Daily Archives: October 3, 2018

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Buy These 3 High-Yield Stocks Raising Dividends in October

I always look forward to the start of a new calendar quarter. Within a few weeks stocks with policies of quarterly dividend increases will start to declare the next dividend rates. It is an interesting market effect that the investing public doesn’t take into account that some companies grow dividends every quarter. The market acts surprised every time it happens. Investors can get ahead of the share price gains by getting in before the dividend announcements.

The best places to find stocks with quarterly dividend increases and current great yields are energy infrastructure stocks and the renewable energy providers. These companies have long term contracts often with built in rate escalators, providing steady income streams. They generate growth by developing or acquiring new assets, each with its own long term service contract. These assets range from interstate energy pipelines, to natural gas liquids processing facilities to wind or solar energy projects.

For the best long term investment results, you want companies that have histories of dividend growth and a solid plan to continue that growth. Look for a balance of current yield and the annual dividend growth prospects. Here are three stocks that fit these criteria.

Clearway Energy (NYSE: CWEN) is the former NRG Yield Inc. (NYSE: NYLD) with a new name and a new sponsor. The Yieldco owns a nationally diverse portfolio of conventional, solar, thermal, wind, and natural gas electricity production assets.

The company was spun out in 2012 by NRG Energy (NYSE: NRG), a regulated electric utility company. Renewable energy assets developed by NRG were sold to NYLD to support the growth of NYLD. Recently the controlling sponsor interest in NYLD was acquired by Global Infrastructure Partners. Along with control of NYLD, Global Infrastructure purchased NRG Renewables 6.4 GW project backlog. Management guidance is for 5% to 8% annual dividend growth.

The company’s history is to increase the dividend each quarter. The next dividend should be announced around November 1.

The shares currently yield 6.3%.

ONEOK, Inc. (NYSE: OKE) provides natural gas transport and processing services in and from the major energy production basins. It owns and operates one of the nation’s premier natural gas liquids (NGL) systems and is a leader in the gathering, processing, storage and transportation of natural gas.

ONEOK’s operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions. Since merging with its controlled MLP, ONEOK Partners in June 2016, the company has been increasing its dividend by about 3.5% each quarter.

The next dividend will be announced in the last week of October.

The shares currently yield 4.9%.

Magellan Midstream Partners LP (NYSE: MMP) is a pipeline focused MLP. The company is primarily a refined energy products (gasoline and other fuels) pipeline company. This sector generates 54% of net operating income. Crude oil pipelines bring in 38% of NOI and the balance of 8% is from marine energy product storage terminals.

Magellan Midstream is a large cap, investment grade, growth focused energy midstream company. It has increased the distribution paid to investors every year since 2001. Currently management forecasts future dividend growth of 5% to 8% per year.

The next distribution will be announced on about October 20.

MMP currently yields 5.6%.

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Market Preview

Market Preview: Strong Employment Numbers Add Fuel

Flagging financial stocks rallied Wednesday providing enough fuel for the market to power higher once again. Taking a cue from the highest ISM non-manufacturing index numbers since 1997, markets rallied out of the gate and held onto fleeting gains into Wednesday’s close. The ISM numbers, combined with strong employment numbers also released Wednesday morning, forced trade tariff worries to the back burner. If financials can truly turn here, as many have been expecting for several months, citing rising interest rates, they may become the new flag bearer for the bull market. But, they’ll need more than one day of positive price action to pull investors to their banner.

Constellation Brands (STZ) reports earnings Thursday morning. The company known for its beverage products, recently upped its stake in Canopy Growth, a Canadian based medical cannabis company, by $4 billion. Investors will be looking for an update on how Constellation intends to integrate Canopy’s products with its brands, and what the timetable looks like. Also reporting earnings on Thursday is Costco (COST). The bulk item retailer is up nicely in 2018, and now sports a fairly rich PE of 36. Analysts are looking for sales and earnings growth to come in strong, but the more important number to focus on may be margins. If the membership company can show margins are moving in a positive trend, the stock could finish out 2018 on a strong note.

Given Wednesday’s data, scheduled Thursday and Friday economic numbers may support positive market action headed into the weekend. Both days are clearly focused on a discussion of jobs. Thursday we’ll see the Challenger Job Cuts Report along with jobless claims, and factory orders numbers. And then Friday brings the release of the employment situation numbers, which includes the unemployment rate, as well as nonfarm and private employment numbers. The unemployment rate is expected to drop again to 3.8%. Average hourly earnings are expected to tick up only .3%. Strong employment numbers could provide a base for the market to catapult into a strong fourth quarter.

Joining the earnings hit parade on Thursday is International Speedway Corporation (ISCA). Given the widely reported decline in the NASCAR fan base, most investors would probably be surprised to learn the stock is actually up over 17% so far in 2018. This may be a case of bad news already being baked into the stock price last year. Analysts don’t expect much out of the racing stadium owner on Thursday, and will mainly be looking for any signs of a stabilization of the fan base. No earnings are currently scheduled for Friday.

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Technology

Energy Stocks Adopting New Technologies

Even as technology invades other areas of industry, there has been one notable laggard in adopting new technologies – the energy industry.

Even the mining industry is using robots to automate many of the functions at mines, but autonomous robots are still a rarity in the oil and gas industry (more on that later). So it is major news that Royal Dutch Shell PLC (NYSE: RDS.A and RDS.B) is investing in an artificial intelligence (AI) platform to support operations across the entire group.

Shell and AI

The company providing the AI platform for Shell is C3IOT on Microsoft Azure. The main initial application of AI at Shell will be for predictive maintenance – such as working out when a piece of equipment is likely to fail, so it can be replaced before it breaks. The company says that more than 600,000 assets from individual pieces of equipment to entire wells will be covered by the predictive maintenance program.

The long-term goal though is to expand the AI platform to support other machine learning, machine vision, and natural language processing (NLP)-based uses in all of Shell’s operations – upstream, downstream, unconventional fuels, refining, and retail operations.

Jay Crotts, Shell Group CIO said “With the C3 IoT Platform, we’re looking forward to significantly enhancing the productivity and scope of our advanced analytics capabilities to create greater economic value across Shell’s operations. C3 IoT allows us to optimize our existing investments in data and cloud infrastructure while accelerating time to value of AI-based applications, so Shell can better serve our customers with even more agility and efficiency.”

I cannot emphasize enough that this is a really big deal in the artificial intelligence space. Tom Siebel, C3 IOT’s CEO, described the deal with Shell to the Financial Times as “the largest AI deployment that we’re aware of anywhere in the world.”

And he correctly suggested that the company had jumped ahead of its oil company peers. Siebel said to the Financial Times, “Everybody else is kind of looking at it. These guys are rolling it out.” Siebel predicts that the benefits for Shell will run into the billions of dollars per year!

And with evidence accumulating that the productivity gains from the shale revolution are slowing down, deploying AI could be the way the oil and gas industry takes its next leap forward.

The slowing of productivity gains from the U.S. shale revolution was emphasized recently by the CEO of Schlumberger, Paal Kinsgaard, who said that the advantages of drilling longer laterals and pumping more sand and water to increase oil production was nearing an end. He pointed to the specific example of the Eagle Ford in Texas where unit well performance is declining.

What the IEA Says

The adoption of AI by companies like Shell is just the tip of the proverbial iceberg when it comes to the potential of technology to transform the industry. The International Energy Agency (IEA) recently gave further examples of how how new technologies can boost the oil and gas industry.

One such example is the use of miniaturized sensors and fiber optic sensors that could be used to boost output or increase the overall recovery of oil and gas from a reservoir. Other examples are the use of automated drilling rigs and robots to inspect and repair subsea infrastructure and to monitor transmission pipelines and tanks.

Drones could also be used to inspect pipelines (which are often spread over many miles) and hard-to-reach equipment such as flare stacks and remote, unmanned offshore facilities. Drones with potent “sniffers” can detect methane leaks coming from oil and gas pipelines at 1,000 times the accuracy of traditional methods, saving pipeline owners significant money that is lost from leaked product and potentially from fines.

In the longer term, the IEA says the potential exists to improve the analysis and processing speed of data, such as the large, unstructured datasets generated by seismic studies. The oil and gas industry will furthermore see more wearables, robotics, and the application of AI in their field operations.

The IEA forecast that widespread use of digital technologies could decrease production costs between 10% and 20%, including through advanced processing of seismic data, the use of sensors, and enhanced reservoir modeling. Technically recoverable oil and gas resources could be boosted by around 5% globally, with the greatest gains expected in shale gas.

European Oils Lead

As you saw earlier, Shell is leading the way when it comes to the adoption of AI among the oil majors. Another European oil major, Total SA (NYSE: TOT), is leading in another segment of technology adoption – autonomous robots.

In a first for the oil industry, an autonomous robot will be deployed to an offshore oil and gas platform in the North Sea later this year. Under this pilot project, the robot will initially be deployed at the French oil firm Total’s gas plant on Shetland before being sent to join Total’s 120 workers on the company’s Alwyn platform, 440 kilometers north-east of Aberdeen, Scotland. The machine, made by Austrian firm Taurob and supported on the software side by German university TU Darmstadt, will be used for visual inspections and detecting gas leaks.

The Total trial will start with just this one robot to see how it handles the harsh conditions in the North Sea, as well as how well it works alongside people. If successful, you could see numerous such robots on offshore platforms across the world within five years, transforming the offshore oil industry.

Like many other industries, technology will eventually transform even the staid oil and gas industry. But as we have seen with other industries, the companies that fail to adopt new technologies will wither and die. The winners will be those companies not afraid of technological change.

In the case of the major oil and gas companies right now, the winners look to be the European companies – Shell (up 14% over the past year) and Total (up 22% over the past year). Both look to be good investments, especially with nice current yields of 5.5% and 4.6% respectively.

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Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.