Fake News Puts These Two Solid High-Yield Stocks on Sale

In my focus area of high yield stocks, I am regularly reminded how committed to losing money are many high-yield stock investors. Any whiff of bad news has them running for the exits, which drives down share price, which causes more fear based selling, which further drives down the share price. You get the picture. Investors who buy high yield stocks are often new to owning stocks, or less well informed on how stock prices fluctuate. To avoid being a money-losing, fear-based seller of dividend stocks, an investor needs to understand the difference between real and fake news that moves stock prices.

Real news about publicly traded companies is primarily quarterly earnings results and the associated management comments about business operations. Press releases directly from the individual companies count as real news. You may notice that these items come out just once to a few times per calendar quarter for most stocks. This is the information on which buy and sell decisions should be made.

Related: Separating Real News from Fake News in the Stock Market

However, the financial news media is hungry for items to fill websites and financial news networks’ broadcast time. The information from these news outlets come from Wall Street analysts and financial writers who share their opinions and try to predict the future. They have no deeper insight that what an investor can get from the information released directly by the companies.

Predicting future results are really just estimates or guesses. I refer to these forecasts as “fake news” because they do not add any real information to my knowledge about individual companies. When a “fake news” item results in a steep share price drop, I review the real news I know about a company and often recommend using the price decline as a buying opportunity. Here are two stocks that recently were affected this way.

Pattern Energy Group (Nasdaq: PEGI) recently experienced a 12.5% decline when the province of Ontario announced it was cancelling over 750 renewable energy contracts. While Pattern Energy was not singled out, the company has a significant presence with several projects under development in Ontario.

A few days after the big drop, a follow up report noted that none of Pattern Energy’s projects would be affected. However, even though the original cause of the decline has been proven to not affect the company, less than half of the steep drop has been recaptured.

This makes PEGI an attractive purchase now with its stable and growing dividend and 9.6% yield.

Over the course of just one week, the share price of Uniti Group (Nasdaq: UNIT) declined by 20%. The drop was almost entirely due to a Wall Street analyst putting a sell recommendation on the stock with a $15 price target.

The real facts are that UNIT at $17.40 per share is the same company with the same prospects as it was when the share price was $4 higher. The big dividend is not at risk, and this is a company that is growing and diversifying its business operations. UNIT now yields almost 14%. It is likely that the Q2 earnings release in early August will give a boost to the share price.

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Buy These 5 High-Yielders from Someplace You Wouldn’t Expect

Driven by a strong economy worldwide and rising corporate confidence, global dividends in 2017 reached record levels. Payouts rose 7.7% last year – the fastest pace since 2014 – to $1.3 trillion.

Domestically, payout growth in the U.S. rebounded from a sluggish 2016 when election uncertainty caused companies to hold off their investment and dividend plans. The U.S. posted dividend growth of 6.3% last year compared with just 1.7% in 2016, he said, with a record $438.1 billion in payouts made to shareholders.

However, the star of the dividend show was Asia, according to a study conducted by asset manager Janus Henderson.

Asian Dividend Payouts Soar

Asia-Pacific companies grew their dividends the fastest, climbing by 12.7% in the 12 months to the end of May to a record $283.5 billion, out of a total of $936.8 billion for dividends generated in the rest of the world — dwarfing the growth rate of dividends elsewhere. Between 2009 and 2018, the value of annual dividends paid out by Asian companies tripled, while payouts from the rest of the world doubled in value, according to the study.

This just shows you how the world has changed in 10 years. Back then, many of Asia’s top businesses were growing quickly, but were not worried about paying income to their shareholders. That perception holds today among investors even though many Asian corporate managements have changed their attitudes towards dividends and now pay out generously.

The numbers back up that change in attitude. In 2017, Asia Pacific companies accounted for $1 for every $6 of the dividends paid worldwide, up from just over $1 in every $9 paid out in 2009. A big contributor has been China where dividends payments have grown from just $8 billion in 1998 to $111 billion in 2016.

I believe Asian stocks have more potential for long-term dividend growth than their U.S. counterparts for a number of reasons. Despite the trade war rhetoric, earnings growth among Asian companies has maintained the momentum that started in late 2016, which reversed a three-year trend of deflation and earnings declines for many companies. Asian companies have also weaned themselves from an over-reliance on debt, and today are less leveraged than those in the United States. And of course, the broader Asia growth story and rise of the consumer class is still alive and well.

Valuations among these companies are also far more attractive than they are in the U.S., thanks to U.S. fund selling driving down the prices of most Asian stocks. In other words, U.S. markets have already built huge earnings expectations into many stock prices and valuations are at historically high levels. By contrast, many Asian stocks have already had the worst case trade war scenario built into them.

How to Invest Into Asian Dividend Payers

If you are interested in capturing some of that dividend growth potential from Asian stocks, there are several ways to do it.

The first is an old-fashioned, but effective, way. You can buy a mutual fund from a company whose sole focus is Asia – the Mathew Asia Dividend Fund (MUTF: MATIX). Its top holdings include well-known blue chips such as Taiwan Semiconductor and HSBC.

But it also includes less well-known names to American investors including Shenzhou International Group Holdings, which is the largest knitwear manufacturer in China and makes clothing for Nike and others. Its stock soared an incredible 4200% over the past decade!

The next way for you to access Asian dividends is through exchange traded funds (ETFs). There are several that focus on Asian dividend payers, including the iShares Asia/Pacific Dividend ETF (NYSE: DVYA), the WisdomTree Asia Pacific ex-Japan Fund (NYSE: AXJL) and the O’Shares FTSE Asia Pacific Quality Dividend ETF (NYSE: OASI).

Some of these ETFs (WisdomTree) have familiar names such as Samsung Electronics, Taiwan Semiconductor and China Mobile in them. While others have more of an emphasis on bank and utility stocks. My personal preference would be to go with the ones that have the growth names in them in hopes of capturing a rising dividend stream.

Of course, the final option is to simply buy some of the high-dividend paying stocks such as China Mobile (NYSE: CHL), which listed on the New York Stock Exchange back on October 22, 1997. This stock used to be a high-flyer because of the rapid growth it enjoyed. But now the Chinese phone market is saturated and its stock performs like any other utility.

The company had a payout ratio of 48% in 2017. China Mobile had a final dividend payment of $0.20 per share for the year ended 31 December 2017. Together with the interim dividend payment of $0.21 per share, and a special dividend payment of $0.41 per share to celebrate the 20th anniversary of its IPO, the total dividend payment for the 2017 financial year amounted to $0.82 per share.

Its current yield is 4.66%, although that has been offset by that U.S. fund selling (trade war fears) that has sent the stock down almost 13% year-to-date. So if you’re going to buy the stock, do it piecemeal because the trade war winds are still blowing.

But once again, my preference would be to buy a broad-based fund or ETF that has a number of dividend-paying companies in the portfolio.

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Market Preview: Earnings Season Enters Late Innings, But AAPL Still to Bat

For the week of July 30:

After the largest one-day loss of capital by a single stock in history last week with Facebook (FB), investors will be understandably nervous going into the end of earnings season. Monday morning will kick-off with a mix of industrials and tech as Caterpillar (CAT), Seagate (STX) and KLA Tencor (KLAC) report earnings. Analysts are expecting continuing strong numbers from CAT based on continued economic strength and rising commodity prices. Though doing well on the year, Seagate fell sharply after last quarter’s earnings. Investors will be looking for any news on a move to solid state technology many believe the company must make.

The GDP number Friday was strong, coming in at 4.1% growth, but that was not enough to keep the market in positive territory as the weekend approached. Consensus is the large number was due to an avoidance of impending trade tariffs, ant that first-half growth has stolen from second-half numbers. Monday the economic calendar brings a continuation of housing data as Pending Home Sales numbers are released. Those numbers will be followed closely by the Dallas Fed Manufacturing Survey.

Tuesday, the last day of July, we’ll get early numbers from Proctor and Gamble (PG) and Pfizer (PFE) in the morning. Facing “reduced competitor pricing” P&G tanked after earnings last quarter. The stock has regained that loss, but still sits well below where it was at the beginning of 2018.  Pfizer announced a major reorg earlier in the month. Investors will be looking for more color on how this will impact the company moving forward.

Early earnings numbers, as well as the Case-Shiller Home Price Index and Consumer Confidence reports will drive pre-lunch trading. But, by mid-day the market’s attention will turn to earnings from Apple (AAPL), which are due after the close. This is the least interesting quarter annually for Apple, with holiday sales behind it and next year’s lineup yet to hit stores. But, with the impact of the Facebook numbers fresh in their minds, investors may not be willing to hold AAPL shares up going into the close on Tuesday.

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