Daily Archives: August 31, 2018

Dividends

Invest Alongside the World’s Top Managers for Dividends Up to 13%

No one likes digging through pages of regulatory filings, but they can often yield valuable information.

For example, institutional investors with at least $100 million of assets must file a 13F form with the Securities and Exchange Commission once a quarter. Think of this as a quarterly scorecard or a window into the holdings of some of the most successful and often secretive investors in the market.

Should you follow suit and piggy-back some of these trades? Well, it’s certainly cheaper than the $1 million minimum buy-in it often takes to invest with the most successful hedge funds, if you’re even invited.

However, there are two important caveats with 13F’s: First, the data can be stale. Holdings at the end of the second quarter aren’t often reported until mid-August, which is an eternity in some investing circles. In addition, a lot of these investors keep their cards close to the vest, so you can’t be entirely sure the purchase is a vote of confidence in the dividend.

The following two stocks have been gleaned from the pages of recent 13F filings and offer readers the opportunity to invest alongside some of the most successful managers on Wall Street.

Top Investment Manager Stock No. 1: New Leader Can Resuscitate Growth

Plains Group (PAGP) is the general partner for energy midstream operator, Plains All-American Pipeline (PAA). The company’s underlying assets transport and store crude oil and natural gas across North America. While commodity prices can be volatile from one-quarter to the next, 93% of Plains’ business is fee-based, providing more stability.

Plains Group was recently listed as a new position of Keith Meister’s Corvex Management. Meister was previously the chief executive officer of Icahn Enterprises (IEP), a vehicle of noted activist investor, Carl Icahn.

Meister and Corvex have yet to show any activist intentions with the company, which is already going through a transition. Plains Group yields 4.6%, in part because of a 45% cut in its quarterly distribution last year. Willie Chiang, COO of the company, is also stepping up to become chief executive officer later this year. He is replacing Greg Armstrong, who was at the helm of Plains for more than two decades.

In the meantime the company’s investment thesis is two-fold: grow its midstream business in the Permian Basin and reduce debt on the balance sheet. Management made progress on both fronts in the second quarter and boosted its earnings before interest, taxes, depreciation and amortization (EBITDA) guidance by 4% earlier this month.

Plains is seeing higher growth in its supply and logistics division and has cut debt by over $1 billion in the past four quarters. Management expects 179% coverage of the dividend this year and is targeting another double-digit increase in adjusted EBITDA in 2019. The company still has progress to make in the coming quarters, but could soon begin rebuilding its dividend.

Top Investment Manager Stock No. 2: Propane Dividend Could Still Burn Investors

Ferrellgas Partners (FGP) could certainly be seen as a contrarian pick, as the master limited partnership has been as volatile as the propane the company sells under the popular Blue Rhino brand. The shares trade in the low-single digits, sport a 13% dividend yield and recently showed up as a new holding of Leon Cooperman’s Omega Advisors.

Whatever potential value Cooperman and Omega see in Ferrellgas, it likely isn’t in the lofty dividend yield. Similar to Plains Group, the company slashed its payout in late 2016, but even the current payout of $0.10 a quarter could be in peril.

Earlier this month, management declared the next distribution to be paid in September, which carried an ominous warning. Ferrellgas isn’t generating enough cash to cover the fixed charges of its $2 billion mountain of debt. Because of these covenants in the bonds, the company has said it may not be able to pay its dividend beginning in December.

Bondholders always receive their interest payments before stockholders get paid dividends. This is especially the case of Ferrellgas, whose balance sheet is “upside down” and has negative shareholder equity.

Following Carl Icahn or your other favorite investors into new stocks is a popular strategy. But buyer beware— the reliability of the dividend yield may be secondary to these top managers. They are often placing bets in the midst of a diversified portfolio and willing to wait several quarters, if not years to see a positive return.

If, however, you’re nearing retirement, or have already retired and are living off income from your investments, there are better bargains to be had for secure 7% to 8% yields with upside and monthly payouts to boot.

Like These Plays: The 8 Best 8% Dividends with Big Upside to Buy Today

The biggest investment managers and Wall Street brokers say you can’t have both the income and safety of bonds and the upside of stocks. You either have to pay hefty fees or be “lucky” enough for the privilege to be invited to invest with them.

They’re wrong. They don’t realize that the nine bond funds in our Contrarian Income Report portfolio have delivered average annualized returns of 23.9% (including dividends)!

Our three top picks today are poised to continue the tradition. These funds are a cornerstone of our 8% “no withdrawal” retirement strategy, which lets retirees rely entirely on dividend income and leave their principal 100% intact.

Well that’s not exactly right. Their principal is more than 100% intact thanks to price gains! Which means principal is actually 110% intact after year 1, and so on.

To do this, we seek out closed-end funds that:

  • Pay 8% or better…
  • Have well-funded distributions…
  • Trade at meaningful discounts to their NAV…
  • And know how to make their shareholders money.

And we talk to management, because online research isn’t enough. We also track insider buying to make sure these guys have real skin in the game.

Today we like three “blue chip” closed-end funds in particular. And wait ‘til you see their yields! These “slam dunk” income plays pay 8.5%, 8.7% and even 8.9% dividends.

Plus, they trade at 10-15% discounts to their net asset value (NAV) today. Which means they’re perfect for your retirement portfolio because your downside risk is minimal. Even if the market takes a tumble, these top-notch funds will simply trade flat… and we’ll still collect those fat dividends!

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

Bear

3 Stocks to Invest In If the Market Nosedives

bear

Source: Chascar via Flickr (Modified)

After nearly a decade of impressive gains across all three major stock indexes, investors are understandably starting to get a little bit nervous about where the market is headed. After all, share prices can’t continue to rise indefinitely … can they? Many analysts are predicting that the bears will have their reckoning next year, but it’s also important to note that pulling out of the market completely comes with its own set of risks — we’ve been wringing our hands about a major pullback for years now and it’s never actually materialized.

However, that doesn’t mean you shouldn’t take analysts’ warnings to heart.

Now is an excellent time to re-evaluate your holdings and take profits in order to stockpile some cash in the event that a pull-back does eventually come. It’s also a good time to load your portfolio with defensive stocks that will still benefit from the market’s bull run, but are unlikely to tank if the market takes a nosedive.

Here’s a look at three stocks to invest in to prepare for the dreaded bear market.

Value Pick: Coca-Cola (KO)

Value Pick: Coca-Cola (KO)

Source: Leo Hidalgo via Flickr (Modified)

In a market that’s soaring to fresh highs, the best thing you can do is look for stocks to invest in that have fallen out of favor among investors, making their valuations much more reasonable. Coca-Cola (NYSE:KO) is one such company whose share price has been stuck in the mid-$40’s for years. While the beverage company isn’t delivering the attractive gains that companies like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) are, it’s a good pillar to lean on in times of trouble.

For one, KO stock is a relatively stable consumer products company that looks unlikely to go under anytime soon. The company’s name recognition and massive portfolio of brands makes it a relatively safe bet even in the event of a recession.

Another reason you want to have KO in your portfolio should the market take a turn is the company’s reliable 3.5% dividend yield, which will continue to deliver even when the market is down.

Recession Buster: Duke Energy (DUK)

Recession Buster: Duke Energy (DUK)

Source: Shutterstock

Another way to prepare for a market downturn is to arm yourself with companies that can make money no matter what. The bull run has made utility companies unpopular among investors, but it’s utilities will be popular stocks to invest in if things take a turn for the worst. 

Duke Energy (NYSE:DUK) is one of the nation’s top utility companies and the fact that its operations are largely regulated makes it a relatively safe bet in times of trouble. Even though DUK stock has underperformed the market this year, the company’s earnings reports show a sound financial base that won’t be shaken in a recession.

Plus, it’s a great income stock, delivering a 4.6% dividend yield that will help boost your portfolio in the event of a bear market. 

All Around Good stock to Invest In: Kraft Heinz (KHC)

When picking stocks to invest in for a bear market, there are a lot of avenues to take — stocks that have been beaten down, consumer staples stocks whose products will still be in demand come a recession and, of course, dividend stocks that will bolster their earnings with reliable payments. Kraft Heinz (NYSE:KHC) is one such company that pretty much meets all of that criteria. The firm’s share price is down nearly 25% so far this year, making it a bargain even in today’s inflated market.

KHC is the fifth-largest food and beverage company in the world with a brand portfolio that houses some of the most iconic names in the business. That kind of size is a huge asset in times of recession because people are unlikely to make major changes to their normal grocery buying habits. On top of that, the firm offers a 4.3% dividend yield which will help ease the pain in a tumultuous market.

It’s worth noting that KHC has some debt issues that make it a little riskier than some of its peers, however it looks like the firm has a plan in place to turn things around through a strategic acquisition that will help the company get its finances back under control.

As of this writing, Laura Hoy was long AMZN and NFLX.

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Market Preview

Market Preview: U.S. / Canada Trade Talks Stall, Ahead Broadcom Earnings and Unemployment

Tense negotiations between the U.S. and Canada stunted the week long rally in the markets, but so far it looks like a small pause as opposed to a reversal. The Nasdaq largely ignored the trade issues, which appear to be hung up on dairy farming subsidies, with Apple (AAPL) and Amazon (AMZN) leading the tech heavy index higher. Amazon is making a push to become the second trillion dollar market cap company after Apple reached that lofty valuation.  Monday may bring a different story if the Canada discussions continue with rancor, and EU tariff troubles make it back into the headlines. Thursday President Trump rekindled the smoldering trade war with the EU saying the European Union was not doing enough when they offered to remove tariffs on autos.

Monday is the Labor Day holiday in the U.S., and markets are closed. But the rest of the week brings plenty of earnings action. Tuesday Workday (WDAY), HealthEquity (HQY) and the business spend management company, Coupa Software (COUP) all report earnings numbers. Analysts will dissect earnings from Ctrip.com (CTRP) info security firm Zscaler (ZS), as well as data management company Cloudera (CLDR) on Wednesday. Some heavy hitters step to the plate on Thursday. Broadcom (AVGO), Palo Alto Networks (PANW) and Marvell Technology (MRVL) all report after the close. Dell Technologies (DVMT) will lead off on Thursday morning. Closing out the first week of September on Friday are Genesco (GCO) and Greece based Tsakos Energy Navigation (TNP).  

Due to the holiday, no economic numbers will be reported on Monday. But for the rest of the week it’s back to business as usual. Tuesday kicks off with ISM manufacturing, PMI manufacturing, and construction spending. Wednesday investors will pick through motor vehicle sales, mortgage applications, Redbook data, and international trade. The trade numbers may be of particular interest if the tariff wars heat back up next week. Thursday is all about jobs, jobs, jobs. Analysts will decipher the job cut report, ADP employment report, and jobless claims. New claims last week came in at 213K. Also on tap for Thursday are productivity and cost numbers, the PMI Services Index, factory orders, and the ISM Non-manufacturing Index. And finally, Friday continues the jobs theme when the employment situation numbers are released. This includes the unemployment rate, average hourly earnings, and the month-over-month change in non-farm payrolls.

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