Monthly Archives: March 2019

Dividends

The 32% Dividend Buffett Would Love to Buy (But Can’t)

Don’t be fooled: imitating the picks of famous stock pickers is a road to retirement ruin.

I get it: gurus like Warren Buffett, Dan Loeb and Ken Fisher are the cream of the crop.

Too bad the big cash wads these guys toss around limit them to the lamest dividend investments. And you can bet almost all of them are missing out on one stock that’s paying a lucky group of investors an incredible 32% dividend!

Let’s dive straight into why following the pros’ lead is a big mistake. Then I’ll give you three ridiculously cheap stocks to grab for massive dividends—before their prices take off into the stratosphere.

And yes, I’ll unmask that amazing 32% payer along the way, and show you how you can grab a piece of that action yourself.

No Place for Dividend Investors

The first problem with mimicking celebrity hotshots? They’re almost always hunting for quick hits—jumping on a hot sector or stock dialed in for a fast gain. Notice I said gain: the big fish put a stock-price surge at the top of their list.

Dividend cash? An afterthought. Check out the pathetic payouts on the 10 stocks that made up their top holdings in the fourth quarter:

Big Names, Lousy Payouts

Source: MarketWatch.com

Two things jump out here:

  1. They’re all tech plays, with the exception of JPM, and …
  2. Six pay no dividend at all. The remainder dribble out a pathetic 1.8%, on average.

Buying High, Selling Low

So we can forget about looking to the pros for income. Now let’s look at gains, because here’s something most people don’t know: by the time we get our hands on the hotshots’ latest picks, they’re way out of date.

That’s because no one gets a peek at them till 45 days after the end of the quarter in which they were bought. Those are the rules governing Form 13F, through which institutional investors must report their holdings to the SEC.

This would have been a big problem if you jumped into the top managers’ favorite tech stocks around the middle of February, when the latest 13Fs came out. By then, the tech sector had already booked 75% of its year-to-date gain!

45 Days Late … and Thousands of Dollars Short

But this doesn’t mean we should ditch tech entirely. Truth is, these companies are sitting on some of the world’s biggest cash piles. Those will only grow as they let loose earth-shattering megatrends like artificial intelligence.

And even though tech and finance have soared, both sectors are home to three bargain buys throwing off massive dividends, too (including the 32% payout I mentioned off the top—we’re almost there)!

Let’s jump in.

High-Dividend Play No. 1:  A 7% Payout From … Google!?

Remember that chart of the hedge funds’ most popular stocks I showed you earlier? I’ll save you from scrolling up. Six names on the list are Amazon.com, Microsoft, Apple, Alphabet, Facebook and PayPal.

Now look at the top-10 holdings of a closed-end fund (CEF) called the Nuveen NASDAQ 100 Dynamic Overwrite Fund (QQQX), payer of an outsized 6.9% dividend as I write. They’re all there:


Source: Nuveen.com

If you’re a member of Contrarian Income Report, you might remember QQQX: we held it from January 2017 till April 2018—just 15 months—and rode it to a hefty 42% total return in that time.

Today this fund is a terrific alternative to big-name (but low-paying) tech stocks. To generate that big payout (and smooth out volatility), QQQX sells call options on 35% to 75% of its portfolio.

Here’s the best part: the fund trades at a 0.76% premium to its net asset value (NAV, or the underlying value of its portfolio) today. I don’t normally recommend CEFs priced above NAV, but this premium is a discount in disguise: it’s averaged 4.7% in the past year and has shot as high as 18.1% in that time.

That’s right: investors will pay up to $1.18 for every buck of QQQX’s assets! The upside and income waiting for us here are obvious.

High-Dividend Play No. 2: “Swap Out” JPM for This 8% Dividend

Now we’re going to trade our miserly “regular” finance stocks for another CEF: the Cohen & Steers Limited Duration Preferred & Income Fund (LDP).

LDP owns bank stocks, but not “regular” bank stocks. Instead, it holds banks’ “preferred stocks,” which throw off waymore dividend cash.

So by spending about a minute in your online brokerage account, you can exchange the regular shares of banks like JP Morgan for LDP and start tapping the fund’s 7.8% dividend (paid monthly, no less).

LDP’s 3.6% discount to NAV makes it fourth-cheapest among its 16 preferred-stock-CEF cousins today. That hedges our downside as we enjoy LDP’s massive payout and tees up further gains as the discount swings to par—inevitable, in my view, in the next 12 months.

Now let’s finally talk about …

High-Dividend Play No. 3: Tech’s Hidden 32% Dividend

Now let’s swing back to tech, and my favorite way to squeeze miserly big-caps for big payouts (up to 32%!): buy their landlords. The best way to do that is with a real estate investment trust (REIT) called Digital Realty Trust (DLR).

DLR owns 198 data centers (storehouses of computer gear every company must have) and boasts a client list that’s a who’s-who of tech. Heck, even JPM shows up here, so you’re getting a slice of the rent from our gurus’ top finance play, too:


Source: Digital Realty Trust February 2019 investor presentation

You’re probably wondering how a stock with a current yield of 4% could ever give you an outsized 32% in cash every year. To answer that, we need to look at the real story here: dividend growth.

DLR’s dividend skyrocketed 591% since its IPO 14 years ago. In other words, if you’d bought then, you’d be getting an amazing (and safe) 32% yield on your original buy today!

How can I say this dividend is safe?

The first reason is history: unlike many tech and finance stocks, DLR has never cut its payout—and kept right on hiking through the financial crisis:

A Battle-Tested Payout

I expect the chart for the next 14 years to look like the chart for the last 14, so, like the folks who bought in 2004, you’re looking at a massive double-digit payout if you buy now and hang on for the long haul.

That brings me to the second reason I love this payout: it’s backed by strong funds from operations (FFO; the go-to cash-flow metric for REITs), with core FFO jumping 7.5% in the fourth quarter. Add in the fact that the payout eats up a modest (for a REIT) 65% of FFO and you get a recipe for more hikes.

The kicker? DLR is cheap, trading at 17.4-times FFO! Don’t wait to grab this one.

Source: Contrarian Outlook

Pot Stocks

Tilray Stock Mania Holds Its Breath as Earnings Approach

The social stigma against marijuana continues to slowly dissipate.

Tilray Stock Mania Holds Its Breath as Earnings Approach

Source: Shutterstock

A construction worker’s pick-up truck passed me twice during a recent walk, apparently looking for a job site, the smell of marijuana smoke redolent in the air. It’s still illegal to smoke in Georgia, but that doesn’t mean the illegal market isn’t operating …

But what about the legal market?

Stock in Tilray (NASDAQ:TLRY), the Canadian pot company, now sits finely poised between earnings due on today after the bell and a shortage of stock to short.

Tilray stock is expected to lose 12 cents per share on revenue of $14.15 million. (Earnings Whispers puts the numbers for earnings and revenue at -15 cents and $17.69mm, respectively.) But that may be less important to speculators than Tilray’s efforts to create credibility with the marijuana and general investor communities.

Consider the following: Tilray has appointed Andrew Pucher, a former managing director at Goldman Sachs (NYSE:GS), as chief corporate development officer.

Pucher joins a team that now includes former executives from Nestle (OTCMKTS:NSRGY), Diageo (NYSE:DEO), Coca-Cola (NYSE:KO) and Starbucks (NASDAQ:SBUX). Further, Tilray has a partnership with Novartis (NYSE:NVS), a joint venture with Anheuser-Busch InBev(NYSE:BUD) and a production agreement with the privately-held Authentic Brands Group.

Finally, Tilray last week announced a deal to buy Manitoba Harvest from Compass Group(NYSE:CODI) for about $315 million.

With all this corporate star power and deal-making, you would think Tilray would be a major pot producer.

What About the Product?

What product?

Tilray sold no marijuana during the first two weeks after Canada legalized it in October. CEO Brendan Kennedy insisted that this will have changed by this quarter, while simultaneously announcing he bought producer Natura Naturals for $26.3 million. If all this is leaving you skeptical about the company, you’re not alone …

Tilray short interest recently stood at 4 million shares, 24.62% of the company’s float, and there’s no more available to borrow. That’s why shares of a company that may report revenue of $17 million trade at a market capitalization of almost $7 billion.

The other is that most of the shares don’t trade, with over 78% held by “individual stakeholders.” There are 79 million shares outstanding.

The Marijuana Market

Speculators are betting that over the next few years, many more U.S. states will legalize marijuana sales and are looking to legislators for guidance.

New Jersey is the latest with a bill to allow recreational sales. Meanwhile, Massachusetts is getting a network of pot shops, debate has begun in Connecticut and New York Governor Andrew Cuomo is pushing the issue.

But despite the examples of Colorado and Washington, the path to legal pot is still not a straight line.

Minnesota Republicans recently rejected a legalization effort, prospects are dimming in New Mexico and New York’s move is being held up by black legislators who want specific provisionsfor their communities to benefit.

As a result, most moves lately have been toward legalizing medical marijuana, with doctors’ prescriptions and extensive regulation. Florida is moving in that direction. So is Oklahoma.

All that said, marijuana remains an illegal drug under U.S. law.

People are still being put in jail for marijuana offenses and Tesla (NASDAQ:TSLA) CEO Elon Musk may lose his SpaceX security clearance after being shown on video smoking pot on a podcast.

Bottom Line on Tilray Stock

Despite the success of Colorado, where marijuana sales are now growing at only single-digit rates in the fifth year of legalization, the product remains controversial.

Tilray and its competitors are preparing for an opportunity that may not come to them for years. Meanwhile, marijuana stocks have been bid well beyond fundamentals. A lot of people are cashing big paychecks, and the dream of a well-regulated American pot market remains hazy.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.comor follow him on Twitter at @danablankenhorn. As of this writing, he owned no shares in companies mentioned in this article.

Source: Investor Place

Dividends

10 Highest Yield Dividend Stocks Going Ex-Div This Week

Stock SymbolEx-Div DatePay DateDiv PayoutYield
APF03/22/1903/28/190.0221.34%
APF03/22/1903/28/191.9121.34%
OXLC03/21/1903/29/190.1416.28%
VGR03/18/1903/28/190.414.48%
CPTA03/20/1903/28/190.0812.64%
TCRD03/19/1903/29/190.2112.50%
GARS03/21/1903/29/190.2312.20%
HIE03/21/1903/29/190.1212.17%
ACP03/20/1903/29/190.1212.00%
DX03/21/1904/01/190.0611.96%

Data current as of market close 03/14/19.It is stocks like these that make up the high-yield portfolio (current average is over 8%) used in the Monthly Dividend Paycheck Calendar, a wealth creation system used by thousands of dividend investors enjoying a steady, reliable income.

The Monthly Dividend Paycheck Calendar is set up to make sure you receive a minimum of 5 paychecks per month and in some months 8, 9, even 12 paychecks per month from stable, reliable stocks with high yields.

Dividends

3 High-Yield REITs for Conservative Investors

It has been a challenging start to 2019 for real estate investment trust (REIT) investors. At the start of the year, the REIT indexes zoomed higher. The last few weeks have investors wonder if the party is already over for the year.

The financial media is placing blame in many places including trade wars, slowing growth and interest rate uncertainty. Many believe interest rates on the long end of the yield curve could rise with the growing Federal deficit. Which if true does not give confidence in REIT values. Fortunately, history shows that the belief that rising interest rates are bad for REITs value is a false assumption.

The current doldrums for the REIT sector may likely end up as a great buying opportunity for future gains.

Both Forbes and the NAREIT website note that historically, REITs have generated returns greater than the S&P 500 during periods of rising rates. How can this happen? As income investments, investors tend to lump REITs in with fixed income investments, i.e. bonds.

When interest rates go up, mathematically bond prices must fall producing negative returns for bond investors. REIT shares are ownership stakes in businesses. Rising interest rates are usually the result of economic growth.

For the REIT sector, an improving economy typically means rising commercial property values and the potential to increase rental rates. A significant portion of the REIT sector sees significantly greater benefits from economic growth than they experience from higher interest expense.

These factors are especially true in the current market. Companies have had several years to prepare for higher rates. This means that well managed REITs have locked in low interest rates with long-term fixed rate debt. These REITs should be able to improve profit margins by boosting lease rates, even as they keep interest expenses low.

There are REITs to avoid. Stay away from any companies that have variable rate borrowing costs. These will see profits squeezed by rising rates.

Avoid REITs that do not have histories of dividend growth. Part of staying ahead of rising rates is to own those REITs that can grow dividends faster than the increases in interest rates and inflation. With the recent retrenchment in REIT values, you can find shares with very attractive yields.

The next step is to ferret out companies that will grow dividends at greater than the rate of inflation. Here are three to get started with.

MGM Growth Properties LLC (NYSE: MGP) is a REIT that was spun-off by MGM Resorts International (NYSE: MGM) in April 2016. In the IPO MGP received ownership to a larger portion of the MGM owned real estate, primarily casino hotel resorts.

The properties are leased back to MGM Resorts on a long-term master net lease. Lease terms are very favorable for MGM Growth Properties. The master lease means that MGM makes a single lease payment and cannot get out of paying for individual properties. All new acquisitions from MGM are added to the master lease. The lease includes annual rent escalators and profit sharing from the portfolio resorts.

The MGP dividend has been increased five times since the IPO and is forecast to grow by 8% in 2019. As the name states, this is a growth focused REIT. They have made offers on Las Vegas properties not owned by MGM.

The stock currently yields 6.0%.

Hotels are a commercial real estate sector that benefit from economic growth and can quickly pass along higher costs as higher room rates.

Summit Hotel Properties, Inc. (NYSE: INN)recently announced very good 2018 results, with expectations of continued growth in 2019. Revenue per Available Room (RevPAR) is the metric to watch with hotel companies.

After two years of flat RevPAR, the metric took started to improve in 2018. Continued profit growth should lead to a 5% to 6% dividend increase this year. The current dividend rate is just 50% of FFO per share.

The continued positive economic outlook should allow INN to grow dividends in the high single digit range.

The stock yields 6.3%.

Kite Realty Group Trust (NYSE: KRG)neighborhood and community shopping centers in selected markets. These shopping centers are different from the malls and are integral to the function of the communities where they are located.

These properties are anchored by internet-resistant tenants like restaurants, grocers, entertainment, and specialty stores. Kite Realty has been a steady 5% per year dividend growth REIT. This will not change even if the investing public gets negative on anything that looks like a mall REIT.

In the retail sector there are great differences between different companies and the types of properties they own. Kite Realty is an undervalued, stable dividend growth REIT.

The current 8.4% yield makes KRG shares very attractive.

Technology

What’s Propelling the Amazon Stock Price Toward $2,000

All across the U.S. these days, retail stores are very much like the Walking Dead.

Ironically, on paper at least, this would seem to be an ideal time to operate a retail store.

After all, we are in the best jobs market we’ve seen in more than 40 years, and the economy remains in great shape. Virtually across the board, high-tech firms have been reporting stellar fourth quarter results.

Retailers, not so much…

But even chain-store firms who managed to beat Wall Street’s forecasts can’t seem to defy the steady shift in power to the web and well-run e-commerce portals.

Consider that the Foot Locker Inc. (NYSE: FL) recently reported its growth more than doubled expectations in its most recent quarter. And yet, just days ago, the sports chain said it will shutter 165 stores.

That was part of a series of store closings that totaled 465 in just 48 hours.5

With that in mind, today I’m going to reiterate a stock I have recommended many times as one that will benefit from the shift from brick-and-mortar retail to e-commerce.

And of course, it’s a firm with market-crushing gains…

Check it out…

Shopping Carnage

The carnage in the shopping landscape actually shows no signs of slowing down. We can see that by the firms that have announced store closings. Besides the Foot Locker, there are:

  1. The Gap Inc. (NYSE: GPS) is closing 230 stores after reporting that during the Christmas holiday, quarter same-store sales fell 7%.
  2. Victoria’s Secret, which is privately held, said same-store sales fell during the holidays by 3%. It’s closing 53 stores this year.
  3. J.C. Penny Co. Inc. (NYSE: JCP) said it is closing 18 of its 850 stores. But analysts expect more closures in the near future.

And let’s not forget that a company that was once the top retailer of its day recently filed for bankruptcy protection from its creditors.

Sears was America’s original “everything” store. Between its actual physical locations and its massive catalogue operations, it offered consumers the opportunity to buy hundreds of goods, covering everything from clothes to tires to furniture.

But like many other retailers, Sears simply failed to keep up with the times. Today’s consumers can buy just about anything they need in a matter of minutes online from the convenience of their computers or mobile devices.

Indeed, data compiled by Statista shows e-commerce continues to ramp up sales with a high compound growth rate.

Total sales for the sector are expected to hit $735.4 billion by 2023. That’s a 64.5% increase from the $446.8 billion level set in the base year of 2017.

Changing the Game

Amid all this chaos, one firm stands out as the preeminent e-commerce firm in the world today. It’s making so much money online that it can now afford to challenge physical retailers at their own game.

When you look on how massive and profitable Amazon.com Inc. (Nasdaq: AMZN) has become, it’s hard to believe that it started off in 1994 with a simple mission of selling physical books over the Web.

Today, the firm continues to deliver growth rates that make regular retailers green with envy. In fact, I think the Amazon stock price could soon reach $2,000 per share.

Consider that at the start of the current decade, Amazon had $34 billion in sales. By next year, that figure should surpass $325 billion. That’s nearly 1,000% growth.

I’ve been watching this firm for years, and was one of the first people to tell you that the share price would handily pass the $1,000 mark. That finally happened in 2017, and now in the early days of 2019, the $2,000 mark is fast coming into focus.

What Doesn’t Amazon Sell?

Of course, Amazon is still a massive bookseller, but now it sells so much more.

We could spend a lot of time talking about all of various kinds of things you can buy through Amazon. It’s likely easier to think of what Amazon doesn’t sell.

Of course, the real secret to Amazon’s success is not based on the stocking and shipping of hard goods. Instead, it’s an uncanny use of technology that touches on everything the firm does.

Take cloud computing as an example. Amazon began to realize that it had built such an impressive global computing platform that it could save massive sums by running its business on its own massive cloud platform.

Soon enough, Amazon began selling its cloud-based web services to others, and that’s now a business that will be bringing in $71 billion in revenue by 2022, according to banking firm Jefferies & Co.

AI Will Help Propel the Amazon Stock Price to $2,000

Amazon has also deeply embraced artificial intelligence (AI). Today, AI brings a lot of smarts to Amazon’s Alexa assistant. And Amazon has big plans to extend AI throughout every one of its business units.

All of these growth areas have enabled Amazon to generate so much cash that it can afford to buy its way into whole new lines of business.

The firm made a high profile 2017 purchase of healthy grocer Whole Foods for $13.7 billion. Now, it’s using the know-how it picked up to make an even deeper push into the grocery market through a chain of stores separate from Whole Foods, according to the Wall Street Journal.

When you consider that Amazon knows how to make a profit where others fail, I have no doubt that the move into groceries will become highly lucrative for Amazon – and its investors.

Simply put, Amazon has the Midas touch. It becomes dominant in every new category it enters. That’s by design, not accident. Amazon only enters into a new category when it knows it has the resources and skills to succeed – on a massive scale.

It’s of no use to examine where this stock has been. You only need to know that its tried-and-true business savvy will help it succeed with each new market it enters.

That’s why this is truly a stock to hold for the long haul, as Amazon adds more growth from its hybrid sales approach.

Source: Money Morning

Technology

3 Tech Stocks to Sell in March

Source: Shutterstock

Most tech stocks have staged impressive comebacks so far in 2019. However, in the next few weeks, we might witness a battle between investors and traders, where there will be considerable profit-taking in several of Wall Street’s tech darlings, including Netflix (NASDAQ:NFLX), PayPal(NASDAQ:PYPL) and Snap (NASDAQ:SNAP).

Like most tech stocks, NFLX, PYPL and SNAP are high momentum stocks. In other words, when the broader markets go up or when the company’s earnings beat expectations, both investors and momentum traders tend to hit the ‘buy’ button fast, expecting superior gains within days or weeks.

However, if markets suffer a decline or if the company cannot keep up with the rising expectations, investors’ risk appetite decreases fast and these stocks can fall much harder than less volatile stocks.

I am expecting some stock price weakness in the near-term in all these three stocks. If you already own any of the Netflix, PayPal or Snap stock, you might want to hold your position. However, within the parameters of your portfolio allocation and risk/return profile, you may consider placing a stop loss at about 5-7% below the current price point. Expect nearer-term trading in these stocks to sell to be choppy at best.

If you are an experienced investor in the options market, you may want to protect your portfolio with a covered call or possibly a put option spread with a 3-month time horizon. If you do not yet hold any of these stocks, you may want to wait several weeks to buy into the shares at the next dip.

With all of that in mind, here’s a deeper look into why these tech stocks might join many other “stocks to sell” lists in the upcoming days.

Netflix (NFLX)

Many investors have put Netflix in their sights as a possible stock to sell soon, as various headwinds have hammered down the positive sentiment surrounding its longer-term outlook.

Specifically, the price of NFLX stock went from an intraday low of $233.68 on Dec. 24 to an intraday high of $371.49 on Feb. 25. Netflix’s quarterly release on Jan. 17 showed that the company beat earnings with earnings-per-share of 30 cents per share. Although its overall numbers were strong, the company cut revenue projections for 2019.

Over the past decade, the company has increased annual revenues from $1.6 billion in 2009 to $15.8 billion in 2018.

With a trailing price-to-earnings ratio of 137, Netflix is a growth stock as well as a speculative stock. Analysts value NFLX stock on the expectation of continued high revenue growth that would lead to future profits. But whenever Wall Street fears the company is failing to meet growth or profit expectations, NFLX stock gets penalized. Hard.

Currently, the most critical metric investors pay attention to is Netflix’s subscriber growth. This number needs to remain strong every quarter to justify the high valuation. For the first quarter of 2019, NFLX is expecting to add 8.9 million paying subscribers.

However, new competitors, including Disney (NYSE:DIS), Amazon (NASDAQ:AMZN) and AT&T(NYSE:T), are increasingly entering the content distribution space. Before too long, the market might become oversaturated.

The upcoming competition from Disney is particularly daunting. Its new streaming service Disney+ will launch by the end of the year and include original movies and TV shows from Disney’s brands, including Marvel and Pixar. The platform is expected to concentrate largely on offering content for families. In preparation for this service, Disney is expected to pull its movies off Netflix. Both companies know that content is king.

Netflix’s current focus is on original content development as well as international expansion. Original content production is a costly business, as it requires the company to part with upfront cash and thus it contributes to Netflix’s negative cash flows. Therefore, as Netflix has to constantly borrow to keep on growing, it faces demanding pressure to ensure that it meets its growth targets. Otherwise, it cannot pay its debts easily.

If NFLX cannot keep up with the aggressive growth assumptions or increase its prices, especially in international markets, then its margins and the stock price would suffer. As these competitors make their mark in the marketplace in 2019, investors may decide to have a wait-and-see attitude, pressuring the recent price gains.

Disney’s ESPN+ platform — the DTC sports entertainment video service — already has over 2 million subscribers. On Apr. 11, Disney will hold an investor day when it will provide a first look at Disney+ and its original content. Meanwhile, on Mar. 25, Apple will also hold an event, where the company is expected to announce its new TV service to rival Netflix. Around both dates, I am expecting volatility in NFLX stock.

Shorter-Term Technical Analysis: Year-to-date, the NFLX stock price is up over 33%. Shorter-term momentum indicators, which describe the speed at which prices move over a given period, have become extremely overbought as a result.

Although these indicators can stay overbought for quite a long time, it would not be not surprising to see some profit-taking following the earnings report.

In other words, the excessive uptrend we have witnessed over the past month, cannot possibly be sustained. The level I’d be watching is $335. If Netflix stock approaches this level, I’d take it as an early warning that price risk is likely to increase.

If you believe in the fundamental bull case for Netflix stock, you might consider waiting for a better time to go long, such as around the low-$300’s or even upper $280’s.

For now, NFLX remains one of the top tech stocks investors are likely to sell in the upcoming weeks.

PayPal (PYPL)

Global online payments company Paypal is also one of the tech stocks that will likely be joining investors’ stocks to sell lists soon.

The price of PYPL stock went from an intraday low of $76.7 on Dec. 24 to an intraday high of $99.45 on Mar. 1.

As fintech competition is heating up, this pioneering company in the digital payments sector still dominates the first-person payments sphere. It has 267 million customer accounts, 21 million of which are merchant accounts. Unlike Netflix, PayPal is a cash generating machine.

When PayPal reported earnings on Jan. 30, it met revenue expectations for the quarter which rose 13% to $4.23 billion. Its adjusted earnings came at 69 cents per share, up 26% from a year ago. The growth in total transaction volumes and in the number of active users was behind the impressive numbers. However, its revenue forecast for 2019 was about 1% below analyst’s estimates and thus, PYPL stock went down the next day.

As a digital wallet, PayPal’s profitable business model depends on processing personal and merchant customer transactions on its global suite of payments platforms. In 2013, when PayPal acquired Braintree, which specializes in payment systems for e-commerce ventures, it also became the owner of Venmo, a peer-to-peer (P2P) mobile payment app. Sending money electronically peer-to-peer with a few taps has taken off among U.S. consumers.

In this market, which is expected to grow by double-digits in the next few years, Venmo has almost 25 million users and is ahead of its closest competitors. According to the latest quarterly report, Venmo processed approximately $19 billion of total payment volume, up 80% year-over-year. Through Venmo, PayPal is reaching a younger customer base.

However, PYPL stock may fundamentally suffer in the coming months if negative global economic and political conditions dominate the headlines. In January, the International Monetary Fund (IMF) warned of a global economic decline as China — the world’s second-biggest economy — has been slowing down considerably.

Likewise, German markets have been particularly worried about the stall in the Chinese economy, as Germany exports heavily to China.

Furthermore, if we do not have a resolution to the U.S.-China trade war in early 2019, the markets may throw in the towel in frustration and another selloff might begin.

Finally, on Mar. 29, the United Kingdom is set to leave the European Union. The U.K. now finds itself without a clear path forward on Brexit. The U.K. and European financial markets are increasingly edgy about the outcome we may have on that day.

In other words, risks for the financial markets are skewed to the downside and in case of a global slowdown, the demand from PayPal customers may soften, denting the price of PYPL stock.

Shorter-Term Technical Analysis: YTD, the PayPal stock price is up over 15%. As in the case of the Netflix technical chart, shorter-term momentum indicators are overbought, signaling potential profit-taking in the shorter term.

In the next few weeks, I do not expect any substantial positive momentum to push the PYPL stock price over the psychologically significant $100 level. Even if it goes over $100, it is not likely to stay up for long.

The two levels I’d be watching are first $95 and then $85. If PayPal approaches $85, then there is likely to be further selling.

If you believe in the fundamental bull case for PayPal stock, you might consider waiting for a better time to go long, such as around the low-$80’s or even upper $70’s.

Snap (SNAP)

Snap Inc joins this list of tech stocks to sell in March as it is also demonstrating signs of near-term volatility. But the possible pain in SNAP stock can be attributed to reasons other than those that affect NFLX and PYPL.

The price of SNAP stock went from an intraday low of $4.82 on Dec. 21 to an intraday high of $10.29 on Feb. 25.

Since its Initial Public Offering in March 2017, SNAP investors have not had much reason to be pleased with the performance of SNAP stock. After an IPO price $17, and a subsequent high of almost $30, it has not rewarded its early shareholders.

However, when SNAP reported earnings Feb. 5, investors welcomed the revenue increase of 36%. Meanwhile, it posted a loss of 4 cents per share, vs. an expected loss of 7 cents a share; its net loss also improved by $158 million to a loss of $192 million. The next day, the price of SNAP was up over 30%.

Now, analysts seem divided as to what is next for the company from a fundamental standpoint. Will it be able to continue its positive growth trend and increase its user numbers? Or will it once again disappoint investors who fear that SNAP does not have a viable business model where it can monetize the app’s popularity?

In other words, Wall Street is currently debating whether every “cool” app will become a successful publicly traded company.

I believe it will take at least a few more quarterly reports to fully appreciate the fundamental story of Snap. But until we have a better picture of the execution of management in 2019, I expect SNAP stock to be volatile.

Shorter-Term Technical Analysis: YTD the price of SNAP stock is up over 80%. In the next few weeks, I do not expect any substantial positive momentum to push the stock price over the psychologically significant $10 level once again. Even if it goes over $10, it is not likely to stay up for long.

If you believe in the fundamental bull case for Snap stock, you might consider waiting for a better time to go long, such as between $7-$8.

As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.

Source: Investor Place

Dividends

Sell These 3 High-Yield Dividend Stocks

With my Dividend Hunter service, I provide a list of high-yield investments that I have deeply researched, and my analysis shows provide an attractive combination of current yield and dividend stability.

As a high-yield stock expert, I often get asked questions about other stocks or investments that are not on my recommendations list. Sometimes a question will show me a new, attractive income investment. Others are learning opportunities on what not to do when picking high-yield investments.

One investment category that generates a lot of questions is closed-end funds (CEFs).

A closed-end fund is an investment pool with shares that trade on the stock exchange. Investors are drawn to CEFs because many have double digit yields and most paid monthly dividends.

Related: Sell These 3 Dividend Stocks About to Cut Dividends

Unfortunately, with most closed-end funds there are usually more negatives than positives when evaluating one for investment potential. Here are a few of the problems you could see.

  • Opaque communications from management on how a CEF is managed. There are not a lot of reporting requirements and any information you find on a fund’s portfolio may be months old. I sometimes refer to the CEF universe as the swamp of managed investment products.
  • CEF shares can trade at a discount or premium to the net asset value (NAV). Fund sponsors do not redeem shares, so the only place to buy or sell is on the stock exchange. If you buy a fund trading at a premium, you are paying more than a dollar for a dollar’s worth of assets. Not a good deal. A CEF trading at a deep discount can be a danger sign that the management has been making some bad investments.
  • Dividends classified as return-of-capital (ROC) are a big danger sign. Technically, return-of-capital are dividends/distributions that are not from earned income such as dividends or interest. While there are types and circumstances where ROC is not destructive to a fund’s NAV, unless you know for sure where the ROC comes from, it’s a danger signal to a CEF’s long term viability.

To recap, the problem with many CEFs is that they are hard to analyze with several factors that on their face are dangerous to your long term investment success. With over 700 publicly traded CEF’s, it is too much work to dig a handful of good ones out of the majority of swamp muck. Here are three high yield CEF’s to dump now if you own them.

Cornerstone Strategic Value (NYSE: CLM) is a CEF with $570 million in assets that owns a portfolio of global equity (stocks) securities.

CLM currently yields over 20%. There are two big danger signals for this fund. First, it is trading at an 11% premium to NAV. The high yield has caused unwitting investors to bid up the share price to 11% above what they would be worth if the fund is liquidated.

The current monthly dividend is 20.53 cents per share. Out of that just one cent is earned income and two cents are capital gains. The remaining 19.3 cents per share is classified as ROC. Historically, most of the dividends have been ROC, which is reflected in the steadily deteriorating NAV.

As typically happens, Cornerstone Total Return (NYSE: CRF) is a similar fund managed by the same advisory firm with the same problems.

This fund is trading at a 12.5% premium to NAV. That is very rich pricing in the CEF world.

The distributions breakdown also is like CLM. The current 19.85 cents month dividend has been paid for since the start of 2019. Each month 18.7 cents of the payout have been classified as return of capital.

Ignore the 20% yield and avoid or sell CRF.

Eagle Point Credit Company LLC (NYSE: ECC)yields 14%. Due to recent large drops in the NAV, the shares trade at an eye-watering 23% premium to NAV.

Out of the 20 cents per share monthly dividends, 7 cents have recently been classified as ROC. Put another way, ECC is earning just 65% of the dividend it’s paying to shareholders.

Here’s the scariest part, the fund’s investment strategy: We seek to achieve our investment objectives by investing primarily in equity and junior debt tranches of CLOs. In plain English, they own the junkiest of the junk in the high-yield debt world.

Uncategorized

7 Growth Stocks Racing to All-Time Highs

Source: Shutterstock

After a brutal late 2018 selloff, financial markets have been on a healthy and stable recovery path thus far in 2019. Through the first three months of the year, the S&P 500 is up 12%, marking one of its best starts to a calendar year in recent memory.

As broader financial markets have stabilized, growth stocks have come back into favor. Indeed, one could say that they’ve done much more than come back into favor. Many of them have rushed to fresh all-time highs in 2019, and that’s after big corrections in late 2018. That means that a handful of these growth stocks have staged huge rallies over the past three months.

Which stocks fit into this category? And can these big rallies last?

These are questions investors should be asking as we head into what projects to be a more volatile time for financial markets throughout the balance of 2019. As such, let’s take a look at seven growth stocks which have raced to all-time highs in early 2019, and analyze whether or not their big rallies can continue.

 iRobot (IRBT)

Why It’s at All-Time Highs: Shares of consumer robotics giant iRobot (NASDAQ:IRBT)have run up to all-time highs prices on the back of a strong double-beat-and-raise fourth-quarter earnings report that emphasized a few positive trends, including continued robust robotic vacuum market expansion, strong margin growth and a mitigated tariff impact.

Where It’s Going Next: The long-term IRBT growth narrative is positive. This company is morphing into a consumer robotics leader with minimal competition, and as such, will be a big revenue and profit grower for a lot longer as the consumer robotics space expands. Such big revenue and profit growth will keep IRBT stock on a long-term winning trajectory. But, in the near term, the valuation seems stretched at nearly 40x forward earnings. This stock needs to trade sideways for the foreseeable future to allow the fundamentals to catch up.

Shopify (SHOP)

Why It’s At All-Time Highs: Shares of e-commerce solutions provider Shopify (NYSE:SHOP) have notched new all-time highs thanks to renewed macroeconomic confidence and a strong Q4 earnings report in which growth hardly slowed and margins continued to move higher.

Where It’s Going Next: In the big picture, Shopify stock is powered by a secular growth narrative that goes something like this: the world is becoming increasingly decentralized thanks to technology democratizing creation and distribution processes. Shopify is enabling and empower this decentralization in the retail world. As this decentralization trend continues to play out over the next several years, Shopify’s merchant base will grow by leaps and bounds. Revenues will roar higher. Profits will, too. So will SHOP stock. As such, the long-term narrative here is very bullish — bullish enough to make this a long-term buy-and-hold stock.

Cronos (CRON)

Why It’s At All-Time Highs: Shares of Canadian cannabis company Cronos (NASDAQ:CRON) have more than doubled in 2019 and run to fresh all-time highs on the back of a multi-billion dollar investment from tobacco giant Altria (NYSE:MO). Investors have interpreted this investment as a major vote of confidence from a well respected global tobacco giant, at a time when global cannabis market fundamentals are improving. Consequently, they have bid up CRON stock to new highs.

Where It’s Going Next: The cannabis market projects to be really, really big one day. With a multi-billion dollar investment from Altria in its back pocket, Cronos has the necessary financial resources, business know-how, and distribution networks to one day turn into a major player in this global market. It’s fair to say that the stock has gone too far, too fast, and needs to cool off. This is likely what will happen. But, after that cooling off period, CRON stock will resume its uptrend, because the long-term fundamentals here of Cronos turning into a global cannabis giant are quite promising.

Wayfair (W)

Why It’s At All-Time Highs: Shares of online home retailer Wayfair (NYSE:W) have surged over the past few weeks to all-time highs thanks to two things. One, confidence in the macroeconomic environments in the U.S. and Europe has dramatically improved. Two, Wayfair’s margins finally stabilized last quarter, and that stabilization coupled with continued robust domestic and international growth served as justification for what had been several quarters of big investment. Investors rallied around those numbers, and bid up W stock to new highs.

Where It’s Going Next: Wayfair is a big growth story. This company has differentiated itself as the leader in a secular growth online home retail market, and this market is very big. Management pegs it at $600 billion in the U.S. and Europe. Revenues were under $7 billion last year, and grew by over 40% year-over-year. Thus, there is lots of runway for Wayfair to remain a big growth company for a lot longer. Having said that, the valuation is a tough pill to swallow here, especially with profit margins still very weak. As such, I wouldn’t chase this rally. But, I would buy any big dips.

The Trade Desk (TTD)

Why It’s At All-Time Highs: Programmatic advertising leader The Trade Desk (NASDAQ:TTD) has exploded to all-time highs over the past few weeks thanks to a robust double-beat-and-raise fourth quarter earnings report which underscored that this company’s growth narrative is still accelerating, and that big growth is here to stay for a lot longer.

Where It’s Going Next: The Trade Desk is a secular growth company powered by still accelerating tailwinds in automation and advertising. Over time, all $1 trillion worth of global ads will be transacted programmatically. That means that Trade Desk, which had under $3 billion in gross spend last year, has a huge opportunity in front of it to grow gross ad spend towards $100 billion-plus. If management successfully executes on that opportunity, TTD stock will head significantly higher in a long term window.

Etsy (ETSY)

Why It’s At All-Time Highs: Shares of Etsy (NASDAQ:ETSY) have surged to all-time highs over the past few weeks thanks to robust holiday numbers which were strong across the board, including robust community, sales, margin, and profit growth. Investors cheered those results, and bid up ETSY stock to fresh highs.

Where It’s Going Next: Etsy is a big growth company with strong growth drivers in e-commerce. But, there’s lots of competition here, from Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY), and others. To be sure, Etsy has held off that competition, but that’s because Etsy dominates a niche of the market, meaning that growth won’t remain big forever. Eventually, it will tap out, and so will margins. That may happen sooner than most expect, and at over 60x forward earnings, a slowdown could be catastrophic for ETSY stock.

Chegg (CHGG)

Why It’s At All-Time Highs: Digital education platform Chegg (NASDAQ:CHGG) has roared to all-time highs on the back of a strong Q4 earnings report which included robust subscriber, revenue, and profit growth, as well as a healthy first quarter and fiscal 2019 guide.

Where It’s Going Next: CHGG stock will head higher from here. Why? Because the company is the unchallenged leader in the digital education market, and that market is far bigger than what the company is currently penetrating. At scale, Chegg will transform into a must-have digital education tool for all high school and college students. It is only a fraction of that today. As such, big growth is here stay for a lot longer. Such big growth is also accompanied by big margins. The combination of big growth and big margins will inevitably power CHGG stock higher in the long run.

Source: Investor Place

REITS

3 High-Yield REITs for Conservative Investors

It has been a challenging start to 2019 for real estate investment trust (REIT) investors. At the start of the year, the REIT indexes zoomed higher. The last few weeks have investors wonder if the party is already over for the year.

The financial media is placing blame in many places including trade wars, slowing growth and interest rate uncertainty. Many believe interest rates on the long end of the yield curve could rise with the growing Federal deficit. Which if true does not give confidence in REIT values. Fortunately, history shows that the belief that rising interest rates are bad for REITs value is a false assumption.

The current doldrums for the REIT sector may likely end up as a great buying opportunity for future gains.

Both Forbes and the NAREIT website note that historically, REITs have generated returns greater than the S&P 500 during periods of rising rates. How can this happen? As income investments, investors tend to lump REITs in with fixed income investments, i.e. bonds.

When interest rates go up, mathematically bond prices must fall producing negative returns for bond investors. REIT shares are ownership stakes in businesses. Rising interest rates are usually the result of economic growth.

For the REIT sector, an improving economy typically means rising commercial property values and the potential to increase rental rates. A significant portion of the REIT sector sees significantly greater benefits from economic growth than they experience from higher interest expense.

These factors are especially true in the current market. Companies have had several years to prepare for higher rates. This means that well managed REITs have locked in low interest rates with long-term fixed rate debt. These REITs should be able to improve profit margins by boosting lease rates, even as they keep interest expenses low.

There are REITs to avoid. Stay away from any companies that have variable rate borrowing costs. These will see profits squeezed by rising rates.

Avoid REITs that do not have histories of dividend growth. Part of staying ahead of rising rates is to own those REITs that can grow dividends faster than the increases in interest rates and inflation. With the recent retrenchment in REIT values, you can find shares with very attractive yields.

The next step is to ferret out companies that will grow dividends at greater than the rate of inflation. Here are three to get started with.

MGM Growth Properties LLC (NYSE: MGP) is a REIT that was spun-off by MGM Resorts International (NYSE: MGM) in April 2016. In the IPO MGP received ownership to a larger portion of the MGM owned real estate, primarily casino hotel resorts.

The properties are leased back to MGM Resorts on a long-term master net lease. Lease terms are very favorable for MGM Growth Properties. The master lease means that MGM makes a single lease payment and cannot get out of paying for individual properties. All new acquisitions from MGM are added to the master lease. The lease includes annual rent escalators and profit sharing from the portfolio resorts.

The MGP dividend has been increased five times since the IPO and is forecast to grow by 8% in 2019. As the name states, this is a growth focused REIT. They have made offers on Las Vegas properties not owned by MGM.

The stock currently yields 6.0%.

Hotels are a commercial real estate sector that benefit from economic growth and can quickly pass along higher costs as higher room rates.

Summit Hotel Properties, Inc. (NYSE: INN)recently announced very good 2018 results, with expectations of continued growth in 2019. Revenue per Available Room (RevPAR) is the metric to watch with hotel companies.

After two years of flat RevPAR, the metric took started to improve in 2018. Continued profit growth should lead to a 5% to 6% dividend increase this year. The current dividend rate is just 50% of FFO per share.

The continued positive economic outlook should allow INN to grow dividends in the high single digit range.

The stock yields 6.3%.

Kite Realty Group Trust (NYSE: KRG)neighborhood and community shopping centers in selected markets. These shopping centers are different from the malls and are integral to the function of the communities where they are located.

These properties are anchored by internet-resistant tenants like restaurants, grocers, entertainment, and specialty stores. Kite Realty has been a steady 5% per year dividend growth REIT. This will not change even if the investing public gets negative on anything that looks like a mall REIT.

In the retail sector there are great differences between different companies and the types of properties they own. Kite Realty is an undervalued, stable dividend growth REIT.

The current 8.4% yield makes KRG shares very attractive.

CEFs

Revealed: The One CEF-Picking Strategy I Use Every Day

Today I’m going to peer into my crystal ball and give you the scoop on where high-yield closed-end funds (CEFs)might be headed in 2019.

Then I’ll give you a proven way to zero in on the ones that are the best bargains for your portfolio now.

CEFs Come Out Flying

First, if you own stocks through CEFs (and if you don’t, click here to discover why these 7%+ payers are a retirement “must-have”), you’re already outrunning the market: my CEF Insider Equity Sub-Index—a great proxy for stock-owning CEFs—is up 13.7% since January 1, a nice lead on the S&P 500’s 12.3% gain.

Even better, CEFs are cruising upward without getting ahead of themselves—exactly what we want in a rock-solid income play. As you can see below, 85% of these funds are still cheap when you compare their market prices to their net asset values (NAVs, or the liquidation value of their portfolios):

CEFs Are Still Bargains …

Source: CEF Insider

Even better for those of us on the hunt for cheap, outsized dividends, well over half of CEFs are trading at discounts bigger than their long-term averages:

… and Discounts Are Bigger Than Ever

Source: CEF Insider

That points to even more upside for us this year, as we tap the incredible 7%+ dividend payouts you can grab from CEFs (including the 18 in our CEF Insider service’s portfolio, which yield an outsized 7.3%, on average, as I write this)

Two Numbers Point to Big CEF Bargains (and Ripoffs, Too)

So how do we hone in on the highest, safest dividends in the CEF space while hedging our downside?

A great strategy (and one I use myself) is to look at funds where NAV and market-price returns vary widely, then spot whether this gap is justified by what’s happening in the market or in the fund itself.

To see this in action, let’s look at the CEFs with the best and worst returns so far this year, by both market price and NAV, plus the fund with the biggest difference between the two:

Let’s start with the Morgan Stanley China A Share Fund (CAF), which fell 18% on a NAV basis and 14.3% on a market-price basis in 2018. That mimicked the Chinese market, which dropped 19.2% last year.

Thus, the fund’s market-price and NAV rebounds in 2019 reflect investors returning to Chinese stocks, which is also driving CAF’s premium to spike suddenly—a common move for the fund after a selloff:

CAF Gets Pricey After a Huge Run

The risks here are clear, but they’re also pretty closely tied to those of Chinese stocks as a whole.

Let’s skip ahead to the India Fund (IIF), because the story there is similar. IIF’s weak NAV return and market return are the result of India’s economy, which is expected to see slowing growth in 2019 and 2020 after beginning to ratchet back in late 2018. Recent tensions with Pakistan don’t help things, so this fund’s decline is pretty rational and unsurprising.

Now let’s consider the Duff & Phelps Select Energy MLP & Midstream Energy Fund (DSE), whose huge NAV return is better than the energy sector’s 15.5% gain for 2019.

Part of DSE’s strong showing in 2019 stems from energy’s rise, but there’s something going on inside the fund, too. In late November, DSE began shifting from investing in energy MLPs to midstream MLPs, a more narrow sector that was extremely oversold in 2018, so has bounced back fast in 2019.

The timing of that change was particularly good, narrowing DSE’s discount slightly, to 9.9%, from where it was in November. Again, a rational response to a change in the fund’s fundamentals.

When a High Yield Signals Danger

Finally, what’s up with the Stone Harbor Emerging Markets Income Fund (EDF) and the huge discrepancy between its market price and NAV returns? This is where we see the irrationality of the CEF world really shine through.

EDF is a poorly performing emerging-market fund with a high expense ratio (2.96%!). Despite those massive fees, the fund’s total NAV return over the last five years has been a measly 3.4% annualized, far below the S&P 500 and hundreds of other CEFs.

This is partly due to the complex emerging-market debt the fund invests in, partly due to fees and partly due to poor decisions, like holding over 10% of its assets in Argentinian debt (yes, the country that has defaulted more than once). This is a fund that should be sold cheap, but its current premium to NAV is not only one of the highest of any CEF, it’s at an all-time high:

Lousy Performance Brings … a Premium!?

Why has that premium been climbing lately? Yield-chasers are driving up its market price: EDF has never cut its dividend and now pays a shocking 15.9% yield. If you only look at that yield, this seems great. But unfortunately, EDF’s returns are less than a quarter of its yield, which means its dividend is not being covered by gains and will be cut.

And while first-level investors have driven EDF’s price sky-high, the fund is a rarity now; many CEFs are fairly priced (and quite a few are still cheap!), despite strong gains so far this year.

Yours Now: 8.3% Dividends and Big Gains From America’s Top Stocks

CEFs’ discounts to NAV make them hands down the best way to buy stocks.

Why?

Because these weird markdowns are basically free money! Why would you buy a “regular” stock when you could buy through a CEF and get it for 10% to 20% off? It’s a no-brainer!

And don’t let EDF’s spooky 16% dividend drive you away—there are plenty of CEFs paying safe high single- and double-digit dividends, and some even pay them monthly!

Take my 5 favorite CEF picks now (which I’ll reveal when you click right here). They throw off life-changing 8.3% average dividend payouts!

My top pick of the bunch holds some of the best stocks in the pharma and biotech sectors and has clobbered the market, with a monstrous 904% return since inception:

This Market-Slayer Is Still Cheap!

Plus, this fund throws off an incredible 9.8% dividend!

And as I write, this stout income play—which has traded at fat premiums many times in the past—goes for a totally unusual 7% discount. That sets us up for even more “bounce back” upside while we pocket that huge 9.8% payout!