After stumbling last Wednesday, the market is back on its feet, with the major indexes all hitting new highs in recent days. Technology stocks have led the way, a reversal of the Dow outperformance we’d seen over the past two weeks.
Several of our holdings reported earnings this week, and I have all the details below. I’m also moving ConEd (ED) back to Hold due to the stock’s recent advance.
HIGH YIELD TIER
BUY – General Motors (GM 43 – yield 3.5%) – On Monday, GM got hit by a Goldman Sachs downgrade, which was heavily covered in the news. The stock remains above its gap from early this month, and I’m going to keep it tentatively on Buy for risk-tolerant high-yield investors. It may be worth noting that Goldman never had GM rated Buy before or during the stock’s recent advance.
Next ex-div date: December 7, 2017
BUY – ONEOK (OKE 54 – yield 5.5%) – ONEOK is the latest addition to our High Yield Tier. The natural gas pipeline company reported earnings that beat expectations after the close yesterday, and looks set to open slightly higher today. Revenues rose 23% year-over-year, beating expectations by $280 million, while EPS beat by one cent. Third-quarter net income hit $165.7 million, thanks to a 16% increase in processing volumes and 5% growth in gas and NGLs transported. Because ONEOK was reporting earnings yesterday, we started our position last week, buying a half position at Thursday’s average price of 53.5. We wound up getting a good price, thanks to Wednesday’s market selloff, which had an outsized impact on pipeline industry stocks. With the first half of our position established, we’ll add an equal number of shares at the stock’s average price today, November 1.
Next ex-div date: January 2018
BUY – Pembina Pipeline (PBA 33 – yield 5.2%) – Pembina is a Canadian pipeline company. After pulling back to the bottom of its trading range in October, PBA started to rebound this week, and is up 2% since our last update. Pembina will report third-quarter results tomorrow, November 2, after the close. Analysts are expecting 45% revenue growth, to $1.10 billion, and 47% EPS growth, to $0.28 from $0.19 last year. Risk-tolerant high yield investors can buy a little here.
Next ex-div date: November 21, 2017 est.
HOLD – Welltower (HCN 67 – yield 5.2%) – HCN is a health care REIT that owns senior housing, post-acute care and outpatient medical facilities. The stock was hit by a prolonged selloff in REITs over the past six weeks, but finally bottomed just above 65 last week. Welltower will report third-quarter earnings on November 7 before the open. Analysts expect EPS of $0.47, down one cent year-over-year, on revenues of $1.07 billion, just half a percent shy of last year’s $1.08 billion in revenue.
Next ex-div date: November 3, 2017
DIVIDEND GROWTH TIER
BUY – BB&T Corp (BBT 49 – yield 2.7%) – Since reporting earnings on October 19, BBT has been up on eight of the last nine trading days, and closed within a few cents of its 52-week high yesterday. Dividend growth investors can buy some here.
Next ex-div date: November 9, 2017
BUY – Broadridge Financial Solutions (BR 86 – yield 1.5%) – Broadridge is a tech company that provides information and services to financial companies. The stock is hitting 52-week highs and looks very healthy. Dividend growth investors who don’t own it can buy a little here, or on a pullback to the stock’s 50-day moving average, currently around 81.
Next ex-div date: December 12, 2017 est.
HOLD – Carnival (CCL 66 – yield 2.7%) – Carnival, the world’s largest cruise line, has lost some momentum since Hurricane Irma, which did significant damage to many Caribbean islands. The stock is chopping around its 50-day moving average now, currently at 66.5. We took partial profits in September, so we’re holding on to the rest to see if CCL will have a second act.
Next ex-div date: November 22, 2017
BUY – CME Group (CME 137 – yield 1.9%) – CME Group owns options, commodity and other financial exchanges. The company reported third-quarter earnings on Thursday, and beat EPS estimates despite generating slightly lower-than-expected revenue. Revenue still rose 5.8% year-over-year, to $890.8 million, falling just a fraction of a percent below expectations. EPS of $1.19 beat estimates by three cents. The stock is 3% higher since the announcement. Dividend growth investors can buy here for steady growth, regular dividends and the annual special dividend.
Next ex-div date: December 7, 2017 est.
BUY – Cummins (CMI 177 – yield 2.4%) – Engine-maker Cummins reported estimate-beating third-quarter earnings yesterday. Revenues and earnings grew 26% and 34% thanks to strong demand for trucks and construction equipment in the U.S. and China. Management also upped its full year revenue guidance and is now projecting 14% to 15% growth. The stock opened lower regardless, possibly because analysts were hoping for greater margin improvement given the improving macro environment. But shares made up for most of the drop during the day yesterday. I’ll keep CMI on Buy.
Next ex-div date: November 16, 2017
BUY – Wynn Resorts (WYNN 147 – yield 1.4%) – Wynn reported third-quarter results on Thursday, and though revenues and EPS both grew by double digits, beating estimates, the stock’s reaction was slightly negative. WYNN made up for that with a big gap up yesterday though. The trigger was a research note from Nomura forecasting a “noticeable pickup” in October gaming numbers from Macau, based on their on-the-ground observations. Wynn owns two casino resorts in Macau and two in Las Vegas, and is building the first major casino in the Boston area. The stock has been consolidating for two months after a multi-month rally; a breakout past 150 would be very bullish. Dividend growth investors can buy here.
Next ex-div date: November 7, 2017 est.
SAFE INCOME TIER
BUY – 3M (MMM 230 – yield 2.0%) – MMM has pulled back slightly since last week’s 6% post-earnings gap up, but remains above the level of the gap. Some consolidation is normal here, so MMM remains a Buy for safe income investors.
Next ex-div date: November 15, 2017 est.
HOLD – Consolidated Edison (ED 86 – yield 3.2%) – ConEd is a New York-area utility. ED is back near the top of its trading range, possibly thanks to Republican’s tax cut plan edging closer to reality. Like many utilities, ED pays the top corporate tax rate and would likely get a big tax cut if Republicans are able to pass something. With the stock near all-time highs, I think it’s time to put ED back on Hold.
Next ex-div date: November 14, 2017
HOLD – Ecolab (ECL 131 – yield 1.1%) – Ecolab reported third-quarter earnings before the open yesterday and the stock opened higher, but the gains were erased after management announced lower full-year guidance on the afternoon conference call. Revenues grew 5%, just a hair more than expected, and adjusted EPS rose 7%, also more than expected, to $1.37. But management narrowed their guidance for 2017 because of hurricane impacts. Management is now forecasting 6% to 9% EPS growth for 2017, to $4.65-$4.75 per share, down from the prior guidance of $4.70-$4.90. ECL is a little lower after the announcement, but still well within its trading range, and remains a decent long-term hold for safe income.
Next ex-div date: December 15, 2017 est.
BUY – Guggenheim BulletShares 2018 High Yield Corporate Bond ETF (BSJI 25 – yield 4.0%)BUY – Guggenheim BulletShares 2019 Corporate Bond ETF (BSCJ 21 – yield 1.8%)
BUY – Guggenheim BulletShares 2020 High Yield Corporate Bond ETF (BSJK 25 – yield 4.8%)
BUY – Guggenheim BulletShares 2021 Corporate Bond ETF (BSCL 21 – yield 2.3%)
Next ex-div dates: all November 2, 2017 est.
BUY – PowerShares Preferred Portfolio (PGX 15 – yield 5.6%) – PGX is an ETF that holds preferred shares. It doesn’t have capital appreciation potential, but trades in a low-volatility range between 14 and 16 and pays monthly dividends of about seven cents per share. It’s currently trading just a hair under 15, so I’ll keep it on Buy for investors who want to add a source of reliable monthly income to their portfolios.
Next ex-div date: November 15, 2017 est.
HOLD – Xcel Energy (XEL 50 – yield 2.9%) – Xcel Energy is a Minnesota-based utility and one of the largest producers of wind power in the U.S. The company reported third-quarter earnings last week, and though the stock’s initial reaction was negative, it’s now up slightly. Like ConEd, the stock is likely seeing a bit of a boost thanks to possibility of a tax cut. Long-term safe income investors can hold.
Next ex-div date: December 19, 2017 est.
Closing prices as of October 31, 2017.
