Much of the income stock universe will report 2019 first quarter results starting on April 28 and running through May 8. Last week there was a 4% to 5% sell-off of many income stocks.

The drop was fueled by some negative Wall Street analyst comments that don’t seem to be well grounded in reality. For many stocks, the quarterly earnings reports are most of the real news upon which long term investors can hang their hats.

I expect that earnings from quality dividend paying companies will positively surprise the market and lead to a reverse of last week’s share price declines.

For long-term, income focused investors, earnings season is a mixed bag. The actual earnings and management comments provide an accurate snapshot of a company’s business and how well they are operating in relation to expectations.

For the stocks I follow, I have a good idea on where the important numbers such as cash flow and dividends should trend. Whether a company remains on or misses the forecast trend determines my recommendation concerning the stock.

The downside to earnings are the games played between Wall Street analyst estimates and the actual earnings result. An earnings “miss” can produce significant share price volatility.

Since the Wall Street crowd changes there expectations frequently, the estimates are of little use for real investment planning. The share price moves you see around the earnings dates are just a game between Wall Street and short term traders.

If you are a longer term investor, sharp share price drops in quality dividend stocks should be viewed as attractive times to buy.

Here are three stocks that have dropped in the weeks before they release earnings and have good potential to exceed market expectation when results are actually announced.

Tanger Factory Outlet Centers (SKT) is real estate investment trust –REIT—that is the only pure play outlet mall company in the larger shopping center REIT sector. The SKT share price has lost 10% of its value over the last few weeks.

Over the last two years, Tanger has struggled with tenant retailers declaring bankruptcy, returning space in the REIT’s malls. Management has been able to keep occupancy high at the cost of not getting historical rental rate growth.

Cash flow per share has been flat and dividend increases in the 1.5% per year range. On the positive side, Tanger has a very conservative balance sheet and a 25 year history of successful business management and dividend growth.

A positive quarterly result could give this stock a solid share price increase. SKT currently yields 7.5%.

CNX Midstream Partners LP (CNXM) is a growth-oriented master limited partnership –MLP– that owns, operates, and develops gathering and other midstream energy assets to service natural gas production in the Marcellus Shale in Pennsylvania and West Virginia.

While much of the energy infrastructure sector has gone through a painful round of financial restructuring, CNXM has steadily grown its revenues and distributions to investors. The MLP’s small cap status has kept it off the radar of investors.

With a 9% yield and 15% distribution growth, this MLP has a good chance for a nice value pop when earnings come out.

New Residential Investment Corp (NRZ) is a finance REIT whose complicated investment portfolio leaves investors confused concerning the company’s prospects. Thus the 12% yield. Over the last six months New Residential has raised over $1 billion from common stock secondary offerings.

Management has not yet revealed how that capital will be invested. A big investment or merger announcement with earnings could boost the NRZ share price.

DIVIDEND INVESTING, HIGH-YIELD INVESTING, HIGH-YIELD INVESTMENTSApril 7, 2019 5:15 am by Investors Alley Staff

Data current as of market close 04/04/19.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.

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Stocks that qualify for near permanent buy and hold status are rare. It’s the nature of investing in stocks to have companies that lose their way or don’t live up to expectations. Then there are the new stocks we find that may be exciting opportunities, and to invest in them current holdings may need to be sold to make room in the portfolio.

That said, a handful of stable, long term visibility dividend paying stocks can provide a solid base upon which to build the rest of your portfolio.

Buy and hold income stocks need to meet a strict set of criteria. Primary is a long history of dividend payments. This history should include steady dividend growth and no dividend cuts. These factors give companies that are conservative and successful in their businesses and have a high level of desire to reward shareholders.

While there are a number of “Dividend Aristocrat” stocks with long histories of dividend growth, these well known names come with low dividend yields. Typical dividend yields from this group run 2% to 3%.

My other criteria is for the stocks to pay attractive, meaningful yields. Dividend yield will be a major component of the total return from dividend growth stock. Higher yields mean more of the return is locked in. Dividend income is also real cash flow that can be reinvested, taken as income, or used to make other investments.

Here are three stocks that can make a great core to an income stock portfolio.

Tanger Factor Outlet Centers (SKT) is the only pure play, outlet style shopping center real estate investment trust (REIT). The company was one of the originators of the outlet mall concept. Tanger has increased its dividend every year since the company’s 1993 IPO.

Currently this REIT is going through a period of flat growth. The challenge is a significant number of client retailer bankruptcies. The returned stores need to be filled with new retailers. Tanger has gone through this cycle before. The company maintains a “fortress” balance sheet and dividend payout is a low percentage of FFO per share.

The current slow period means you can buy SKT with a very attractive 6.75% yield.

Enterprise Products Partners LP (EPD) is a large-cap $62 billion market value master limited partnership that provides a wide range of energy infrastructure services.

Services include:

• natural gas gathering, treating, processing, transportation and storage
• NGL transportation, fractionation, storage and import and export terminals
• crude oil gathering, transportation, storage and terminals
• petrochemical and refined products transportation, storage and terminals
• a marine transportation business that operates primarily on the United States inland and Intracoastal Waterway systems.

EPD increases its distribution rate paid to investors every quarter and has grown the payout for 20 consecutive years. Currently the company pays out about 60% of distributable cash flow, leaving it with over $2 billion per year in retained earnings to invest for future growth.

EPD yields 4.5%.

Main Street Capital Corp. (MAIN) is a business development company (BDC) that provides debt and equity financing to small and mid-sized corporations.

BDCs operate under special organization and tax rules that provide corporate income tax relief. Those rules can also be restrictive against growth for anything less than the best BDC management teams.

By almost all measures Main Street can lay claim to being the best company and best stock in the BDC sector. Main Street has over $4 billion in assets under management.

Since it went public in 2007, MAIN has more than doubled its dividend rate. The dividend has never been reduced and has always been fully covered by net investment income.

Dividends are paid monthly and in recent years has been increased one to two times a year.

Since 2018 Main Street has paid additional supplemental dividends twice a year. Shares of MAIN yield 6.4%.Mueller Report a Dud: Trump unleashes the greatest income stream in American history

While Congress and the media were too busy looking for Russians, 16 of Trump’s Executive Orders could’ve just launched a little-known income opportunity called ‘venture royalties.’ 

They’re approved by Congress and Americans are collecting checks every month for $2,123… even $9,586. Everyone is asking me about income right now, I’m pointing to venture royalties. Here’s how to collect 14 royalty checks this year. Click here.

One of the big, sparsely covered parts of President Trump’s plan to overhaul the government is his administration’s focus on revamping how many government agencies operate.

In 2018 the White House put out proposals to transform agencies in the areas of food, education, social services and air travel. Top on the list are to get the federal government less involved in the mortgage insurance business with the overhaul of Fannie Mae and Freddie Mac, the two mortgage securitization and guarantee companies that were nationalized by the Federal government during the 2007-2008 financial crisis. A recapitalization of the two mortgage giants would be a huge benefit to one particular high yield stock.

Fannie (founded 1938) and Freddie (in 1970) were set up as private corporations to expand the availability of home mortgages through securitization and guarantees of payment of principal and interest. The two were created by Acts of Congress and were commonly referred to as government sponsored entities (GSE’s). What you had were private companies whose businesses had an implied Federal government backing.

You may remember that the 2007-2008 financial crisis was triggered by an implosion of the mortgage-backed securities markets. As the largest issuers of this type of securities, the two GSE’s faced total collapse and went to the government for a bailout. On September 7, 2008, Federal Housing Finance Agency (FHFA) director James B. Lockhart III announced he had put Fannie Mae and Freddie Mac under the conservatorship of the FHFA. The action has been described as “one of the most sweeping government interventions in private financial markets in decades”. The two GSE’s have been “wards” of the government ever since, which is now going on 11 years.

Under complete government control, the two companies have continued to provide mortgage insurance, buy mortgages and issue new mortgage securitizations. The companies are profitable and have been paying out those profits as large dividends paid into the Federal Treasury.

Before the government takeover, Freddie and Fannie were both publicly traded corporations. Shares of the two remain in investor hands. The problem is that investors currently get no benefit from the business success of the two. The Trump plan involves getting Fannie and Freddie out from under government control and back into the public arena. Details need to be worked out between the White House and Congress.

What will happen with Fannie and Freddie unleashed with be a more competitive mortgage origination and mortgage services market place. High-yield New Residential Investment Corp. (NYSE: NRZ) is one company that has built a very well run business in the mortgage securities and mortgage servicing world. The potential synergies of doing synergetic business with the two GSE’s should be extremely beneficial to New Residential.

NRZ’s primary business is owning and managing an investment portfolio of mortgage servicing rights (MSRs). These are the payments taken from every mortgage payment to pay the servicing company. When purchased at the right price, this is a very profitable business. The company has consistently generated mid-teens annual returns with this very specialized financial instrument. I can see New Residential collaborating with Fannie and/or Freddie in the area of MSR management for the benefit of both parties.

In 2018 New Residential acquired a full service mortgage servicing business. The GSE’s are not engaged in servicing so, being able to offer the full range of mortgage servicing services to Fannie and Freddie would be another area of collaboration. As the world now works, NRZ is a very well run and profitable company that pays big dividends, resulting in a high-yield stock. The proposed government spin-off of Fannie and Freddie would only increase NRZ’s growth potential. The shares currently yield 12.1%.Mueller Report a Dud: Trump unleashes the greatest income stream in American history

While Congress and the media were too busy looking for Russians, 16 of Trump’s Executive Orders could’ve just launched a little-known income opportunity called ‘venture royalties.’ 

They’re approved by Congress and Americans are collecting checks every month for $2,123… even $9,586. Everyone is asking me about income right now, I’m pointing to venture royalties. Here’s how to collect 14 royalty checks this year. Click here.

The next U.S. economic recession is coming. Guaranteed!

It is likely that you are reading many predictions concerning the next recession. Last year the pundits were predicting one for 2019. Now I am seeing more predictions for a recession in 2020 or 2021. These predictions are mostly about marketing, because the people making the guesses on the next recession are betting on a sure thing. The economy does cycle, so at some point in the future we will go through a period of negative economic growth.

Predicting the timing of the next recession is a harder task.

At the current time I would say any prediction that ends up correct was more of a lucky guess than from astute analysis. The economy continues to chug along at a moderate 2% to 3% annual GDP growth rate. The economic indicators that traditionally are leading clues for the next economic slow down are giving mixed signals, with a slight bias towards continued growth. Yet it is good to have a plan and some investments in your portfolio that are recession resistant. There is always the possibility of an unforeseen economic event that pushes the economy into negative growth.

Recession resistant income stocks are those that meet two criteria:

First, they have businesses that will continue to generate revenue and free cash flow even in a negative growth economy.

Second, we want to own shares of companies with above average free cash flow coverage of the current dividend rate. Excess cash flow gives a company’s board of directors’ confidence to not cut dividend rates when the economy is under pressure.

Understand that in a recession driven bear market all stock prices will fall.

As high yield stock investors we want to ride through the bear market and subsequent stock recovery with our dividend earnings intact. This allows us to buy more shares when prices are down and boost portfolio income coming out the other side. Remember for the same reasons a recession is inevitable, so is the following recovery. The economy goes through cycles.

Here are three stocks that should be able to sustain and possibly grow their dividends through the next economic recession.

Kinder Morgan Inc. (NYSE: KMI) is a large-cap owner and operator of energy infrastructure assets.

The company owns an interest in or operates approximately 84,000 miles of pipelines and 157 terminals. The pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide and more. The terminals store and handle petroleum products, chemicals and other products.

Management guidance has 2019 distributable cash flow $5 billion, providing 2.2 times coverage of this year’s dividend payments. That is much better than the typical 1.3 to 1.5 times coverage prevalent in the energy infrastructure space.

Kinder Morgan plans to increase the dividend by 25% this year and next year.

The shares yield 4.0%.

National Retail Properties, Inc. (NYSE: NNN) is a triple-net lease REIT that 3,000 single tenant retail properties in 48 states.

The properties are leased and operated by businesses that won’t go out of business in an economic recession. Think of your local convenience stores, auto parts shops and movie theaters.

For 2018, the company’s dividend payout ratio was 77% of adjusted funds from operations (AFFO). This is very solid dividend coverage for a net lease REIT.

This company has increased its dividend for 29 consecutive years, which means the dividend has grown through the last several economic recessions. That’s a record a Board of Directors will not want to stop.

NNN shares yield 3.8%.

Tanger Factor Outlet Centers (NYSE: SKT) owns and operates 44 outlet center type shopping malls.

Tanger was an originator of this type of mall and is the only pure play outlet center REIT. This type of mall will outperform other retail sectors when the economy is going through a slowdown. People always will shop. They are more likely to shop at an outlet mall if they believe times are tough.

Tanger operates very conservatively, with a low debt ratio and dividend well covered by cash flow. The SKT dividend has been increased every year since the company’s 1993 IPO.

The stock currently yields 7.1%.

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.

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.

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.