more than $1bn (£700m).
“It’s a company you think you know but there is more to it,” Burgeman says. “And it is investing in growth. While its range of brands has not changed much in the past few years, it is always tweaking them so that they move along with the times. It is switching to low-sugar versions of its drinks, for example. Continuously investing money in your brands like this creates value. If you don’t do it you will start to go backwards.”
Pepsi’s efforts to grow also involve seeking new markets for its products. “Pepsi is more US-focused than Coca-Cola, so there is an opportunity to sell more beyond its home market,” he adds. “The company has proved itself to be a good allocator of capital, which allows it to make high returns on capital and generate lots of cash. In other words, it’s a good compounder.”
He acknowledges the threat from greater regulation as governments attempt to tackle obesity but says Pepsi has “dials it can twiddle” in response. “It could move towards baked versions of crisps, for example. Given enough time it could probably change its entire range to healthy products. But I can’t see snacks and drinks coming under the same kind of pressure as smoking,” he says.
“We like core blue-chip stocks and Pepsi is one of the first to go into the discretionary funds we run for our clients. There’s a lot to like about it.”
Questor says: buy
Ticker: Nasdaq: PEP
Share price at close: $155.89
Update: Axon
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Essential Utilities (WTRG) - >>> 3 Stocks You Can Buy and Hold Forever
Motley Fool
June 4, 2021
https://www.fool.com/investing/2021/06/04/3-stocks-you-can-buy-and-hold-forever/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
Essential Utilities (NYSE:WTRG) is a regulated water and natural gas utility provider with roughly 5 million customers in 10 states. This business isn't very exciting, but it's a stable cash-flow investment that should chug along comfortably for years.
The company grew substantially through a major acquisition last year, but it looks set to grow 5% to 7% annually through 2023. Essential Utilities operates in regulated markets, so the rates it can charge customers are visible to the public. Regulation and the nature of utility infrastructure also make it very difficult for competitors to disrupt incumbents. These characteristics make this a really stable and reliable stock, which is perfect for dividend investors.
Essential Utilities pays a 2.1% dividend yield, which is fairly attractive in today's environment. That's especially strong when you consider the additional risk assumed by higher-yield stocks in the energy or real estate sectors, for example. Essential Utilities is moving along with a 60% payout ratio, indicating that the company produces more than enough profit to sustain and grow its dividend. Given the reliable growth forecasts for the medium term, this is a stable income investment. It won't deliver huge growth, but it will continue to kick off cash.
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>>> REITs as an inflation play
Real estate investment trusts can help generate income and hedge against inflation.
BY FIDELITY LEARNING CENTER
04/28/2021
https://www.fidelity.com/learning-center/overview
Key takeaways
In an inflationary environment, real estate investment trusts (REITs) offer investors a unique combination of potential for capital appreciation, inflation hedging, and income.
REITs invest in a wide variety of types of real estate. Among the potential winners: REITs that invest in industrial real estate, data centers and communication-tower properties..
REITs also have unique tax and reporting complexities that other types of investments may not.
Careful security selection by active managers can help manage the risks of investing in REITs.
With inflation rising and interest rates still near historic lows, investments that have historically performed well in inflationary times are appealing and so are those that can deliver income despite low rates.
Historically, when inflation has risen, stocks and real estate have tended to fare relatively well compared with bonds. While past performance offers no guarantees about what may happen in the future, the track record of both stocks and real estate may make this a good time to find out more about REITs, which are companies that own, operate, or finance income-generating real estate including offices, apartments, shopping centers, hotels, and more.
Most REITs are publicly traded and enable investors to earn dividends from real estate without having to buy individual properties. REITs offer the potential for capital appreciation of stocks (and the potential exposure to stock market volatility), income in the form of dividends, and also the benefit of exposure to underlying real estate that has tended to gain in value during inflationary times. Furthermore, after a year of COVID-related restrictions which emptied many commercial buildings of tenants and customers, many REITs are trading at modest valuations even as economic growth revives.
Why REITs?
Besides its historical role as an inflation hedge and a source of income, real estate can also provide diversification within the equity portion of an investor's portfolio. While it's difficult and expensive to get exposure to real estate by buying and managing a building or developing a piece of land, buying shares of REITs that purchase and bundle buildings or land offer a practical and relatively liquid means of doing so. Keep in mind, though, that diversification and asset allocation do not ensure a profit or guarantee against loss.
"I find REITS to be quite attractive and we're adding them," says Adam Kramer, lead manager of the Fidelity® Multi-Asset Income fund and co-manager of the Fidelity® Strategic Dividend Income fund. "It's a really interesting time for real estate in so many ways, because we've had this huge retreat from offices, an acceleration of the retreat from brick and mortar shopping, and now at least some things are coming back."
Potential winners and losers
While REITs overall may be attractive, though, would-be investors need to understand that not every REIT is equally attractive. REITs typically specialize in certain types of properties such as retail or apartment buildings and COVID-19 has accelerated trends that are transforming real estate markets, benefiting some types of properties and disfavoring others.
Steve Buller, manager of Fidelity® Real Estate Investment ETF says 2 of the most significant trends he's watching are the ongoing decline of brick-and-mortar retail properties and the accompanying growth in demand for industrial real estate driven by the growth of e-commerce. He says that owners of data-center and communication-tower properties have also experienced rapid demand growth as telecommuting has gone mainstream over the past year.
That same trend toward telecommuting is also raising questions about the future of office real estate. Buller expects a likely reduction in future demand for office space and is also watching to see how the shift toward remote work could influence demand for apartments as telecommuters reconsider where they are able to live while still earning a living.
Value and income
Kramer says that many REITs still have a lot of this uncertainty priced into them and because so much bad news took place last year a lot of companies already cut their dividends. He feels more comfortable about dividends actually growing from the low single digits to the mid single digits next year. "When you consider dividend yield, dividend growth, and potential for multiple expansion, REITs look more attractive to me than other income-oriented asset classes," says Kramer. "So that's why we've been looking across the full spectrum, but not only in the US. I'm finding opportunities in Canada as well. Canada is way behind the US in terms of the vaccine rollout and there’s more uncertainty around the reopening and use of some of the properties that these REITs own."
Managing the unique risks of REITs
Careful security selection by active managers can help manage the risks of investing in this distinctive and highly variegated asset class. One of the unique characteristics of REIT shares is that they are liquid assets that derive their value partly from the ownership of illiquid assets. That can pose operating challenges because changes in real estate values or economic downturns can have a significant negative effect on real estate owners. REITs also have unique tax and reporting complexities that other types of investments may not. Experienced managers with deep knowledge of individual companies and real estate markets can help investors avoid some of the risks while gaining the benefits of diversification, income potential, and inflation hedging.
Finding ideas
Many investors may have some exposure to REITs through diversified mutual funds and ETFs. Those who want to further diversify their portfolios with REITs should determine their existing level of exposure, consider the risks and complexities, and research professionally managed mutual funds and ETFs. You can run screens using the Mutual Fund and ETF Evaluators on Fidelity.com. Below are the results of some illustrative mutual fund screens (these are not recommendations of Fidelity).
Mutual funds that invest in REITs
Fidelity funds
Fidelity® Real Estate Investment Portfolio (FRESX)
Fidelity® International Real Estate Fund (FIREX)
Fidelity® Real Estate Income Fund (FRIFX)
Fidelity® Multi-Asset Income Fund (FMSDX)
Non-Fidelity funds
MFS Global Real Estate Fund (MGLAX)
American Century Global Real Estate Fund (ARYVX)
Franklin Real Estate Securities Fund (FREEX)
Exchange-traded funds
Alps Active REIT ETF (REIT)
Fidelity® Real Estate Investment ETF (FPRO)
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PG, KO, VZ - >>> Forget AT&T: Here Are 3 Better Dividend Stocks
Plenty of income-producing picks aren't saddled by all the unknowns that surround AT&T at this time.
Motley Fool
by James Brumley
Nov 25, 2020
AT&T (NYSE:T) certainly has more than its fair share of problems right now. Its cable TV business -- primarily DIRECTV -- lost another 627,000 customers last quarter. It's lost more than 7 million of its television subscribers in just the past couple of years. Meanwhile, its WarnerMedia arm has been struggling with COVID-19-related theater shutdowns and filming impasses. WarnerMedia's revenue fell 10% last quarter, led lower by its Warner Bros. studio.
Yet, lots of investors are still digging the company's quarterly dividend and its current yield of 7.4%. And they should. Despite its litany of challenges, last quarter's adjusted earnings of $0.76 per share was still more than enough to cover its current quarterly dividend of $0.52. And that was a notably poor quarter. Before the COVID-19 pandemic took hold, AT&T was regularly earning between $0.80 and $0.90 per share, per quarter.
Nevertheless, although 35 straight years of annual dividend growth makes this telecom giant a Dividend Aristocrat one can count on, there are alternatives out there that bring a little less drama and volatility to the table. Income investors thinking about a new position in AT&T may instead want to consider Procter & Gamble (NYSE:PG), Coca-Cola (NYSE:KO), and Verizon Communications (NYSE:VZ). Let's take a closer look at these three dividend stocks.
1. Procter & Gamble
Dividend yield: 2.3%
You know the company, but you may not know just how familiar you are with the consumer goods titan. Procter & Gamble is the name behind Pampers diapers, Downy fabric softener, Tide laundry detergent, Charmin toilet paper, and Gillette shaving supplies, just to name a few of its brands. Not only does the company have a lot of different ways to make money, but it makes the goods people keep buying regardless of the economic environment.
One of the chief investor criticisms of P&G in recent years has been that it's fallen out of touch with the way consumers think. For instance, Gillette has lost market share in recent years to newcomers like Dollar Shave Club and Harry's, which do lots of their business online. Some of these criticisms were legitimate too, even if the dividend wasn't immediately threatened. Most big problems start out as unrecognized small problems.
Procter & Gamble has evolved its operation in a big way, however. Chiefly, it's embraced the power of connecting with consumers in stores as well as online. Last quarter's e-commerce business was up 50% year over year, and while digital still only drives between 11% and 12% of its revenue, the company has clearly learned that it needs to be omnichannel, and it's learning how to be omnichannel.
2. Coca-Cola
Dividend yield: 3.1%
Sugary sodas may be falling out of favor as consumers become more health-minded, but The Coca-Cola Company is so much more than its Coke and Sprite brands. This is the same company that owns Dasani water, Minute Maid juices, POWERADE, Gold Peak tea, Barq's root beer, and other drink brands. Its products can be found all the way down your grocer's beverage aisle.
This diverse portfolio hasn't always been enough to keep the company on a steady growth track. Revenue peaked in 2013, for example, with the company still too reliant on sparkling beverages. That's continued to change in the meantime, as has its business model. Coca-Cola shortly thereafter began a major restructuring effort, offloading the bottling aspect of its business to localized franchises.
The end result was shrinking revenue that obscured the headwind related to changing consumer behavior, but ultimately, what remained was higher-margin revenue. Operating as well as net income began to grow again in 2018 even though revenue didn't.
The company was still in regrouping mode as of last year, and the pandemic rendered this year's numbers useless as a measure of the beverage company's health. To the extent one can ferret out the post-COVID-19 normal for The Coca-Cola Company, however, the reorganization of its bottling and licensing business appeared to be working well. Last year's third-quarter revenue grew 8%, and pre-tax net income grew 3% year over year. Fourth-quarter revenue last year improved 16%, and pre-tax income more than doubled. Perhaps most important, last year's full-year diluted earnings of $2.07 per share was more than enough to cover its current annualized payout of $1.64 per share.
3. Verizon Communications
Dividend yield: 4.2%
Finally, while AT&T may not be the best fit for all income-minded investors, that doesn't mean a telecom name can't round out your dividend-paying positions. Verizon Communications is yielding a pretty healthy 4.2% on its dividend and has upped its annual payout 14 years in a row now. That doesn't yet qualify the company as a Dividend Aristocrat, but it sure looks like Verizon is working its way toward that label.
The biggest reason Verizon is arguably the better pick of the two telecom plays, however, is that Verizon hasn't bogged itself down by misguided ventures like a television and movie studio or a cable television operation. Yes, its acquisitions of AOL and Yahoo! turned into debacles. Beyond those gaffes, though, Verizon has kept a tight focus on things it could do well, and things that improve its core telecom business.
Its big pet project of late has of course been fifth-generation networking (5G). The company noted in March it would spend another $18 billion in 5G infrastructure this year, and well it should. M Science estimated in August that Verizon has sold more 5G smartphones than any other wireless carrier by far, plugging them into its robust 5G network that leans heavily on its huge fiberoptic network. In the meantime, Verizon has already started to deploy at-home broadband hardware that connects consumers to its wireless 5G network.
It will take some time for Verizon to monetize and then annuitize this technology. But that just means the company's got a long earnings runway that should keep its dividend growing for years to come.
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>>> Pepsi raises dividend by 7%
MarketWatch
Nov. 19, 2020
By Claudia Assis
https://www.marketwatch.com/story/pepsi-raises-dividend-by-7-2020-11-19?siteid=yhoof2
PepsiCo Inc. PEP, +0.07% said late Thursday its board of directors have authorized a quarterly dividend of $1.0225 a share, a 7% increase from the comparable year-ago period. The move is consistent with PepsiCo's previously announced increase in its annualized dividend to $4.09 a share from $3.82 a share, which began with the June 2020 payment, the company said. The quarterly dividend is payable on Jan. 7 to shareholders of record on Dec. 4. PepsiCo has paid consecutive quarterly cash dividends since 1965, and 2020 marked the company's 48th consecutive annual dividend increase, it said.
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Cannabis ETF dividends - >>> Understanding THCX, MJ Cannabis ETF Dividend Announcements
MarketWatch
June 22, 2020
By Javier Hasse
https://www.marketwatch.com/story/understanding-thcx-mj-cannabis-etf-dividend-announcements-2020-06-22
Last week, two major cannabis-focused ETFs — the ETFMG Alternative Harvest ETF MJ, -0.29% and the Cannabis ETF THCX, -0.44% — announced they would be distributing dividends.
THCX declared a dividend of approximately 25 cents per share, to be paid June 23 to shareholders of record as of the close of business June 22. With this distribution, THCX’s year-to-date dividend payment amounts to roughly 67 cents per share.
MJ, for its part, paid a dividend of 28 cents per share on June 18, to shareholders of record as of the close of business on June 16. With this last payout, the fund expects to provide its shareholders an annualized yield of 8.17% — 7.42% after deducting MJ’s 0.75% expense ratio.
By back of the envelope calculations, THCX’s annualized yield stands around 6.7% before expenses and fees.
But, how is it possible ETFs are returning money to their shareholders even with their valuations down by double digits (around 20%) since the beginning of the year?
The short answer: the money for the dividend (at least in THCX’s case) is coming from securities lending income, according to Matt Markiewicz,Managing Director of THCX The Cannabis ETF.
What this means is, the fund’s positions are being lent out to borrowers at attractive rates. Since the shareholders of THCX are entitled to the majority of that income earned, this income is being returned in the form of a dividend.
Take into account most cannabis stocks boast stellar borrow rates due to the relatively low market cap and float of many of them. This is a result of a higher-than-normal demand to borrow stocks – either to short or just to trade, coupled with a lower-than-average supply of these stocks.
Compound this with the fact that many cannabis stocks are also heavily shorted and what you get is a very favorable solution for the lender. In this context, ETFs like THCX, can lend shares to an institutional investor even for a few days and generate revenue for its own investors.
“Given the fact that most cannabis companies don't pay a dividend, let alone turn a profit, some cannabis ETFs may offer a unique value proposition as they give investors diverse exposure to a growth theme but with an income component,” Markiewicz told Benzinga.
In fact, in two decades working on Wall Street, Markiewicz hasn’t seen many equity portfolios tilted toward growth industries that offer any meaningful level of yield.
“In this zero interest rate environment, financial advisors are open to out-of-the-box solutions to help provide income for their clients. They just don't know it may exist in a cannabis ETF however,” he said.
The investor feels like investors have piled into mega-cap, dividend-paying stocks like Procter & Gamble Co PG, -0.16%, Johnson & Johnson JNJ, -0.53% and even Microsoft Corp. MSFT, -0.95%.
Others, instead, have turned to fixed income ETFs which, “thanks to the Fed, have seen record inflows this year – and it's not even July,” Markiewicz added.
“The herd mentality can be a tailwind when those asset prices are going up of course but when the tide goes out, it may not feel so comfortable standing naked on the beach.”
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>>> AT&T Drops Lowest-Priced DirecTV Option, but There's a Method to the Madness
Potential buyers of the cable satellite brand need to see the business is at least capable of viability in the future.
James Brumley
Sep 10, 2020
https://www.fool.com/investing/2020/09/10/att-drops-lowest-priced-directv-option-but-theres/
On the surface, it seems like (another) bad decision from telco giant AT&T (NYSE:T). The company is no longer offering its cheapest "Select" package to new DirecTV subscribers, making it even less compelling for newcomers to sign on to the struggling service. That move follows DirecTV's similarly uninviting decision made in June to raise the price of several plans by $10 per month -- at least for newcomers. Existing subscribers will continue to pay their same recent rates, which remain above new customers' discounted costs during their first of service.
For a cable television brand that's lost nearly 4 million satellite cable customers over the course of the past four quarters, though, this isn't a time to close any doors. There's a certain logic to the move, however, not despite resurfaced rumors that AT&T is looking to shed at least most of DirecTV, but because of them.
DirecTV's rising introductory prices
Phillip Swann, perhaps better known as the web's TV Answer Man, appears to be the first to report it: DirecTV's "Select" plan that sold for $59.99 per month for the first year of a new customer's subscription is no longer an option. The next-cheapest offer for newcomers is "Entertainment," which costs $64.99 per month during the first year of a two-year commitment but jumps to what is presently a price of $97 per month after the first year. The second year of the "Select" plan cost around $80 per month while it was still sold.
It seems like a step in the wrong direction, particularly given the plethora of cheaper and free streaming services now permeating the television arena.
To fully understand what led AT&T to this particular decision, though, one has to go back to something AT&T's now-retired CEO Randall Stephenson said last May during an investor conference hosted by J.P. Morgan. Stephenson explained at the event:
[T]he other element to give you sustainable profitability is cleaning up the customer base. Because we have a number of customers on our rolls that are very low-ARPU [average revenue per user] customers and we don't see any line of sight to getting them to a profitable level. And so as these customers' contracts or whatnot are coming up, there are many who are opting to just leave, and it's caused churn to spike considerably. These are really low-ARPU customers.
Erasing any doubt that profitability is the priority, Stephenson added:
[T]he lion's share of this customer base are high-quality customers. ... The churn is over 100% driven by just this cleanup of the customer base. ... We get to 2020, we think these customer numbers can begin to improve significantly. And in fact, we will achieve the EBITDA stability of Entertainment Group this year."
Fast forward to today. The COVID-19 pandemic clearly disrupted every company's 2020 plans, and it's not clear if this cleanup work of DirecTV's customer has led to the EBITDA stability Stephenson was talking about then. What is clear, however, is that new CEO John Stankey doesn't believe bringing bargain-minded customers into the DirecTV fold does any good either.
The bottom line for AT&T
AT&T isn't the only cable company grappling with higher costs that have been matched with waning pricing power. Mike Cavanagh, CFO of rival cable television provider Comcast (NASDAQ:CMCS.A), commented around the same time last year, "we will not chase unprofitable video subs." Presumably, other cable television names are of the same mind, aiming to manage the cable contraction profitably rather than fight it. Neither the companies with cable TV operations nor their shareholders seemed surprised or terribly upset that the industry lost another 4 million customers during the first half of this year.
AT&T, however, may have a much stronger motivation to prove a smaller DirecTV unit is actually a more profitable one. A few days ago The Wall Street Journal reprised the notion that the telecom powerhouse is looking to offload at least most of its cable satellite brand, suggesting talks with private equity firms have already taken place. Those prospective suitors may be leery of buying a business that's bogged down by a swath of ever-changing customers that are taking an ever-changing toll on the bottom line. On the flip side, suitors may be ok with a stable and loyal customer base that's also persistently profitable.
Whatever the case, it's difficult to categorize what AT&T is doing with DirecTV as anything but defensive.
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AT&T, Phillip Morris - >>> 3 Stocks to Buy With Dividends Yielding More Than 5%
AT&T and two other stable blue-chip stocks continue to pay out big dividends throughout the COVID-19 crisis.
by Leo Sun
Sep 10, 2020
https://www.fool.com/investing/2020/09/10/3-stocks-to-buy-with-dividends-yielding-more-than/
2020 has been a tough year for income investors, as the COVID-19 crisis forced many companies to abruptly cut or suspend their dividends. However, many reliable dividend stocks survived that wash out, and continue to pay forward yields exceeding 5%.
Let's examine three of those high-yield heavyweights: AT&T (NYSE:T), Seagate (NASDAQ:STX), and Philip Morris International (NYSE:PM). All three of these blue-chip companies face near-term headwinds, but their core businesses could stabilize in the near future -- so investors who buy these high-yielding stocks could be well-rewarded for their patience.
1. AT&T
AT&T is one of the top wireless carriers in the U.S. It's also a leading pay-TV provider, thanks to its takeover of DirecTV five years ago, and its acquisition of Time Warner in 2018 turned it into a media juggernaut.
AT&T faces three main headwinds: Its wireless business faces tough competition, it's ceding pay-TV subscribers to streaming services, and the COVID-19 crisis crippled its new WarnerMedia segment by postponing releases of new movies and shows.
As AT&T dealt with all those challenges, it attempted to unite its fragmented ecosystem of streaming services, divest its weaker business units, and reduce its long-term debt. Moreover, it maintained that juggling act while dealing with an activist challenge last year and a CEO change earlier this year.
Analysts expect those pressures to reduce AT&T's revenue and earnings by 6% and 11%, respectively, this year. However, its growth could stabilize next year as the pandemic passes, new 5G handsets hit the market, and its streaming efforts start to bear fruit.
Investors clearly aren't excited about AT&T's near-term prospects -- that's why its stock declined over 20% this year, and trades at just nine times forward earnings. However, AT&T has also raised its dividend for 36 straight years, making it a Dividend Aristocrat of the S&P 500, and its forward yield of 7% will provide some decent income even as its stock treads water. It also spent just 57% of its free cash flow on its dividend over the past 12 months, which leaves it plenty of room for future hikes.
2. Seagate Technology
Seagate is one of the world's largest producers of platter-based HDDs (hard disk drives). Sales of HDDs have decelerated in recent years due to competition from flash memory-based SSDs (solid state drives), which are smaller, faster, more power-efficient, and less prone to damage than HDDs.
Seagate's main HDD rival, Western Digital (NASDAQ:WDC), aggressively expanded into the SSD market by buying flash memory chipmaker SanDisk in 2016. But instead of following WD's lead, Seagate focused on developing cheaper and higher-capacity HDDs for cost-conscious enterprise and data center customers.
Seagate's less capital-intensive business model generated more free cash flow for buybacks and dividends. That's why Seagate continued to pay its dividend throughout the COVID-19 crisis, while WD suspended its dividend earlier this year.
Seagate currently pays a forward yield of 5.4%, and it raised its dividend for the first time in four years last November. It spent 60% of its FCF on those payments over the past 12 months, and it could raise its dividend again this year if the macro headwinds wane.
For now, analysts expect Seagate's revenue and earnings to decline 5% and 8%, respectively, this year. Its HDD shipments to the video and image application, mission critical, and consumer markets could continue to decline and offset stronger shipments to the cloud and data center markets.
That near-term outlook seems grim, and the stock's 20% decline this year and its low forward P/E of 9 reflect that pessimism. However, Seagate was in the middle of a cyclical recovery prior to the pandemic, and its revenue had risen year-over-year for two straight quarters with expanding gross margins -- fueled by rising sales of its higher-capacity drives. That disrupted recovery could resume after the pandemic passes, its low valuation and high yield should limit its downside potential.
3. Philip Morris International
Philip Morris International, the tobacco giant that split from Altria (NYSE:MO) in 2008, sells top cigarette brands like Marlboro overseas. Like its domestic counterpart, PMI is struggling with declining smoking rates worldwide.
PMI generally raises its prices and cuts costs to squeeze growth from its declining cigarette shipments. It's also aggressively expanding its lineup of iQOS devices, which heat up tobacco sticks instead of burning them, to new markets.
Those two strategies have helped PMI generate stable revenue and earnings growth over the past few years, even as its core cigarette business shrank. It also suspended its buybacks five years ago due to unpredictable currency headwinds, which freed up even more cash for its dividends.
That's why PMI currently pays a forward yield of 5.9%. It's raised that dividend every year since it split with Altria, and it spent 93% of its FCF on those payments over the past 12 months .
Wall Street expects PMI's revenue and earnings to decline 4% and 2%, respectively, this year as the pandemic shuts down top cigarette retailers like convenience stores. However, its growth is expected to rebound next year after the pandemic ends.
Investors don't seem to be too excited about PMI: Its stock has declined about 7% this year, and trades at just 14 times forward earnings. Over the long term, PMI could also run out room to raise prices and cut costs. But for now, PMI remains a good defensive stock for a market downturn, and its strengths should continue to outweigh its weaknesses for at least a few more years.
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>>> NextEra Energy Partners, LP (NEP) acquires, owns, and manages contracted clean energy projects in the United States. It owns a portfolio of contracted renewable generation assets consisting of wind and solar projects, as well as contracted natural gas pipeline assets. The company was founded in 2014 and is headquartered in Juno Beach, Florida. <<<
NEE, PLD, TRP - >>> 3 Top Dividend Stocks to Buy Right Now
These high-quality dividends look attractive these days.
Motley Fool
Matthew DiLallo
Sep 5, 2020
https://www.fool.com/investing/2020/09/05/3-top-dividend-stocks-to-buy-right-now/
This year has not been a good one for dividend investors. More than 600 public companies reduced or suspended their dividends by the end of the second quarter, including over 60 members of the S&P 500. That trend, which has continued during the third quarter, will likely spur others to take similar actions.
However, it isn't all bad news for dividend investors. Several companies have a durable payout that should have no problem surviving the current economic turmoil. Three that stand out as good buys right now are utility NextEra Energy (NYSE:NEE), industrial REIT Prologis (NYSE:PLD), and pipeline giant TC Energy (NYSE:TRP).
Generating steady dividend growth
NextEra Energy's dividend currently clocks in at 2%, which is slightly above the market's average of 1.7%. It's a rock-solid payout backed by the company's stable income-generating utilities and renewable energy assets. The company further supports its dividend with a relatively low payout ratio (60% vs. 65% for its utility peers) and one of the utility sector's highest credit ratings.
That strong financial profile gives NextEra the financial flexibility to expand its utilities and renewable-energy portfolio. It currently has the biggest expansion backlog in its history, which provides it with a clear line of sight on future earnings and dividend growth. The utility anticipates its earnings expanding by around 8% per year through 2022, which should support dividend growth of about 10% annually during that time frame. That steady profile of dividend growth makes it stand out, given all the problems other companies have had maintaining their payouts this year.
A fast-growing payout backed by in-demand real estate
Prologis currently pays an above-average dividend that yields 2.3%. The REIT also backs up its payout with a rock-solid financial profile. Because its logistics real estate is crucial to supporting e-commerce, its tenants continued to pay their rent like clockwork this year. As a result, Prologis is on track to generate $1 billion in free cash flow this year after covering its dividend.
That gives it the money to continue expanding its real estate portfolio, complemented by a top-tier balance sheet. Those future additions should enable Prologis to continue growing its cash flow, which should support a growing dividend. The REIT has delivered above-average growth over the past five years, increasing its payout at a 10% compound annual rate (versus 9% from the average dividend stock in the S&P 500). With that trend likely to continue, it's an ideal option for those seeking an income stream backed by real estate.
A fully fueled dividend growth engine
TC Energy offers income investors the best of both worlds. The Canadian pipeline giant currently pays a big-time dividend at a 5.1% yield. Meanwhile, it sees lots of growth ahead: an 8% to 10% increase for 2021, followed by 5% to 7% annual growth after that.
Three factors power TC Energy's dividend growth plan. First, it produces stable cash flow backed by long-term, fixed-rate contracts, or government-regulated rates. Second, it has a top-notch financial profile, including a conservative dividend payout ratio (roughly 40% of its annual cash flow) and a top-rated balance sheet. Finally, it has a multibillion-dollar expansion program underway, including contractually secured oil and gas pipeline projects and a life extension of its nuclear power plant. Those all make it a great stock for investors seeking a big yield with enticing growth prospects.
Durable dividends even during these turbulent times
NextEra Energy, Prologis, and TC Energy are ideal dividend stocks. They pay above-average yields that are well-supported by their steady operations and strong financial profiles. Their dividends aren't just surviving but thriving, as all three companies have plenty of power to keep growing their payouts. That makes them ideal buys for income seekers right now.
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NEE, AWK, PLD - >>> 3 Top Dividend Stocks for a Better Retirement
This trio pays durable dividends that should continue to grow in the coming years.
Motley Fool
by Matthew DiLallo
Aug 30, 2020
https://www.fool.com/investing/2020/08/30/3-top-dividend-stocks-for-a-better-retirement/
If there's one thing retirees want, it's an income stream that can sustain them through their golden years, ideally one that will grow along with their expenses. While fixed income options like bonds can deliver the desired durability, they don't offer the upside. On the other hand, dividend stocks can provide retirees with a steadily rising income stream.
Three companies that have a long history of growth that they should be able to maintain in the future are NextEra Energy (NYSE:NEE), American Water Works (NYSE:AWK), and Prologis (NYSE:PLD). That makes them ideal stocks for retirement-focused investors.
High-powered dividend growth
Electric utility NextEra Energy has been an outstanding dividend stock over the years. Since 2004, the company has grown its payout at a 9.4% compound annual rate. Thanks in part to that outsize growth, it currently yields slightly more than 2%, which is a bit better than the S&P 500's average of 1.7%.
More growth seems likely as NextEra currently expects to increase its dividend by about 10% per year through at least 2022. Powering that forecast is its reasonably low dividend payout ratio (60% at the end of 2019, versus 65% for its industry peers) and its expectation that earnings will expand by 6% to 8% per year during that timeframe, with it expecting growth at the high end of that range. Powering that earnings growth outlook is the company's massive backlog of renewable energy projects, which it can fund with retained cash and its A-rated balance sheet. That focus on renewables could enable the company to keep increasing its payout for years to come.
A steadily growing income stream
Water utility American Water Works currently offers investors a below-average yield at 1.6%. However, what its payout lacks in size, it more than makes up for in durability and growth potential. One reason for the lower yield is that American Water Works pays out a conservative amount of its earnings, usually 50% to 60% each year. That enables it to retain more money to expand its operations, which it complements by having one of the highest-rated balance sheets in the utility sector.
That strong financial profile gives American Water Works the flexibility to continue expanding. It currently plans to invest $20 billion to $22 billion over the next 10 years. The utility sees $8.9 billion to $9.4 billion of that coming between now and 2024. That should support dividend increases of 7% to 10% per year through that timeframe, though it expects growth toward that range's high-end.
Steadily building a bigger dividend
Industrial REIT Prologis currently yields an above-average 2.3%. That's a well-supported payout despite all the turmoil in the real estate sector this year. While some real estate subsectors are under pressure because of the economic downturn, logistic properties have remained in high demand as they support the fast-paced growth of e-commerce. As a result, Prologis recently increased its earnings forecast for this year, which has it on pace to generate $1 billion in free cash after paying its dividend.
When combined with its A-rated credit, that excess cash gives Prologis the financial flexibility to continue expanding its portfolio. The company currently expects to start between $800 million to $1.2 billion of new logistics projects this year and spend $500 million to $600 million on acquisitions. Those investments should enable the company to keep growing its cash flow, which should allow it to continue increasing its dividend at an above-average pace. That's been the case over the last five years as the REIT has grown its dividend at a 10% compound annual rate, which is ahead of the S&P 500's 9% growth rate.
Dividend stocks to build a better retirement
Investing in dividend stocks can be a great way to generate income in retirement. Three excellent ones are NextEra Energy, American Water Works, and Prologis. Not only should their payouts endure the economy's inevitable downturns, but they should also keep rising in the years ahead, helping a retiree offset some of their inflating expenses.
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>>> Is Innovative Industrial Properties a Great Dividend Stock?
The cannabis company raised its payouts by 6% earlier this year.
Motley Fool
David Jagielski
Aug 23, 2020
https://www.fool.com/investing/2020/08/23/is-innovative-industrial-properties-a-great-divide/
Are you looking for a great dividend stock? They're often hard to find, and that's because it takes a lot to be one. The company needs to pay investors an above-average yield, it should increase its payouts regularly, and the dividend payments should also be safe. You want to be able to just buy the stock and not worry about it.
Today, I'll look at whether cannabis-focused Innovative Industrial Properties (NYSE:IIPR) hits all the checkmarks to be considered a great dividend stock. Let's take a close look at not just the company's dividend, but the strength of Innovative's overall operations, to assess whether you should invest in the company today.
Innovative's dividend yield of 3.5% is well above average
Currently, Innovative pays its shareholders a quarterly dividend of $1.06. At a price of about $120 per share, the stock's yielding a little over 3.5% today. If you were to invest in an average stock on the S&P 500, your yield would be closer to 2%. That's a big difference, and it's easier to see when you put it into dollars. A $25,000 investment at a 2% yield would earn you $500 each year. But at a rate of 3.5%, you'd be earning $875, or an extra $275 annually. Imagine you hold the dividend stock for 10 years, and you're now looking at a difference of $2,750. And that's without factoring in any dividend growth along the way.
Innovative has increased its dividend payments by more than 300% in just two years
Even if a dividend stock pays a decent yield today, you also want to consider its growth. If the dividend isn't increasing over the years, that means inflation will erode your payouts over time. Innovative is a real estate investment trust (REIT), meaning it has to pay 90% of its earnings back out to its shareholders. As long as profits continue to rise, so too will the company's dividend payments.
Innovative has been growing its dividend rapidly in recent years. Just two years ago, the San Diego-based company was paying its shareholders a quarterly dividend of $0.25. Payouts have more than quadrupled in value since then, rising 324%. The company's most recent rate hike, from $1.00 to $1.06, is a modest 6% increase and likely much more sustainable over the long term, if investors are wondering what type of increase might be more typical in the future.
However, there are never any guarantees when it comes to dividends. Investors always need to be prepared in the event that a rate hike doesn't happen, or is not as high as they had hoped. For now, at least, Innovative looks like a solid dividend growth stock.
Is Innovative's dividend safe?
On Aug. 5, Innovative released its second-quarter results for fiscal 2020, recording sales of $24.3 million. That's a year-over-year increase of 183% from the prior-year period, when its sales were $8.6 million. The big jump comes primarily as a result of Innovative acquiring and leasing out more properties than it had a year ago.
Since April, Innovative acquired a total of eight properties with rentable square footage totaling 775,000. At the end of June, Innovative owned 58 properties with a total of 4.4 million rentable square feet. A year ago, the company owned just 22 properties, and its rentable square footage then was 1.7 million.
Innovative's strategy involves acquiring distressed assets in the cannabis industry and then leasing them back to marijuana companies. It's been working well for the business and has helped generate strong streams of income. In Q2, Innovative recorded funds from operations (FFO) of $19.7 million -- up 321% from a year ago. FFO is a common substitute for net income when evaluating REITs, as it can give a better picture of the company's overall performance when factoring out depreciation and other adjustments.
FFO per share was $1.12 in Q2, and that suggests that Innovative's quarterly dividend of $1.06 is well supported by the company's current operations.
The dividend is great
With above-average payouts that have increased rapidly in recent years and some impressive sales and profit growth, Innovative checks off all the boxes of a great dividend stock and then some. And with more states potentially legalizing cannabis this year, there may be many more growth opportunities for Innovative to continue adding properties to its portfolio in the near future.
Year to date, the stock's been soaring above not just the Horizons Marijuana Life Sciences ETF (OTC:HMLS.F) but also the S&P 500:
Its incredible growth, along with a top dividend, makes Innovative an appealing investment to add to your portfolio today and hang on to for many years as the cannabis industry continues to expand.
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>>> How to invest for income now
Tactical multi-asset investing takes on low rates and bad news
BY ADAM KRAMER, PORTFOLIO MANAGER,
FIDELITY VIEWPOINTS
05/01/2020
Key takeaways
Multi-asset income strategies may help investors seek income despite low interest rates.
Professional investment managers may find opportunities when markets misprice assets in reaction to bad news.
Opportunities exist now in investment-grade corporate bonds, high-yield bonds, dividend-paying stocks, convertible bonds, and Treasury inflation-protected securities.
With interest rates at historic lows and some companies reducing or eliminating dividends, it's a challenging time for investors who seek income from their portfolios. Challenging, though, is not the same as impossible. A professionally managed, tactical approach to income investing that can look for opportunities in a wide variety of asset classes may help income-seeking investors achieve their goals, despite low rates.
In fact, economic uncertainty and anxiety about the spread of COVID-19 make this a good time for tactical investing. That's because when uncertainty is high, markets may temporarily misprice assets based on short-term events and overlook other factors, such as how much investors might earn over a longer term on those assets.
For professional managers who can identify those mispricings, the combination of abundant bad news and the freedom to invest in a wide variety of assets can present opportunities. Rather than overreact to bad news, tactical managers can seek assets they believe have the potential to outperform if the bad news "turns out not to be so bad after all." Even if reality turns out as negative as markets expect, prices shouldn't fall much because investors anticipated it. Keeping an eye out for mispricings can also help avoid assets where not enough bad news may be priced in and prices are too high.
Looking for opportunities
The forces that drive financial markets are always in motion. Economic growth increases and slows. Investors' enthusiasm for certain asset classes or companies rises and falls. New technologies arise, while older ones fade away. Unforeseeable events can act on global economies in unexpected ways. Because market conditions constantly change, the investments that deliver the highest returns today may not be the ones that do so next month or next year. That's why multi-asset income strategies that can invest across a wide variety of asset classes may be able to deliver more consistent returns and a better balance between risk and return than those with fewer options to choose from.
How yields and risks of popular investment choices compare
The data in the chart is described in the text.
For illustrative purposes only.
Source: Fidelity Investments
The chart above depicts general long-term directional and ranking relationships among a number of asset classes on the dimensions of yield and beta. Beta is estimated in comparison to US common stocks as represented by the S&P 500 index. The relationships and relative rankings among these asset classes will vary over time.
Finding opportunities now
As the US Treasury, Federal Reserve, and federal government continue to be pragmatic and supportive of the economy, the coronavirus pandemic has created opportunities within many income-oriented US asset class. As concerns over the economic impact of the virus's spread prompted many investors to sell assets, prices of many bonds as well as stocks dropped to levels not seen since the global financial crisis. Assets sold off with little regard for fundamentals and since then, professional investment managers have been buying those that offer income and value on the expectation that if events turn out better than expected, their prices could rise in addition to paying interest and dividend income.
While many companies' operations have been severely reduced, dividend-paying US large-cap stocks present opportunities for managers of income strategies who practice careful security selection and seek companies with strong balance sheets that pay sustainable dividends. Many of these stocks' prices fell significantly during widespread selling that accompanied the spread of COVID-19 around the world. They include consumer staples, pharmaceuticals, and information technology companies, and also companies in sectors such as materials and energy that have historically performed well as the economy emerges from recession.
Some dividend-paying stocks related to the transportation of oil and refined products also offer opportunities. Oil tanker operators are an example of how the ability to spot mispriced assets can benefit income-seeking investors. Theirs were among the first stocks to move lower as the coronavirus spread in China and oil demand fell. Oil production cuts are generally a negative for oil tankers because there's less cargo for them to carry. However, demand and prices have fallen faster than production, and oil companies are storing crude oil on ships. That means more need for ships than expected. Despite plunging global oil demand, these companies will soon start declaring their first quarter dividends and should have a much better situation than previously expected.
Preferred stocks have been very expensive but are now priced near their historical averages. Most US preferreds are in banks which are in much better shape than they were during the financial crisis.
Remember, though, as we've seen this year, stock markets are volatile and can decline significantly.
Many high-quality companies' investment-grade corporate bonds offer opportunities, including those from defense contractors, regulated utilities, and large US banks. Many of these bonds are now selling at discounts. Unusually, these bonds' prices fell along with stocks during the March COVID-19-related sell-off. Since then, prices of many highly rated bonds have recovered, but BBB-rated investment-grade corporate bonds offer both attractive prices and income, with many yielding near 4%, as of April 29, 2020.
Some high-yield bonds with credit ratings of BB and B also present opportunities, particularly those issued by cable, telecommunications, packaging, and industrial companies. Many of these bonds are selling at a discount, with yields of 6% and 9%, respectively, as of April 29, 2020.
To be sure, bonds of less than investment-grade quality involve greater risk of default or price changes due to changes in the credit quality of the issuer. Because of these risks, careful security selection by professional managers is important.
Convertible bonds issued by companies in industries such as technology and health care, whose underlying stocks had been expensive are currently more reasonably priced, at close to their averages over the past 25 years. Many new bonds offering attractive yields are being issued as companies seek to adjust to the new COVID-19 reality.
Convertible bond prices can fall if interest rates rise and stock prices decline, but they are less sensitive to such changes than both stocks and traditional corporate bonds. While bad news can help create opportunities, too much of it can have the opposite effect. Too much bad news has been priced into US Treasurys, which have rallied and no longer look attractive. While they can act as hedges to protect investors in down markets, they currently offer little yield.
Treasury inflation protected securities (TIPS), which adjust to the consumer price index, can be an attractive alternative to Treasurys. When real yields move lower, TIPS have historically done well. In the COVID-19 world, financial markets are pricing in very little future inflation due to falling oil prices and reduced business and consumer spending. This is reflected in declining real yields which give TIPS a better balance between risk and reward than nominal Treasuries looking out over the next year or two.
Finding ideas
Investors interested in these strategies should research professionally managed mutual funds. You can run screens using the Mutual Fund Screener on Fidelity.com. Below are the results of some illustrative mutual fund screens (these are not recommendations of Adam Kramer or Fidelity).
Multi-asset class income funds
Fidelity funds
Fidelity® Multi-Asset Income Fund (FMSDX)
Non-Fidelity funds
BlackRock Multi-Asset Income Portfolio (BAICX)
American Century Multi-Asset Income Fund (AMJVX)
Invesco Multi-Asset Income Fund (PIAFX)
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IIPR - >>> Here's How Many Times Marijuana's Dividend King Has Raised Its Payout
In just three short years, this pot stock has delivered amazing returns and dividend income.
Motley Fool
Dan Caplinger
Jul 26, 2020
https://www.fool.com/investing/2020/07/26/heres-how-many-times-marijuanas-dividend-king-has.aspx
Marijuana stocks have been a minefield lately, with many of the giants of the cannabis industry having fallen on tough times. The list of major cannabis producers that have lost ground again in 2020 is long, and it's been hard to find consistent winners among pure plays in the pot space.
Yet when you look beyond companies that are actually growing marijuana themselves, there's one company that stands out for its amazing performance. Innovative Industrial Properties (NYSE:IIPR) has become the most famous dividend stock in the cannabis sector, and a recent dividend increase has extended the real estate investment trust's dominant streak of payout boosts in its short four-year history as a publicly traded company.
The latest move from Innovative Industrial
Dividend investors got good news from Innovative Industrial back in June, when the cannabis REIT announced yet another dividend increase. Shareholders who owned stock on June 30 got a July 15 quarterly dividend payment of $1.06 per share. That was up 6% from the previous level of $1 per share.
With the increase, Innovative Industrial boosted its yield as well. Based on current prices, dividend investors are getting around a 4.3% dividend yield from their investment in the marijuana real estate specialist. That's come despite a share price gain of more than 30% so far in 2020.
An amazing streak of dividend success
By itself, there's nothing all that impressive about a 6% dividend increase. Companies across the market make such moves all the time. But when you put the boost into a broader context, it's a lot clearer what Innovative Industrial has managed to put together with its business.
Innovative Industrial paid its first dividend just three years ago, in the second quarter of 2017. The first quarterly payment of $0.15 per share was modest, but it still made the REIT special in the marijuana stock world. Most cannabis companies still pay no dividend, leaving Innovative Industrial as an obvious pick for income investors.
Since then, Innovative Industrial has declared 12 quarterly dividends. Five of those happened to be exactly the same as the previous quarter's payout. However, on seven occasions -- in just three years! -- the cannabis REIT has delivered a dividend increase.
Moreover, most of those increases have been far more significant than its latest increase. Take a look:
Innovative Industrial's December 2017 dividend was up 67% to $0.25 per share.
In September 2018, a 40% increase brought the payout to $0.35 per share.
March 2019 included a 29% rise to $0.45 per share.
The very next quarter, in June 2019, shareholders got a 33% boost to $0.60 per share.
September 2019's payment of $0.78 per share was up another 30% and brought the quarterly streak to two in a row.
Innovative paid an even $1 per share in December 2019, up 28% from the dividend it distributed three months before.
All in all, Innovative is now paying more than seven times what it did in its first-ever dividend.
Where Innovative is finding all this income
As a real estate investment trust, Innovative Industrial is required to pay out 90% of its net income to shareholders, so it's not surprising to see dividends increasing consistently as the company grows. What's impressive, though, is the pace of that growth, especially during economically challenging times.
However, the nature of Innovative Industrial's business model explains some of the growth. The REIT looks for and purchases suitable properties that it can lease out to tenants, which are typically cannabis cultivators or other companies with operations related to the marijuana industry. Given the difficulty in getting financing right now, most cannabis producers can't afford to purchase greenhouses or other buildings outright. A lease with Innovative Industrial solves their cash flow issues while giving the REIT an opportunity for growth.
Moreover, regulations on cannabis businesses can make real estate transactions more complicated. Working with Innovative Industrial means having an expert in the field that already knows what requirements there are, and the REIT is willing to work with prospective tenants. That's been an invaluable service, and one that Innovative Industrial can profit from.
Expect more growth ahead
Innovative Industrial continues to find lucrative new properties for investment, and it's been successful in raising capital whenever it's needed. That points to a strong future for the marijuana REIT. It also suggests that dividends should continue to be on the rise -- building further on one of the biggest success stories among cannabis stocks .
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>>> 9 Dividend Stocks to Buy and Hold Forever
U.S.News & World Report
by Jeff Reeves
July 16, 2020
https://finance.yahoo.com/news/9-dividend-stocks-buy-hold-210557490.html
These stocks offer decades of potential dividends.
There are a number of dividend stocks that have been surging in 2020, including plays related to consumer staples and social distancing amid the pandemic. However, income investors may not be best served by chasing these short-term trends. After all, dividend yields are calculated using a stock's payouts across 12 months' time -- so you have to hold them at least a year to get your full payout. That means if you're looking at dividend stocks, it helps to think in years or even decades rather than weeks or months. Sound impossible? Just look at a few ultra-long-term stocks that you can buy now and hold forever as potential income investments in any environment. Here are nine dividend stocks to hang on to for the long haul.
Novartis (ticker: NVS)
It has been a volatile year for many health care stocks, with some companies soaring based on potential related to the pandemic and others suffering amid economic uncertainty. However, Swiss drugmaker Novartis stands out with bright, long-term prospects thanks to its diversification. NVS offers a wide array of treatments for a host of diseases, across skin conditions, cancers, neurological disorders and a wide variety of other chronic ailments. Novartis admittedly only pays dividends once a year, but that shouldn't matter when your holding period is forever -- and with a robust product pipeline alongside a stable of proven moneymakers, the future looks very bright for this health care play beyond the fad of pandemic investments in 2020.
Current yield: 3.5%
National Health Investors (NHI)
A twist on the reliable business of health care is medical real estate firm National Health Investors. NHI specializes in financing solutions across the sector, largely focusing on senior-housing facilities and retirement communities. It also includes hospitals, medical office buildings and other sites. Nothing is more certain in life than getting old and needing more care as we age, so the result is a reliable stream of cash to fuel generous and reliable dividends from NHI that will withstand the test of time. As proof, while some medical real estate plays have cut their dividends lately, NHI actually increased its payouts from $1.05 to $1.10 per quarter in early 2020.
Current yield: 7.7%
PetMed Express (PETS)
Another very different take on health care is this smaller and pet-focused offering, PetMed. Though selling heartworm and flea medication is not as glamorous as treating cancer or developing a cure for Alzheimer's disease, investors should be interested in PETS for its dominance in the durable and fast-growing category of pet expenses. While Wall Street has really fallen in love with this stock this year as it has been growing rapidly, this is not a flash in the pan stock; reliable revenue fuels dividends that have surged from 18 cents in 2016 to 28 cents a share presently -- more than 55% growth in just under five years and an encouraging sign of future income potential. Whatever the future holds, you can be sure there will be pet owners in it. That's good news for PetMed and its shareholders.
Current yield: 2.9%
Amcor (AMCR)
While online merchants such as PetMed have seen their day in the sun in 2020 thanks to social distancing, the reality is that more dollars are being spent digitally every year. Consider that in 2019, total e-commerce spending in the U.S. was up about 15% over the prior year, while overall spending and gross domestic product growth were in the low single digits. You can pick and choose individual merchants if you want to really cash in on this growth trend, but that's risky -- and besides, most highfliers like Amazon.com (AMZN) don't pay a penny in dividends. A lower-risk, long-term play on this trend is packaging giant Amcor, which makes all manner of containers that allow e-commerce businesses to thrive and ship their goods intact. It's not as high-margin as selling a TV or a mattress online, but it's certainly more reliable as evidenced by a steady stream of dividends.
Current yield: 4.4%
Verizon Communications (VZ)
Speaking of the internet, the only way you can have reliable connectivity to buy anything is through a key telecom provider such as Verizon. Its 5G -- or fifth generation -- wireless network continues to grow impressively, with about 35 metro markets covered at present. The company's core wireless business also continues to dominate as the largest network of subscribers in the U.S. On top of that, its FiOS fiber-optic service for homes and business is growing strong. Thanks to its investments in network quality, VZ will remain a force for many years to come. And as long as customers keep paying their bills, that will result in a reliable income stream for shareholders.
Current yield: 4.5%
Toronto-Dominion Bank (TD)
If you're looking for a "forever" financial stock, it's hard to forget about the 2008 financial crisis that resulted in catastrophic losses for big U.S. banks like Citigroup (C) and Bank of America (BAC). However, our neighbors to the north fared much better because banks like TD are more closely regulated institutions and do not engage in risky investment and lending practices. TD maintains little exposure to investment banking and trading to this day -- cutting out risky and cyclical business lines -- but it's one of the largest banks in the world anyway, at more than $80 billion in market capitalization. That's larger than Goldman Sachs (GS), and much less risky with its retail-banking focus. With a generous dividend that dates back to 1857, this is a long-term holding you can rely on.
Current yield: 5%
Duke Energy Corp. (DUK)
One of the largest for-profit utilities in the U.S., Duke boasts a market value of roughly $60 billion at present and nearly 8 million electric customers across six different states, covering a service area of more than 90,000 square miles. On top of that, it operates a natural gas distribution network serving close to 2 million more customers. There's a lot of uncertainty about the future of energy amid climate change concerns, but one thing is certain: A utility like Duke will remain entrenched regardless of what power source it uses to fuel its distribution network. Electricity is a necessity, particularly in a digital age, meaning a steady stream of payments to DUK and a steady flow of dividends back to shareholders as a result.
Current yield: 4.7%
Oneok (OKE)
An energy stock of a different flavor, Oneok is a "midstream" fossil fuel company focused on pipelines and processing facilities. It operates one of the largest natural gas systems in the country, with facilities to liquefy, store and transport gas. The company has been in operation for more than a century. There's not as much potential as energy exploration firms -- which find new oil and gas fields and bring them online -- and the margins are smaller than wholesalers and refiners that take fossil fuels and market them to the masses. That said, the pipelines and tanks business of OKE means reliable revenue for the long haul and dividends that are far less risky than other stocks in the energy sector that are more closely tied to trends of supply and demand.
Current yield: 13%
Chubb (CB)
Speaking of less risk, Switzerland-based insurance giant Chubb is in the business of managing risk via its policies that cover residences, automobiles, businesses, boats and a host of other assets. With more than a century of operations under its belt -- and more than a century of dividend payments -- CB knows a thing or two about how to cover the costs of claims and still have plenty left over for its shareholders. Though not a household name, this nearly $60 billion financial company offers a dividend that is sure to stick around and even grow considerably in the years to come.
Current yield: 2.4%
Nine dividend stocks to buy and hold:
-- Novartis (NVS)
-- National Health Investors (NHI)
-- PetMed Express (PETS)
-- Amcor (AMCR)
-- Verizon Communications (VZ)
-- Toronto-Dominion Bank (TD)
-- Duke Energy Corp. (DUK)
-- Oneok (OKE)
-- Chubb (CB)
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>>> Why Cannabis Stock IIPR Returned 19% in the First Half of 2020
This dividend-paying marijuana stock was a rare winner in the cannabis space.
Motley Fool
by Beth McKenna
Jul 3, 2020
https://www.fool.com/investing/2020/07/03/why-cannabis-stock-iipr-returned-19-in-the-first-h.aspx
What happened
Innovative Industrial Properties (NYSE:IIPR) stock returned 18.9% in the first half of 2020 (January through June), according to data from S&P Global Market Intelligence. The S&P 500 index had a negative 3.1% return over this period.
The company, often referred to as IIP, is a real estate investment trust (REIT) focused on the cannabis industry. It specializes in industrial properties used for growing and processing cannabis in U.S. states where medical marijuana is legal.
So what
We can attribute IIP stock's solid performance in the first half of 2020 to the company's continued strong financial performance. While most companies in the cannabis space are not profitable, IIP is firmly in the green. Moreover, it also pays a generous dividend, currently yielding 4.5%.
In the first quarter, revenue skyrocketed 210% year over year to $21.1 million, earnings per share (EPS) soared 118% to $0.72, and adjusted funds from operations (FFO) -- a key metric for REITs that drives dividend payouts -- surged 107% to $1.12.
During the quarter IIP acquired seven properties, and it acquired two more between the end of the quarter and May 6, the date of the earnings release. At that time it owned a total of 55 properties.
As you can see in the following chart, IIP has recovered fairly decently from the pandemic-driven market sell-off that started in mid-February and deepened in March. That's not the case with most stocks in the group. The three largest Canadian growers by market cap, Canopy Growth, Cronos Group, and Aurora Cannabis, lost about 23%, 22%, and 52%, respectively, in the first half of 2020.
Now what
For full-year 2020, Wall Street analysts are modeling for Innovative Industrial Properties to grow revenue and EPS 147% and 73%, respectively, year over year.
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>>> Like Dividends? You'll Love These 5 Stocks
This group of companies offers reliable dividend payouts.
Motley Fool
by Robert Izquierdo
Jun 1, 2020
https://www.fool.com/investing/2020/06/01/like-dividends-youll-love-these-5-stocks.aspx
Picking the best dividend stocks to add to your investment portfolio requires more than looking for the highest yields. For years of dependable dividend income, you need to find well-run companies with solid business models capable of maintaining the dividend through tough economic times.
These five companies fit that description and provide your investment portfolio with a diversified array of businesses to boot. The companies are listed in order of their dividend yields based on recent share prices.
1. AT&T: 6.7% dividend yield
Investors like AT&T (NYSE:T) for its high-yield dividend, but some shy away due to the company's large debt load resulting from relatively recent acquisitions of DIRECTV and Time Warner. DIRECTV has lost millions of subscribers as consumers shift from cable television to streaming services. That's part of why AT&T launched its HBO Max streaming service on May 27.
Even if HBO Max is successful, it won't provide the bulk of AT&T's revenue. That comes from its telecommunications business, which saw wireless service revenue grow 2.5% year over year in the first quarter, the fourth consecutive quarter of revenue growth.
Despite the uncertainty injected into global economies by the coronavirus pandemic, AT&T is committed to paying down its debt and maintaining its dividend. The company has raised its dividend each year for the past 35 straight, qualifying it for Dividend Aristocrat status. The company has the funds to do so, with about $10 billion in cash and $3.9 billion in free cash flow at the end of Q1. Its telecom business will also benefit from the growth in 5G wireless technology, making AT&T a compelling dividend stock.
2. PepsiCo: 3.09% dividend yield
PepsiCo (NYSE:PEP) is experiencing success despite the current economic downturn thanks to its popular array of snack foods and beverages. The company saw first-quarter revenue rise 7.7% year over year, and its sales have grown steadily for the past two years.
PepsiCo exited the first quarter with a healthy balance sheet. It had $85.1 billion in total assets compared with $71.5 billion in total liabilities. It also increased its dividend for the 48th consecutive year in May, putting it two years away from becoming a Dividend King.
With pandemic-induced lockdowns around the world blunting consumer in-store shopping, PepsiCo made the bold move of launching websites to enable direct-to-consumer sales. If successful, it will reduce costs and grow margins. The company's work to evolve its business combined with its financial success and solid dividend makes it an attractive income investment.
3. Target: 2.23% dividend yield
Target (NYSE:TGT) recently reported first-quarter results, and its 11.3% year-over-year revenue growth despite the coronavirus pandemic reflects why the retail giant is a company to invest in.
Target's business includes consumer staples that sell regardless of the broader economy. It invested in omnichannel retail solutions, creating a seamless customer experience between online and in-store shopping. This led to strong comparable digital sales growth of 141% for the quarter.
Target is well-positioned to continue its current success. Revenue has grown the last three years, and the company has increased its payout for 52 consecutive years, a reassuring sign of dividend stability.
4. Allstate: 2.20% dividend yield
Allstate (NYSE:ALL), the insurance company known for its "You're in good hands" slogan, experienced a revenue drop in the first quarter of 2020 not because its business struggled in the face of the pandemic, but because its investments declined with the resulting global economic downturn.
Yet its core insurance business is healthy. That revenue grew 4.4% year over year for the quarter, and has grown every year for the past four years.
Allstate returned $670 million to shareholders in the quarter through stock buybacks and dividends. The company's low payout ratio of 18% means it can support the dividend even amid a global economic decline.
Its financial position is solid with access to $3.4 billion in assets from its holding company and another $8.8 billion from securities salable in a week. With its combination of a steady insurance business and healthy finances, investors will find that Allstate lives up to its slogan.
5. Waste Management: 2.05% dividend yield
Reliable stocks in an economic downturn include utilities and trash collectors. Among the latter, Waste Management (NYSE:WM) is a dividend stock worthy of your portfolio.
Communities need trash collection regardless of the economy. That helped propel Waste Management's first-quarter revenue to $3.73 billion, up from last year's $3.70 billion. Its revenue has steadily increased for the last four years.
Its finances are healthy with $3.1 billion in cash and equivalents, and free cash flow of $318 million at the end of the quarter. This more than covers the $236 million in dividend payments.
The company has reiterated its commitment to the dividend, which has increased for 17 consecutive years. Its payout ratio of 55% means its dividend payout is as resilient as Waste Management's business.
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>>> 3 Top Dividend Stocks for a Better Retirement
Procter & Gamble and two other Dividend Aristocrats are still solid investments in a rough market.
Motley Fool
by Leo Sun
Jun 3, 2020
https://www.fool.com/investing/2020/06/03/3-top-dividend-stocks-for-a-better-retirement.aspx
The U.S.-China trade war, the COVID-19 pandemic, and the unrest across America have likely caused significant worry for many retirees who rely on their investment portfolios for stable income. However, people rarely make a profit by panicking, and the top Dividend Aristocrats -- stocks in the S&P 500 that have raised their dividend payouts for at least 25 straight years -- should weather these near-term challenges.
Today, we'll examine three top Dividend Aristocrats that can still offer retirees stability through this volatile time period for the market: Procter & Gamble (NYSE:PG), Kimberly-Clark (NYSE:KMB), and Coca-Cola (NYSE:KO).
1. Procter & Gamble
Procter & Gamble, the consumer staples giant that sells billion-dollar brands like Bounty, Charmin, Crest, Head & Shoulders, Gillette, Pampers, Pringles, and Tide, has raised its dividend annually for over six decades.
P&G raised its dividend in April, even as many other companies slashed their payouts to conserve cash during the COVID-19 crisis. It currently pays a forward yield of 2.7%, and spent just 57% of its free cash flow on its dividend over the past 12 months.
P&G's organic sales and currency-neutral core EPS grew 5% and 15%, respectively, last year. For fiscal 2020, which ends in late June, it expects its organic sales to rise 4%-5%, and for its core EPS to grow 8%-11%.
P&G's confident guidance was buoyed by robust demand for household essentials like toilet paper, paper towels, diapers, and cleaning products during the pandemic -- which offset the weaker growth of its grooming and beauty businesses.
P&G's stock isn't cheap at 22 times forward earnings, but that premium is arguably justified by its well-diversified business, wide moat, and stable dividend payments. P&G delivered a total return of over 160% over the past decade, and will likely remain a resilient investment for retirees.
2. Kimberly-Clark
Kimberly-Clark is another consumer staples giant that remained resistant to the COVID-19 crisis. The maker of Kleenex, Cottonelle toilet paper, and Huggies diapers benefited from shoppers stocking up on paper-based products.
Its organic sales rose 4% in 2019 with growth across all global regions, and jumped 11% in the first quarter on COVID-induced purchases. Its adjusted earnings grew 4% in 2019, and surged 28% in the first quarter as both its volumes and net selling prices improved.
Kimberly-Clark didn't offer any full-year guidance like P&G, but analysts expect its revenue to stay roughly flat and for its earnings to grow 9%. It currently pays a forward dividend yield of 3%, it's raised its payout annually for nearly half a century, and it spent just over three-quarters of its free cash flow on that payout over the past 12 months.
Its stock trades at a reasonable 19 times forward earnings, and should remain an appealing defensive stock throughout the COVID-19 crisis and other upcoming macro challenges. It delivered a total return of over 240% over the past 10 years -- and should remain a solid stock for retirees.
3. Coca-Cola
Coca-Cola has raised its dividend annually for nearly six decades. It currently pays a forward yield of 3.5%, and spent less than half of its free cash flow on that payout over the past 12 months.
Coca-Cola, like other soda makers, struggled with slowing demand for its sugary drinks as consumers pivoted toward healthier alternatives. However, Coca-Cola expanded its portfolio with new brands of juices, teas, bottled water, and other non-carbonated drinks. It also refreshed its flagship sodas with smaller cans and healthier versions with less sugar, calories, and caffeine; acquired coffee giant Costa Coffee; and experimented with new energy drinks and alcoholic beverages.
Coca-Cola's organic sales grew by 6% last year. They stayed flat in the first quarter, as COVID-19 disrupted "away from home" channels like restaurants, but that headwind should fade as businesses reopen.
Wall Street expects Coca-Cola's reported revenue and earnings to both decline 11% this year, but its organic growth -- which excludes acquisitions, divestments, currency impacts, and other variable expenses -- should look better. The stock has delivered a total return of more than 150% over the past decade, and it remains one of Warren Buffett's top holdings -- which strongly suggests it's a safe stock to "buy and forget" for most retirees.
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>>> Best Dividend Stocks In 2020: Five Strong-Yield Stocks Beating The S&P 500
Investors Business Daily
APARNA NARAYANAN
04/15/2020
https://www.investors.com/research/best-dividend-stocks/
McDonald's (MCD), Lockheed Martin (LMT), Texas Instruments (TXN), Home Depot (HD) and Automatic Data Processing (ADP) count among the best dividend stocks in 2020, yoking solid yields to strong performance. McDonald's and the other top dividend stocks can give a big boost to growth and income portfolios.
IBD screened for stocks offering more than the S&P 500's roughly 2.3% dividend yield, while outperforming the index over the past five years. That's a high bar, which relatively few stocks meet, especially given the stock market volatility and coronavirus correction of late.
Both share-price increases and attractive payouts play a part in successful dividend investing.
Best Dividend Stocks: Top 5
Company/Benchmark Index Symbol Yield (%) 5-Yr Return (%)
S&P 500 2.3 34
McDonald's MCD 2.8 94
Lockheed Martin LMT 2.6 90
Texas Instruments TXN 3.4 88
Home Depot HD 3.0 80
Automatic Data Processing ADP 2.5 71
For investors looking for the best dividend stocks to buy and hold in 2020, several metrics matter.
Dividend stability reflects a long and steady track record of payouts. Dividend growth points to a company in sound financial health, working hard to make its stock more attractive to new and existing income investors.
A company with stable earnings is more likely to pay steady — and perhaps rising — dividends.
The dividend payout ratio (dividend per share divided by earnings per share) can help you assess whether the dividend is sustainable. A ratio greater than 100% may warn of a potential cut.
Not all high-dividend stocks are smart investments. Use the information below as a starting point for your own research.
Best Dividend Stocks: McDonald's
The fast-food icon has raised its dividend every year since it first started paying a dividend in 1976.
Dividend yield: McDonald's stock bears a $5.00 annual dividend, yielding 2.8%.
Five-year return: McDonald's delivered a 94% compound stock market return over the past five years (not including reinvested dividends), vs. 34% for the S&P 500, as tracked by SPDR S&P 500 ETF (SPY).
Dividend growth rate: 8%, measured over the past five years.
Dividend stability factor: 2, on a scale from zero (most stable) to 99 (most volatile), over the past five years.
Dividend payout ratio: 73.7%.
Earnings stability factor: 3, on a scale from zero (most stable) to 99 (least stable), over the past five years. McDonald's grew EPS at a 14% annual rate over this period.
Best Dividend Stocks: Lockheed Martin
The aerospace and defense giant has paid dividends since 1995. It's grown dividends 17 years in a row.
Dividend yield: Lockheed Martin stock offers a $9.60 annual dividend per share, for a 2.6% yield.
Five-year return: 90%.
Dividend growth rate: 13%.
Dividend stability factor: 7.
Dividend payout ratio: 39.8%.
Earnings stability factor: 8. Lockheed Martin grew earnings per share at a 16% annual pace over this period.
Best Dividend Stocks: Texas Instruments
The chipmaker boasts 16 years in a row of growing dividends. It first declared a dividend in April 1962.
Dividend yield: Texas Instruments stock has a $3.60 annual dividend, yielding 3.4%.
Five-year return: 88%.
Dividend growth rate: 23%.
Dividend stability factor: 3.
Dividend payout ratio: 77.9%.
Earnings stability factor: 6. Texas Instruments grew EPS at a 20% annual clip the past five years.
Best Dividend Stocks: Home Depot
The home improvement chain has paid a dividend for more than three decades. It has grown dividends for seven consecutive years.
Dividend yield: Home Depot stock provides a $6.00 annual dividend, for a 3.0% yield.
Five-year return: 80%.
Dividend growth rate: 32%.
Dividend stability factor: 7.
Dividend payout ratio: 60.1%
Earnings stability factor: 3. Home Depot grew EPS at a 19% annual rate the last five years.
Best Dividend Stocks: Automatic Data Processing
The provider of HR and payroll solutions has a dividend history that stretches back to at least 1989.
Dividend yield: ADP stock pays a $3.64 annual dividend per share, yielding 2.5%.
Five-year return: 71%.
Dividend growth rate: 13%.
Dividend stability factor: 4.
Dividend payout ratio: 60.2%.
Earnings stability factor: 3. Automatic Data Processing grew EPS at a 17% annual rate the last five years.
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>>> Six High Dividend Stocks You Can Count On
Investors Business Daily
MATT KRANTZ
03/27/2020
https://www.investors.com/etfs-and-funds/personal-finance/high-dividend-stocks/
It's easy to chase high dividend stocks — and even easier to lose money on them if they fall. There's a better way to find high dividend yields you can count on to make you money — which includes stocks like REIT Coresite Realty (COR), banks like N B T Bancorp (NBTB) and retailer Home Depot (HD).
All things held equal, when a stock falls the dividend yield rises. In other words, if you own a company with a massive yield that's rising, you're likely losing money on the underlying stock. That's not a successful long-term strategy. It's actually a common way to lose money.
What's an investor looking for high dividend stocks to do then? Find stocks with market-beating yields and shares that at least keep pace with the market long term. That way you get a rich dividend that isn't eroded by a faltering stock price.
To help you find such opportunities, Investor's Business Daily pinpoints high dividend stocks that yield at least 40% more than the Standard & Poor's 500 (yielding roughly 2.1%). But, just as importantly, they have a stock price that at least keeps up with the market.
High Dividend Stocks: Math Distorts Reality
A rising dividend yield may simply be masking a money-losing stock. Math and the way dividend yields are calculated is why this happens. The formula for dividend yield is:
Dividend yield = Annual dividend/Stock share price
Why does this equation matter? A falling stock can make a dividend yield look great.
Let's say you buy a $30-a-share stock that pays $3 a year in dividends. You might be initially thrilled with your impressive 10% annual dividend yield ($3 dividend divided by $30 stock price). The stock's yield is 400% larger than the S&P 500's roughly 2.1% yield.
Now, the stock crashes to $15 a share and the company holds the dividend the same. Applying the same dividend yield formula, the stock's dividend yield doubles to 20%. Looks great. But wait a second, despite the higher yield, you're worse off because you lost $15 a share on the stock.
It will take five years of $3 dividend payments just to break even on your stock loss.
This is why chasing yield is often a bad idea when looking for high-dividend stocks. High yields are often a mathematical distortion of a declining stock.
Chasing Yield Can Cost You Money
Losing money on a dividend-paying stock is not just a theory. It's a common occurrence. In fact, 413 stocks in the S&P 500 paid a dividend going into 2019, says S&P Global Market Intelligence. Of those dividend-paying stocks, 38, or 9%, saw their shares fall enough during the year to wipe out the entire year's dividend yield, or worse. And that's in a good market. Nearly two-thirds of dividend stocks dropped by more than their yield in a less bullish 2018. And in 2020, nearly all S&P 500 stock are down more than their yield.
Take Kraft Heinz (KHC), one of Warren Buffett's high dividend stocks darlings, as an example. The stock yielded 5.8% going into 2019. Shares of the food company dropped 25% though, during the year. That left investors with a net loss of nearly 20%, even with the fat dividend.
Keep in mind, too, companies paying high dividends can cut them when the business wanes. General Electric (GE) cut its storied dividend in the fourth quarter of 2018 to just a penny a share, down from the 12 cents a share it paid previously.
High Dividend Stocks: IBD's Better Approach
So, if chasing yield doesn't work, what does? One IBD strategy looks for high-dividend stocks with signs of stability going for them.
Specifically, these stocks have:
High dividend yields of 3%-plus. That's more than 42% higher than the S&P's 2.1% yield.
Three- and five-year earnings growth of 10%-plus.
Earnings stability of 20 or better. Earnings stability is measured by looking at how much earnings per share swings from the five-year trend. A lower number indicates more stability.
No cuts to the dividend (which be harder to find after 2020).
IBD also only looks at stocks that have at least kept pace with the S&P 500 the past five years (a 28% gain through the end of the March 2020). That way, owning the high-dividend stocks at least didn't cost you in lost opportunity.
Finally, stocks also must have a Relative Strength Rating of 70 or higher out of a possible 99. This means the stock outperforms 70% of all stocks in IBD's database.
You might think no stocks can clear all these hurdles. Actually, six did.
High Dividend Yield Winner: Coresite
When you've narrowed down the list of high-dividend stocks this much, it's OK to look for the top dividend yields. That title goes to Coresite. Based in Denver, Coresite provides data center and computing facilities to more than 1,300 companies. The stock yields 4.4%, well above the market.
Real estate investment trusts, like Coresite tend to be high payers because tax rules require them to return 90% of their taxable income to shareholders annually.
Given that REITs must pay out nearly all earnings as dividends, it's not surprising to see one on the list of high dividend stocks.
Shares of Coresite are up 129% over the past five years. Earnings grew at an 11% annualized clip the past three years and are stable. On top of this, the company boosted its dividend by more than 25%.
Now, that's a reliable dividend.
Dividend Darling: Home Depot
Atlanta-based Home Depot runs near ubiquitous home-improvement and construction supply stores. The fact building supplies are used in remodels, not just new construction, offers some diversification to protect Home Depot somewhat in a slowdown.
The number that matters most to investors, though, is 3.1%. That's the dividend yield, which is backed up with 20% average annual, highly stable, earnings growth the past three years. The dividend has also risen by a healthy 32% clip. And rather than wiping out dividends, shares are up roughly 140% more than the S&P 500 over the past five years.
Banks Flex Their Dividend Power
Several banks, including N B T Bancorp, show why durable earnings coupled with dividend yields can be a powerful combination.
The Norwich, N.Y.-based bank's 3.3% dividend yield calls out to income-seeking investors. But our analysis shows there's more to it than just a market-beating payout. Double-digit earnings growth the past five years and 17% earnings growth the past three show the bank is tapping new routes of expansion. Most promising is the bank, following the financial crisis, is committed to dividend growth. N B T boosted its dividend 5%. All this, and an acceptable Relative Strength of 71.
The Full List Of IBD High Dividend Stocks You Can Count On
Symbol Company Indicated Yield % 3 Year EPS Growth Rate (%)
EPS Growth Rate % 5 Year EPS 5 YR Stability Factor Dividend Growth Relative Strength 5-Year Price Ch. %
(AYR) Aircastle Ltd* 4 16 10 18 10 97 42
(COR) Coresite Realty Corp 4.4 11 27 15 29 80 129
(HD) Home Depot Inc 3.1 20 19 3 32 79 68
(TXN) Texas Instruments 3.5 17 20 6 23 76 78
(NBTB) N B T Bancorp 3.3 17 11 6 5 71 29
(PCLB) Pinnacle Bancshares 3.1 14 10 3 9 71 37
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>>> These 13 Tempting Dividend Stocks Torched Investors
Investors Business Daily
MATT KRANTZ
01/17/2020
https://www.investors.com/etfs-and-funds/sectors/sp500-these-13-tempting-dividend-stocks-torched-yield-chasers/
Savvy investors know chasing dividend yield is dangerous. And those that tried it anyway with some S&P 500 stocks learned why not to — the hard way — yet again.
Owners of 13 high-dividend stocks going into 2019, including consumer discretionary stocks Macy's (M) and Gap (GPS), and energy stock Occidental Petroleum (OXY), wound up with net losses of 10% or more during the year. This is according to an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Investors wound up losing money despite each of these stocks yielding 3% at the start of 2019 — because the stocks themselves plummeted. The SPDR S&P 500 ETF Trust (SPY), in comparison, started 2019 yielding just 2.01% (it's down to 1.7% now).
Losing money especially stung in 2019, when the S&P 500 rose nearly 29%. It especially hurt when you thought your dividends were money in the bank.
In fact, 413 stocks in the S&P 500 paid a dividend going into 2019, says S&P Global Market Intelligence. Of those dividend-paying stocks, 38, or 9%, saw their shares fall enough during the year to wipe out the entire year's dividend yield, or worse. And that's in a good market. Nearly two-thirds of dividend stocks dropped by more than their yield during 2018's more challenging market.
If you're looking for yield, it's much better to use IBD's strategy of finding high-yield stocks you can count on.
SPDR Sector ETFs:
Real Estate XLRE
Utilities XLU
Communication Services XLC
Information Technology XLK
Consumer Staples XLP
Health Care XLV
Industrials XLI
Consumer Discretionary XLY
Materials XLB
Financials XLF
Energy XLE
S&P 500 dividend payments are rising and expected to jump again this year.
Last year, S&P 500 companies paid a record $485 billion in dividends. And if forecasters are right, the dividend payment is likely to surpass half-a-trillion dollars in 2020.
And right now, the sector paying the highest yield is the Energy Select Sector SPDR ETF (XLE) at 3.3%. But even the sector itself shows the danger of chasing yield. Shares of the energy ETF are down 4% over the past 12 months, exceeding the current dividend yield.
Dividends for the Communication Service Select SPDR ETF (XLC) yield just 0.8%, the lowest of the 11 S&P 500 sectors. But you won't see many investors complaining, as the ETF's price is up nearly 27% the past 12 months.
Chasing yield, though, burns even more with individual stocks.
Macy's: An S&P 500 Warning Of Chasing Yield
Want an example in the S&P 500 of how a big dividend alone won't save you from losses? Look no further than Macy's.
The department store waved a juicy 5.07% yield in front of investors starting in 2019. But investors who took the dividend wager suffered mightily. Shares of the company fell nearly 43% in 2019. Macy's reported adjusted losses in three out of the four quarters of 2019. You wound up losing your dividend and then some.
Following Macy's stock price fall, the dividend is now up to 8.7%. But who will fall for it again? Analysts already think Macy's adjusted earnings per share will tumble 35% in fiscal 2020. And revenue is seen falling 1% to $24.7 billion. The 9 IBD Composite Rating, of a best-possible 99, alone should scare you off.
Drilling Down On Dangerous Energy Dividends
If you need a reminder why to not chase energy dividends, look deeper. Take Occidental Petroleum. The company started 2019 off yielding 5.1%. But that was a siren's song. Shares of the S&P 500 —energy firm ended up dropping nearly 33% in 2019.
The energy company's adjusted earnings per share is expected to fall 63% in 2019 and another 39% in 2020. That's definitely a risk for anyone thinking about chasing the dividend yield, now up to 6.7%.
Again, these painful reminders just show why growth stocks, even with no or low dividends, are often a better bet.
S&P 500 Companies That Torched Dividend Yields In 2019 By Net Loss
Company Ticker Dividend yield on Jan. 1, 2019 2019 % ch. Sector Net loss Yield now Composite Rating
Macy's (M) 5.07% -42.9% Consumer Discretionary -37.8% 8.7% 9
Occidental Petroleum (OXY) 5.08% -32.9% Energy -27.8% 6.7% 24
The Gap (GPS) 3.77% -31.4% Consumer Discretionary -27.6% 5.4% 24
L Brands (LB) 9.35% -29.4% Consumer Discretionary -20.1% 6.1% 21
Kraft Heinz (KHC) 5.81% -25.3% Consumer Staples -19.5% 5.1% 38
Kohl's (KSS) 3.68% -23.2% Consumer Discretionary -19.5% 5.7% 11
Tapestry (TPR) 4.00% -20.1% Consumer Discretionary -16.1% 4.7% 36
Nordstrom (JWN) 3.18% -12.2% Consumer Discretionary -9.0% 3.7% 46
Franklin Resources (BEN) 3.51% -12.4% Financials -8.9% 4.3% 18
Nielsen Holdings (NLSN) 6.00% -13.0% Industrials -7.0% 1.1% 30
Pfizer (PFE) 3.30% -10.2% Health Care -6.9% 3.7% 61
Simon Property Group (SPG) 4.76% -11.3% Real Estate -6.6% 5.7% 32
H&R Block (HRB) 3.94% -7.4% Consumer Discretionary -3.5%
4.2% 33
SPDR S&P 500 ETF Trust (SPY) 2.01% 28.8% 30.8% 1.7%
<<<
>>> 5 Utilities Stocks That Will Help Pay the Bills
InvestorPlace
by David Moadel
May 21, 2020
https://finance.yahoo.com/news/5-utilities-stocks-help-pay-185044371.html
Are you looking for a wild ride or are you looking for consistent income? For a de-risked portfolio and solid dividends, utilities stocks are a time-tested favorite investment option.
Along with the dividends, utilities stocks are considered relatively safe because they provide power to homes and businesses. This is considered a necessity that never goes out of style.
It’s a sound policy to stick to the best companies in any sector. When it comes to utilities companies, five names are well-regarded and have a long history:
Duke Energy (NYSE:DUK)
Southern (NYSE:SO)
Dominion Energy (NYSE:D)
Consolidated Edison (NYSE:ED)
Excelon (NASDAQ:EXC)
Utilities Stocks to Buy:
Duke Energy (DUK)
Like just about every company in the United States, Duke Energy is dealing with the Covid-19 crisis. This particular company seems to be taking the situation in stride, however.
Consider Duke’s first-quarter net income, which came out to $899 million. That’s just about exactly in line with the same quarter of the previous year, when Duke’s net income was $900 million. Meanwhile, this year’s first-quarter revenue totaled $5.95 billion, which is not too far below the $6.16 billion reported in the first quarter of the prior year.
So, while there is some pressure being felt during the pandemic, it’s not too severe. For the time being, DUK stockholders can ride out the crisis with a decent 4.54% forward annual dividend yield.
Southern (SO)
“Critical infrastructure businesses like ours never take a day off,” observed Thomas A. Fanning, the president and CEO of utilities giant Southern. Fanning’s 100% right about that as Southern is an essential utilities provider for around 8 million customers.
Southern remains in good fiscal health, as well. For 2020’s first quarter, the company posted adjusted earnings per share of 78 cents. That’s an eight-cent year-over-year increase as well as 6 cents greater than the company’s estimate.
SO stock is a safe bet since it has such a massive presence and is crucial to people’s standard of living. It’s also a dividend achiever with a forward annual yield of 4.78%. All in all, this pick deserves to be on anyone’s top utilities stocks list.
Dominion Energy (D)
If you said that D stock is recession-proof, you’d by exaggerating but only slightly. The shares have held up fairly well during the novel coronavirus crisis. Besides, the 4.77% forward annual dividend yield is a strong incentive to hold the stock.
Fiscally, Dominion Energy has held up reasonably well despite the pandemic. For the first quarter of this year, Dominion reported total revenues of $4.5 billion. That’s actually a marked improvement over the revenues of $3.9 billion Dominion generated in the year-ago quarter.
With over 7 million customers across 20 U.S. states relying on Dominion for their energy needs, this company’s a mainstay in the utilities sector and D stock is a highly reliable income generator.
Consolidated Edison (ED)
Like to invest in companies that have been around for a while? If so, take a look at Consolidated Edison, which was founded way back in 1884. If you happen to reside in New York or New Jersey, there’s a fair chance that your electricity service is provided by this esteemed company.
Has “Con Ed” been able to weather the Covid storm? The answer would be yes as the company’s adjusted earnings for the first quarter totaled $451 million. That’s $1.35 per share and it beats the $448 million, or $1.39 per share, generated during the same quarter of last year.
Plus, ED stock features a trailing 12-month price-to-earnings ratio of 18.15 and a forward annual dividend yield of 4.32%. Those are nice stats and this stock should perform well even in these challenging times.
Excelon (EXC)
This one’s a little bit different from the other utilities-sector stocks on this list. Excelon is a relative newcomer, having been incorporated in 1999. Plus, EXC stock is the only name on this list that’s traded on the Nasdaq.
So, it could be argued that Excelon is a more “modern” utilities company. Its true strength, however, is that it’s diversified with fossil, nuclear, hydroelectric, wind and solar segments.
With 87 cents per share in operating earnings for 2020’s first quarter, Excelon remains on par with its results from the same quarter of last year. Additionally, a trailing 12-month price-to-earnings ratio of 13.79 and a forward annual dividend yield of 4.17% indicate a compelling value with EXC stock.
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The 3 Best Dividend Growth Stock ETFs:
Prologis - >>> Opinion: Three dividend stocks of cash-flow-rich companies poised to thrive during this economic crisis
MarketWatch
By Philip van Doorn
5-9-20
https://www.marketwatch.com/story/three-dividend-stocks-of-cash-flow-rich-companies-poised-to-thrive-during-this-economic-crisis-2020-05-07?siteid=bigcharts&dist=bigcharts
Prologis PLD, -0.95% is a real-estate investment trust that develops, operates and leases warehouses and distribution centers, while also providing logistics services. Its top customer, with 17 million square feet of leased space (5.8% of “net effective rent”) at the end of 2019 was Amazon.com AMZN, +0.87%. Other large customers include Home Depot HD, +2.06%, FedEx FDX, -1.45%, United Parcel Service UPS, -0.72% and Walmart WMT, +2.04%.
The stock is down 1% this year and has a dividend yield of 2.64%. The company was included in this “early” list of S&P 500 companies that increased their quarterly sales the most from a year earlier, as most companies reported sales declines.
The continued transition to online retail has been a boon to Prologis, with the shares returning 160% over the past five years, compared with a 52% return for the S&P 500. Koontz believes “inventory building” will now be the “biggest driver” for Prologis over the long term, in light of all the shortages experienced in the U.S. since the coronavirus shutdown began in March.
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>>> The Humbling of Exxon
The industrial giant missed the shale boom, overspent on projects, and saw its debt rise to $50 billion as its stock plummeted.
4-30-20
Bloomberg
By Kevin Crowley and Bryan Gruley
https://www.bloomberg.com/features/2020-exxonmobil-coronavirus-oil-demand/?srnd=businessweek-v2
Darren Woods, chief executive officer of ExxonMobil Corp., was chipper as he bandied with industry analysts on Jan. 31 about his company’s poor 2019 performance. The coronavirus had yet to spread far beyond China, but Woods had prepared to say a few words about it if anyone asked. No one did.
As for the lower earnings and sliding share price, Woods assured his conference-call audience that things were under control. Oil prices languishing in the $60-a-barrel range weren’t a problem but an opportunity. “We know demand will continue to grow, driven by rising population, economic growth, and higher standards of living,” Woods said. “We believe strongly that investing in the trough of this cycle has some real advantages.” He went on to describe how Exxon would spend in excess of $30 billion on exploration and other projects in 2020, more than any other Western oil company. “While we would prefer higher prices and margins”, he said, “we don’t want to waste the opportunity this low-price environment provides.”
Over the next several weeks, Covid-19 ravaged the oil industry by vaporizing global demand just as Russia and Saudi Arabia launched a price war. Investors were stunned to see oil fall to an 18-year-low of $22.74 a barrel at the end of March. An agreement aimed at cutting output and boosting prices failed to halt the slide, and on April 20 some oil contracts were trading for less than zero—sellers were paying buyers to take the crude. The fallout for producers large and small has been devastating. “You’re seeing fragilities exposed,” says Kenneth Medlock III, senior director of the Center for Energy Studies at Rice University’s Baker Institute for Public Policy. “Covid-19 is doing things that nobody could have imagined.”
Perhaps no company has been humbled as profoundly by recent events as Exxon, the West’s largest oil producer by market value and an industry paragon that sets the bar not just for itself but for its competitors. And the pandemic isn’t primarily to blame; the culprit is just as much the company itself.
The coronavirus has laid bare a decade’s worth of miscalculations. Exxon missed the wild and lucrative early days of shale oil. An adventure in the oil sands of Canada swallowed billions of dollars with little to show for it. Political tensions doomed a megadeal in Russia. Exxon ended up spending so much on projects that it has to borrow to cover dividend payments. Over a 10-year period, Exxon’s stock has declined 10.8% on a total return basis, which includes dividends. The company’s major rivals all posted positive returns in that period, except for BP Plc, which had the Deepwater Horizon spill in the Gulf of Mexico in 2010. The wider S&P 500 Index has returned nearly 200%.
The oil business is all about how much you produce, how low you get your costs, and how well you capture resources for the future. Exxon produces about 4 million barrels a day—essentially the same as 10 years ago, despite repeated vows to push the number higher. Meanwhile, the company’s debt has risen from effectively zero to $50 billion, and its profit last year was a bit more than half what it was a decade ago. Once the undisputed king of Wall Street, Exxon today is worth less than Home Depot Inc., which has less than half the revenue.
Exxon’s Return on Invested Capital
Fiscal years
Former CEO Rex Tillerson oversaw that eventful span before leaving to become President Trump’s secretary of state. Under Tillerson, Woods ran Exxon’s then-successful refining business. The rangy, white-haired graduate of Texas A&M University is known for his unfailing optimism and affability. (Woods declined to be interviewed for this article.) The size of the job he has now is difficult to overstate. In an unprecedented crisis he’s guiding what author Steve Coll, in his book Private Empire: ExxonMobil and American Power, called “a corporate state within the American state?…?one of the most powerful businesses ever produced by American capitalism.”
For four decades Exxon has plowed ahead, eyes on the distant horizon, keeping its share price steady, financial returns healthy, and dividend rising through wars and recessions, Democratic administrations and Republican. Now the world will see how well Exxon can survive a pandemic—and whether it has what it takes to thrive in the aftermath.
On Jan. 30, 2009, Exxon reported a 2008 profit of $45.2 billion, at that time the biggest annual profit ever recorded by a public U.S. company. Revenue was $425 billion, the stock closed that day at $76, and Exxon pumped more oil than any OPEC member except Saudi Arabia and Iran.
Tillerson had been CEO for three years. A gruff Texan who’d risen through Exxon’s rough-and-tumble drilling and exploration businesses, he was about to make his biggest deal to date: the $31 billion acquisition of XTO Energy Inc., the largest independent U.S. producer of natural gas. The deal was bold not just because of the price, but also because in buying XTO, Exxon was tacitly acknowledging that concerns over greenhouse gases would spur demand for cleaner gas. The purchase also surprised some investors, who couldn’t easily see how the company would make a return. This wasn’t like Exxon, known for an iron discipline about cutting deals that offered clear, reliable payoffs. Tillerson told analysts, “We’ll probably suffer in the near term as we put it together. This is really about value creation over the next many years.”
XTO’s expertise was in extracting gas from subterranean rock using newly developed fracturing techniques. But as Exxon assimilated XTO, wildcatters such as Harold Hamm of Continental Resources Inc. and Scott Sheffield of Pioneer Natural Resources Co. were discovering that fracking worked for oil, too. Soon it became clear that the real riches in North Dakota and West Texas shale were in oil, because crude was rising in price while gas was plummeting.
As the decade wore on, the magnitude of oil accessible in U.S. shale would make the country an energy superpower to rival OPEC. Yet it would be years before Exxon would embrace shale oil. “I would be less than honest if I were to say to you?...?we saw it all coming, because we did not, quite frankly,” Tillerson said at a 2012 event at the Council on Foreign Relations. Later, in 2019, he told a Houston industry conference that he “probably paid too much for XTO,” a rare Exxon mea culpa. Tillerson didn’t respond to requests for comment for this article.
Exxon wasn’t the only energy giant to whiff early on in the shale oil boom. So did Chevron, Royal Dutch Shell, and BP. That’s partly because the business was undergoing a fundamental change that the supermajors weren’t eager to accept. For decades, politicians and consumers were paranoid about running short of oil and gas. The biggest companies, led by Exxon, spent great sums exploring and drilling in ever more exotic and forbidding geographies, seeking the next mother lode.
Shale changed the calculus. Nobody doubted anymore that there were oceans of oil in the ground; it was a matter of getting it out as inexpensively as you could. The Hamms and Sheffields, fueled by cheap money from Wall Street, were driving down extraction costs and ramping up production in old American oilfields that the big boys had long ago abandoned. Some of them were a short drive from Exxon’s Irving, Texas, headquarters. Exxon, meanwhile, was taking chances on faraway lands.
Consider western Canada, where Exxon invested in the Kearl oil sands project. If you believed the world was short of crude, it sounded great: millions and millions of barrels waiting to be squeezed from Alberta sand, and Exxon’s technical prowess to plumb them. But upfront costs ran 18% higher than expected, and in 2014 oil prices began a nearly two-year swoon as OPEC flooded the world with oil in the hope of suffocating American shale drillers.
With crude dipping below $40 a barrel, Exxon’s hand was forced. In early 2017, after investing more than $16 billion, the company had to erase 3.3 billion barrels from its listing of crude reserves, most of it from Alberta. The company couldn’t control oil prices, of course, but the oil sands write-off was nevertheless part of the deepest reserves cut in Exxon’s modern history. (Exxon last year rebooked some of the Alberta reserves.)
Russia seemed more of a sure thing. Russian President Vladimir Putin and Tillerson had a history. In 2003, under then-CEO Lee Raymond, Exxon had come close to buying into Yukos Oil Co., the Russian oil producer owned by Putin adversary Mikhail Khodorkovsky. Putin balked at the prospect of Exxon calling the shots on production and other matters; Tillerson, then an Exxon senior vice president, was just as wary of Putin meddling with Yukos. He helped persuade Raymond to back off, which forged a bond between Putin and Tillerson that no other Western oil company executive enjoyed.
In 2011, Putin and Tillerson agreed on the first piece of what was envisioned as a $300 billion exploration deal that opened vast tracts of the Russian Arctic thought to contain billions of barrels of oil. It was an ideal match: Exxon wanted the natural resources, Putin the expertise and money. Then, in 2014, the Obama administration imposed sanctions on Russia for its annexation of Crimea. The sanctions prevented Exxon from continuing work on most of the Russia project. Another big fish had gotten away. Again, Exxon probably couldn’t have predicted Crimea—nor was it alone in seeking access to Russian crude. But maybe that’s what you get for trusting Putin.
By the time Tillerson departed to join the Trump administration, Exxon looked a lot different than it did when it reported those record earnings. Revenue and profit were a fraction of what they’d been, and the stock had lost its premium to other S&P 500 Index energy companies for the first time since 1997. Worse, for the first time since the Great Depression, Standard & Poor’s had stripped Exxon of its top credit rating. And the company faced a New York state lawsuit alleging that it had intentionally misled investors about the dangers of climate change. (The company won the case in December 2019.)
When Woods became CEO in January 2017, there were the predictable media stories about him stepping out of Tillerson’s shadow. That wasn’t going to be easy given the big write-off, the S&P downgrade, and the other unfortunate circumstances Woods inherited. But he was determined to rebuild Exxon with projects in Brazil, Guyana, Mozambique, and Papua New Guinea—the sorts of efforts that for some shareholders conjured unpleasant memories of Canada and Russia. Exxon also had finally jumped into shale oil with a $6 billion acquisition of acreage—negotiated by Tillerson—in West Texas’ prodigious Permian Basin.
Other supermajors weren’t as eager to embark on new endeavors. Like Exxon, they’d spent heavily, then paid for it during the 2014-16 crash. Burned investors were cooling on energy stocks and diverting their money into tech, pharma, and other sectors. Energy now makes up less than 3% of the S&P 500 Index, compared with more than 10% in 2009.
The growing movement to transition away from fossil fuels to solar, wind, and other energy sources was also peeling away investment. Such is the clamor in Europe that Royal Dutch Shell Plc and BP both have pledged to become carbon neutral by 2050 and invest heavily in renewable energy sources. Exxon has made no such pledge, instead investing in early-stage green technologies while insisting that the world will need more and more oil and gas until at least 2040, driven by China and India. Some on Wall Street see demand peaking as early as 2030.
2020 Breakeven Prices
Breakeven defined as oil price needed to cover capital spending and dividends.
At his first annual Investor Day, in March 2017, Woods vowed to spend more on new ventures so Exxon would be ready when the market turned. “We are confident,” he declared before dozens of analysts and shareholders in New York City. “Our job is to compete and succeed in any market, irrespective of conditions or price.”
Even then, a lot of institutional investors were inclined to take an Exxon CEO’s word as gospel. But an odd turning point came a year into Woods’s tenure. Wall Street analysts threw a little tantrum about the lack of forward-looking data in Exxon’s quarterly reports. They were growing weary of sunny promises belied by a lackluster share price.
With the company planning to spend so much money on stuff rivals saw little need for, the analysts zeroed in on why Exxon’s CEO never appeared on quarterly conference calls to answer their questions, as the top bosses at almost every other S&P 500 company did. “We think times have changed, and that Exxon may not necessarily be able to expect the market will continue to offer it the benefit of the doubt,” a Barclays Plc analyst wrote in a February 2018 investor note. In other words, Exxon was no longer a special case.
Two months later, Jeff Woodbury, Exxon’s then-investor relations vice president, promised that Woods would soon start participating in conference calls, saying, “We believe that the investment community did not have a very good understanding of what our value growth potential was.”
Taking On Debt
“Good morning, everyone,” Woods said when he stepped onstage at Exxon’s most recent Investor Day, on March 5 in New York. He waited for a response. When none came, he said, “Good morning, everyone?” Still nothing. “Come on now,” Woods said. “A little bit of energy here.” Nervous titters rippled through the audience.
On that Thursday, the coronavirus had only begun to wreak havoc with America’s health and economic well-being. Social distancing wasn’t yet happening widely, though guests at the Exxon presentation were offered small bottles of hand sanitizer. Woods mentioned the virus as part of a “very challenging short-term-margin environment” facing Exxon in 2020. It was a new twist on a familiar spiel that investors could have heard Tillerson spinning years before. “The longer-term horizon is clear, and today our focus is on that horizon,” Woods said.
Exxon was for the most part sticking with its plan. Woods said he intended to pare spending barely 6%, to a maximum of $33 billion for the year, and emphasized the company’s “optionality”—a word he uses a lot—to adjust spending to react to market conditions. While others retrench, Woods said, “We believe the best time to invest in these businesses is during a low, which will lead to greater value capture in the coming upswing. You can do that if you have the opportunities and the financial capacity, which we do. This is a key competitive advantage of ours.”
Within 48 hours, Woods’s plan was in trouble. The Russians and Saudis, unable to agree on how much crude to pump, started pushing oil prices down. At the same time, demand was spiraling lower as lockdowns proliferated around the world. Storage tanks and pipelines were overwhelmed with unwanted oil, refineries reduced their inflows of raw crude, high-cost wells were shut. Analyst Paul Sankey of Mizuho Securities USA observed in an investor note that Exxon was “stepping up when the industry was stepping back. Turns out, they were stepping off a cliff.”
On March 16, S&P again downgraded Exxon’s credit rating, to AA from AA+, and said it could happen again “if the company does not take adequate steps to improve cash flows and leverage.” A week later the stock closed at $31.45, the lowest since 2002. Investors started to wonder whether Exxon might end its string of 37 straight yearly increases in its dividend. To cover that $14.7 billion payment—third-highest among S&P 500 companies—along with its aggressive capital spending, Exxon needed crude to fetch about $77 a barrel, the highest breakeven among oil majors, according to RBC Capital Markets.
The stock began to recover in early April, but it was all too much. On April 7, Woods said Exxon would cut 2020 capital spending to $23 billion—a drop of an additional $10 billion, or 30%—and shave operating expenses by 15%. The bulk of the cuts would be aimed at the Permian. Exxon would defer some activities in its Guyana project while postponing investment decisions elsewhere. “They cried uncle,” says Rice University’s Medlock. With the cuts, the breakeven dropped to $60 a barrel, still tops among the biggest companies.
You could almost feel Woods gritting his teeth in the company’s statement that day: “The long-term fundamentals that underpin the company’s business plans have not changed—population and energy demand will grow, and the economy will rebound.” Despite the cuts, Exxon still expected Permian production would rise. In other words, the company wasn’t abandoning its strategy; it was just hitting pause in deference to Covid-19.
Woods certainly can’t be faulted for not foreseeing the oil carnage of April, with the industry abandoning fracking and laying off more than 50,000 workers in March alone. And Exxon isn’t seeking government intervention to help save U.S. shale oil as Hamm, Sheffield, and others are. With as many as one in three shale players expected to exit the market one way or another, Exxon could be in a position to snap up cheap acreage after the virus retreats. “The large companies might actually get bigger on the back of this,” says Medlock.
For now, though, it’s hard not to see Exxon as just another company getting tossed around by the market. After the recent Investor Day, a reporter asked Woods if Exxon was still capable of navigating today’s up-and-down-and-down-some-more energy business. “I don’t think you stay in business for 135 years,” Woods said, “without being attentive to the needs of your customers, your stakeholders, and the communities that you operate in.” It wasn’t actually an answer.
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>>> Exxon's CEO On How Oil Giant Plans To Maintain Dividend, Focus On Balance Sheet
Benzinga
Jayson Derrick
April 07, 2020
https://www.benzinga.com/news/20/04/15759671/exxons-ceo-on-how-oil-giant-plans-to-maintain-dividend-focus-on-balance-sheet?utm_campaign=partner_feed&utm_source=yahooFinance&utm_medium=partner_feed&utm_content=site
Exxon's CEO On How Oil Giant Plans To Maintain Dividend, Focus On Balance
Oil giant Exxon Mobil Corporation is committed to maintaining its dividend, mostly due to a decades-long focus on maintaining a healthy balance sheet, CEO Darren Woods said Tuesday on CNBC's "Squawk Box."
CEO Says Exxon's Focus Unchanged
Exxon remains committed to satisfying the needs of its large retail investor base in paying dividends, and it won't shy away from tapping its balance sheet to come up with cash if needed in the short-term, Woods said.
The main focus of the balance sheet remains unchanged in that it is needed to support new projects, he said.
Exxon was on the receiving end of an S&P rating downgrade in March from AA+ stable to AA stable, but this has no impact on how management looks at its balance sheet, the CEO said.
Recovery Will Come, Woods Says
An oil recovery is "on the way," but the exact timing can't be anticipated, Woods said.
Exxon's current strategy is to invest in projects with no particular recovery curve to "get through" current headwinds, he said.
What's Next For Exxon
Improving standards of living and economic growth are among the two largest drivers of demand for oil, the CEO said.
These trends will re-emerge in the future. and Exxon needs to "be ready to meet those demands when that recovery happens," he said.
The stock was trading 3.95% higher at $42.07 at the time of publication Tuesday.
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>>> Dividend ETFs may lose out under the $2 trillion coronavirus relief bill
MarketWatch
March 27, 2020
By Andrea Riquier
https://www.marketwatch.com/story/dividend-etfs-may-lose-out-under-the-2-trillion-coronavirus-relief-bill-2020-03-26?mod=article_inline
Know what’s inside your fund, one analyst urges
The U.S. Congress is taking appropriate steps to protect taxpayers, but that means investors need to look after their own portfolios, one analyst says.
The massive stimulus bill approved by the Senate and under consideration by the House of Representatives to offset the economic effects of the coronavirus epidemic has a provision fund investors should pay attention to, according to one analyst.
The “Cares Act” specifies that any companies that borrow from the U.S. government may not buy back shares of their stock or pay dividends to shareholders for at least one year after the loan is repaid.
“While this is a taxpayer-friendly approach to provide support to businesses in need, it is also a reminder for investors to look inside their dividend fund to understand what they have exposure to,” said CFRA’s head of ETF and mutual fund research, Todd Rosenbluth, in an analysis out Thursday.
CFRA expects companies in the travel sector, such as hotels, resort operators and cruise lines, to see a negative impact from the COVID-19 outbreak, while supermarkets, providers of household products, and biotechnology and pharmaceutical companies will benefit.
As a reminder that the coronavirus isn’t the only headwind weighing on financial markets, CFRA noted that companies tied to oil-and-gas equipment and services and exploration and production will be negatively impacted by the global oil price war.
Rosenbluth examined two popular exchange-traded funds to highlight what differences in portfolio composition might mean for dividends. The First Trust Value Line Dividend Index ETF FVD, +3.80% has 12% of its portfolio invested in consumer staples, and 8% in health care, with only 2% in energy, a lineup that might withstand the downturn.
It is worth noting, however, that half of that ETF’s top 10 holdings are in financial companies. Financials face a double whammy in the current environment: it’s very hard for them to make money when interest rates are so low, and they are expected to bear the brunt of a coming wave of corporate bankruptcies and defaults.
In contrast, another ETF, the iShares Core High Dividend fund HDV, +4.51%, has a 24% weighting in energy stocks, Rosenbluth noted. That may be somewhat mitigated by a strong position in health care, he said.
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>>> Here are the best bets for investors seeking income, according to Goldman Sachs
MarketWatch
April 4, 2020
By Andrea Riquier
https://www.marketwatch.com/story/here-are-the-best-bets-for-investors-seeking-income-according-to-goldman-2020-03-30?mod=article_inline
Banks should weather the storm, Goldman’s analysts reckon
Home Depot is one of Goldman Sachs’ best bets for dividends.
It’s hard times for anyone relying on income investments. The stimulus bill signed into law Friday keeps any companies that borrow from the government from paying dividends to shareholders for at least a year after the loan is repaid — even as bond yields have collapsed to to near all-time lows.
That makes it critical for investors focused on income to “consider stocks with both high dividend yields and the capacity to maintain the distributions,” Goldman Sachs strategists wrote in an analysis out Monday.
The provisions of the CARE Act likely exacerbate a trend of companies trying to keep as much cash on hand as possible as the economic downturn worsens. The Goldman strategists estimate dividends for S&P 500 stocks will decline 25% to $44 per share in 2020, and note 12 companies, ranging from Apache Corp. APA, +13.35% to Old Dominion Freight Line ODFL, +0.35% , have already reduced or suspended their shareholder payouts.
“We expect significantly more dividend cuts are likely to be announced during April in conjunction with the release of quarterly financial results,” the analysts wrote.
The Goldman team screened the Russell 1000 for companies with an annualized dividend yield greater than 3%, ample cash on hand, healthy balance sheets, and what they call “reasonable payout ratios.” Each of the stocks they identified have not under-performed the rest of the market since the peak, are rated by S&P as at least BBB+.
“The typical stock on our list has paid its dividend for 90 quarters (23 years) without reducing its distribution,” the Goldman strategists wrote. Their full list contains companies from 10 of the 11 S&P 500 sectors; energy is the only one missing. We’ve listed the top — highest-yielding — stock from each of the 10 sectors below.
COMPANY ANNUAL DIVIDEND YIELD CONSECUTIVE QUARTERS WITH NO DIVIDEND CUT SECTOR
Omnicom Group Inc. OMC, +2.92% 5% 50 Communication services
Home Depot Inc. HD, +4.78% 3.1% 128 Consumer discretionary
Archer-Daniels-Midland ADM, +4.29% 4.3% 23 Consumer staples
Wells Fargo & Co. WFC, +5.54% 6.7% 39 Financials
Bristol-Myers Squibb BMY, +1.74%
Merck & Co. Inc. MRK, +0.55% ) 3.4% 114 Health care, pharmaceuticals
3M Co. MMM, +1.07%
Emerson Electric Co. EMR, +6.69% 4.4% 156 Industrials
IBM IBM, +3.79% 6.0% 102 Tech
Nucor Corp. NUE, +5.12% 4.8% 41 Materials
Regency Centers REG, +4.28% 5.9% 39 Real estate
CenterPoint Energy CNP, +4.68% 7.1% 55 Utilties
Source: Goldman Sachs
About one-third of the stocks that wound up on Goldman’s list of 40 are financials. The strategists wrote that their bank equity research analyst colleagues had modelled stress scenarios and found that “banks are in a position to maintain dividends at or close to the current run rate.”
That’s an important caveat given the particularly precarious position for financials now. It’s not just the economic fall-out from the coronavirus pandemic that’s troubling them, but an expected wave of defaults and bankruptcies from the collapse in oil prices.
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>>> These 60 large U.S. companies are ‘susceptible to a dividend cut,’ according to Jefferies
MarketWatch
April 6, 2020
By Philip van Doorn
https://www.marketwatch.com/story/these-60-large-us-companies-are-susceptible-to-a-dividend-cut-according-to-jefferies-2020-03-31?siteid=bigcharts&dist=bigcharts
Investors who rely on income are already seeing companies reduce or eliminate dividend payouts as the coronavirus spreads
FedEx is among 60 S&P 500 companies that analysts at Jefferies believe are 'susceptible' to dividend cuts.
The deadly coronavirus is taking a toll on financial markets around the world. Stock-price declines have been swift and relentless.
Now there is intense pressure for companies to shore up cash reserves, not only by reducing investment and suspending share buybacks, but by cutting dividend payouts.
Jefferies global equity strategist Sean Darby has listed 60 companies in the S&P 500 SPX, +2.67% that he and his colleagues think are “susceptible to a dividend cut.”
Here’s the entire list, followed by explanations and more background from Darby:
COMPANY TICKER DIVIDEND YIELD DIVIDEND COVERAGE RATIO NET DEBT TO EQUITY
General Mills Inc. GIS, -0.03% 3.62% 1.49 177.3%
Evergy Inc. EVRG, +1.70% 3.42% 1.47 117.3%
Sempra Energy SRE, +5.94% 3.48% 1.46 120.0%
Qualcomm Inc. QCOM, -0.88% 3.59% 1.45 74.8%
PPL Corp. PPL, +4.35% 6.43% 1.44 171.9%
American Electric Power Co. Inc. AEP, +2.77% 3.34% 1.42 149.3%
Genuine Parts Co. GPC, +1.59% 4.78% 1.40 114.9%
Consolidated Edison Inc. ED, +1.30% 3.79% 1.38 117.1%
3M Co. MMM, +1.07% 4.27% 1.38 186.1%
International Flavors & Fragrances Inc. IFF, +4.36% 2.78% 1.38 64.3%
PepsiCo Inc. PEP, +1.40% 3.04% 1.37 187.6%
Duke Energy Corp. DUK, +2.86% 4.53% 1.36 130.8%
United Parcel Service Inc. Class B UPS, +0.51% 4.13% 1.33 683.1%
Eversource Energy ES, +1.97% 2.71% 1.33 117.6%
J.M. Smucker Co. SJM, +0.37% 3.18% 1.32 72.9%
Coca-Cola Co. KO, +2.03% 3.64% 1.30 156.3%
Becton, Dickinson and Co. BDX, -0.08% 1.42% 1.30 89.3%
Kellogg Co. K, +1.38% 3.83% 1.25 243.6%
Bristol-Myers Squibb Co. BMY, +1.74% 3.31% 1.20 60.7%
Equity Residential EQR, +6.99% 3.85% 1.15 84.7%
Las Vegas Sands Corp. LVS, +2.41% 7.27% 1.14 132.3%
American Tower Corp. AMT, +0.90% 1.72% 1.13 448.8%
Campbell Soup Co. CPB, -1.50% 3.01% 1.12 759.3%
Federal Realty Investment Trust FRT, +3.46% 5.60% 1.11 121.6%
FirstEnergy Corp. FE, +3.00% 3.85% 1.10 295.2%
Microchip Technology Inc. MCHP, +3.58% 2.13% 1.03 186.8%
Gap Inc. GPS, +9.43% 13.07% 0.96 181.6%
Kinder Morgan Inc Class P KMI, +6.09% 7.54% 0.96 93.4%
Hershey Co. HSY, +0.69% 2.24% 0.96 228.5%
AT&T Inc. T, +3.54% 6.88% 0.93 87.3%
AvalonBay Communities Inc. AVB, +5.65% 4.18% 0.92 67.3%
Extra Space Storage Inc. EXR, +1.88% 3.72% 0.92 179.9%
SL Green Realty Corp. SLG, +3.89% 7.68% 0.91 92.9%
Welltower Inc. WELL, +3.93% 7.38% 0.88 88.9%
Oneok Inc. OKE, +10.57% 18.66% 0.88 204.4%
NiSource Inc NI, +1.73% 3.22% 0.88 159.7%
Boston Properties Inc. BXP, +1.52% 4.22% 0.86 144.5%
Essex Property Trust Inc. ESS, +6.02% 3.68% 0.86 91.1%
AES Corp. AES, +7.89% 4.19% 0.83 306.6%
Simon Property Group Inc. SPG, +5.68% 14.84% 0.82 767.0%
Mid-America Apartment Communities Inc. MAA, +4.79% 3.73% 0.79 70.9%
FedEx Corp. FDX, +4.84% 2.09% 0.79 86.0%
Alexandria Real Estate Equities Inc. ARE, +2.13% 2.85% 0.79 67.5%
Kimco Realty Corp. KIM, +5.18% 11.09% 0.72 106.8%
Broadcom Inc. AVGO, +2.93% 5.41% 0.64 111.1%
Amcor PLC AMCR, +3.78% 5.64% 0.63 97.0%
Equinix Inc. EQIX, +1.78% 1.65% 0.61 129.0%
Regency Centers Corp. REG, +4.28% 5.96% 0.61 64.0%
Molson Coors Beverage Co. Class B TAP, +2.80% 5.66% 0.57 63.5%
Digital Realty Trust Inc. DLR, +5.10% 3.20% 0.55 100.7%
Realty Income Corp. O, +5.14% 5.26% 0.51 81.1%
Newell Brands Inc NWL, +1.98% 6.74% 0.47 121.1%
Williams Companies Inc. WMB, +8.98% 11.58% 0.47 135.7%
UDR Inc. UDR, +6.30% 3.82% 0.46 111.1%
Dominion Energy Inc D, +4.40% 4.90% 0.46 112.3%
Crown Castle International Corp. CCI, +3.24% 3.24% 0.39 226.3%
Iron Mountain Inc. IRM, +3.05% 9.96% 0.38 711.8%
Ventas Inc. VTR, +5.35% 11.01% 0.37 113.7%
Wynn Resorts Ltd. WYNN, +8.53% 6.55% 0.31 533.9%
Healthpeak Properties Inc. PEAK, +6.14% 6.08% 0.06 95.5%
Source: Jefferies
The table is sorted by declining dividend coverage ratio, which was calculated by the Jefferies analysts by dividing the firm’s estimated earnings for the companies over the next 12 months by the expected dividend payouts based on the current dividend rates. A higher coverage ratio is better. However, a high ratio of net debt to equity is of concern. The net-debt-to-equity ratio was calculated by subtracting cash from debt and dividing by equity.
When asked in an email why he used earnings instead of free cash flow for the dividend coverage ratio, Darby replied: “Many companies will smooth dividend payments, so if we look at earnings measures, we can get an idea of how confident they are about future payments.”
One company that would have made Darby’s list was Macy’s M, +2.77%. However, the retailer suspended its dividend March 20 after temporarily closing all of its stores March 17. Macy’s placed the “majority” of its employees on furlough this week.
Debt-market pressure
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Trump on March 27. Companies that borrow from the federal government will be unable to pay dividends for a year after the loans have been repaid in full.
Of course, companies that don’t receive federal assistance will be able to continue paying dividends and even buying back shares. But in this new climate, management teams have to be careful.
“As companies become more aware that they are running their businesses for the bond holders (and credit markets) rather than for the equity investors, their focus will turn to managing cash rather than earnings,” Darby wrote in his report March 30.
He explained that debt issuers with sub-investment-grade ratings (below BBB) appeared not to have access to the Federal Reserve’s Primary Market Corporate Credit Facility (PMCCF) or its Secondary Market Corporate Credit Facility (SMCCF), which were established March 23.
Darby went further, pointing out that the ratings firms might cut their ratings for BBB-rated bond issuers, making them likely to lose access to those programs.
So there are all sorts of reasons for companies to think ahead and shore up cash any way they can, by suspending share buybacks, cutting capital expenditures and cutting or suspending dividends.
In a report listing large-cap stocks with “safe dividends,” Goldman Sachs analyst Cole Hunter predicted dividends for the S&P 500 would decline by 25% in 2020.
<<<
>>> Companies Suspend Dividends, Buybacks As Pandemic Weakens Market
Benzinga
Shanthi Rexaline
March 26, 2020
https://finance.yahoo.com/news/companies-suspend-dividends-buybacks-pandemic-201244468.html
Dividend and buybacks are the primary means adopted by companies to reward their shareholders. Shareholders can also find returns from capital gains or stock price appreciation, which may or may not be in the company's control.
As desperate times call for desperate measures, a slew of companies have announced suspensions of dividend, buybacks or both as the coronavirus pandemic wallops the market.
Why Companies Hit The Pause Button
These moves stem from the need to conserve cash as companies navigate through a turbulent phase that's likely to hit their top- and bottom-lines.
There's a political reason to exercise prudence too, with Congress on the cusp of passing a -trillion stimulus package. Lawmakers have expressed their opposition to companies squandering away aid money with buybacks.
The following companies have announced suspension shareholder reward programs in the wake of the pandemic.
Intel Corporation (NASDAQ: INTC) revealed in a 8-K filing Tuesday it is suspending its stock repurchases due to the pandemic. The company termed the decision as prudent, given the length and uncertainty of the pandemic. Dividends, won't be affected, Intel said.
The suspension stalls a $20-billion buyback the company announced in October 2019.
Ford Motor Company (NYSE: F) announced March 19 it's suspending its dividend to preserve cash and provide additional flexibility. The automaker also withdrew its guidance.
Boeing Co (NYSE: BA), which is beset by both fundamental and geopolitical woes, announced the suspension of its dividend program. The company also said it will extend the pause in its share repurchases.
Big banks JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corp (NYSE: BAC), Citigroup Inc (NYSE: C), Goldman Sachs Group Inc (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo & Co (NYSE: WFC), Bank of New York Mellon Corp (NYSE: BK) and State Street Corp (NYSE: STT) have all suspended their buybacks until the second quarter in order to lend money to individuals and businesses.
Oil giants Royal Dutch Shell plc ADR Class A (NYSE: RDS-A) and Total SA (NYSE: TOT), which are confronted with a steep decline in oil prices, have also announced a stalling of buybacks, while most other oil majors have hinted at slashing their capital expenditures.
McDonald's Corp's (NYSE: MCD) CEO Chris Kempczinsk said in an interview with CNBC the company suspended its $15-billion buyback several weeks ago.
Department stores Macy's Inc (NYSE: M) and Nordstrom, Inc. (NYSE: JWN) suspended their respective dividends, while Nordstrom also halted buybacks. Peer Kohl's Corporation (NYSE: KSS) withdrew its buyback program while suggesting it is evaluating its dividend.
Miner Freeport-McMoRan Inc (NYSE: FCX) announced the suspension of its dividend.
Marriott International Inc (NASDAQ: MAR) said it is halting dividend payments after the payout of a previously announced first-quarter dividend March 31.
Telecom giant AT&T Inc. (NYSE: T) announced the suspension of its buyback program in a bid to protect its dividend.
Among airlines, Delta Air Lines, Inc. (NYSE: DAL) announced March 10 the suspension of buybacks and the deferring of $500 million in capex. Subsequently, on March 20, the company announced temporary halting of future dividend payments. Alaska Air Group, Inc. (NASDAQ: ALK) also said it is suspending its dividend program while also slashing 70% of its capacity.
<<<
>>> Utilities Plunge: Making Sense Of The Sector's Big Decline
Seeking Alpha
Mar. 23, 2020
by Ian Bezek
https://seekingalpha.com/article/4333697-utilities-plunge-making-sense-of-sectors-big-decline
Summary
Utility stocks dropped nearly 20% between last Tuesday and last Friday.
This has to be concerning to investors that bought these stocks as strong defensive plays.
There are two factors that could hurt utility profitability going forward.
The sector offers fine yields, but isn't compelling yet aside from the income.
This idea was discussed in more depth with members of my private investing community, Ian's Insider Corner. Get started today »
This article was highlighted for PRO subscribers, Seeking Alpha's service for professional investors. Find out how you can get the best content on Seeking Alpha here.
Last week, the Utility Select Sector SPDR (XLU) sector got utterly smashed. From Tuesday's high onward, the XLU ETF lost 18% of its value. I don't recall these names ever getting hit this badly, even in 2008. It's simply been an incredible drop, with the sector giving back 5 years of gains in a little over a month:
Even more incredibly, if you go way back, XLU was trading for $43 prior to the financial crisis. Thus it's only gone up 10% over the past 13 years, with all other returns coming from dividends. Even farther back, XLU traded for as much as $34 in the year 2000, meaning that the ETF is up only 40% over the past 20 years. Of course, with dividends, things look a lot better. Still, it's a stunning turn of events for a sector that had looked unstoppable over the past two years. On a longer-term chart, you can see that XLU is rapidly threatening to breach price levels from more than a decade ago:
What can we take away from this? For one, utilities have reverted to form - they're simply not a great (nor particularly bad) industry historically. Over the past 82 years (data through 2015) utilities were the median sector, coming in 15th out of 30 in the market, producing essentially market-matching returns:
That table comes from this article, where I discussed this data in much more detail. The fundamental return is calculated based on the real annual growth of dividends over the past eight decades.
As for the question of utilities being defensive, though their stock prices suddenly gave way last week, the companies are still favorable ones to hold in an economic downturn. But investors were using them to play offense throughout 2019, hoping that falling interest rates would lead to sustained higher valuation ratios for the sector. In theory, that's probably still a reasonable hypothesis; reliable dividend streams are worth a lot more in a zero interest rate world.
In the short-run, however, above average valuation ratios become their own risk factor. When people are getting margin calls, or simply wanting to shift funds into more beaten-up names, they're going to sell the stuff where they are still showing a profit. Defensive assets can turn into a source of funds during a panic; even gold (GLD) started selling off at the height of the market panic. Simply put, people will get funds in the short-term wherever they can find them.
Over the long-haul, however, utilities should remain a defensive sector. Thus, is now the time to be buying as prices have come in dramatically? In some cases, yes. A lot of individual utility stocks have come down a great deal in March. That said, before you get too aggressive with your purchases, here are a couple of things to keep in mind.
Potential Issues: Declining Demand, Declining Returns On Equity
Interestingly, there's been (at least that I've seen) little discussion of the economic impact of the current situation on utility companies. Sure, some folks are considering the possibility of the government stopping utilities from collecting on past due clients for the duration of the crisis. That could hurt a bit on a marginal basis.
But zoom out. If the economy grinds to a halt for a few months, what happens to electricity usage? Over in the oil market, traders have quickly reacted to the slowdown by absolutely slamming the price of crude, and its refined products such as gasoline. Oil is more sensitive to the economy than electricity, as oil is the dominate transportation fuel. Most electricity uses, by contrast, aren't greatly impacted by a near-term economic slowdown.
Still, it probably isn't reasonable to think that electricity demand will remain steady. What do we have for data? I haven't seen much yet, but I did run across this interesting data point on New York City electricity usage. There's a ton of caveats here, as it's just one city, the weather could be a factor, and so on. But there appears to be a sharp rollover that started in the week of March 16th:
Historically, we can also look back to 2000 and 2009. Interestingly, due to rises in efficiency, electricity usage per person has pretty much stopped going up in the U.S. - it peaked in 2000 and has gone no higher:
Looking at the data, we can see there was a noticeable decline between 2000 and 2001, in some part likely due to the overall economic slowdown and then also specifically the sizable drop-off in economic activity immediately following the 9/11 attacks.
Moving forward, from 2008 to 2009, electricity consumption per capita dropped from 13,663kWh to 12,914. The effect was particularly harsh in the first quarter of 2009, when the economy and stock market were still heading downward. For that quarter, Power Magazine reported that residential electricity consumption was down 2.5%, commercial consumption was down 4.7%, and industrial consumption was down by fully 13.8%.
We should expect as much of a decline, and probably significantly more in the near-term, in 2020. Residential usage may actually go up a touch, as people spend far more time at home. That said, the marginal electricity use from staying at home probably isn't that high, many high-impact uses such as heating and appliances aren't going to change too much.
Meanwhile, commercial use is going to get pummeled. In 2009, stores had less activity, but there wasn't a mass government-ordered shutdown. You had malls with few shoppers, but not malls that were locked up with everything turned off inside as we have now. Similarly, industrial use will plummet for the length of the shutdown, as non-essential factories simply won't operate.
Longer-term, there's also the question of authorized returns on equity "ROE". Utilities tend to bargain with states and localities to earn a set rate on their capital investments. These ROE targets are a balance that should give utilities sufficient incentive to invest in needed services and provide safe and reliable operations for consumers. On the other hand, the locality has an obvious incentive to keep the utility from price gouging. These ROE targets are a well-known feature of the industry - here's a table by S&P from 2017, for example, showing this process in action:
There are now two factors working against utilities going forward. For one, with the economy hurting, look for states to be tougher at the negotiating table. When times are tough, there's less slack to be had overall. Second, the lower interest rates for longer environment is going to drag down the overall "fair" ROE target as time goes on. In a world where a utility's capital costs, say, 5%, a 10% ROE might make sense. But if the utility can now get capital at half that, the state or locality is likely to want a chunk of that savings as well. At the end of the day, utilities are regulated businesses, and as such, they aren't going to get the full benefits of favorable market-pricing developments.
As I showed above, historically utilities have been an average industry, doing no better or worse than the market as a whole. And after their recent sell-off, many individual utility stocks are back to more normal valuations, though they're by no means "cheap" yet.
Should you buy some? They're still one of the safest income sources around, no doubt, and the current yields have moved up nicely. For longer-term investors, however, you can surely find more attractive stocks that are much more deeply-discounted at the moment.
<<<
The Energy ETFs probably haven't bottomed yet, but looking at XLE, it now has a yield of 8.8% (!) This ETF holds the big names (see below).
Where the bottom will be for this sector is unclear, but it's hard to not be enticed by the 8.8% yield. This could be something to gradually build up a position in over time as a long term 'contrarian value' play. It may be a long time waiting for a rebound, but the possibility also exists for a full blown Saudi-Iran war that could devastate Saudi production. They were very close to that scenario last September -
Exxon Mobil - XOM - 22%
Chevron - CVX - 21%
Kinder Morgan - KMI - 5%
EOG Resources - EOG - 5%
ConocoPhillips - COP - 4%
Schlumberger - SLB - 4%
Marathon - MPC - 4%
Phillips 66 - PSX - 4%
Occidental - OXY - 4%
ONEOK - OKE - 3%
Name | Symbol | % Assets |
---|---|---|
Johnson & Johnson | JNJ | 3.75% |
Procter & Gamble Co | PG | 3.47% |
JPMorgan Chase & Co | JPM | 3.08% |
Verizon Communications Inc | VZ | 2.45% |
Pfizer Inc | PFE | 2.05% |
Walmart Inc | WMT | 2.01% |
AT&T Inc | T | 2.00% |
Comcast Corp Class A | CMCSA | 1.99% |
Merck & Co Inc | MRK | 1.97% |
Intel Corp | INTC | 1.95% |
Name | Symbol | % Assets |
---|---|---|
Qualcomm Inc | QCOM | 4.38% |
BlackRock Inc | BLK | 4.33% |
Texas Instruments Inc | TXN | 4.19% |
United Parcel Service Inc Class B | UPS | 3.98% |
Pfizer Inc | PFE | 3.97% |
PepsiCo Inc | PEP | 3.93% |
3M Co | MMM | 3.90% |
Coca-Cola Co | KO | 3.87% |
Verizon Communications Inc | VZ | 3.84% |
International Business Machines Corp | IBM | 3.69% |
Name | Symbol | % Assets |
---|---|---|
AT&T Inc | T | 9.13% |
Exxon Mobil Corp | XOM | 8.47% |
Johnson & Johnson | JNJ | 6.53% |
Verizon Communications Inc | VZ | 6.47% |
Chevron Corp | CVX | 5.60% |
Pfizer Inc | PFE | 5.55% |
Coca-Cola Co | KO | 4.07% |
PepsiCo Inc | PEP | 3.70% |
Cisco Systems Inc | CSCO | 3.66% |
Merck & Co Inc | MRK | 3.66% |
Name | Symbol | % Assets |
---|---|---|
Apple Inc | AAPL | 6.18% |
Microsoft Corp | MSFT | 5.23% |
Procter & Gamble Co | PG | 3.60% |
PepsiCo Inc | PEP | 2.65% |
JPMorgan Chase & Co | JPM | 2.34% |
Philip Morris International Inc | PM | 2.18% |
Williams Companies Inc | WMB | 2.12% |
Chevron Corp | CVX | 1.96% |
Linde PLC | LIN.L | 1.92% |
Altria Group Inc | MO | 1.87% |
Name | Symbol | % Assets |
---|---|---|
Enbridge Inc | ENB.TO | 8.89% |
Kinder Morgan Inc Class P | KMI | 8.59% |
TC Energy Corp | TRP.TO | 8.48% |
Williams Companies Inc | WMB | 8.00% |
ONEOK Inc | OKE | 6.89% |
Cheniere Energy Inc | LNG | 6.46% |
Targa Resources Corp | TRGP | 4.99% |
Antero Midstream Corp | AM | 4.63% |
Energy Transfer LP | ET | 4.54% |
Equitrans Midstream Corp | ETRN | 4.48% |
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