5 High-Growth Tech Stocks Poised to Benefit from Megatrends

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It’s no secret. Technology is booming right now — and so are tech stocks. At this point, the technological advances are happening almost too quickly to keep up with. Investors are looking for the next high-growth tech stocks, and there are almost too many possibilities.

Right now technology is poised to change our lives more now than any time since widespread use of the Internet first began. A number of tech sectors are about to explode. But how do you know which ones?

Here are some sectors to start with. Solar energy, artificial intelligence, robots , cloud computing, autonomous driving and e-commerce are among the tech megatrends that are set to intensify by leaps and bounds going forward.

And investors can profit tremendously from these megatrends.

I’ve selected 5 high-growth tech stocks from these tech sectors to get you started.

High-Growth Tech Stocks Poised to Benefit from Megatrends: SolarEdge (SEDG)

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As the world decreases its reliance on fossil fuels, solar energy companies are set to profit.

SolarEdge Technologies Inc (NASDAQ:SEDGdevelops “solar energy optimization and monitoring systems.” Thus far, SEDG has seen its profits jump as the use of solar energy becomes more widespread. In the fourth quarter of last year, the company’s operating income surged 128%, while its revenues jumped 70% year-over-year to $34.6 million.

SolarEdge says that its “inverter system maximizes power generation at the individual PV module-level while lowering the cost of energy produced by the solar PV system.” These great results indicate that its products are indeed far superior to those of the competition.

Solar Edge’s partnerships with major Japanese company OMRON and Korean giant LG Electronics also validate the potency of its technology. Moreover, the company has a significant presence in India,indicating that it can benefit from the tremendous growth of solar energy in that nation. Although Solar Edge stock has nearly quadrupled in the last year, the shares can rally much further, given the strength of its technology and the growth of solar energy.

High-Growth Tech Stocks Poised to Benefit from Megatrends: First Solar (FSLR)

First Solar, Inc. (NASDAQ: FSLR) is another high-growth tech stock in the solar sector.

Right now First Solar appears to be benefiting from the strong growth of solar in many countries,including Japan and Australia. In recognition of these positive trends, First Solar stock has jumped 150% over the last year.

By early next quarter, the company plans to begin manufacturing Series 6 PV modules, which will “provide more watts per lift than comparable crystalline silicon solar panels.”

Meanwhile, a UBS analyst last week recommended  both First Solar stock and Solar Edge stock, saying that the companies have “differentiated products and zero debt,” according to Barron’s.

High-Growth Tech Stocks Poised to Benefit from Megatrends:  Alibaba Group (BABA)

What to Expect From BABA Stock Earnings

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Let’s not kid ourselves. Most investors — especially in the tech sector — are looking for the next Amazon.com, Inc. (NASDAQ:AMZN).

So why not Alibaba Group Holding Limited (NYSE: BABA)? This Chinese company is an e-commerce giant that’s also rapidly expanding into other tech sectors.

E-commerce in China continues to grow rapidly, as shown by the 56% jump in Alibaba’s revenuelast quarter. China’s economy also continues to expand quickly, which should provide additional tailwinds for Alibaba. The giant also has a strong foothold in India, another rapidly growing economy.

Finally, the giant is also leveraged to another tech growth engine, cloud computing. Its cloud computing business is expanding at breakneck speed, posting a 104% year-over-year revenue surge last quarter.

Given the rapid growth of e-commerce in China and India, and the ever accelerating proliferation of cloud computing, Alibaba stock is a great name for growth investors to own.

High-Growth Tech Stocks Poised to Benefit from Megatrends: iRobot (IRBT)

iRobot Corporation (NASDAQ:IRBT)

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The robots have arrived. And it’s great for investors.

As artificial intelligence improves, robots will be able to handle more and more tasks. For example, robots are delivering items in a Las Vegas hotel. Soon robots will be able to detect and report dead wi-fi zones.

As robots are able to take on more and more tasks, they will become increasingly popular, greatly benefiting robot makers, including iRobot Corporation (NASDAQ: IRBT).

Additionally, as labor becomes more expensive, the company’s cleaning robots will become more attractive, boosting First Robot’s profits and lighting a rocket under iRobot stock.

The company is already benefiting tremendously from these positive trends,  as its revenue jumped 54% year-over-year last quarter, and it expects its top line to rise 19%-22% in 2018. Shares did fall following IRBT’s last earnings report — but that just gives potential investors a discount.

High-Growth Tech Stocks Poised to Benefit from Megatrends: Baidu (BIDU)

Baidu, Inc (NASDAQ: BIDU), driven by its high R&D investments, has become one of the leaders in the artificial intelligence and driverless car spaces. And a number of factors show that the company will remain on top.

Baidu has unveiled products, powered by AI, that can “support multi-party video calls,” provide multiple types of lighting and use emotional intelligence to serve people.

More than 90 partners, including Microsoft, Intel, and Nvidia, have signed onto Baidu’s self-driving car technology, indicating that the technology is state-of-the-art and poised to proliferate. Providing self-driving car technology will enable Baidu to profit by selling consumer data, advertising, and ancillary services such as tracking systems.

As a result, Baidu stock is poised to rally over the longer term.

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Source: Investor Place

4 Dividends That Pay Monthly (Up to 12% Per Year)

If you’re planning to retire (or are currently retired), I urge you to become intimately familiar with monthly dividend stocks. They offer the ultimate consideration: income payments that actually line up with your monthly bills.

Today, I’m going to help get you started by introducing you to four monthly dividend payers that yield up to 12%. But first: What’s so great about this type of stock?

When you pay your bills – be it the mortgage, the electricity, the TV – you don’t sit down at the kitchen table to do that every quarter. You do it every single month. But most dividend stocks don’t keep the same kind of schedule. American stocks typically pay shareholders once every three months.

Monthly dividend stocks, however, help you to tackle regular expenses without worrying about fluctuations in payouts depending on timing. And these every-30-day payers also have a couple of additional benefits, too:

  • It’s a sign of stability: Promising a dividend check every single month is a bold promise that a company wouldn’t make if it wasn’t serious about keeping (and even raising) the payout.
  • Faster gains. Even if you have 20 or 30 years left to retirement, a monthly payout can be put back to work more quickly than a quarterly one. A monthly payer, in fact, can generate thousands of dollars more in additional returns via reinvested dividends over the course of a couple decades than a quarterly payer with the same yield.

Are all monthly dividend stocks perfect? Far from it. Today, I’m going to show you four payers yielding between 4% and 12%. Two should make your wish list, while two are proof that even monthly dividends aren’t always perfect.

LTC Properties (LTC)
Dividend Yield: 5.8%

LTC Properties (LTC) is one of the more interesting plays in the real estate investment trust space, combining health care and retirement properties in a way that’s tailor-made to capture the potential of the aging Baby Boomers.

Specifically, LTC Properties has a total of 208 properties across 29 states that includes 105 assisted living facilities and 96 skilled nursing facilities, with the remaining seven properties classified as simply “other.”

The company’s fourth-quarter and full-year earnings report didn’t exactly include screamingly positive results. Q4 funds from operations declined by a penny per share from the year-ago period to 77 cents per share, though for the whole year, FFO improved from $3.06 per share in 2016 too $3.10 per share in 2017.

Still, shares have hemorrhaged more than 25% since July of last year, with some of that coming amid the malaise of the broader REIT space. That has LTC selling at less than 13 times FFO, and yielding nearly 6%.

That should give investors plenty to think about, especially when you consider that LTC’s properties naturally benefit immensely from the aging of America’s Boomers, and have the added bonus of being located in areas that have high demand for senior health care services. Also appealing is a low debt burden of around 30% of its market capitalization, as well as a dividend that represents less than 75% of FFO.

Wall Street sometimes lets momentum get the best of it, and that appears to be the case in LTC Properties. This REIT is positioned for growth yet value-priced – and a substantial monthly dividend only makes it look that much better.

Global Net Lease (GNL)
Dividend Yield: 12.6%

At first blush, Global Net Lease (GNL) looks like a prime opportunity.

You can’t ask for more diversification than what GNL offers. This real estate investment trust boasts 321 single-tenant properties it leases out to 100 tenants across 41 industries in eight countries, including the U.S., the U.K., Germany and Finland. The industry diversification is outstanding, with financial services the largest slice of the pie at just 14%; but its properties span everything from aerospace to healthcare to utilities. Moreover, its tenants include stable companies such as FedEx (FDX), Family Dollar and ING Groep (ING), but no one of them makes up more than 5% of straight-line rent.

Moreover, the stock has been battered to the tune of about 30% in a year, driving its yield to well over 12%.

But …

Global Net Lease (GNL) Keeps Flooding the Market With Shares

While Global Net Lease does continue to post growth, its share count is expanding, too, diluting the value of its business. Moreover, the company also pays out fees to external management that drag on operations, and in fact, that healthy dividend isn’t perfectly covered. Last year, the company paid out $2.13 per share in dividends but only collected $2.03 per share in core funds from operation.

The dividend is a real concern here. The payout hasn’t budged in years, and now GNL is overstretching to keep its promises. While a 12% yield is tempting, it may not be a 12% yield for long.

Stag Industrial (STAG)
Dividend Yield: 5.9%

I have written about STAG Industrial (STAG) before, and in the context of monthly dividend stocks, it’s worth mentioning it again.

STAG Industrial is a REIT that specializes in warehouses, boasting 70.2 million square feet across 365 buildings in 37 states. I realize the warehouse business doesn’t exactly stir one’s spirits, but this word might:


Three of STAG’s top 10 tenants are XPO Logistics (XPO)FedEx (FDX) and DHL – companies that have plenty to gain as more people have their goods delivered rather than make their way to the store. And as more retailers move to this model, they too will need the kinds of facilities that Stag provides.

The fundamental story here still looks great. STAG grew funds from operations by 7% to $1.69 per share in 2017, and occupancy sits at 95.3%. Moreover, the company increased its dividend again – the third hike in 12 months – to 11.83 cents per share. That means STAG’s monthly check is well covered, with a roughly 84% FFO payout ratio, and at 14 times FFO, I would consider this attractive REIT fairly priced.

Shaw Communications (SJR)
Dividend Yield: 4.9%

Shaw Communications (SJR) is a Canadian telecom with a hefty yield at the moment. The question investors want to ask themselves is, are they getting a still-stable payout such as those from AT&T (T) or a Verizon (VZ), or are they getting an eventual dividend cut a la Frontier Communications (FTR) or Windstream (WIN)?

The answer is somewhere in between – and that’s not a good thing.

Shaw, which offers internet, television, telephone and other services across several provinces, is in the midst of a self-proclaimed “total business transformation” that includes a heavy renewed push in its wireless business to help offset continued declines in wireline operations. The company will be taking a $450 million charge related to this restructuring, including accepting 3,300 employee buyouts. All told, the company is reducing its workforce by roughly a quarter.

The market has been punishing SJR shares, which are off more than 17% since Jan. 1. That has helped plump the yield up on this monthly dividend payer to nearly 5%. However, SJR remains more expensive against future earnings estimates than rivals such as Telus (TU) and Rogers Communications (RCI), and its path to normalcy is far from clear. Among other things, it still will have to find funds to make itself competitive in the upcoming push to transition from 4G to the newer 5G technology, which includes buying spectrum and upgrading its network.

While 5% is nice if you can get it for AT&T or Verizon, which enjoy an effective duopoloy in the U.S., it still doesn’t seem quite enough to justify a purchase in Shaw, which faces a much less sure path ahead – especially in the short-term.

Your Best Plays Today: Monthly Payouts and 8% Yields 

Monthly payers deserve a place in your portfolio, period. If you’re retired, they keep your cash flow as smooth as silk. And if you’re not retired, you can reinvest your dividends faster—giving your nest egg a nice extra boost.

If that’s not a win-win, I don’t know what is!

That’s why I’ve dropped four monthly dividend stocks into the “6 pack” of steady investments that make up my .

Quality monthly dividend stocks are a rare breed, but with the right picks, you can use the power of faster compounding to achieve a fully paid-for retirement for around $500,000 – more than a quarter of a million dollars less than the suits at Merrill Lynch say you need to retire well!

And then once you hit retirement, you can collect a smooth, steady stream of monthly dividend checks to use against your monthly bills.

That’s as win-win as it gets!

My “8% Monthly Payer Portfolio” can hand you a rock-solid $40,000 per year in regular income. That translates into a steady drip of more than $3,300 per month that won’t vary – other than the occasional payout increases granted by these dividend dynamos, that is!

This strategy isn’t capped at $500,000 – if you’ve saved up even more, you could be looking at monthly income of $6,349 or even $12,698 per month. That pummels the kinds of payouts you would see from a basket of quarterly-paying Dividend Aristocrats.

One last bonus: Several of these picks are more than just slow-and-steady dividend drippers – they also possess several catalysts for growth, meaning they can deliver income while growing your nest egg! That’s a vital part of retirement that many people overlook, convinced that their only strategy after age 65 is to watch their portfolio wither as they start to take withdrawals. That’s just not true!

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Source: Contrarian Outlook

Here’s How to Generate 425% Returns on Higher Interest Rates

This week, we get the next installment of the FOMC meeting – the big Fed meeting where they decide what to do with interest rates.  The meetings are a bit more interesting these days since rates are going up and some sort of definitive actions tends to take place.

Keep in mind, we had several years where the only thing investors were concerned about is what the Fed was doing with QE (Quantitative Easing).  Interest rates weren’t even in the picture at that point.  These days, we’re back to some level of normalcy, with rates slowly heading higher.

The market is expecting the Fed to raise rates by a quarter point.  According to the CME’s Fed Fund Futures, there’s about a 90% probability of it happening. That part isn’t really what investors will be focused on.

Instead, it’s what the Fed says about the economy and inflation that will really be the primary focus of the market.  Of course, inflation concerns are a big part of why we had the early February selloff.  It’s not entirely out the question that the Fed says something which will subsequently send stocks much lower (or much higher).

What the central bank sees in the economic data, especially in regard to inflation statistics, should go a long way towards defining their rate increase strategy this year.  In other words, it could very much be an important FOMC meeting.  It could also be a complete snooze fest.

Regardless, plenty of traders will be positioning themselves in various assets in preparation of the announcement.  One popular instrument for trading the Fed meeting is iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT).  Bond prices are based almost entirely off of interest rates and interest rate expectations, so action in TLT makes sense ahead of the FOMC meeting.

While a quarter point increase is already built in to the market, further increases may or may not be accounted for.  If investors believe interest rates could go higher faster than originally anticipated, bond prices could take a dive.

At least one trader in TLT is betting on treasury bonds having pretty decent downside potential over the next month.

Here’s the trade…

With TLT at $120, the April 20th 115-118 put spread (buying the 118 put, selling the 115 put) traded for $0.48.  The vertical spread, as this sort of trade is called, was executed 500 times.  That means the max loss is just the premium paid, or $24,000, if TLT remains above $118 over the next month or so.

Breakeven for the trade is $117.52 and max gain is at $115 or below by April expiration.  Max gain is $126,000, so the trader has the potential to generate 425% returns on the trade.

This is exactly the type of trade I’m a big fan of.  It has minimal risk with very strong return potential.  It’s the kind of trade I frequently make in my options trading service. The timing suggests it’s related to expectations of higher interest rates post-FOMC meeting, which makes perfect sense.  In fact, there’s nothing wrong with doing an exact copy of this trade in your own trading account.

Get up to 14 dividend paychecks per month from safe, reliable stocks with The Monthly Dividend Paycheck Calendar, an easy-to-use system that shows you which dividend stocks to pick, when to buy them, when you get paid your dividends, and how much.  All you have to do is buy the stocks you like and tell them where to send your dividend payments. For more information Click Here.

Source: Investors Alley 

Are We Underestimating the Blockchain?

Dear Early Investor,

Cryptocurrencies can offer investors dazzling returns.

That’s a nice conversation starter.

But cryptocurrencies can do so much more.

Adam and I have talked a lot about the gains that have been made (and the gains likely to come).

We’ve also talked about how nice it is to finally have a viable alternative to fiat money (aka traditional currency).

Cryptocurrency prices rose so quickly in 2017 (more than 10X) that progress made in the equally exciting blockchain technology has been drowned out.

The profits are real… and happening now. It’s definitely created a buzz.

But what about the technology itself?

Well, it’s developing about as well as can be expected. Every day, new advances are announced.

A bipartisan bill in Colorado proposes using blockchain tech to protect state data.

Developers of TrueBit, a smart contract that scales transaction computations through interactive verification, were able to move Doge coins to the Ethereum network and back again. Once the technology is fully developed, it could allow a degree of scalability currently out of Ethereum’s reach.

American Express has applied for a patent to use blockchain tech to boost transaction speed.

None of this is surprising.

There are thousands of developers around the world working on new blockchain technologies. The companies that employ them announce their breakthroughs with as much fanfare as possible, in hopes of attracting both funding and top-caliber engineers to their projects.

Yet it seems that cryptocurrency is garnering as many detractors as enthusiasts and eager investors. Here are three rules to explain why this is happening.

Rule No. 1: The more transformative a technology, the more skepticism it engenders in its early days. Breakthrough technology is hard for most people to understand and accept. What’s more, it doesn’t come fresh out of the lab fully developed. New products are greeted with disbelief or bemusement, as if they’re toys. (See my article here for more of my thoughts on this.) Past examples include Skype, mobile phones, iPads and desktop computers.

It’s why bitcoin wasn’t taken as seriously as it should have been when it first appeared on the scene. And it’s still the case today!

Rule No. 2: It takes time for external technological forces to catch up. An ecosystem needs to mature around any breakthrough technology. Thomas Edison invented the lightbulb in 1879. Two years later, he patented a system for electricity distribution. A year after that, the first few thousand houses in New York City were electrified. And efficient scaling was still years away.

Because prices and fees fall, network effects kick in and accessibility improves. Basically, technology adoption is sluggish at first, but it gains speed over time.

But that is neither a smooth nor a linear process. I’m a big believer in an adage known as Amara’s law…

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

Roy Amara was a co-founder of the Institute for the Future in Palo Alto. He describes a typical pattern with new technologies as “a big promise upfront, disappointment and then slowly growing confidence in results that exceed the original expectations.”

This is true, he says, of computation, genome sequencing, solar power, wind power and even home grocery delivery.

Let me add blockchain technology to his list.

Rule No. 3: Unproven technology is where the biggest investment gains (and risks) are made. I think very few people would dispute this. Yet this same rule makes early and unproven technology an easy target.

A typical comment I hear: “Lots of people invest in it, few use it.”

Of course, I can say the same thing about crowdfunded startups that have thousands of investors but little or no sales to speak of.

That doesn’t mean a thing to early investors. It comes with the territory. But we do expect the technology to work… and eventually make a profit.

We have legitimate “proof of concept” claims from blockchain technology companies, but we’re so early in the life of this technology that we don’t know for sure if it will be put to work on a massive scale… or even if it will work at all.

It goes to show just how nascent the technology in this current period is.

We’re basically in the experimental, pre-commercial phase of blockchain technology. Lots of things are being tried and tested in controlled trials, but very little is being trotted out for actual use. Mass consumption is still years away.

Late, Early or Just Right?

Most of you probably wonder if you’re too late. Ha! You should be concerned whether you’re too early.

The good news: You’re neither. I’m very bullish on the long-term outlook for blockchain and cryptocurrency investments. We’re at the very beginning of a multidecade phenomenon.

I’m convinced that dozens of industries will be reinvented by distributed ledger technologies and decentralized digital-asset-backed protocols. The change will be massive and global… and will develop into a multitrillion-dollar space. In terms of scale and impact, it will be similar to the internet, which transformed EVERYTHING.

The extraordinary returns come very early in the cycle. Your timing couldn’t be better.

Of course, it all has to play out. And maybe it will never amount to anything (though I doubt that very much).

My advice? Invest a small percentage of your savings – enough to make a difference in your life if the cryptocurrency/blockchain space overcomes current skepticism and gains broad acceptance, as we expect it to.

Remember, needle-moving technologies have always experienced tremendous challenges early on.

Good investing,

Andy Gordon
Co-Founder, Early Investing

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Source: Early Investing 

7 High-Quality Dividends for 2018 and Beyond

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Are you ready to find the holy grail of dividend investing? The ideal dividends are stocks in strong companies which pay out a high dividend yield. Savvy investors can reinvest payments and, over time, create a veritable treasure trove of double-digit annual gains.

Furthermore dividend stocks from financially healthy companies offer a savvy way to hedge risk against more volatile stocks. “While equity markets have been volatile recently, dividend payments are reflective of corporate health and economic conditions and we expect them to be much more stable” Ben Lofthouse, a director at Janus Henderson, told CNBC recently.

To pinpoint these elusive stocks, I set the TipRanks’ stock screener to filter for stocks with a “positive, high or very high” dividend yield and a “strong buy” analyst consensus rating. This is based on only ratings from the last three months. The result: we can be confident that these are premium stock picks with the biggest Street support right now. Plus looking at the average analyst price target is a handy indicator of the dividends’ upside potential in terms of share price.

So with that in mind, let’s take a closer look right now:

High-Quality Dividends: Broadcom (AVGO)

Dividend Yield: 2.9%

Semiconductor giant Broadcom Ltd (NASDAQ:AVGO) has just paid a dividend of $1.75, up from $1.02 the previous quarter. Indeed, with a dividend yield of 2.9%, AVGO has an impressive dividend growth record of eight years and counting.

Even without Qualcomm, Inc. (NASDAQ:QCOM), analysts still see AVGO as one of the best investments out there. The stock has 99% Street support with 20 buy ratings and just 1 hold rating in the last three months. These analysts see AVGO spiking 32% to hit $324 in the next year. Top Oppenheimer analyst Rick Schafer says “Now past the QCOM saga, we expect AVGO to return to its playbook finding and executing “bitesized” accretive deals. We remain long-term buyers with a $315 target.”

He adds: “We believe AVGO has one of the most strategically and financially attractive business models in semiconductors.” Going forward, the company enjoys multiple catalysts, including a sustained competitive advantage in high-end filters and a “sticky” non-mobile business. Plus, management has the ability to drive enviable growth/profitability in a host of business environments.

President Donald Trump blocked Singapore-based Broadcom’s $117 billion hostile takeover of Qualcomm on March 12. He attributed the unusual decision to national security concerns.

High-Quality Dividends: Air Products and Chemicals (APD)

High-Quality Dividends: Air Products and Chemicals (APD)

Dividend Yield: 2.6%

If you haven’t heard of Air Products and Chemicals, Inc. (NYSE:APD), listen closely. This is a comparatively high-quality Dividend Aristocrat — one of only 50 companies that has raised its dividend payout for over 25 consecutive years. Pennsylvania-based APD is the largest supplier of hydrogen and helium gas in the world.

It also pays a lucrative dividend and has just further hiked its payout by 15.8% to $1.10 a share per quarter. This is on a 2.6% yield — just slightly higher than the sector average.

The best part is that the company’s strong outlook is likely to lead to further dividend increases. TipRanks reveals that this stock has 100% support from the Street right now. Over the last three months, eight analysts have published buy ratings on Air Products — no hold or sell ratings here. These analysts are predicting over 13% upside potential from the current share price.

Five-star Key Banc analyst Michael Sison has just ramped his price target $9 to $184. He is becoming increasingly bullish on APD due to its: 1) first-quarter EPS beat; 2) lower tax rate; and 3) higher confidence in the company’s volume projections. All this leads him to conclude that the company is on track to produce impressive earnings growth of 16% year over year.

High-Quality Dividends: Medtronic (MDT)

Dividend Yield: 2.3%

I highly recommend Irish-based Medtronic PLC (NYSE:MDT), one of the world’s largest medical equipment development companies. Medtronic has a whopping 40 consecutive years of rising dividend payments under its belt. Currently, MDT pays a 46-cent quarterly dividend on a 2.3% current yield with a low payout ratio under 50%.

On top of being a Dividend Aristocrat, Medtronic also boasts a steadily rising share price over the last five years. And the word on the Street is that 2018 will be a stellar year for this “strong buy” stock. The company has launched its own robot-assisted surgery device with Mazor Robotics (NASDAQ:MZOR) — and the partnership is starting to bear fruit. According to CEO Omar Ishrak, we will start to see the revenue from this “pull through” in coming quarters.

In the last three months, Medtronic has received seven buy ratings vs just one hold ratings. These analysts are projecting a 14% spike for the company from its current share price. Take Needham’s Michael Matson, who reiterated his buy rating and bullish $95 price target on Feb. 21. “We are encouraged by the stronger revenue growth and expect it to eventually translate into stronger EPS growth as currency headwinds ease” explains Matson.

High-Quality Dividends: McDonald’s (MCD)

Dividend Yield: 2.5%

McDonald’s Corporation (NYSE:MCD) a.k.a. the “Golden Arches,” boasts a lucrative dividend payout. Back in September, the board of directors approved a sizable payout increase of 7%. This counts as McDonald’s 41st straight dividend increase. As a result, McDonald’s paid shareholders a $1.01 quarterly dividend in December with a 2.5% yield.

And this isn’t all. The Street is rallying around McDonald’s right now. In the last month the stock has received no less than seven back-to-back buy ratings. With an eye on the new value menu, Jefferies’ Andy Barish reiterated his buy rating and $200 price target (26% upside potential) on March 16. The $1 $2 $3 menu means a roughly 15% price cut for consumers.

He attributes recent share weakness to general market fluctuations and overly high expectations. Crucially Barish still has faith in his 3% gains in U.S. same-store-sales estimate for Q1. So does BMO Capital’s Andrew Strelzik. He sees MCD recording 3% same store sales growth beyond just the first quarter due to its “solid playbook of internal initiatives.”

“As MCD’s comp softness proves temporary, investor focus likely will revert to its free cash flow potential in a normalized capex environment” wrote Strelzik on March 12. According to BMO’s calculations, MCD should generate roughly $7 billion of run-rate free cash flow by early 2020.

High-Quality Dividends: Chevron (CVX)

Dividend Yield: 3.9%

Oil and gas giant Chevron Corporation(NYSE:CVX) is a premium dividend stock for the long-term. Chevron’s dividend yield is a lucrative 3.9% thanks to an annual payout of $4.48. Note that the yield is far above the basic materials sector average of 2.4%. Most impressively, Chevron has a strong record of steady dividend increases over the last 32 years. Yes that’s right, we are looking at a Dividend Aristocrat here.

Shares have pulled back recently over $130 in January to under $114. But don’t be alarmed! This is a buying opportunity. From a Street perspective, Chevron is still a top pick. This is a “strong buy” stock with 100% support from top analysts over the last three months. Even better, with a $142 average price target, these seven top analysts see 25% upside potential from the current share price.

The most bullish analyst of the pack is Cowen & Co’s Sam Margolin. He has a very confident price target on CVX of $160 (39% upside potential from the current share price). Margolin blames concerns over Australian LNG free cash flow and growth in the Permian basin as responsible for the slipping prices. But he reassures investors that both these investment pillars are still fundamentally intact.

Bear in mind Margolin is one of the Top 200 analysts on TipRanks for his precise stock picking ability. In the basic materials sector specifically, his ranking shoots up to top 10. And on CVX specifically he scores an 86% success rate and 9.2% average return.

High-Quality Dividends: Philip Morris (PM)

Dividend Yield: 4.3%

I highly recommend checking out Marlboro-maker Philip Morris International Inc. (NYSE:PM). Not only does PM pay a high dividend yield over 4%, it also boasts a 10-year dividend growth streak. The company is about to begin trading ex-dividend in advance of a $1.07 quarterly payout in April. So, the million-dollar question — should you invest now?

Looking forward, all cigarette companies face a huge industry disruption. Global smoking habits are set for inevitable long-term decline. Luckily PM has a get-out plan. The company recently announced that it wants to build its future “on smoke-free products that are a much better choice than cigarette smoking.” The result: a strong push towards reduced-risk vapes and e-cigarettes that contain nicotine but don’t burn tobacco.

And it looks like the Street approves of this dramatic decision. In the last three months, PM has received only buy ratings. The five analysts covering the stock have an average price target on PM of $123.40. This suggests big upside potential of over 25%.

Indeed, Citigroup’s Adam Speilman has just upgraded PM from “hold” to “buy.” We are facing a “new world of tobacco” says Spielman as vapes and heated tobacco record strong uptake. He believes PM is moving as fast as possible into this new world and – as a result- margins will start increasing again in the next 12 months.

High-Quality Dividends: Cedar Fair (FUN)

Cedar Fair, L.P. (NYSE:FUN)

Dividend Yield: 5.4%

Theme park giant Cedar Fair, L.P. (NYSE:FUN) is a key dividend stock that often gets overlooked by investors. Not only does FUN pay out a relatively high yield of over 5%, it has raised its dividend every year for the last five years.

Indeed, on average Cedar Fair has increased its dividend payment by 6.6% annually over the last three years. Shareholders have just received a quarterly dividend payout of $0.89 on March 19.

Top B.Riley FBR analyst Barton Crockett continues to see Cedar Fair as an appealing combination of growth and yield. He blames brutally cold weather for “flattening”‘ 2017 but does not let this dent his long-term optimism. FUN has a prime position in the theme park industry with “little, if any, construction of meaningful new theme parks.”

“A return to past trends of 4% EBITDA growth looks quite reasonable and appealing for a stock indicating a yield of nearly 5.5% and operating as a leader in theme park industry that is secularly well positioned” concludes Crockett. Now he projects a 20% share price increase in the coming months.

Despite a tough 2017, our data shows that Cedar has received four consecutive buy ratings from analysts in the last three months. These analysts are predicting 16% upside potential from the current share price.

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Source: Investor Place 

Sell These 3 Utility Stocks Being Squeezed at Both Ends

It strikes me, at times, how little humankind has changed over the centuries. The ancient Greeks waited for answers to the most pertinent questions of their day from the Oracle at Delphi – a high priestess that supposedly spoke to the god Apollo.

Today, Wall Street also waits for word from on high as to the future course of markets from the Federal Reserve. The new Chairman (or is it Oracle) Jay Powell will explain to the public why the Fed deemed it is necessary to raise the federal funds interest rates by a quarter percentage point again, to the range of 1.50% to 1.75%.

Market pundits will attempt to interpret exactly what the Fed’s future plans are by looking at the so-called dot plots to see if three or four interest rate hikes (including this one in March) are in Wall Street’s future. That ‘analysis’ will lead to classic, almost Pavlovian, response by some market participants to immediately sell some sectors in response to future higher rates.

One type of stock that will be sold is the so-called dividend aristocrats. The reasoning is straightforward… in the three years through 2017, the average yield on the dividend aristocrats index was 0.4% higher than 10-year Treasury yields, according to Bloomberg data. Now, the average dividend aristocrat offers a yield of 2.3% versus the more than 2.8% yield on the 10-year Treasury.

Utilities: Bond Proxies

One sector that has consistently paid higher dividends has been utilities. These companies make much of their income from regulated assets which means that their earnings and dividend payments are steadier and more reliable. That makes their shares behave more like bonds. In other words, they are bond proxies.

But now that ability to attract investors with higher dividends  is under pressure thanks to the Fed raising rates, making government bonds more competitive among income-seeking investors. In a Pavlovian-type response, JPMorgan in February came out with a list of 50 bond proxies that they put on an avoid list for investors. More than half of the list consisted of utility firms.

However, the current harsh reality is that U.S. utilities’ finances are under pressure from both higher rates and the effects of the recently-passed tax law. The sub-sector most under pressure is the power sector. Let me explain…

Power Sector Punishment

First of all, these companies are in a no-growth environment. U.S. demand for electricity is stagnating: total power consumption was slightly lower last year than in 2010, according to the Energy Information Administration. There has also been a major shift in utilities’ fuel mix. Since 2010, the proportion of U.S. electricity generated by coal-fired plants has dropped from 45% to 30%, while the proportion from natural gas rose from 24% to 32% and the proportion from renewables rose from 4% to 10%.

But the U.S. power sector has been doing fine because two of its crucial inputs were dirt cheap: natural gas and money (thanks to near zero interest rates). The utilities need money to constantly upkeep and upgrade their power infrastructure. But now the Fed’s policy change is changing that dynamic and raising their costs.

Rising rates aren’t good news for the utilities sector because many of the companies are heavily indebted. The utilities in the S&P 500 have debt with an average maturity of 14.5 years, according to JPMorgan. And while only 19% of their debt matures by 2020, over time, rising interest rates will put upward pressure on their costs. In their regulated businesses, the utilities should be able to recover much of their increased costs from their customers. But the more companies try to raise rates, the higher the risk that they will get push back from various states’ regulators.

The power companies’ problems are being compounded by the recent changes in the tax laws. As you can imagine, the changes are very complex and will affect different companies in different ways.

However, one common effect is that it will squeeze utilities’ cash flows. The corporate tax rate has been cut from 35% to 21%. But it is believed that states’ regulators will insist that customers benefit from that reduction with lower bills. Eventually, the power companies may be able to recoup the lost income. But in the short run this loss of revenue means that cash flows will be squeezed. This may even result in some utilities’ credit ratings being cut.

Some Companies Will Cope

Management at some utility firms are already taking action in order to alleviate this expected loss in their cash flow. They have decided to issue more stock (diluting existing shareholders) and cut back on capital expenditures.

One of the largest utilities, Duke Energy (NYSE: DUK), announced in February that it planned to raise $2 billion from selling shares this year and would also cut its five-year capital spending plan by $1 billion. Its CEO, Lynn Good, said the share sale was needed “to maintain the strength of our balance sheet”.

Another large utility, First Energy (NYSE: FE), announced in January a $2.5 billion investment in common and convertible preferred shares (again diluting existing investors), from a number of institutional investors including Elliott Management and GIC. The funds would be used to pay off debt, contribute to its pension fund, and to “strengthen the company’s investment-grade balance sheet”.

These type of actions should help secure these companies’ future. But it will hold back their stock performance over the short- to intermediate-term, as well as the performance of a broad utilities’ ETF such as the Utilities Select Sector SPDR Fund (NYSE: XLU), which is down 4.62% year-to-date.

For now, I would avoid the entire utility sector. But if you have a high risk tolerance, you may want to consider the ProShares Ultra Short Utilities ETF (NYSE: SDP). This ETF seeks a return that is double the inverse of the return on the Dow Jones U.S. Utilities Index. This ETF is up more than 7% year-to-date.

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Source: Investors Alley 

This “Billionaire’s Secret” Lets You Buy Stocks for 19% Off

One of the greatest things about closed-end funds (CEFs) is that they often cost less than they’re really worth.

And no, I’m not basing that on some obscure metric—I’m literally talking about the difference between the market price of the assets the fund owns and the market price of the fund itself.

It works like this: a CEF can trade for, say, $9.90, even though all the assets the fund holds (known as the net asset value, or NAV) are worth $10. Believe it or not, this happens a lot—it’s exactly how billionaire investors make big money in CEFs.

Take, for instance, Boaz Weinstein of Saba Capital Management. He’s a pretty big name on Wall Street for one reason: he was the guy who took down the so-called “London Whale,” a reckless trader with JPMorgan Chase & Co. (JPM) who racked up $6 billion in losses on phenomenally dumb bets.

Weinstein was the guy on the other side of those bets.

And now Weinstein has another lopsided Wall Street mistake in his crosshairs, and it has everything to do with closed-end funds.

As I told you last year, Weinstein stated that he was betting big on CEFs, spotting an opportunity to buy these funds, which were heavily discounted at the time, and waiting for the market to clue in to the big profits they offered.

Here’s how our CEF Insider equity indexes have done since Weinstein’s big bet:

A Steady Profit

Source: CEF Insider

Even after the recent volatility, these funds are up around 15% from a year ago. The best news is that there are still a lot of discounted CEFs floating around, despite this gain, so if you want to get in on the action, you’re not too late.

Which brings me to the 2 CEFs I’ll show you now.

2 CEFs Selling for Up to 19% Off

Let’s start with the Eagle Growth & Income Opportunities Fund (EGIF), which is a tiny, $111.5-million fund trading at a huge 16.8% discount to NAV. If you think this is because EGIF is holding dangerous stuff, think again; many holdings are value stocks with strong cash flows, like AT&T (T), Phillip Morris (PM) and Cisco Systems (CSCO).

Buy these stocks on the open market or hold them through a value-stock mutual fund or ETF and you’ll get $100 worth of stocks for every $100 you put in.

But with EGIF, you’ll get $100 of stocks for $83.20, thanks to that absurd discount to NAV.

Why else should you consider EGIF now?

Simply put, its discount has gotten a lot bigger thanks to the recent market volatility:

Cheap Fund Gets Cheaper

So if you were to buy now and wait for the fund to trade at par, you’d be looking at a 20% return. Or if you’re more impatient, just wait for this CEF to go back to where it was less than a year ago. You’ll still get a nice 5.6% return. And while you wait, you can enjoy EGIF’s 5.6% dividend stream.

A second fund to consider is the GDL Fund (GDL), run by famed value investor Mario Gabelli. Mario is a seasoned Wall Street billionaire not unlike Warren Buffet; using time-tested value-investing principles, his team looks for discounted stocks around the world and bets big on them.

But despite all that expertise, GDL trades at a ridiculous 18.6% discount to NAV!

GDL’s Absurd Markdown

The bottom line?

With $81.40 you’ll get $100 worth of stocks in high-quality global companies like Time Warner (TWX), which is likely to pop soon when it merges with AT&T, as well as Parmalat (PLT), the Italian dairy producer, which has a large share of the EU market, and Advanced Accelerator Applications (AAAP), which drug-making giant Novartis (NVS) is seeking to acquire.

Obviously, Gabelli’s team knows their stuff.

Buying now would get you this value portfolio at a huge discount. Wait for its discount to revert to where it was a few months ago, and you’ve got 8.1% upside. Keep holding on and collecting the 4.2% dividend stream and you’ll likely rack up even more gains, thanks to GDL’s strong and under-appreciated portfolio.

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Source: Contrarian Outlook 

Buy This 17% High-Yield Stock Selling at a Temporary Discount

Last week a Federal Energy Regulatory Commission (FERC) ruling sent the MLP and energy infrastructure stocks into a tailspin. The news release caused an immediate 10% drop in the MLP indexes. Prices recovered to close at a 5% decline. A closer read of the facts shows the fears were overblown and this steep drop may end up in hindsight as the MLP sector’s equivalent of the March 2009 bottom of the last stock bear market.

Here is the scary headline from Bloomberg:

Pipeline Stocks Plunge After FERC Kills Key Income-Tax Allowance

The reality is that the ruling only applies to interstate (not intrastate, which is most pipeline miles) pipelines and to just one of the methods a pipeline company can use to set interstate transport rates. Here is how large cap MLP Magellan Midstream Partners, L.P. (NYSE: MMP) explains the effect of the FERC ruling on its business:

“Although Magellan is organized as an MLP, it does not have cost-of-service rates that would be directly impacted by this policy change. Rather, the rates on approximately 40% of the shipments on Magellan’s refined products pipeline system are regulated by the FERC primarily through an index methodology. As an alternative to cost-of-service or index-based rates, interstate pipeline companies may establish rates by obtaining authority to charge market-based rates in competitive markets or by negotiation with unaffiliated shippers. Approximately 60% of Magellan’s refined products pipeline system’s markets are either subject to regulations by the related state or approved for market-based rates by the FERC. In addition, most of the tariffs on Magellan’s crude oil pipelines are established by negotiated rates that generally provide for annual adjustments in line with changes in the FERC index, subject to certain modifications.”

Numerous other large cap MLPs and corporate pipeline companies have issued press releases to state that their business results will not be affected by the FERC ruling. It appears that few pipelines have rates set using the “cost of service” rules.

Related: A High-Yield Stock That’s Better at 15% Than One at 20%

In the bigger picture, MLP values have been falling since late January. Over the same period companies in the sector reported 2017 fourth quarter results that were very positive. MLP fundamentals have been improving for several quarters, and the trend will continue as North American oil and gas production continues to grow.

15 MLPs in the Alerian MLP Infrastructure Index raised distributions and the other 10 kept them level. There were no reductions. This combination of falling market values against strong fundamentals reminds me very much of the bottom of the last bear market which occurred in March 2009. At that time, it seemed that nothing would stop the market decline. In hindsight that point in time was when stocks reached what I politely call “stupidly cheap” prices. Currently quality MLPs look “stupidly cheap.”

Here are the bear market charts of the SPDR S&P 500 ETF (NYSE: SPY) for the 2007 to 2009 bear market compared to the Alerian MLP ETF (NYSE: AMLP) bear market which started in February 2017. If MLPs form a bottom here, the pattern points to significant gains over the next few years.

If you own quality MLPs that have fallen in value, it is a good time to add more to your positions. In my Dividend Hunter newsletter, my primary MLP recommendation is the InfraCap MLP ETF (NYSE: AMZA). This ETF pays monthly dividends which benefit from option selling by the fund managers. After the big FERC fueled drop, AMZA yields over 17%.


Dump These 3 Steel Stocks as Tariff’s Rip Up the Industry

The imposition of a 25% tariff on imported steel by President Trump has certainly been a headline grabber. But it obscures the long-term problems faced by the U.S. steel industry.

And it only addresses one side of the classic economic equation for any commodity – supply and the industry’s struggle against cheap imports. The share of the U.S. steel market taken by imports was only 26.9% in 2017, up slightly from 2016’s level of 25.4%.

The other part of the equation is demand and that remains a sore spot. There is a genuine long-term weakness in domestic demand for steel. The only bright spots on that front are the auto and the shale oil and gas industries.

Related: Trump’s Trade War Set to Cost This Automaker $1 Billion: Sell Now

The decline in U.S. steel output since the 1970s is clearly seen in this graph. 2017 estimated steel use in the U.S. was 110 million metric tons, which was far below the 136 million ton level in 2006, before the financial crisis. U.S. steel production was up 3% in 2017, but capacity utilization remains low at 74%. In other words, there is still overcapacity in the U.S. steel industry based on current demand.

And the situation could get worse. . . . .

Higher Prices = Lower Demand

A basic economic principle is that higher prices lead to lower demand. And the steel tariffs mean higher prices for manufacturers in the United States that use steel. So unless US steel-using manufacturers are also protected from imports by tariffs, they will end up being losers on the global stage because the higher steel cost will make them uncompetitive. That’s the slippery slope you get on when you begin imposing tariffs – you have to end up shielding more and more industries.

Before Trump acted to impose tariffs on steel, forecasters had been predicting a decent year for the steelmakers. Growth in steel demand, as forecast by the consultancy Wood Mackenzie and others, was expected to be in the 7% range. But if higher costs start pricing US manufacturers out of world markets, that expected rise in demand will quickly disappear and jobs could even be lost.

The solution – instead of tariffs – would have been to begin moving forward on President Trump’s dream of rebuilding America’s deteriorating infrastructure. For example, there are more than 54,000 bridges in the United States that need to be repaired or replaced, according to the American Road and Transportation Builders Association. Just think about how much steel would be needed to just tackle that problem.

And there’s a whole lot more in infrastructure that needs to be done… that’s why the American Society of Civil Engineers most recent report card gave U.S. infrastructure an overall grade of D+. The report also said that if our country’s investment gap is not addressed by 2025, the U.S. economy will lose nearly $4 trillion in GDP.

In simple terms, if you want to be competitive globally in the 21st century, you need a 21st century infrastructure and not one a hundred years old.

Stay Away From Steel Stocks

I do not expect the United States to seriously address its infrastructure problem. Therefore, I do not see additional demand coming online any time soon for U.S. steelmakers. And there is a related problem the U.S. steel companies have…

That is, some of their mills are simply inefficient and uncompetitive. This has been a decades-long problem for the U.S. steel industry, even going back to just after World War II. U.S. steel producers held on stubbornly to old technology – the so-called ‘open hearth’ steel production method. Meantime, the Europeans and everyone else adopted the more efficient ‘basic oxygen’ process.

Of course, other newer steelmaking technologies are in use today, but the roots of the decline of the American industry began then. By the time the U.S. steel industry modernized (after begging for protection against those darn foreigners), it had already lost its spot as the world’s steel kingpin.

As the famous quote attributed to Mark Twain says, “History doesn’t repeat itself, but it often rhymes.”

Therefore, I expect the benefits of the tariffs to the steel companies to disappear as quickly as a morning fog on a hot summer day.

This makes the stocks of the steel companies un-investable or, if you have a high risk tolerance, outright shorts. Especially at these elevated price levels, which seemed to have all the possible good news already factored in.

Related: Here’s Why You Need to Buy These 3 Metals Stocks Today

At the top of the list of steel stocks to avoid is U.S. Steel (NYSE: X), which saddens me because my grandfather used to work for the company.

Vertical Research Group analyst Gordon Johnson recently said on CNBC that the operating costs for the company are up, meaning the tariffs will offer little benefit.  Johnson specifically pointed to the soon-to-be-reopened Granite City mill in Illinois as “one of the least efficient steel mills in the world”.

U.S. Steel is also facing operational issues in its flat-rolled division with increased outage and plant maintenance costs rising. The company sees higher plant-related spending as it accelerates its efforts to revitalize this unit. Maintenance and outage expenses for the flat-rolled unit for 2017 increased by $341 million on a year over year basis. The company expects maintenance and outage spending for 2018 to be similar to 2017.

The second stock on the no-touch list is AK Steel Holding (NYSE: AKS). Like U.S. Steel, it faces planned maintenance outages in some facilities, affecting production. The company recorded outage costs of $85 million in 2017 and in 2018, it expects expenses associated with planned outages to be about $50 million.

But there are other, bigger problems for AK Steel. AK Steel’s cost structure is higher than its peers due to its greater reliance on external supplies of raw materials. It pays nearly double for iron ore pellets compared to its integrated competitors, who consume their own pellets. The company saw higher year over year costs for raw materials such as iron ore and other alloys in the fourth quarter and raw material cost inflation is expected to continue throughout the year.

Finally, a broad way to play the chronic overcapacity in the global steel industry is through an exchange traded fund – the VanEck Vectors Steel ETF (NYSE: SLX).

The top positions in the fund (27 stocks make up the fund) are the mining firms that produce the aforementioned raw materials needed for steel production like iron ore. However, it is still loaded with steel-producing companies from all over the world. About half the stocks in the portfolio are U.S. steel industry companies.

It would not surprise me to see this ETF slide from its current price near $50 into the $30s or even $20s.

Get Your Hands on Stocks Growing Revenues (and Stock Prices!) Faster than Google and Apple

I’d like to reveal to you the blue chip stocks – one in particular – that could literally be worth millions of dollars to you over the next decade.

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Source: Investors Alley 

7 Dividend Stocks That May Be Hurting Your Retirement

Source: Shutterstock

Two key goals in retirement are to generate safe income and preserve capital. No one wants to outlive their nest egg.

Dividend-paying stocks are a popular asset class used to generate predictable, growing income. However, unlike the interest income paid by government-backed Treasury bonds, a common stock dividend can be far more discretionary in nature. When times get tough, a business will typically opt to reduce its dividend before jeopardizing its ability to meet its debt obligations, preserve its credit rating or invest in its long-term growth projects.

Unfortunately, a number of businesses are facing the tough decision to reduce their dividend at any one moment.

To alert investors of stocks that have the highest risk of reducing their current dividend in the future, Simply Safe Dividends created a Dividend Safety Score system that analyzes a company’s payout ratios, debt levels, recession performance, cash flow generation, recent earnings performance, dividend longevity and more.

Dividend Safety Scores are available for thousands of stocks, and scores range from 0 to 100. A score of 50 represents a borderline safe payout, but conservative investors are best off sticking with companies that score over 60 for Dividend Safety.

Investors can learn more about Dividend Safety Scores and view their real-time track record here(since inception they have flagged 99% of dividend cuts in advance).

I used Dividend Safety Scores to identify seven companies that have either recently cut their dividend and remain in trouble, or that could be facing a dividend cut in the near future. Owning companies like these can hurt a conservative retirement portfolio.

Dividend Stocks to Avoid: Frontier (FTR)

Dividend Stocks to Avoid: Frontier (FTR)

Source: Shutterstock

Dividend Yield: 0% (Dividend is currently suspended)

Dividend Safety Score: 1 (Very Unsafe)

Frontier Communications Corp (NASDAQ:FTR) finally bit the bullet and completely suspended its dividend in February 2018. The company had a Dividend Safety Score of 1, signaling a very unsafe payout, from Simply Safe Dividends before its cut announcement was made.

Frontier has reported a net loss the last two fiscal years and is saddled with debt, in part due to its poor decision to acquire some of Verizon’s fiber assets in 2016 for $10 billion.

The firm’s weak financial position has made it very challenging for it to make the investments in its communications networks that are necessary to remain competitive.

When combined with Frontier’s large debt load, sizable dividend and ongoing customer losses, management’s decision to eliminate the payout isn’t a big surprise.

Investors seeking high-yield replacement ideas can review analysis on our favorite high-dividend stocks here.

Dividend Stocks to Avoid: CenturyLink (CTL)

Dividend Stocks to Avoid: CenturyLink (CTL)

Source: Shutterstock

Dividend Yield: 12.7%

Dividend Safety Score: 3 (Very Unsafe)

CenturyLink Inc (NYSE:CTL) is one of the largest telecom services providers in America and sports a juicy yield north of 10%.

The company closed its $34 billion acquisition of international service provider Level 3 Communications in late 2017 to become more focused on serving businesses rather than consumers. The combined company has more than 10 million landline phone connections, over 5 million broadband internet subscribers, a few hundred thousand satellite TV subscribers, and a large focus on enterprise IT services.

CenturyLink is no stranger to dividend cuts, having reduced its payout in early 2013 (CTL’s stock tumbled more than 20% on the news). And another dividend cut could be in the cards, with Simply Safe Dividends assigning the company a very weak Dividend Safety Score of 3.

Legacy wireline phone services have been in decline for years as wireless phones continue replacing them. As a result, the company’s primary cash cow has been shrinking at a double-digit pace, causing its payout ratio to spike above 100% last year.

Investors are hoping the company’s Level 3 acquisition will successfully diversify CenturyLink’s cash flow away from declining legacy landlines and result in a more sustainable dividend profile.

Unfortunately, CenturyLink had to take on substantial debt to do this deal, and its sales and margins continued contracting last quarter.

Investors can learn more about CenturyLink’s Level 3 acquisition and how it impacts dividend safety here.

Overall, CenturyLink’s management team appears to have a very slim margin for error, and the dividend is on shaky ground. Conservative income investors are likely better off going elsewhere for reliable dividends and capital preservation.

Dividend Stocks to Avoid: Government Properties Income Trust (GOV)

Dividend Stocks to Avoid: Government Properties Income Trust (GOV)

Source: Shutterstock

Dividend Yield: 12.5%

Dividend Safety Score: 3 (Very Unsafe)

While Government Properties Income Trust (NASDAQ:GOV) has not raised its dividend over the last five years, income investors can’t complain about the stock’s generous 8% average dividend yield during this time.

GOV current yields more than 12%, but unlike recent years, the stock is increasingly looking like a yield trap. In fact, Simply Safe Dividends assigns the company an extremely low Dividend Safety Score of 3.

GOV is a real estate investment trust which owns over 100 properties leased primarily to the U.S. government and state governments.

Unfortunately, governments are looking to become much more efficient with their spending, including reducing the amount of office space per employee.

Analysts expect GOV’s adjusted funds from operations (AFFO) per share to slip more than 15% over the next 12 months, which will push the company’s AFFO payout ratio to nearly 130%.

When combined with the firm’s substantial amount of debt, a meaningful dividend cut could be on the horizon.

Dividend Stocks to Avoid: GlaxoSmithKline (GSK)

Dividend Stocks to Avoid: GlaxoSmithKline (GSK)

Source: Shutterstock

Dividend Yield: 6.8%

Dividend Safety Score: 30 (Unsafe)

GlaxoSmithKline Plc (ADR) (NYSE:GSK) has kept its dividend frozen since 2012 and has impressively paid uninterrupted dividends for nearly 20 consecutive years. When combined with its high yield and seemingly conservative payout ratio below 40%, it’s no wonder why the stock is popular with income investors.

However, the pharmaceutical giant is facing real growth struggles as branded and generic competition eats away at the pricing of its core drugs.

With pressure to continue expanding and its dividend consuming a meaningful amount of cash flow, it’s not out of the question that GlaxoSmithKline might opt to reduce its dividend to free up growth capital and keep its balance sheet in good shape.

GlaxoSmithKline has a Dividend Safety Score of 30 from Simply Safe Dividends, indicating that its payout is potentially unsafe and has a heightened risk of being cut in the future.

Income investors can learn more about GlaxoSmithKline and the safety of its dividend in the research note here.

Dividend Stocks to Avoid: Waddell & Reed (WDR)

Dividend Stocks to Avoid: Waddell & Reed (WDR)

Source: Shutterstock

Dividend Yield: 5.1%

Dividend Safety Score: 12 (Very Unsafe)

It’s no secret that the actively managed investment fund industry is under pressure. High fees, generally poor performance and an ever-growing number of low-cost passively managed funds are all factors putting pressure on companies like Waddell & Reed.

The company’s earnings have steadily declined since 2014, pushing its dividend payout ratio up to close to 90% last year. As a result, management ultimately decided to slash the firm’s quarterly dividend by 46%.

Simply Safe Dividends had assigned the company a Dividend Safety Score of 12 prior to its reduction announcement, signaling high risk of a payout cut.

Unfortunately the outlook remains somewhat grim for the business, largely driven by continued performance struggles and relatively high fees that averaged 66.5 basis points last quarter.

Less than 30% of Waddell & Reed’s fund assets were ranked in the top half of their group by Morningstar over the past three-year performance period. Not surprisingly, Waddell & Reed continues to see a couple billion dollars of asset outflows each quarter.

Should the market take a tumble, the business would come under further strain. Investors looking for a higher quality business in this industry can review our research on T. Rowe Price (TROW) here.

Dividend Stocks to Avoid: Dine Brands Global (DIN)

Dividend Stocks to Avoid: Dine Brands Global (DIN)

Source: Shutterstock

Dividend Yield: 3.6%

Dividend Safety Score: 4 (Very Unsafe)

Dine Brands Global Inc (NYSE:DIN) owns or franchises more than 1,900 Applebee’s and nearly 1,800 International House of Pancakes (IHOP) restaurants throughout the country.

The full-service casual dining industry has come under pressure in recent years. More consumers are opting for quick-service restaurants, which typically offer lower prices, better food quality and shorter waits to support an on-the-go lifestyle.

Dine Brands Global saw its adjusted earnings per share decline by more than 30% in fiscal 2017, driven largely by a 5.3% decline in Applebee’s comparable same-restaurant sales.

This pressure ultimately caused the company to lower its dividend by 35% in February 2018 to free up cash for brand investments and support its stretched balance sheet.

Simply Safe Dividends had issued the company a Dividend Safety Score of 4 prior to the dividend cut announcement, signaling that the firm’s payout was potentially very unsafe.

While the new dividend amount appears to be more sustainable for now, the business remains under press. The stock’s new yield sits close to 3.6%, which isn’t very competitive with other income options given the payout’s weak growth potential going forward.

Dividend Stocks to Avoid: Macquarie (MIC)

Dividend Stocks to Avoid: Macquarie (MIC)

Dividend Yield: 15.1%

Dividend Safety Score: 20 (Very Unsafe)

The market usually does not like surprise dividend cuts, and Macquarie Infrastructure Corp’s(NYSE:MIC) decision to reduce its payout by 31% in February 2018 was no exception.

MIC’s stock tumbled as much as 40% on the news and remains in the dumps. Not only do dividend cuts reduce retirement income, but they can permanently lose an investor’s hard-earned capital.

The infrastructure company’s management has historically run the business with a relatively high debt load and elevated payout ratio, reflecting the fairly predictable results its assets generated but retaining little cash with which to plow back into growth projects.

A new CEO started in late 2017 and decided to monetize several major assets at the company for a hefty profit. As a result, cash flow will fall and the dividend needed to be adjusted down with it for the rest of 2018.

A lower dividend also allows the company to fund more of its growth projects with internally generated cash flow rather than depend more on capital markets to raise funds.

Simply Safe Dividends had slapped the company with a “Very Unsafe” score of 20 prior to its surprising announcement.

Conservative investors can consider cutting their losses and moving on to other investment opportunities with safer, faster-growing income.

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