It’s Time to Go Long on This ETF While the Rest of the Market Panics

Let’s talk about big, long-term trends.

You know, those relentless economic and technological movements that promise to endure, no matter what’s happening in the stock market.

I’m talking about things that we can’t live without – like water or electricity – as well as fast-developing socio-economic trends like the shift towards greater use of robotics and automation.

I bring this up today because – as was inevitable – the markets are experiencing a sudden bout of serious volatility.

Following a whipping at the end of last week, the major indexes suffered a bloodbath to kick off this week, with the Dow shedding 1,175 points on Monday. It was the index’s biggest one-day points loss in history and the strong start to 2018 has been wiped out in the blink of an eye.

If you’re prone to panic… don’t.

Such volatility is something I’ve forewarned about a few times in recent articles – and I’ve given you a variety of investments to consider that are well-positioned to weather such storms.

But I’ve also highlighted companies that aren’t just defensive. They’re ones that should rise over the long term regardless – and are capitalizing on the robotics trend that I mentioned above.

These Two ‘Bots Are Rising

Specifically, I’m referring to ABB Ltd. (NYSE: ABB), which I profiled on November 30, and Brooks Automation(Nasdaq: BRKS), which I wrote about on December 14. Both stocks are up since I wrote about them.

As I noted in my original ABB piece, almost one-third of the firm’s annual sales come from its robotics business. And Frost & Sullivan recently recognized its prowess in this area with the 2017 Global Company of the Year Award for innovation in automation systems. The award was based on ABB’s industry-leading work in the Distributed Control Systems (DCS) industry. ABB connects 70 million smart devices via 70,000 automated control systems.

With Brooks, the company reported strong fiscal first-quarter earnings last week, with revenue totaling $189.3 million – up 18% over Q1 2017. Non-GAAP net income also rose by 35% over Q1 2017 to $35 million. That resulted in $0.32 EPS – up 25% and beating estimates by a penny.

For the current quarter, revenue is projected to hit $195 million to 205 million, with EPS between $0.33 and $0.41.

On a wider industry scale, the verdict is clear: The robotics and automation trend is growing. Fast.

  • The International Data Corp (IDC) projects robotics spending to surge to $230.7 billion in the five-year period to 2021 – with a CAGR of 22.8%.
  • The International Federation of Robots (IFR) says 1.3 million industrial robots will enter the global factory “workforce” this year. The figure will rise to 1.7 million by 2020.
  • The IFR projects even bigger growth for the service robot industry, with 32 million units in operation between this year and 2020. That will bring the market value to $11.7 billion.

As John Santagate, research manager at IDC Manufacturing Insights’ Supply Chain, says, “We continue to see strong demand for robotics across a wide range of industries.”

And as technology and innovation improves, the reach is spreading beyond just industrial and manufacturing, too. Dr. Jing Bing Zhang, research director at IDC Manufacturing Insights’ Robotics division, says. “The convergence of robotics, artificial intelligence, and machine learning are driving the development of the next generation of intelligent robots for industrial, commercial, and consumer applications. Robots with innovative capabilities such as ease of use, self-diagnosis, zero downtime, learning and adaptation, and cognitive interaction are emerging and driving wider adoption of robotics and enabling new uses in healthcare, insurance, education, and retail.”

He’s right. Growth here will continue for years to come – and I’m still positive on ABB and Brooks.

The past week’s market downturn also gives you a great chance to buy another investment on the cheap.

Go Robo

With volatility currently cranking higher, if you’re looking for a more diversified way to play this trend, take a look at the ROBO Global Robotics and Automation ETF (Nasdaq: ROBO).

Launched in October 2013, the actively managed fund (which includes both investment managers and industry experts) was the first to track global robotics, automation, and AI. It holds 89 stocks – including stalwarts like iRobot (Nasdaq: IRBT)and Rockwell Automation (NYSE: ROK) – with the $2.4 billion in assets divided equally among them.

In a testament to the strength of the industry, ROBO is coming off a stellar 2017, in which it gained 40%. It’s up 68% since inception.

With “lots of people looking at what’s going to happen over the next 5, 10, 20 years,” according to Global X Funds director of research Jay Jacobs, the robotics and automation trend is most definitely one place they’re looking. And as the industries continue to expand, heavily diversified funds like ROBO are right in the sweet spot of the growth.

Not only that, the market’s current downturn means you can buy shares for around 8.5% cheaper than a couple of weeks ago.

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Dump These Healthcare Stocks Getting Amazoned

Amazon.com (Nasdaq: AMZN) has often been referred to as the ‘Death Star’. In Star Wars, this was the ultimate weapon, capable of destroying an entire planet. Not a bad analogy, considering Amazon’s ability to totally disrupt the existing order of entire industries.

Next on the list of industries to be disrupted looks to be healthcare, as Amazon recently announced a partnership with Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A and BRK.B) and JPMorgan (NYSE: JPM). The three behemoths are forming a not-for-profit healthcare firm whose goal will be to lower costs for the three companies nearly one million employees and “potentially all Americans”.

This is good news for American consumers. Here’s why…

The rising price for healthcare in the U.S. has meant health benefits now make up about 20% of total worker compensation, up from a mere 7% in the 1950s. This is likely one of the major reasons why we have wage stagnation in our country. Healthcare – emergencies and the cost of them – are also the number one reason for personal bankruptcies in the U.S.

Ripe for Disruption

But while the Amazon-led venture may be good for consumers, any company in the healthcare sector, except those that actually provide the care or manufacture medicines should be shaking in their boots.

The reason why was summed up nicely by Carmen Weelso, director of research at Janus Henderson, when she spoke to the Financial Times. She said, “The healthcare sector is ripe for disruption. [JPMorgan, Berkshire, Amazon] are potentially creating a model for something that is a lot cheaper than what is out there already.” Weelso added, “Healthcare margins are fat, and it is opaque how they make their decisions. Their profits have been great, so they’ve got a target on their back.”

This venture will be a competitive threat to all of the many middlemen in the healthcare sector. These include insurance companies, wholesalers and pharmacy benefit managers (PBMs). I’m sure the CEOs of these middlemen companies recall Jeff Bezos’ words: “Your margin is my opportunity.”

The U.S. simply has too many middlemen involved in its healthcare system. And so despite spending more per capita on healthcare than any other developed country, the US still ranks 12th out of the 12 wealthiest industrialized countries when it comes to life expectancy, according to data from the Organization for Economic Co-operation and Development (OECD).

So make no mistake – this venture is aimed squarely at those middlemen driving up the cost of healthcare. Warren Buffett said, “The ballooning cost of healthcare act as a hungry tapeworm on the American economy.” And he’s right – check out this graph on rising drug costs:

So what sectors are companies are in the crosshairs of these three giants of American industry?

First are the healthcare insurance companies. These include the top five U.S. insurers: UnitedHealthAnthemAetnaHumana and Cigna. UnitedHealth alone provides or manages employee health insurance for nearly 30 million people.

Next come the PBMs that negotiate drug prices on the behalf of insurance firms and employers. These include Express Scripts and CVS Health and UnitedHealth. These latter three are involved in the lives of 250 million people!

And while the drugmakers will not be affected directly – Amazon will not begin manufacturing drugs – they will be affected in so far as they may struggle trying to maintain premium pricing on their drugs.

What the Venture May Do

While no one yet knows what exactly the venture may do, I think their first target will be insurance.

Amazon, Berkshire and JPMorgan will “self insure” their employees on a not-for-profit basis. Importantly, they would likely invite more companies to join the initiative in the very near future.

Some large companies, including all the U.S. automakers, already fund their own insurance plans by keeping the premiums and setting aside capital for potential losses. But they have contracted with the health insurers and PBMs to manage the plans. That has left control and fat profit margins still in the hands of those firms. For example, Amazon uses Express Scripts as its PBM and JPMorgan uses both Cigna and UnitedHealth to meet its employee healthcare needs.

This alternative is definitely needed. According to the Kaiser Family Foundation, annual premiums for employer-sponsored family health coverage reached $18,764 last year, up 3% from 2016. Workers, on average, paid $5,714 towards the cost of their coverage with employers picking up the rest. You can clearly the rising cost of healthcare insurance:

The not-so-funny joke among those in charge of employee benefits is that they currently have no option but to deal with ‘CUBA’ – Cigna, UnitedHealth, Blue Cross, Anthem or Aetna. But now, there will soon be a much cheaper and very viable alternative in the form of this newly-formed Amazon-led venture.
Investment Implications

So what could the investment implications be for you? They’re pretty obvious.

It should give you another reason to own  Amazon, if you needed one. I think the ‘Death Star’ will be successful in disrupting another sector, benefiting American consumers.

And even though the middlemen companies will fight change tooth and nail (already the big insurers have voiced their ‘concerns’ to JPMorgan’s Jaime Dimon) I would avoid or sell the stocks of all these companies.

I would even go as far as, if you have a high risk tolerance, to look at shorting these two ETFs that are loaded with middlemen stocks, the iShares U.S. Healthcare Providers ETF (NYSE: IHF) and the SPDR S&P Health Care Services ETF (NYSE: XHS).

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

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

Revenues for one firm in particular is growing faster than that of Google and Apple, the darlings of Wall Street. Investors have watched the stock price shoot up over 100% this past year and we’re just getting started.

You need to get in this stock before April 1st (it’s closer than you think!).

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7 Stocks to Own Should the Latest Correction Get REALLY Ugly

It’s official. The latest correction in the markets has entered scary territory. If you’re one of the thousands of investors freaking out, you might want to consider these seven stocks to own should things get really ugly.

Boy, did it come out of the blue, or what?

The S&P 500 gained 5.7% in January. By the end of trading Feb. 7, it had lost more than 80% of those gains culminating with the index’s reversal of fortune.

Up 1.2% in the first few hours of February 7 trading, investors fled in droves, sending stocks for a 0.5% loss on the day, the fourth negative performance in five days of trading erasing more than a trillion dollars in market cap. 

Where to hide other than cash?

Here are seven stocks to own I believe can withstand whatever else this correction throws at investors.

You’ll note all seven have little or no debt, lots of free cash and as wide a moat as possible.

Happy investing.

Stocks to Own Should Latest Correction Get Really Ugly: Public Storage (PSA)

I recently moved from Toronto to Halifax, a thousand-mile change in residence. Not having moved in a while, my wife and I had accumulated a lot of junk.

It made me realize that people don’t like to part with their junk, hence the growth in self-storage facilities like the ones owned by Public Storage (NYSE:PSA).

There’s a two-step process. 

First, you realize your house is overloaded with stuff, so you rent a storage locker to declutter. Then after a few years, you forget why you had a storage locker in the first place, so you call someone like 1-800-Got-Junk to haul it away. And then you repeat the process over and over until you die.

I’m facetious, of course, but I’m sure there’s a grain of truth in what I’m saying. In good times and bad, people are always looking for storage space.

Last July, I called PSA a boring stock to own, which it is, because it operates in an industry that’s only going to keep growing as boomers downsize.

Since recommending its stock, it’s down a little more than 10%. At the time, I thought it was cheap; it’s even cheaper today. It yields an attractive 4.3%. 

Stocks to Own Should Latest Correction Get Really Ugly: Acuity Brands (AYI)

Stocks to Own Should Latest Correction Get Really Ugly: Acuity Brands (AYI)

Source: Shutterstock

Consider this my contrarian pick of the bunch.

Acuity Brands, Inc. (NYSE:AYI) specializes in lighting solutions for homes and businesses. It has been in an awful funk in recent years after going on a big run that saw its stock deliver annual returns of 29%, 62%, 29% and 67% between 2012 and 2015.

In January, I called Acuity Brands one of the ten stocks that could surprise in 2018. That’s on top of recommending its stock on two occasions in 2017.

Since my article, it has lost another 20% on top of the 24% it lost in 2017.

A glutton for punishment, I can’t ignore the fact analysts expect it to earn $9.40 a share in 2018 and $10.23 in 2019. That’s less than 15 times its forward 2019 earnings.

Considering its P/E ratio hasn’t been this low since 2008, I see Acuity as a smart buy in a market that’s taking down overpriced stocks.

Stocks to Own Should Latest Correction Get Really Ugly: Hormel Foods (HRL)

When times get difficult, many people eat to forget their problems. A company like Hormel Foods Corp (NYSE:HRL) can help with that. Some of its brands have been around for years such as Spam, its mystery meat product in a can.

Hormel as increased its dividend for 52 consecutive years. In times of market volatility, it’s nice to know you’re going to get paid regardless of what happens to the stock price in the interim.

In October, Hormel announced that it was paying $850 million to acquire Columbus Manufacturing, Inc., a California business that specializes in premium deli meats under the Columbus brand. Together with its other deli brands Hormel and Jennie-O, it allows the company to provide a stronger offering to grocery stores in the refrigerated foods aisle.

Accretive to earnings in both 2018 and 2019, this is an excellent example of a strategic investment that will transform this segment of Hormel’s business.

Hormel stock has flatlined since early 2016. The Columbus acquisition should help get it unstuck. Until it does, a 2.3% yield isn’t a bad trade-off for a stock that’s trading at 17.5 times cash flow, its cheapest valuation since 2012.

Stocks to Own Should Latest Correction Get Really Ugly: Tractor Supply (TSCO)

Stocks to Own Should Latest Correction Get Really Ugly: Tractor Supply (TSCO)

Tractor Supply Company (NASDAQ:TSCO) serves the rural lifestyle. Its combination of product offerings provides a nice contrast to retailers like Walmart Inc (NYSE:WMT) and Home Depot Inc (NYSE:HD).

In the last couple of years, TSCO’s stock has missed out on the broader rally in the markets and now trades in the high $60’s, well off its all-time high of $97, hit in May 2016.

Its recent earnings results are encouraging — same-store sales up 4% in Q4 2017 compared to 3.8% a year earlier; transactions were up 2.7% and average ticket increased 1.3% — but it needs to work a little harder on keeping margins in check if it also wants to grow the bottom line.

A big reason for the 120 basis point increase in its Q4 2017 SG&A expenses is Tractor Supply continues to work on providing a better customer experience through technology and employee training and those things cost money.

In 2018, TSCO sees comps of at least 2%, net income of between $490 million and $515 million, and net sales of at least $7.69 billion.

In the past week, TSCO stock’s seen a 12% slide in its share price and is now trading at 16.7times its forward earnings, which is well below its average P/E ratio over the past decade. 

Perhaps, this too is a contrarian pick for a volatile market, but I see a stock that’s taken a beating for far too long and is ready to come to life.

Stocks to Own Should Latest Correction Get Really Ugly: Carter’s (CRI)

Stocks to Own Should Latest Correction Get Really Ugly: Carter’s (CRI)

Source: Shutterstock

When it comes to buying clothes for babies and young children, Carter’s, Inc. (NYSE:CRI) has the upper hand on the rest of retail. Between the Carter’s and OshKosh B’gosh brands, many new parents make it a must visit, hence why it’s the largest branded marketer of apparel to these two age groups.

Sure, we might not be having kids at the same rate as in the past, but we’re definitely willing to spend money on those we do bring into the world. We’ll forego buying ourselves a nice pair of pants to buy that cute jumper for our newborn.

In Carter’s Q3 2017 results announced at the end of October, it had notably strong U.S. results. Retail same-store sales increased 2.6% on the strength of eCommerce comp growth of 20.9%, offset by a 3.2% decline in brick and mortar sales.

Interestingly, that’s not necessarily a bad thing for the company. As customers become accustomed to the fit of its clothes, it makes sense for returning buyers to purchase online saving themselves time.

Omnichannel means you’re sometimes going to see store comps contract as eCommerce grows. It’s a fact of life in the new retail.

Carter’s continues to drive margins higher generating record free cash flow which it uses to buyback shares, pay dividends and keep debt low.

As long as people have kids, it’s a great stock to own in volatile markets. 

Stocks to Own Should Latest Correction Get Really Ugly: Church & Dwight (CHD)

Church & Dwight Co., Inc. (NYSE:CHD) not only is a great stock to own should the markets get really ugly, it’s one of the most consistent performers trading on the NYSE.

Back in 2016, I wrote about the consumer packaged goods company’s perfect record over the past decade. It hadn’t experienced a single year in negative territory. It’s carried on with that tradition notching gains of 5.8% in 2016 and 15.3% in 2017. 

The gains over the past two years seem insignificant compared to the S&P 500, but over the long haul, Church & Dwight has delivered for shareholders. A $10,000 investment in CHD stock at the beginning of 2008 is worth approximately $42,000. The same investment in the index is worth approximately $23,000 or 40% less.

The company has a proven method for building its business through acquisitions and organic growth. By focusing on a few healthy brands, it’s able to grow market share over time.

If you’re going to buy only one consumer defensive stock for your portfolio, Church & Dwight ought to be it.

Stocks to Own Should Latest Correction Get Really Ugly: Jacobs Engineering (JEC)

Stocks to Own Should Latest Correction Get Really Ugly: Jacobs Engineering (JEC)

Source: Shutterstock

While an infrastructure plan is said to be coming from the White House at any moment, Jacobs Engineering Group Inc (NYSE:JEC) is too busy to notice.

The professional services company just released its Q1 2018 results and they were very healthy with adjusted net earnings up 13% to $97 million or $0.77 a share with double-digit organic revenue growth from its professional services segment.

The company continues to integrate its 2017, $3.3 billion acquisition of CH2M, Colorado’s largest privately held company. Jacobs is excited about the future with CH2M a part of the company.

Jacobs raised its fiscal 2018 guidance for adjusted earnings from $3.75 a share to $4.05, almost a 10% increase, as a result of the lower corporate tax rate.

It finished the quarter with a backlog of $26.2 billion. As the company continues to focus on profitable growth, I would expect JEC stock to hold up well should the markets continue to correct.

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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.

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Source: Contrarian Outlook 

Why These Cryptos Fail to Toe the Line

Most cryptos fell in January. All the big ones anyway. I’m talking about the top six (by market capitalization).

The seventh? That’s NEO.

It’s called “China’s Ethereum” by some. Like its American cousin, it specializes in smart contracts.

It nearly doubled in January, from $74.54 on January 1 to $145.76 on January 31.

NEO’s price follows its own path because its main applications will be in China, not the West. And the majority of investors are Asians, not Westerners.

As an investor in NEO, I must admit, it was nice to see.

And it wasn’t the only cryptocurrency to do so.

VeChain (VEN) is a top-20 altcoin. It shot up 146% in January. Like NEO, it’s another China-centric coin, developing blockchain solutions for Chinese companies.

Populous, currently ranked 23rd by market cap, rose 72% last month. Its platform, currently in beta, garnered some positive comments and interest from the crypto investment community.

The first week of February didn’t see a turnaround. As I write, bitcoin is already down another 20%… Ether is down 29%… and Litecoin is down 6% (but all three are now heading up!).

Like those in January, though, some coins have not fallen in line.

Tether, with a current ranking of 16 and a market cap of $2.2 billion, is holding its value so far this month.

So are a few other much smaller coins, like bitCNY. It has a cap of around $32 million.

BitCNY is a decentralized cryptocurrency based on the BitShares blockchain that is pegged to the Chinese yuan. The demand of bitCNY emanates from users who desire that the token get the same purchasing power as the yuan.

In a nutshell, bitCNY is a token that represents the amount of BitShares (BTS) equivalent to one yuan.

From around $0.14 at the end of January, as I write, the token is trading at $0.17, a rise of 14%.

Market pegged assets are NOT leveraged to sudden price booms like many other digital coins. They simply follow the price of the asset they are pegged with.

Because bitCNY operates differently from other coins, it can go up while the vast majority of coins go down.

Russian startup Revain, on the other hand, is a more typical crypto. The company built an unbiased feedback platform where reviews cannot be changed or deleted. Revain hopes to stop the spread of fake news and ratings manipulation.

Revain has a market cap of more than $300 million, ranked No. 58. Its price went up 18% in the first week of February.

Apart from Revain, bitCNY and Tether, 16 other coins are up in the month of February. Here’s a list of the top 12 as I write…

Source: Coinmarketcap.com

Two coins are up by triple digits and six by double digits.

But the only one that’s a top 20 coin by market cap is Tether (currently ranked No. 16).

Most of these coins are tiny. The top gainer, Quebecoin, has a market cap of $680,000.

Small caps can sometimes be manipulated. For example, bitcoin Diamond, the second-top-ranked coin, is extremely volatile, even for a cryptocurrency. Its volatility can be traced to suspected pump-and-dump schemes emanating from Asia.

Is that what’s happening with E-Coin (ECN)? Take a look at its seven-day chart…

As I write, it’s up almost 4,000% in the last 36 hours. And I can’t figure out why!

Its price hike seems to have come from transactions totaling less than $50,000 that occurred on CoinExchange in the last 24 hours.

E-Coin is a European exchange service that works with bitcoin, Litecoin and dollars. It seems to be on the up and up.

But until I know for sure what’s going on, I’m keeping my distance.

The variety of cryptos you can buy and sell is truly amazing. But recent market activity seems to be ignoring that, not quite treating them as an undifferentiated whole but also failing to take into full account the huge differences in technologies and prospects among the cryptocoins.

There are very few that manage to break free of a falling market and rise.

Today, I’m seeing this dynamic again. The market has turned up, and I count only seven coins out of the top 100 that have gone down in the last 24 hours.

When there is a shortage of concrete metrics to go by, investment sentiment plays a bigger role in boosting or withdrawing support.

That seems to be the case here…

At least for now.

Good investing,

Andy Gordon
Co-Founder, Early Investing

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Source: Early Investing 

7 Top Takeover Targets for 2018

When the market experiences a sharp sell-off, savvy investors may choose to look elsewhere for their profit fix. Luckily enough, Morgan Stanley has just released a very intriguing report highlighting 15 stocks that are most likely to be bought in 2018. The firm singled out these acquisition targets by looking for large, liquid stocks from different sectors that are most likely to be acquired in the next 12 months. There is big value in identifying takeover targets correctly, as share prices tend to soar when a deal is announced.

From the list, we used TipRanks to identify the top stocks with a bullish Street outlook. Four of the seven stocks below boast a “Strong Buy” analyst consensus rating. Three of the stocks score a “Moderate Buy” analyst consensus rating — but for two of the stocks this is due to the lack of ratings more than than the sentiment itself. The advantage of these stocks is that they represent compelling investing opportunities — with or without a takeover deal.

TipRanks’ algorithms track and rank almost 5,000 Wall Street analysts. This allows us to: 1) see the overall analyst consensus and upside potential on any stock and 2) extract insights from the Street’s best-performing analysts.

So with this in mind, let’s take a closer look at what the Street has to say about these key stocks:

Top Takeover Targets: Domino’s Pizza (DPZ)

Domino’s Pizza Inc (NYSE:DPZ) has just experienced one of its busiest delivery days. The company expected to sell over 13 million pizza slices and 4 million chicken wings across the US on Super Bowl Sunday — boosted by multiple special offers on chicken wings and pizza toppings.

And, with strong U.S. growth under its belt, this pizza delivery giant scores a “Strong Buy” rating from the Street. This breaks down into eight buy ratings vs just two hold ratings. Meanwhile the average price target of $230 indicates upside potential of over 10% from the current share price.

Top Maxim Group analyst Stephen Anderson has a $250 price target on DPZ (18% upside). He says: “DPZ is one of our top industry picks as the valuation remains attractive.” Anderson also points out that for the first time, DPZ is now the market share leader in the Quick Service pizza category with 16.9% of total sales.

Top Takeover Targets: Graphic Packaging (GPK)

Top Takeover Targets: Graphic Packaging (GPK)

You’ve probably purchased food, beverages or other consumer products sold in packaging by Graphic Packaging Holding Company (NYSE:GPK). Immediately, we can see from the Street that GPK has a “Strong Buy” analyst consensus rating and big upside potential of 29% to boot.

RBC Capital’s Arun Viswanathan ramped up his $17 price target to $19 (23% upside) while reiterating his buy rating. He attributes the bullish move to 1) tax benefits for US-exposed packaging companies like GPK and 2) the recent $5 billion offer for KapStone Paper(NYSE:KS) from packaging company WestRock LLC (NYSE:WRK).

The deal, announced on Feb. 1, sees WRK pay a multiple of about 10x for KapStone. As a result of the tax reforms, GPK will now only pay a 24%-27% rate instead of 35.18% previously.

Top Takeover Targets: Pinnacle Foods (PF)

Top Takeover Targets: Pinnacle Foods (PF)

Pinnacle Foods, Inc. (NYSE:PF) is the business behind many famous food brands, including Birds Eye vegetables and Log Cabin syrups. Indeed its brands are so widespread that apparently  85% of US households have a Pinnacle Foods product in their kitchen right now. But most interesting of all is that Dan Loeb’s Third Point fund has just taken a stake in PF- leading the takeover rumor mill to work overtime.

Stephens analyst Farha Aslam reiterated her buy rating on Jan. 29 with a $65 price target (11% upside). She is convinced that if Loeb spearheads an activist campaign it would be for a sale instead of simply operational or management changes. Aslam suggests food giants ConAgra Foods (NYSE:CAG) or Tyson Foods (NYSE:TSN) as potential buyers with a valuation of around $67-$70 per share. Indeed Tyson Foods is not afraid of big purchases. It acquired sausage company Hillshire Brands for a whopping $8.55 billion back in 2014.

From a Street perspective, this “Strong Buy” stock has received 100% Street support over the last year. On the basis of the last three months alone, analysts see Pinnacle spiking to $67 (15% upside) from the current $60 share price.

Top Takeover Targets: Express Scripts (ESRX)

Top Takeover Targets: Express Scripts (ESRX)

Express Scripts Holding Company (NASDAQ:ESRX) is the largest pharmacy benefit management organization in the US. TipRanks reveals that the company has a “Strong Buy” analyst consensus rating from best-performing analysts. Indeed JP Morgan’s Lisa Gill calls ESRX her top pick in Healthcare Technology & Distribution for fiscal 2018.

But most exciting here is the recent upgrade by RBC Capital’s George Hill. On Jan. 31 he ramped up his price target from $68 to a very bullish $91 (31% upside potential).

Hill reaffirms Morgan Stanley’s selection and says that Express Scripts looks like an attractive M&A target as “one of the few remaining assets at scale”. He also cites the “recent sharp pullback on Amazon.com, Inc.’s (NASDAQ:AMZN) healthcare entry” as de-risking the stock.

Top Takeover Targets: W.R. Grace (GRA)

Top Takeover Targets: W.R. Grace (GRA)

This U.S. chemicals conglomerate has only received two recent analyst ratings — hence its “Moderate Buy” analyst consensus. However, both these ratings are firm buys. In particular, we can see that KeyBanc’s Michael Sison highlights the opportunity for large M&A as one of W.R. Grace & Co.’s (NYSE:GRA) ongoing catalysts.

Indeed, the company has just signed a $416 million deal for Albemarle Corp’s (NYSE:ALB) polyolefin catalysts and components business for $416 million. Sison highlighted the company’s improving results and reiterated his buy rating with an $87 price target (24% upside).

Top Takeover Targets: Allergan (AGN)

Barclays’ Douglas Tsao has just upgraded Botox maker Allergan Plc. (NYSE:AGN) from “hold” to “buy.” The move comes with a bullish $230 price target (39% upside) up from $220 previously. Tsao’s shift in sentiment, after over three years on the sidelines, comes from the company’s market-leading Botox position. And he doesn’t see any cause for concern any time soon:

“While Revance’s RT-002 and, to a less extent, Evolus, represent competition, we expect Botox will retain its market leadership,” Tsao wrote on January 29. “Especially in the case of Revance, we expect new entrants to drive market expansion from current levels.” As a result he calls the Irish-based company’s aesthetics business “undervalued at current levels.”

However concerns over the stock’s longer-term outlook have led to its more cautious “Moderate Buy” analyst consensus rating. In the last three months Allergan has received nine buy ratings. However these are offset by five hold ratings. Analysts (on average) see the stock rising 29% to hit $213 in the coming months.

Top Takeover Targets: Six Flags (SIX)

Six Flags Entertainment Corp (NYSE:SIX) is one of the world’s largest theme park operators with over 135 rollercoasters to its name. Top B.Riley FBR analyst Barton Crockett is bullish on theme parks in general- and SIX specifically.

Despite a volatile 2017, Crockett is confident the stock “can maintain a premium multiple because of exposure to high-margin international licensing, a unique focus on share repurchase, and a tendency for attractive growth (ex-natural disaster interruptions from fires, earthquakes and hurricanes that impacted 2017.)” He reiterated his buy rating on Jan 26 while ramping up his price target from $71 to $78 (21% upside potential).

Bear in mind that SIX also pays out a lucrative dividend. Wedbush’s James Hardimananticipates that SIX will pay a 4.2% dividend yield on his estimated 2018 dividend payout of $3.18. Hardiman sees SIX at $76 vs the current share price of $65.

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Source: Investors Alley

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%.

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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%.

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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 

Here’s Why Crypto Is Correcting… and Why It’s Temporary

Last week, I was at my son’s friend’s birthday party, and one of the dads there brought up crypto.

We were discussing various coins when another parent overheard and broke into the conversation. “I hope you guys don’t own any bitcoin, because that thing is crashing hard!” he said with a grin.

I nodded politely and acknowledged that crypto is going through a rough patch, with prices correcting practically across the board.

Then I asked the other dad if he knew what a bitcoin cost a year ago. He didn’t.

So I told him that bitcoin was trading for around $948 one year ago. And that despite the recent pullback, bitcoin is still up around 9X to 10X over the last 12 months.

The entire crypto market, as tracked by Coinmarketcap, has risen from around $15 billion early last year to around $400 billion today.

I don’t know of any other asset that even comes close to these returns. And the further back you go, the more insane the returns get. When I first bought in the spring of 2013, bitcoin was trading for $84. And it had just run up to that price from around $5 only months before.

My point is that if you paid attention only to mainstream news sources, you might think bitcoin was trading at multiyear lows. It’s “crashing,” “plummeting “… it “won’t survive.”

I believe this pullback is completely natural. Here’s why…

A Natural (Yet Nasty) Correction

I look at the crypto market like this: 15 steps forward, nine steps back.

When an asset increases in value 20X, as bitcoin did last year, it’s only natural for some owners to take profits. Others who bought in at $15,000 or $19,000 are likely panic-selling.

This is simply how markets operate. Weak hands are shaken out during these times.

Yet a significant portion of the investors who bought in over the last year will hold strong. And they will continue to hold for years because historically, that’s the most proven way to make money in crypto. This is the sturdy base of crypto owners, and it continues to grow steadily.

Let’s look beyond price action for a moment and recognize that huge developments are taking place in the crypto world.

First, governments appear to be closer to regulating crypto markets. If done correctly, this will be a very positive development.

The fact that South Korea, for example, is banning anonymous cryptocurrency trading, is arguably a good thing.

We need trust to make these new markets work long term. And that will never happen if naysayers can point to crypto as a haven for hackers and criminals.

So, just as banks are required to verify accounts under “know your customer” laws, cryptocurrency exchanges around the globe are now moving in that direction as well.

We also got news this week that Robinhood, the commission-free stock trading service with millions of users, is moving into the crypto markets. Soon, users will be able to buy and sell crypto with zero commission.

Still, there’s clearly some other factor holding cryptocurrency markets back. And it’s not what you might expect…

Exchanges Are Growing Too Fast

A primary factor in the crypto pullback that most people haven’t recognized is this: Most exchanges are growing far too fast.

So many people are entering the market that many exchanges have had to shut down new user registrations. Most others can’t keep up with customer support.

Bittrex, Bitfinex, CEX. IO and Binance (four of the largest crypto exchanges in the world) have been forced to deny new customer accounts due to explosive growth.

Binance, for example, added 240,000 new accounts in a single hour on January 10. It has since stopped accepting new accounts and only recently began allowing a small number of new users per day.

Coinbase, the largest U.S.-based exchange, continues to experience major growing pains. Its customer support is flooded, and it can’t verify new accounts fast enough.

Exchanges simply can’t keep up with the massive influx of new crypto investors.

Naturally, this has put a damper on markets. When the flow of new buyers is bottlenecked by exchange capacity, it’s of course going to cause a temporary pullback in prices.

Behind the scenes, however, crypto exchanges are furiously upgrading their systems and hiring to meet demand. Due to security requirements and the fact that exchanges are now required to verify all customers, this takes time.

The point is that exponential user growth is a great problem to have. Exchanges are working diligently to accommodate new users, and I suspect that soon, most of them will reopen new account registrations and clear their customer service backlogs.

When this happens, I expect to see a sharp rebound in crypto markets. And then we can begin the next leg up. If we get more clarity on government regulation, even better. There’s also the X-factor of institutional buyers, who I still believe will start moving into the crypto market in the next few months.

By the end of the year, I’m fairly certain we’ll look back at this dip and say, “Damn, that was a great buying opportunity.” But in the midst of a nasty correction, the opportunity is hard to recognize.

It seems like the end of the world for crypto, but I assure you… it’s not.

We’re still at the very beginning.

Have a great weekend, everyone.

Adam Sharp
Co-Founder, Early Investing

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Source: Early Investing 

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