Category Archives: Dividends

7 High-Quality Dividends for 2018 and Beyond

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

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

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

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

High-Quality Dividends: Broadcom (AVGO)

Dividend Yield: 2.9%

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

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

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

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

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

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

Dividend Yield: 2.6%

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

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

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

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

High-Quality Dividends: Medtronic (MDT)

Dividend Yield: 2.3%

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

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

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

High-Quality Dividends: McDonald’s (MCD)

Dividend Yield: 2.5%

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

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

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

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

High-Quality Dividends: Chevron (CVX)

Dividend Yield: 3.9%

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

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

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

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

High-Quality Dividends: Philip Morris (PM)

Dividend Yield: 4.3%

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

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

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

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

High-Quality Dividends: Cedar Fair (FUN)

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

Dividend Yield: 5.4%

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

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

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

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

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

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Source: Investor Place 

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

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

Here is the scary headline from Bloomberg:

Pipeline Stocks Plunge After FERC Kills Key Income-Tax Allowance

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

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

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

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

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

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

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

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

 

3 Funds Paying Up to 12% and Set to Rip Higher

The big rebound is on! But don’t worry, your opportunity to grab big gains (and dividends) hasn’t evaporated.

There’s still time!

And you can start with 3 of the 4 funds I pounded the table on back on February 19. At the time, all 4 of these cheap selloff buys were paying a combined 13.4% income stream.

So why are just 3 of these funds still worthy of your attention, only a few weeks later?

I’ll unpack that—and name these 3 top-flight funds—in a moment. First, let’s step back and take a look at what happened in a very wild February, and where it all leaves us now.

A Market Disaster Gets Undone

So much has happened. First, the S&P 500 (SPY) did this:

Was It All a Dream?

The good news is, the stock market losses we saw at the start of the month are now history.

The even better news is that the S&P 500 is up just over 3% from the start of 2018, meaning this market isn’t overheated. That “goldilocks” position should be giving investors more confidence that now is the right time to get back into the game.

It also means time is running out if you haven’t gotten back in already.

And if you’re sitting on cash?

No problem. I’ll show you where to put that cash to work without overpaying too much for the wrong investments.

But before I get to that, let’s take a look at those 4 funds I earmarked in February. They were the PCM Fund (PCM), the Virtus Global Multi-Sector Income Fund (VGI), the Kayne Anderson MLP Investment Company (KYN) and the Dreyfus Strategic Municipal Bond Fund (DSM).

How do these funds look now?

A Quick Improvement

While the warm weather—and a corresponding drop in natural gas and heating oil demand—has weighed on the master limited partnership–focused Kayne Anderson fund, the average return for these picks since I pointed them out, about two weeks ago, is 2.7%, while the S&P 500 is down slightly since then.

In other words, if you’ve heard that buying a low-fee index fund is the right thing to do, just take a look at that chart.

So What Now?

To determine which of these funds remain compelling options, we need to look at their discount to net asset value.

This is where we compare the market price for these funds, which trade daily like normal stocks, and their NAV, which is based on the market price of every item in their portfolios.

Now you’d think an efficient market would make these two figures the same, right? Wrong!

That’s because these are closed-end funds, a little-known corner of the market that’s worth around $300 billion, compared to the multi-trillion-dollar mutual fund and ETF universes. (If you’re unfamiliar with CEFs, click here for an easy-to-follow primer I recently wrote on these cash machines.)

The small size of the CEF market means a lot of big investors who could profit from these inefficiencies don’t bother—and it also means a lot of mom-and-pop investors don’t know these funds even exist.

That’s our opportunity.

The 4 funds I’ve shown you are all CEFs, and, of course, none of them are trading at their NAV (although two do come close):

3 Bargains—and 1 Ship That’s Sailed

First, let’s tackle the PCM Fund, which trades at a 9.8% premium to its NAV, meaning it’s priced above the actual market value of its portfolio. That’s because PIMCO, the fund manager, is great at beating the market, so the market rewards them with a premium.

But a near double-digit premium is too rich for my blood, so this isn’t the best fund to buy right now. And if you nabbed PCM at its unusually low premium earlier in February, you might want to consider getting out or, at the very least, holding on and allocating cash to other investments.

Meanwhile, the Dreyfus Strategic Municipal Bond Fund sports a discount to NAV that has widened since my February 19 article—but investors haven’t really lost any money since I recommended it. How is that possible?

Simple: the fund’s price has slid, but the NAV is staying straight.

Stable NAV, Lower Price

And since investors are still getting the fund’s 5.5% dividend yield, they’re pocketing a strong income stream while they hold on. And since it’s gotten even cheaper, despite the fact that the fund’s real, intrinsic value hasn’t changed, it’s something worth considering if you have cash to spare.

Now let’s hit the Virtus Global Multi-Sector Income Fund and the Kayne Anderson MLP Investment Company. Both funds are trading close to their NAV, and both are paying massive dividends—12% and 10.6%, respectively. So should income investors hold on or buy more?

To answer that question, we’ll take a look at this chart showing where their discounts to NAV stand relative to history:

The Big Picture

This chart makes one thing clear: KYN is now cheaper than it’s been through most of its history, where it tends to trade at a premium to NAV. On the other hand, VGI’s discount, while off a bit from the last few months, is narrower than it usually is.

That makes one thing clear: buying more KYN and waiting for it to revert to its historical mean looks like a smart move, while cautiously adding VGI is also practical, since it’s a strong fund with a very good portfolio.

So if you’re sitting on cash, 3 of these funds still deserve your attention. And thanks to the 500-strong CEF market, there are a lot more out there, too—starting with the 14 I want to tell you about now.

One Click for the 14 Best Funds of 2018

That’s right—you can skim right through all the 500 or so CEFs in the world with just one click and go straight to the 15 funds with the highest yields and biggest gains ahead in 2018 (I’m talking SAFE dividends up to 9.6% and double-digit upside).

All you need is a no-risk 60-day trial to my CEF Insider service. And your timing is perfect, because I’m making a limited number of these trial memberships available now!

Simply CLICK HERE to start your no-obligation trial. When you do, you’ll get instant access to the names, tickers and my complete research on each and every one of the 15 cash machines in the CEF Insider portfolio.

These 15 bargain CEFs all trade at absurd discounts to NAV that are slowly narrowing. That puts unrelenting upward pressure on their share prices and sets us up for a market-crushing gain in 2018!

But the best part—by far—is the dividends.

Right now, the portfolio boasts an average yield of 7.4%. But remember, that’s just the average! Cherry-pick my 3 highest-yielding funds and you’ll be pocketing life-changing payouts like 9.6%, 9.55% and 9.0%!

I hope you’ll take this opportunity to join the small group of investors across the country who are pocketing regular monthly dividend checks from these 15 terrific funds.

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Source: Contrarian Outlook 

3 High-Yield Dividend Stocks in the Income Stock Sweet Spot

The stock market has turned volatile, and the income stock sectors feel downright unwelcoming. Since I have contact with thousands of investors I learn there are a thousand different situations in the market. The investor who bought at a higher price doesn’t like to see the share price drops in his portfolio. Another is expecting a cash infusion next week and hopes prices will stay down until she gets the money and can load up on shares at the current low prices.

I tell my Dividend Hunter readers that you can’t earn dividends unless you own shares of dividend paying stocks. Trying to time the market can leave an investor without any shares that are paying dividends. It takes a somewhat different mindset to get away from worrying about share prices and to focus on building an income stream. The good part is that when the stock market corrects, or becomes volatile, or forgets which way is up, the income investor will continue to rake in dividends. In a choppy market I like to add to those stocks that hit my “sweet spot” combination of current yield and dividend growth.

In a flat or volatile market, cash dividends are real returns, so a higher yield can be viewed as a cushion against share price movement. Dividend growth is a factor that can make a stock more attractive even if the market is not in a price appreciation mode. You can find dividend stocks with low yields, such as 3% or less and double digit annual dividend growth. At the other end of the spectrum are the 10% yield stocks, but with little potential for dividend growth.

If total stock market returns go flat, I recommend going for the middle ground. Find stocks with attractive yields. I the current market the range would be 5% to 7%. These stocks need to have recent history and prospects of mid to high single digit dividend growth. The dividend payments give you solid cash returns, and the dividend growth prospects can give support to share prices in a volatile market. In the long run, this combination should produce total annual returns in the low double digits.

Here are three stocks that fit the criteria discussed above:

Aircastle Limited (NYSE: AYR) owns approximately 220 commercial aircraft that are leased to 81 airlines around the world. Aircastle must be nimble to adjust for changing needs for aircraft type and client airlines financial conditions. For example, in 2017, Aircastle purchased 68 aircraft and sold 37. The business is very profitable. The company generated a 15% return on equity last year and reported adjusted net income of $2.15 per share.

The current dividend rate of $1.12 per share per year is well covered by net income and free cash flow. In recent years, Aircastle has been increasing the quarterly dividend by 7% to 8% per year. The foundation of Aircastle’ s results is the steady growth in international air traffic, which appears to be immune to global economic conditions. The shares currently yield 5.75%.

Brixmor Property Group Inc (NYSE: BRX) is a real estate investment trust (REIT) that owns community and neighborhood strip malls. These malls are typically anchored by a grocery store and the tenants are often in businesses that are largely immune from ecommerce sales competition, or in recent terminology, “being Amazoned”.

The company’s board of directors recently shook up the management team, with the goal of more active rental rate management. The REIT’s major tenants are financially strong, but there is a group of weaker tenants with absurdly low rental rates. Replacing these tenants will allow Brixmor to grow revenue and free cash flow. The company should be able to continue its recent history of 5% to 6% dividend growth. The BRX shares yield 7.1%.

Related: Buy This Stock Paying 15% That’s Better Than Paying 20%

ONEOK, Inc. (NYSE: OKE) is an energy sector infrastructure services company. ONEOK (pronounced “one-oak”) focuses on natural gas and natural gas liquids, also called NGLs. The company provides gas gathering services in the energy plays, facilities to process NGLs into the different components like ethane and propane, and interstate pipelines to transport natural gas and NGLs to their demand centers.

The growth in gas production has been lost in the news about the U.S. becoming the world’s largest crude oil producer. Oil wells also produce natural gas and NGLs. ONEOK is the primary, and often the only, company gathering and processing gas in the major crude oil plays.

The company expects to grow its dividend by 8% to 10% per year. OKE currently yields 5.5%.

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


Source: Investors Alley

3 REIT Dividend Increases Coming in March

As a dividend focused stock analyst, I put less emphasis on short term share price fluctuations and more on dividend yields and dividend growth prospects. When the market turns volatile, such as what we have experienced in the last several weeks, it is good to go back to the basics of dividend investing, which for me is dividend growth. A growing payout should, over time result in a higher share price. One nice way to get a quick start to capital gains from dividend growth is to buy shares just before an announced dividend increase.

I maintain a database of about 130 REITs, which I use to track yields and dividend growth. The typical REIT increases its dividend rate once a year, at about the same time each year. Across the REIT universe, the dividend increase announcements come in almost every month of the year. Each month I like to cover the REITs on my list that have historically increased their payouts in the following month. You can use this information to establish longer term positions in stocks with growing dividends or try for the short-term capital gain that often occurs when a dividend increase is announced. Here are three potential REIT dividend increases for March.

Taubman Centers, Inc. (NYSE: TCO) acquires, develops, owns and operates regional and super-regional shopping centers. The company has grown its dividend by a 6% annual compound growth rate for the last 10 years. The payout rate was boosted by 5.0% last year. Despite a challenging retail environment in 2017, the company was able to generate growth in all its key financial metrics.

The current dividend rate is 66% of 2018’s FFO/share cash flow guidance, so a moderate dividend increase is probable to keep the growth track record going.

I forecast a 4% to 5% increase in the quarterly payout. Taubman Centers should announce the new dividend rate in early March. TCO yields 4.1%.

UDR, Inc. (NYSE: UDR) owns and operates multi-family apartment complexes. The company increased its dividend by 5.1% last year and has averaged annual dividend growth of 7.1% over the last five years. Adjusted FFO per share was up 5.5% for 2017.

Apartments have recently been viewed as a hot REIT sector that is slowing. Despite lower investor expectations, recent results from other apartment REIT have reported continued above average growth.

UDR should announce its new dividend rate in the second half of March. UDR yields 3.6%.

InfraREIT Inc. (NYSE: HIFR) is a REIT that owns electric power transmission and distribution assets in Texas. The company came to market with a January 2015 IPO. After its first year, the HIFR dividend was boosted by 11.1%. The dividend was not increased in 2017, even though revenues and cash flow were up in the high single digits.

During last year, the company ran into regulatory issues and was forced to exchange some assets. I expect the company will return to dividend growth in 2018 A high single digits dividend increase is very possible.

The next dividend announcement will be in early March, with an end of March record date and payment around April 20. HIFR currently yields 5.2%.

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


Source: Investors Alley 

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

Last week I hosted an online session for my Dividend Hunter newsletter subscribers with InfraCap co-founders Jay Hatfield, CEO and Portfolio Manager and Edward Ryan, CFO and COO. During the hour long discussion we covered MLP investing and the changes to the high-yield InfraCap MLP ETF (NYSE: AMZA).

In January, AMZA announced a dividend policy change, going from quarterly to monthly and reducing the overall annual rate. As a result, the AMZA yield went from over 20% down to 15%. The move will benefit investors in the long term, but I wanted to get Jay and Ed in to discuss the different aspects of managing AMZA with my newsletter subscribers. The following is from my notes on the session.

The discussion started with details on valuations in the MLP space. It was shown on the presentation slides that compared to historical values the MLP yield and yield spread over BBB rated bonds are relatively high, which indicates MLPs are undervalued on historical standards.

The yield for the Alerian MLP Infrastructure Index (AMZI) is just under 8%, while REITs are yielding about 4.7% and utilities are at 4.0%. The slides on Enterprise value (EV) to EBITDA and Debt/EBITDA show that MLPs have as a group fixed their financial issues that caused business stress when energy prices crashed in 2015.

I asked Jay to discuss why he liked Energy Transfer Partners LP (NYSE: ETP) as the largest holding in the InfraCap MLP ETF (NYSE: AMZA). He discussed how ETP had become undervalued due to mechanical selling. When ETP merged with Sunoco Logistics, ETP was suddenly overweight in index tracking MLP funds. These index funds were forced to sell ETP to become balanced with the MLP indexes they are committed to mirror. Then Alerian put a 10% weighting cap on MLPs in the AMZI, and funds tracking that popular MLP index were again forced to sell ETP units to stay in line with the index weightings. The result is that Jay believes ETP with its 12% yield is very undervalued and has lots of upside potential from here.

We discussed the fact that MLP market values are highly influenced by the swings in energy commodity prices, especially crude oil. At the same time, both crude oil and natural gas production in the U.S. continue to grow.

Crude oil production growth is decreasing the need for oil imports and the increase in natural gas is being absorbed by the shift to gas to produce electricity, new chemical plants being built in the U.S. and the recent launch and growth of LNG exports. These charts show the production growth. It is this growth that produces the revenue growth for midstream MLPs. It was noted that MLPs increased distributions by 1.5% for the 2018 first quarter, which puts the sector on path for 6% annual distribution growth.

Now to the topic I think most want to hear about, the AMZA dividends. Ed and Jay discussed how during the last year, they were getting large purchases of new shares just before the ex-dividend date. As a result, they would have to immediately pay out some of the new capital as dividends. This left less capital to invest in MLPs to support the future dividends on new and existing shares.

With MLP values declining in 2017 it became very difficult to support both the dividend rate and the NAV (share value). Despite the challenges, AMZA did outperform the AMZI in 2017. The new dividend rate of $0.11 per share and monthly payment are intended to both continue to pay a very attractive yield and allow the NAV to grow.

The new dividend rate gives AMZA a 15% yield. The distributions from MLPs owned by the fund account for the first 10% and the fund’s call selling program will bring in the other 5%. Jay expressed confidence the management team could produce 5% cash flow from option selling and still grow the NAV when MLP values move higher. Ed and Jay also noted that the 5% figure will stay the same as the NAV increases. This means that if AMZA moves up to $10 or $12 per share, they will be able to generate higher cash per share from the options program. This fact plus the distribution growth in the MLP sector gives the potential for future dividend growth from AMZA. Nothing was predicted, and much is dependent on MLP values.

Taxes on dividends were discussed. Since MLP distributions are classified as non-taxable return of capital, the two-thirds of the AMZA dividend from the MLP distributions will be ROC. The one-third from the options selling program will come through as qualified dividends. Ed noted that future dividends should end up close to the two-thirds/one-third tax characteristics with the new dividend program. About taxes, Ed noted that the new tax law and lower corporate income tax rate provides a higher relative benefit to MLP funds compared to individual MLP investments.

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


Source: Investors Alley 

9 Dividends Due for a Raise in March

Dividend growth is the key to retirement because it fends off the effects of inflation. Even amid low inflation of 2% to 3% a year, a stagnant dividend will actually lose 2% to 3% of purchasing power a year. The only way to actually grow your income over time, then, is to invest in companies whose management makes rising dividends a priority.

That’s one reason you should buy stocks before their dividend increases. And we’ll review nine upcoming payout raises in a moment.

But there’s a second reason that’s coming to the fore of late: interest rates.

While the Federal Reserve has tried to put the spurs to interest rates with five bumps to the Fed funds rate since December 2015, bond yields haven’t cooperated much. The 10-year Treasury reached 2.6% in late 2016 and early 2017, but retreated each time. But near the end of 2017 and into 2018, rates went on the march again, and they’re now making another attack on 2.6% and higher.

Is the T-Note Back?

Why does that matter? Because low-growth stocks with 2% to 3% yields and flatlining dividend expansion are starting to look far less attractive to the higher security of American debt. Conversely, even modestly yielding companies that actually grow their dividends and have some potential for capital gains remain superior investments – after all, the only way for bonds’ yields to continue rising from here is for their prices to drop.

So let’s take a look at nine stocks (yielding up to 9%) that are due to up their payouts sometime in March. Here’s the list, in order of ascending yield:

Oracle (ORCL)
Dividend Yield: 1.5%

Tech stalwart Oracle (ORCL) is a relatively young dividend payer, having started a nickel-quarterly distribution in 2009 as the market began emerging from its bear fit. Since then, however, the company has well more than tripled its payout to 19 cents per share, including a 26.7% hike in 2017.

Oracle has been criticized for being late to certain technological trends, most notably the cloud, but Nomura’s Christopher Eberle recently slapped a “Buy” rating on the stock in part because the company has rectified that situation and now offers a deep suite of cloud-based business apps.

The promise in Oracle’s cloud and on-premise software has helped drive roughly Nasdaq Composite-meeting returns in the past 12 months. But investors will want to continue seeing robust growth in the dividend as well. An announcement on that front should come sometime in the middle of March.

Best Buy (BBY)
Dividend Yield: 1.8%

Pop quiz: Which stock has a better total return in the past five years: Best Buy (BBY), or Amazon (AMZN)?

Nothing Makes Sense Anymore

Yes, Amazon is a threat to companies across several industries, and Best Buy’s future is far from guaranteed. But to say that Best Buy figured out how to at least fend off the giant is both fair and accurate.

Also, don’t sleep on this retailer’s dividend. While other brick-and-mortar outfits have had to slow or stop their payout growth altogether, BBY has doubled its distribution since 2013.

If that’s to continue in 2018, Best Buy should let investors know either in very early March, or the waning days of February.

Vail Resorts (MTN)
Dividend Yield: 1.8%

Vail Resorts (MTN) – the operator of ski and other resorts in Vail, Colorado, as well as across the U.S. and the world – is one of several stocks I highlighted because their dividends could benefit from Republicans’ proposed tax overhaul.

Well, Washington delivered.

That means we should look ahead to Vail’s next potential dividend increase, which should be announced sometime in the early to middle part of March.

If past precedent means anything, this isn’t going to be a small hike. Vail’s payout has more than quintupled since 2013 to its current quarterly dole of $1.053 per share. That includes a robust 30% improvement in 2017.

American Tower (AMT)
Dividend Yield: 1.9%

American Tower (AMT) is one of the more interesting real estate investment trusts (REITs) out there. That’s because rather than owning apartments, office buildings or warehouses, it owns and operates wireless and broadcast towers and other infrastructure in the U.S. and abroad.

Here, its customers include the likes of Verizon (VZ) and AT&T (T), meaning it has its hand in most of the calls and mobile internet surfing going on in this country right this very minute.

AMT also stands out for its performance over the past year, in which the stock has gained 37% versus a 4% loss for the broader Vanguard REIT ETF (VNQ). That should continue going forward, in part thanks to a recent deal with Vodafone (VOD) and Idea Cellular to widen its exposure in India by roughly a third.

That in turn bodes well for the company’s dividend, which goes up not every year but every quarter, including a regular April distribution the company typically announces in early March.

American Tower (AMT) Has Separated Itself From the Pack

Colgate-Palmolive (CL)
Dividend Yield: 2.1%

Consumer staples giant Colgate-Palmolive (CL) needs to open up its purse strings.

The maker of namesake Colgate dental products and Palmolive soaps, as well as Speed Stick and other personal care brands, has grossly underperformed the broader market over the past year thanks to eroding growth and far better investing options in a rip-roaring market.

Why buy Colgate, after all, when the way is clear for the likes of Amazon (AMZN) and Alphabet (GOOGL)?

The only thing Colgate has going for it is its dividend, which the company has grown for 54 consecutive years – one of the longest streaks among the Dividend Aristocrats. But CL has been getting by not on generosity, but technicality; the company’s payout expanded by less than 3% in 2017.

With more profits in its pocket thanks to more favorable tax rates, Colgate needs to give its income-hungry shareholders something to cheer about. News on that front should come sometime during the first two weeks of March.

Signet Jewelers (SIG)
Dividend Yield: 2.1%

Signet Jewelers (SIG) – the corporate entity lording over the mall jewelry trinity of Zales, Kay Jewelers and Jared – has been a dog’s breakfast for more than two years now. Since October 2015, shares have lost nearly two-thirds of their value.

What hasn’t gone wrong? The company’s operational results have been propped up by the 2014 purchase of Zales, but the company clearly is suffering from a shopper exodus from malls. The company got cracked hard in late November after announcing a 20-cent-per-share loss and 5% year-over-year drop in same-store sales for its third quarter, then reduced its 2018 earnings guidance by about 14%.

It followed that up with a December report that the Consumer Financial Protection Bureau’s is exploring the company’s credit practices and promotional offers, with a particular eye on a law that forbids “unfair, deceptive, or abusive act or practice.”

The only thing shareholders have going for it is a token dividend that still only yields 2% despite its steep losses. Signet at least is solidly profitable, so investors should hope for another payout hike, which would be announced sometime in late March.

The CFPB Went to Jared

Realty Income (O)
Dividend Yield: 4.7%

Realty Income (O), the “Monthly Dividend Company,” is revered among income hunters for its frequent regular payouts and strong history of increases. As its homepage loudly boasts, the company has delivered 81 consecutive quarterly dividend increases and 570 consecutive monthly dividends paid.

It’s also a weird bird in that the increases don’t come in neat, three-month increments. For instance, O had been announcing dividend increases every January for the past few years, but came out swinging a little early with a December 2017 proclamation instead.

Realty Income also has a streak of dividend-increase announcements in mid-March. It remains to be seen whether the company will pop this one off early, too.

W.P. Carey (WPC)
Dividend Yield: 6.1%

W.P. Carey (WPC), like American Tower and Realty Income, delivers greater dividends every single quarter, and has been raising its payouts at that frequency for several years.

WPC, as a reminder, is a net lease REIT whose properties span a wide set of industries, from retail to automotive to hotels to even government entities. Some of its top tenants include German DIY retailer Hellweg, Amerco (UHAL)subsidiary U-Haul and Marriott (MAR).

W.P. Carey has been sliding of late in the wake of weak third-quarter results and a broader decline in the REIT industry. Nonetheless, the company should offer up another dividend improvement sometime in the back half of March.

W.P. Carey (WPC) Keeps Building Its Dividends

GameStop (GME)
Dividend Yield: 9.0%

GameStop’s (GME) long-term prospects look mostly doomed because of the growing migration of gaming to digital sales and downloads. Still, the company looked like it would have a flicker of hope at the start of 2017, given the launch of two systems: the Nintendo (NTDOY) Switch and the Microsoft (MSFT) Xbox One X and S.

No such luck.

GME shares have plunged 30% over the past 52 weeks while the S&P 500 has climbed nearly 24%. That has come despite a third-quarter beat and raised expectations for its fiscal 2017 comps, which improved from -5% to flat, to an improvement in the low to mid-single digits.

We’re still nowhere near dividend danger at the moment, considering GME is tracking $1.52 per share in annual payouts compared to $3.42 in trailing-12-month earnings. Thus, you can expect at least a token increase to the payout sometime in either early March or late February.

Revealed: The 7 “Must Have” Dividend-Growth Stocks for 2018

Life is too short to waste our time with middling dividends! Since share prices move higher with their payouts, there’s a simple way to maximize our stock market returns: Buy the dividends that are growing the fastest.

Don’t be fooled by modest current yields. They often don’t capture the growth potential (and it’s the dividend’s velocity that really makes us big money – not its starting point).

How to we buy high-velocity dividends, the dividend aristocrats of tomorrow? It’s a simple three-step process:

Step 1. You invest a set amount of money into one of these “hidden yield” stocks and immediately start getting regular returns on the order of 3%, 4%, or maybe more.

That alone is better than you can get from just about any other conservative investment right now.

Step 2. Over time, your dividend payments go up so you’re eventually earning 8%, 9%, or 10% a year on your original investment.

That should not only keep pace with inflation or rising interest rates, it should stay ahead of them.

Step 3. As your income is rising, other investors are also bidding up the price of your shares to keep pace with the increasing yields.

This combination of rising dividends and capital appreciation is what gives you the potential to earn 12% or more on average with almost no effort or active investing at all.

Please don't make this huge dividend mistake... If you are currently investing in dividend stocks – or even if you think you MIGHT invest in any dividend stocks over the next several months – then please take a few minutes to read this urgent new report. Not only could it prevent you from making a huge mistake related to income investing, it could also help you earn 12% a year from here on out! Click here to get the full story right away. 

Source: Contrarian Outlook 

3 High-Yield Energy Stocks Ready to Climb After Exxon Mobil’s Blunder

Recent good news out of the energy sector has been masked by the stock market pullback and a not-so-great earnings report from Exxon Mobil (NYSE: XOM). However, beneath the noise exists some attractive total return potential for dividend investors in energy infrastructure services companies.

Here are some of the details about the current state of U.S. energy production.

 

  • Last week the Energy Information Agency (EIA) announced the U.S. had surpassed 10 million barrels per day of crude oil production. Production had not been at the 10 million bpd level since 1970. This is double the crude production 10 years ago.
  • Net imports of 2.5 million bpd are at the lowest level since 1973 and 7.5 million bpd lower than a decade ago.
  • S. natural gas production has grown by 37% over the last decade. Liquid natural gas (LNG) exports started in 2016 and are rapidly ramping up.
  • Polyethylene, the basic material of plastics, production uses natural gas as its raw material. Domestic and foreign chemical companies are building new polyethylene production plants in the U.S. to source inexpensive natural gas. By 2021, Texas will be the largest producer of ethylene by steam cracking in the world. Louisiana is also a hot bed for new production plants.

The growth in both upstream production and downstream demand for crude oil and natural gas puts energy midstream infrastructure companies in a very good position for growth and profits. These are the companies that provide the gathering, processing and transport of energy commodities from the production plays to the end users.

Related: Getting Paid 15% in Monthly Dividends From The Growing Energy Sector

Another beneficial change for many investors is a reduction in the use of the master limited partnership (MLP) structure by a number of energy midstream companies. The challenges of the previous three years pushed these companies back into the corporate structure. This means investors can buy higher yield energy midstream stocks and earn regular dividends. With these companies investors receive IRS Forms 1099 and not the unpopular Schedules K-1.

Here are three energy infrastructure companies that have restructured in recent years and are now poised to grow revenues, cash flow and dividends.

At the time of its 2010 IPO, Targa Resources Corp (NYSE: TRGP) owned the general partner interests in the midstream MLP, Targa Resources Partners LP (NYSE: NGLS). When energy prices crashed in 2015, the separate general partner and MLP business arrangement was an expense drag on the companies. In early 2016 TRGP completed the purchase of all NGLS units, which eliminated the general partner expenses. Currently Targa Resources operates four business units providing the following services:

  • Gathering, compressing, treating, processing, and selling natural gas.
  • Storing, fractionating, treating, transporting, and selling NGLs and NGL products, including services to LPG exporters.
  • Gathering, storing, terminaling and selling crude oil.
  • Storing, terminaling, and selling refined petroleum products.

TRGP yields 7.7% and has paid the current $0.91 per share dividend since the 2015 third quarter. I forecast that dividend growth will resume in late 2018 or early 2019.

Plains GP Holdings LP (NYSE: PAGP) was also a general partner interests company, owning GP rights from large cap MLP Plains All American Pipeline, LP (NYSE: PAA). Last year, the companies restructured, eliminating the GP interests and expenses. Now each PAGP share is backed by one PAA unit. PAA is a K-1 reporting company and PAGP reports tax info on a Form 1099. In all other respects, they are shares of the same company with the same dividend rates.

Plains owns the largest independent network of crude oil and natural gas liquids pipelines and storage facilities. The company handles more than 5 million barrels of oil per day. The dividend rate was reduced twice in the past two years as the company struggled to cope with the crash in crude oil prices. The business finances are now very secure, and I expect the dividends to start growing again in 2019. PAGP yields 5.9%.

ONEOK, Inc. (NYSE: OKE) is another former general partner company that bought in its controlled MLP, ONEOK Partners LP. ONEOK completed the roll-up transaction in June 2017. This midstream company focuses on providing natural gas infrastructure services. Operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions.

After the ONEOK Partners merger was completed, ONEOK increased its dividend by 21%. In January this year, the company again boosted the payout, increasing the dividend by 3.4%. Company EBITDA is forecast to increase by 20% in 2018 compared to last year. Management has given dividend growth guidance of 9% to 11% per year through 2021. OKE yields 5.3%.

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

2 Set and Forget High-Yield Stocks with a Long History of Raising Dividends

Fear of Missing Out (FOMO) has become a psychological phenomenon mostly affecting younger generations. However, FOMO has become a driving force for many investors, and it is not a plan for long term success. You can save yourself a lot of mental anguish and investment losses by sticking with a fundamentals driven dividend focused investment strategy.

Here is one definition of FOMO: ‘‘the uneasy and sometimes all-consuming feeling that you’re missing out – that your peers are doing, in the know about, or in possession of more or something better than you’’. For younger folks its this feeling that keeps them glued to their phones, constantly checking on their social media accounts. For investors, FOMO can be spotted by the habits of having one of the financial news networks running on a TV most of the day and by constantly checking brokerage account values and individual stock prices.

One sign I see from individual investors that they are in the clutches of FOMO is that each time one of their stocks drops by a few percent they must know the reason for the decline. The belief is that with a reason they will then know whether to keep the shares or sell. Since most stock market movement is not driven by actual news from the individual companies, these investors can let their fears take over and sell the stock positions for losses. The financial news puts out a lot of information that tries to explain why stock prices are moving. The explanations are just a way after the fact to try to explain the random movement of share prices in the short term. To be a successful long-term investor, it is a better practice to mostly or completely ignore the day to day news items that “experts” claim are moving the market.

To be a successful investor, instead of a short-term trader, you need to have a strategy based on the underlying fundamental financials of the companies in which you buy and own shares. There are different strategies to choose from including growth stocks where the companies are growing faster than the economy, value stocks where the market does not see the value of a company’s assets, or bets on future technologies with stocks such as Tesla or drug stock IPOs.

The strategy I employ and share with my Dividend Hunter readers is to earn dividend income from companies with stable and growing per share cash flows. I search the stock market universe for those companies whose shares have attractive yields, current dividends are well covered by free cash flow, and there is a plan or potential for continued cash flow growth.

With these companies you don’t need to check share prices every day. Once a quarter when earnings come out, you check the cash flow per share, the dividend announcement, and the income statement to see if the company is staying on plan. If that is the case, you continue to own the shares. This strategy lets you stay invested through the ups and downs of the stock market. When share prices do drop, your knowledge of the companies’ underlying financial strengths allows you to confidently purchase more shares. You get to adhere to the rarely followed investing rule to buy low and earn more dividends.

Here are two stocks that just released their 2017 earnings result that illustrate the dividend growth investing strategy.

Simon Property Group Inc. (NYSE: SPG) is an owner of Class A and outlet center type of malls. With a $51 billion market cap, SPG is the largest publicly traded REIT. When evaluating a REIT, funds from operations (FFO) is the metric the shows dividend paying ability. For 2017, Simon reported FFO of $11.21 per share. This was up 6.4% over 2016. Management provides 2018 FFO guidance of $11.96 per share at the midpoint. If guidance is met, the cash flow per share will grow by 6.7% this year. With the 2017 fourth quarter earnings, the quarterly dividend was increased by 11.4% to $1.95 per share. The annual dividend rate of $7.80 per share is handily covered by almost $12 of FFO cash flow. This is a stock that is growing free cash flow and growing the dividend. An investor just needs to check in once a quarter to make sure the numbers are on track.

On Wednesday management declared a dividend of $1.95. The payout date is February 28th with an ex-dividend date of February 13th. SPG yields 4.5%.

Eastgroup Properties (NYSE: EGP) is a $3 billion market cap industrial properties REIT. For 2017 this company saw FFO increase by 6% to $4.26 per share. Industrial properties are the commercial property segment most benefitting from the shift to e-commerce retail sales. It takes three times as much warehouse space to fulfil e-commerce orders compared to traditional brick and mortar retail warehouse needs. Eastgroup increased its dividend by 3.2% in 2017 and the current dividend rate is just 59% of FFO. The company has paid dividends for 25 consecutive years, increasing the dividend in 22 of those years. This is an income stock you can count on to pay and grow the dividends. Current yield is 2.9%.

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


Source: Investors Alley 

2 Stocks Set to Soar 25%+ in 2018 and 3 to Sell Now

nterest rates are soaring, the market is panicking … and dividend stocks are yesterday’s news. Right?

Yes and no.

While some double-digit paying dogs should be sold immediately—market meltdown or no—there are other stocks (here I’m talking about top-notch dividend growers) that are ripe to be bought for 25%+ upside in the next 12 months.

There’s no doubt the 10-year Treasury yield’s recent run to 2.8%, an 18% rise since January 1, has slammed the brakes on the stock-market rally and hit high-yield plays like REITs particularly hard.

10-Year Rises, High-Yielders Wobble

If you hold high-yielders in your portfolio, you know what I’m talking about.

So should you be worried? No way—and that goes double if you’re investing for the long haul

Which brings me back to the  top-notch  dividend plays I just mentioned; today I want to show you two  (including a bargain real estate stock with a 5.5% yield and incredible dividend growth).

First, if you’ve followed my articles on Contrarian Outlook, you probably know what I’m going to say next: while a rise in rates may temporarily hit dividend payers, they’re actually a long-term plus because they signal a strong economy. And that way more than cancels out the resulting higher borrowing (and other) costs these companies will face.

It’s been proven over and over, including when REITs pummeled the market in the-last rising-rate period, from 2004–06.

Some Dividends Are Still Sucker’s Bets

But we still need to be careful, because some companies pay out more than they bring in through earnings per share (EPS) or free cash flow (FCF). And others are so hobbled by debt—and feeble growth—that even the slightly higher (but still low, by historical standards) rates we’re seeing now could tip their payouts over the cliff.

We’ll look at 3 of these toxic stocks now. Then we’ll move on to those 2 dividend champs I mentioned earlier.

Toxic Dividend Stock #1: CenturyLink (12% yield)

I just don’t understand what the dividend crowd sees in CenturyLink (CTL), which is still beating the S&P 500 since January 1, even with the latest market rout:

An Undeserved Win

There’s one number driving this: 12%. That’s the absurd dividend yield this telecom stock pays. And as I told you on January 23, CenturyLink’s payout is having a classic Wile E. Coyote moment.

That’s because the company can’t count on rising sales (revenue dropped 8% in the third quarter), EPS (down 39%) or FCF (down 41.4%) to backstop its payout. No wonder it’s paying out a totally unsustainable 253% of trailing-twelve-month FCF and 373% of EPS as dividends!

My take? Don’t be taken in by CenturyLink’s eye-popping yield and deceptively cheap forward P/E of 12. This stock is cheap for a reason: its payout is on borrowed time.

Toxic Dividend #2: Tupperware Brands (5.0% yield)

Tupperware Brands’ (TUP) dividend yield has lurched to 5.0%, but that’s not because the plastic-container peddler just gave investors a fat raise—it’s because the stock has cratered 20% since January 30!

Not the Payout Pop You Want

The reason? On top of the broader market wipeout, TUP’s Q4 earnings report left the herd cold: even though adjusted EPS jumped 10%, to $1.59, revenue fell 2%, meaning cost cuts, not sales growth, puffed up the bottom line.

The company’s forecast was also bland: the midpoint of expected 2018 EPS, $4.58, was just 4% higher than the $4.41 TUP earned last year! That’s just not enough to lift the dividend. And if TUP comes up short, a payout cut is definitely in play, given the 96% of FCF the dividend ate up in the last 12 months.

One thing that could whack TUP’s earnings forecast is its high exposure to volatile emerging markets (and their currencies): around 67% of sales. That’s just too risky for my taste—especially when there are fast-growing (and safe) payouts available, like the two I’ll show you further on.

Meantime, we need to talk about…

Toxic Dividend #3: Kraft-Heinz (3.2% yield)

Kraft-Heinz (KHC): To see how the game has changed for food stocks like KHC, look no further than the closest supermarket; people are clearly craving more natural food and less processed fare.

And Kraft-Heinz’s banners are way behind the curve.

Yesterday’s Brands

Source: kraftheinzcompany.com

No wonder the consumer-staples giant is showing the same pattern we saw with Tupperware: rising earnings propped up by cost cuts, not growth. In Q3, Kraft-Heinz’s sales dipped 1.7%, while adjusted EPS soared 15%.

Which brings me to the dividend: in the last 12 months, Kraft-Heinz paid out a worrying 92% of earnings and 126% of FCF to shareholders!

Sure, Berkshire Hathaway (BRK.B) is a major KHC shareholder, but that’s not enough to offset the company’s weak growth, ho-hum 3.2% yield and the very real chance payout growth will stall—if not reverse—knocking down the share price when it does.

Which brings me to…

2 Cheap Dividend Champs to Put on Your Buy List

Now that we know what to keep out of our portfolio, let’s pivot to 2 dividend payers positioned to thrive as rates head higher, starting with one you really need to move on in the next couple days.

Dividend Champ #1: Brookfield Property Partners (5.5% yield)

I recommended Brookfield Property Partners (BPY), owner of malls, office towers, warehouses and apartments the world over, in a September article for 3 reasons:

  1. A healthy dividend (5.5% as I write).
  2. Strong payout growth, with the dividend up 18% since BPY was spun off from Brookfield Asset Management (BAM) in 2013; and
  3. Low volatility. You can practically set your watch by this one!

A Steady Course

Don’t take this to mean you would have lost money with Brookfield! Because when you add in that nice dividend, you get this:

BPY’s True Gain

I know what you’re thinking: that rise still trails the S&P 500, which was up some 85%in that time. But keep in mind that BPY’s return was in cash, while folks holding your average S&P 500 name were stuck with a pathetic sub-2% payout.

Besides, that disrespect is what’s behind our opportunity. Because BPY (technically a partnership, not a REIT) trades at 72% of book value (or what it would be worth if it were broken up and sold off today).

That’s ridiculous for the company’s top-notch portfolio, which is throwing off high-single-digit growth in funds from operations (FFO, a better measure of BPY’s performance than EPS) and a soaring dividend payout!

Management knows the score: they’re calling for 8% to 11% yearly FFO growth through 2021, and yearly dividend hikes of 5% to 8% to match. With BPY’s next payout increase set to be announced February 8, the time to buy is now.

Dividend Champ #2: Ecolab (1.2% Yield)

Ecolab (ECL) isn’t the sexiest company out there: it peddles water-treatment products, cleaners and lubricants, as well as services that help cut use of water and other resources. It has clients in dozens of industries, from manufacturers to food makers.

The stock’s yield is also a yawner for most dividend fans, at just 1.2%.

But if either so-called weakness keeps you away, you’re making a mistake.

For one steady demand for Ecolab’s products mean the company is a free-cash-flow machine, with FCF more than doubling in the last decade:

A Cash Cow

And don’t be fooled by that low dividend yield; it masks a payout that’s surged higher every single year for the last 25 years. It’s nearly doubled in the last 5 years alone, including a hefty 11% hike in December.

Those payout hikes will continue, thanks to growing sales as the global economy takes off. Ecolab saw higher revenue across all 3 of its divisions—Global Energy, Global Industrial and Global Institutional—in Q3.

Wall Street thinks the party’s just starting, too, and for once, I agree. The average analyst estimate calls for EPS of $5.34 for 2018, up nearly 14% from a forecast $4.69 in 2017. (ECL reports Q4 earnings February 20).

Throw in a ridiculously low payout ratio of 33% of earnings (and 41% of FCF), and further dividend growth is a lock. And that, in turn, will drive more of the market-crushing share-price gains ECL shareholders love:

Stock Price Climbs the Dividend Ladder

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Source: Contrarian Outlook