Cabot Turnaround Letter Weekly Update
Today’s note includes earnings updates, ratings changes, the podcast and the Catalyst Report.
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Outside of your job, you probably don’t get paid for most of the things you do. But investing in a stock that pays a dividend is one of the exceptions. When you buy a dividend stock, the company will pay you for owning it. And that’s outside any increase (or decrease) in overall stock price.
But what is a dividend? A dividend is a bonus. An extra. It’s a portion of earnings that the company pays to investors on a quarterly or yearly basis.
Here’s the thing about dividend stocks, though. Some people say dividend stocks aren’t sexy. They bore the bejesus out of people. People get turned off by a boring dividend stock.
They shouldn’t. Over time, dividend stocks vastly outperform stocks that don’t pay dividends. When you buy a dividend stock, you know for sure that you’ll receive a steady stream of income. If the market crashes and the share price begins to fall, you at least have a nice 3% or 4% yield (or higher) to soften the blow.
In fact, the best dividend-paying stocks can help you reach a variety of investment goals, including protecting your wealth, generating income and reaping capital gains. Let’s break that down.
Buying a stock that doesn’t pay a dividend can only reward you in one way: share price appreciation. Dividend investing, however, grows your wealth in three ways.
First, like with any stock, your portfolio increases as the price of the stock appreciates. Second, you will receive an income stream of dividend payments, which you can collect in cash or reinvest to further boost your holdings. Lastly, many companies increase their dividends over time, providing an income stream that often outpaces inflation, and greatly increasing the yield the longer you hold the investment. (Your yield is how much you earn in income every year as a percentage of your investment.)
Furthermore, companies that have the cash flow to pay regular dividends typically make safer, more reliable investments. The best dividend-paying stocks are high-quality, long-lived companies with predictable business models—they aren’t going to suddenly crash due to a lousy quarter or an adverse news event.
Bear in mind, however, that the first thing to consider regarding a high dividend, or any dividend for that matter, is whether it is safe and sustainable. Often times, a yield becomes high because the stock price has fallen considerably. A stock price usually falls because of poor operational performance, which imperils its ability to sustain the dividend.
It is generally not wise to be allured by a 8%, 9% or 10% yield on a stock that will have difficulty maintaining the dividend and is less likely to grow it. Over time, you should fare much better with a more modest high yield on a company that can sustain the payout and likely grow it over time.
To learn more about investing in dividend stocks, be sure to download your FREE copy of our report, Cabot’s 5 Best Dividend Stocks.
Today’s note includes earnings updates, ratings changes, the podcast and the Catalyst Report.
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Arcosa (ACA) released an uninspiring report on Wednesday that was particularly ill-timed given yesterday’s market retreat. The company missed across the board. Revenue was up 2.7% to $459 million, missing by $4.7 million while adjusted EPS of $0.33 missed by $0.08. Guidance for 2021 missed...
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Personalis (PSNL) released preliminary Q4 results on January 11 and the official release after the close yesterday offered no surprises. Personalis (PSNL) Moves To SELL
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Stock Recommendation Tracker
The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
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Stock Recommendation Tracker
The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
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More Cracks Appear
At the start of November we saw a couple of blastoff-type indicators flash green (like the Three Day Thrust rule), and that turned out to be the start of a powerful intermediate-term advance. During the next two-plus months, progress was relative there...
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The big picture for the market is that the uptrend is intact but under the surface we’re continuing to see pockets of turbulence. While the S&P 500 is just 2% off its high from last week and the S&P 600 Small Cap Index a..
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You may have seen that a relatively new Explorer idea, Fisker (FSR), was up 38% yesterday. It turns out that my analogy of comparing the company to Apple’s relationship to Foxconn was truer than even I could imagine. The news yesterday was that Foxconn will be a..
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Sprout Social (SPT) reported Q4 results yesterday that surpassed expectations. Revenue was up 32.6% to $37.3 million (beating by $1.4 million) while adjusted EPS of -$0.06 beat by $0.05. Guidance for 2021 looks solid with management calling for 2021 revenue of $172.5 million (up modestly...
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Earnings have been sensational. Reported earnings for S&P 500 companies have grown an average of 2% in the fourth quarter, compared to an expected -11%.
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“Legal Weed Stocks Dip Despite New Jersey Governor Signing Recreational Cannabis Bill Into Law”
That was the headline on one of my news sources yesterday morning, implying that the action of the stocks in light of that legalization event was somehow illogical. But as know...
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Upwork (UPWK) reported Q4 results yesterday that surpassed expectations on the top and bottom lines. Revenue was up 32% to $106.2 million (beating by $8.8 million) while adjusted EPS of $0.06 beat by $0.06. Guidance for 2021 also surpassed consensus.
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Open-Up Stocks Thrive While the Market Struggles
It’s been a rare down week in the market. But there’s nothing to be alarmed about. The S&P 500 is only down a little so far. And the uptrend that has existed for almost a year is intact.
Even...
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The stock market is clearly accelerating the “reopening” trade. Small cap and cyclical stocks as well as commodity prices are surging, interest rates continue to tick up (the 10-year Treasury yield is now 1.38%, up from 0.92% at year-end), and novel financial vehicles SPACs,...
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Judging by some headlines and my Twitter feed, you would think the markets are in meltdown mode. But I just checked and the S&P 500 is only 1.9% down from its all-time high. And the Russell Micro-Cap Index is down 4.0% from its high...
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We are modestly optimistic on energy prices – domestic production will likely remain subdued while global demand has essentially returned to pre-pandemic levels even though some petroleum-driven demand for gasoline and jet fuel hasn’t fully recovered yet.
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Buying investment real estate is the best way to take advantage of the current housing boom. But there's an easier way too.
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Last week wasn’t great for growth stocks and so far, this week is just plain awful. The primary culprits are known; risk of inflation and higher interest rates have pushed cyclical stocks up and growth stocks down (generally speaking).
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The stock market added to its gains last week up for a second straight week with the S&P 500 up 1.2% while the Nasdaq jumped 1.7%. Of note, February expiration is upon us this week. And all three of our February positions (Alcoa, and...
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With the shares continuing to surge past our recently raised 65 price target, and now being priced at a premium to even our upgraded valuation metrics
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