Markets have stayed strong since our last update, still led by the Nasdaq. Energy stocks have also had a good week, thanks to a pop in oil prices. The price of a barrel of oil is the highest it’s been in two years after a weekend of surprising political events in Saudi Arabia, OPEC’s biggest exporter. But industry experts don’t expect the surge to last, warning that higher U.S. production will depress prices again soon enough.
REITs have also strengthened since our last update, despite the near-certainty that the Fed will hike rates next month. The strongest performers include residential, data center and storage REITs, and a select group of retail REITs.
Utilities, industrials and health care stocks have also had a good week, while financials and materials stocks have stumbled. Most important, earnings season marches on. I have updates below from all the companies that reported this week.
HIGH YIELD TIER
BUY – General Motors (GM 42 – yield 3.6%) – GM has pulled back to its 50-day moving average, which looks like a decent buying opportunity for risk-tolerant investors. The automaker reported better-than-expected October sales numbers last Wednesday. Sales declined 2.3% year-over-year, much less than the 7.3% drop analysts were expecting. Overall, U.S. auto sales rose slightly last month, instead of declining as expected (sales were very strong last October). While industry watchers are once again warning of “peak auto,” low unemployment, rising consumer confidence and low gas prices are all keeping sales humming for now. Of course, GM is in a short-term downtrend, but it looks like a normal pullback for now.
Next ex-div date: December 7, 2017
BUY – ONEOK (OKE 53 – yield 5.6%) – After opening higher following last Wednesday’s estimate-beating earnings report, OKE pulled back to end the week, trading ex-dividend on Friday. The stock bounced around 52 though, and is now rebounding. We established the second half of our position at last Wednesday’s average price of 54.86, for an average cost basis of 54.18. OKE is rated Buy for investors who want high current yield.
Next ex-div date: January 2018
BUY – Pembina Pipeline (PBA 36 – yield 4.8%) – PBA surged back to the top of its trading range after reporting third-quarter results after the close on Thursday, bringing the stock’s total gain over the past two weeks to over 10%. The company’s merger with Veresen, another Canadian pipeline company, is proceeding as planned. Try to buy on pullbacks, or, if it comes first, on a breakout past 36.
Next ex-div date: November 21, 2017 est.
HOLD – Welltower (HCN 69 – yield 5.1%) – Welltower reported third-quarter earnings that beat revenue and FFO estimates yesterday. Revenue grew 1%, to $1.09 billion, to beat the consensus estimate by 2%. FFO (short for funds from operations, a measure of cash flow used by REITs) also rose 2% to hit $1.08 per share, beating estimates by three cents. Management raised its full-year guidance slightly and the stock closed up just under 1%. HCN is trending up nicely, but it’s still early—I’ll put it back on Buy once this uptrend proves it has some staying power.
Next ex-div date: February 2, 2018 est.
DIVIDEND GROWTH TIER
BUY – BB&T Corp (BBT 48 – yield 2.7%) – After trading sideways since our last update, BBT pulled back sharply with financial stocks yesterday. Interest rates have slid slightly over the past two weeks, but a December rate hike remains a near-certainty. More likely, financial stocks were spooked by lousy bank earnings from Europe, where Credit Agricole SA led international bank stocks lower. Assuming the slump doesn’t get significantly worse today, BBT remains on Buy.
Next ex-div date: November 9, 2017
BUY – Broadridge Financial Solutions (BR 87 – yield 1.5%) – Broadridge is a tech company that provides information and services to financial companies. The company reported earnings that beat estimates this morning, including year-over-year growth of 3% in revenues and 50% in adjusted EPS. 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 try to wait for a pullback to the stock’s 50-day moving average, currently around 82.
Next ex-div date: December 12, 2017 est.
HOLD – Carnival (CCL 66 – yield 2.7%) – Royal Caribbean (RCL) beat estimates yesterday, giving peer CCL a nice pop (while the two are competitors, rising cruise demand, the primary driver of their earnings growth, is good for both). CCL continues to chop around its 50-day moving average, currently at 66. We took partial profits in September, but we’re holding onto the rest to see if CCL will have a second act.
Next ex-div date: November 22, 2017
BUY – CME Group (CME 138 – yield 1.9%) – CME’s post-earnings rally stalled Friday around 140, a nine-year-high for the stock. CME’s longer-term uptrend is intact, and dividend growth investors can buy here or on pullbacks toward the 50-day, currently at 134.
Next ex-div date: December 7, 2017 est.
BUY – Cummins (CMI 172 – yield 2.5%) – Despite reporting estimate-beating third-quarter earnings last Tuesday, CMI dropped about 2% and hasn’t recovered yet. Industry watchers point to margin issues, arguing that Cummin’s margins should be stronger given the improving macro environment. The stock has stabilized though, and remains above its 50-day, so I’ll keep it on Buy for now.
Next ex-div date: November 16, 2017
BUY – Wynn Resorts (WYNN 152 – yield 1.3%) – WYNN broke out past resistance at 150 after October gaming numbers from Macau beat estimates last Wednesday, and the stock is now hitting new 52-week highs. After a six-month rally, WYNN spent September and October consolidating, but now looks ready to get going again. Dividend growth investors can buy here.
Next ex-div date: November 15, 2017
SAFE INCOME TIER
BUY – 3M (MMM 230 – yield 2.0%) – MMM continues to consolidate a bit below its post-earnings high. MMM remains a Buy for safe income investors.
Next ex-div date: November 15, 2017 est.
HOLD – Consolidated Edison (ED 88 – yield 3.1%) – I put ED back on Hold last week because the stock is near all-time highs, but if you own it, hold on tight. ConEd, a New York-area utility, is a great long-term income holding. The company reported earnings last week, but business is so predictable that the stock rarely has much of a reaction to quarterly announcements. It can be pushed around by interest rate moves and, recently, talk of corporate tax cuts.
Next ex-div date: November 14, 2017
HOLD – Ecolab (ECL 131 – yield 1.1%) – ECL got a little jumpy after reporting third-quarter earnings last Tuesday, but has since calmed down, and remains a good Hold for long-term safe income investors. This year’s results will be impacted somewhat by the unusually fierce hurricane season (Ecolab is based in Houston) but longer-term growth estimates remain strong.
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 December 1, 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 13, 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. Utility stocks are in an uptrend, partially thanks to the possibility of significant tax cuts for the industry, and XEL is trading just below all-time highs. Long-term safe income investors can hold.
Next ex-div date: December 19, 2017 est.
Closing prices as of November 7, 2017.
