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Dividend Investor
Safe Income and Dividend Growth

January 15, 2025

Things are getting dicey in the market.


The problem is interest rates. Growth expectations are strong following the election. At the same time, inflation has been sticky and not moving lower. Investors were already expecting higher rates for longer when they got a gut punch with last week’s strong jobs report.

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A Crucial Week

Things are getting dicey in the market.

The problem is interest rates. Growth expectations are strong following the election. At the same time, inflation has been sticky and not moving lower. Investors were already expecting higher rates for longer when they got a gut punch with last week’s strong jobs report.

Already pessimistic interest rate expectations took a turn for the worse last week. Months ago, investors expected four Fed rate cuts in 2025. That changed to expectations of just two rate cuts after last month’s Fed meeting. But in the past week, many analysts have been considering the possibility of zero cuts this year. And some outliers are even entertaining the possibility of a rate hike.

Meanwhile, the benchmark 10-year Treasury rate is soaring toward the danger level. It’s now at 4.8%, up from 3.6% in September when the Fed started cutting the Fed Funds rate. That’s the highest level since the rate peaked at about 5% in late 2023, and dangerously close to that number. That’s a problem.

There has been much consternation over the last six months about the pace of Fed rate cuts. And the market persevered through even the more pessimistic expectations. But that was always with the assumption that interest rates had peaked. Stocks priced the belief that rates at least wouldn’t get to new highs. That belief will be tested this week.

With the 10-year teetering on the brink of 5%, it won’t take that much to put it over the top. And the December CPI inflation number will come out this week. A bad number could do the trick. And that would almost assuredly add further downside to an already declining market.

Of course, the number could be OK and relieve the market. In fact, the PPI number came in a little softer than expected on Tuesday. That’s a good sign. It’s also a week in which big banks will report earnings. Good results could alleviate some of the current market angst. We’ll see. There’s a good chance the market will be OK. But the market is in more danger of a significant selloff or a correction than it has been in some time. We’re on the brink.

Recent Activity

December 18
AbbVie Inc. (ABBV) – Rating change “HOLD” to “BUY”

Broadcom Inc. (AVGO) – Rating change “BUY” to “HOLD”

SOLD American Tower Corporation (AMT) - $184.85

January 8

ONEOK Inc. (OKE) - Rating change – “HOLD” to “BUY”

AbbVie Inc. (ABBV) – Buy half

NextEra Energy (NEE) – Rating change “HOLD” to “BUY”

January 15

Toll Brothers, Inc. (TOL) – Rating change “BUY” to “HOLD”

High Yield Tier

AGNC Investment Corporation (AGNC – yield 15.8%) Although it is still likely that AGNC will have a good year in 2025, the story is deteriorating for now. It’s a huge positive for the mortgage REIT that the Fed has begun a rate-cutting cycle that will likely last years. But rate cut expectations have taken a turn for the worse and are now on hold. Spreads are still higher as the Fed Funds rate has already been cut by 1% and longer rates are higher. But the interest rate story is souring. The next week could be crucial in determining if that narrative gains traction or things cool off. BUY

Brookfield Infrastructure Partners (BIP – yield 5.2%) Like most other utilities, BIP was riding high until the middle of October when the interest rate narrative changed for the worse. The business itself is solid with remarkably stable revenues and a growing dividend. BIP was a superstar performer before inflation and rising interest rates. But it has been beholden to the interest rate narrative for the last two years. Odds of significantly lower rates soon have diminished of late. Things change and the longer-term trend for rates seems to be going in the right direction and BIP should improve going forward. (This security generates a K1 form at tax time.) BUY

Cheniere Energy Partners, L.P. (CQP – yield 6.1%) This liquid natural gas exporting partnership is back in business after a dip in December. CQP rallied after the election, pulled back, and has since recovered. It’s up over 15% since the election. The incoming administration is highly encouraging of natural gas exports and Cheniere is the country’s largest exporter. Natural gas-related stocks have also been strong as electricity demand skyrockets and the use of the fuel is expanding both in the U.S. and overseas. The longer-term situation was always strong and now the short-term situation is improving. (This security generates a K1 form at tax time.) BUY

Enterprise Product Partners (EPD – yield 6.6%) – This high-yielding midstream energy partnership has regained its footing after a steep early-December selloff following a huge post-election surge. Despite all the bouncing around, EPD is still up 11% since the election. And the future is still bright. There should be more oil and gas sloshing around the country in the years ahead. And EPD can move higher. The stock is still well below the all-time high set in 2014. And now earnings are much higher. (This security generates a K1 form at tax time.) BUY

FS KKR Capital Corp. (FSK – yield 13.1%) This Business Development Company (BDC) has been bouncing around since the middle of November. But it’s still up 9% since the election. It even endured the last ex-dividend without a selloff, which is unusual for a stock with such a high yield. FSK is a strong beneficiary of the Trump victory. The perception of high economic growth going forward is exactly what FSK needed. It has a portfolio of smaller companies that tend to be economically sensitive. The prognosis got better going forward. BUY

Main Street Capital Corporation (MAIN – yield 7.1%) As a BDC, this story is very similar to that of FSK. Main’s portfolio of companies not only makes high-interest loans, but it also takes equity stakes. The equity stakes are the primary reason the total returns have been better than just about every other BDC. MAIN broke out to new all-time highs this month. Despite a hiccup over the past few weeks, MAIN is a rare stock that didn’t have a December swoon. The improving economic outlook leaves room for further appreciation. BUY

ONEOK Inc. (OKE – yield 3.8%) – This more volatile midstream energy company stock has mimicked and exaggerated the behavior of its peers. It soared after the election and then gave up most of those gains in December but has regained its footing this month. The stock soared 18.5% in November then fell about 6% since. Nevertheless, OKE seems to have resumed its pre-election upward trajectory after pricing out the excess. The market loves the new acquisitions of Medallion Midstream and Enlink Midstream (ENLC), as the new additions will be accretive immediately. The story remains strong as recent actions will enhance earnings into a future that just got better with the election. BUY

The Williams Companies, Inc. (WMB – yield 3.4%) – Ditto for WMB. It was on fire after the election but pulled back in December. The stock has been moving higher again over the past month and is still up about 7% since the election and has returned 69% over the past year. It did that despite a flat energy sector because the natural gas business is hot. The spigots should unleash in the years ahead because of the “drill, baby, drill” policies of the new administration and growing demand in the U.S. and overseas. Williams guided to the upper half of 2024 estimates and the future looks great. BUY

Dividend Growth Tier

AbbVie (ABBV – yield 3.7%) The future looks good for this life science and biotech company. AbbVie is turning the corner from the Humira expiration as new drugs Skyrizi and Rinvoq are expected to generate $19 billion this year, replacing nearly all the peak Humira revenue alone. The company returned to slow revenue growth in the second half of 2024 and is expected to generate “robust” growth this year. There are also several drugs that should receive FDA approval this year. ABBV returned a respectable 15% in 2024 but 2025 should be much better as greener pastures are finally arriving. But an early sticking point is trepidation over the nomination of RFK to HHS and fears about pricing. BUY

Ally Financial Inc. (ALLY – yield 3.4%) This could be a big week that determines the near-term direction of this online banking company stock. Big banks start reporting earnings this week. The results as well as the statements by management could confirm or deny the recent bullishness in the sector. But either way, it is unlikely that short-term rates will move higher, and the regulatory environment is certain to become much more friendly in the new administration. Analysts are also expecting earnings growth of 40% in 2025. BUY

Broadcom Inc. (AVGO – yield 1.2%) – Sure, AVGO came off the high. But it had to. That’s why it was downgraded to a hold. But it is hanging tough near the top of the range, indicating that it is likely to hold the recent gains. This semiconductor, software and artificial intelligence juggernaut really got a boost from earnings last month. AVGO soared 38% in the two days following the report. The company said demand for its AI chip (XPU) is booming and expects it to generate revenues between $60 billion and $90 billion by 2027. Revenue was $12.2 billion in fiscal 2024. The revelation has captured the imagination of investors. Even this week’s news about AI chip sale restrictions in China, which roiled Nvidia (NVDA), didn’t hurt the stock at all. HOLD

Cheniere Energy, Inc. (LNG – yield 0.9%) It’s a brand new all-time high. Natural gas is hot as skyrocketing electricity demand from AI has a big impact on the main fuel source that generates it. This liquid natural gas (LNG) exporter is a definite beneficiary of the Trump election. That’s why, unlike most energy stocks, it’s above the November high. Cheniere stands to benefit from a friendlier regulatory environment, more natural gas production, cheaper domestic prices, and encouragement of natural gas exports. BUY

Constellation Energy Corporation (CEG – yield 0.5%) This electricity demand story is hot stuff. CEG had yet another huge surge higher. The stock soared more than 25% last Friday after the company announced it will acquire natural gas and geothermal electricity giant Calpine Corp. for $16.4 billion. The deal includes 50 million CEG shares and $4.5 billion in cash plus the assumption of $12.7 billion in debt for a net price of $26.6 billion. The deal is expected to close within the next 12 months. Obviously, the market likes the deal.

The acquisition makes Constellation the biggest independent electricity provider in the nation at a time when demand for electricity is skyrocketing because of artificial intelligence. The company was already the largest provider of clean energy for electricity, and this makes it a giant. Carbon-friendly power generation is the most desirable for technology companies looking to secure power sources for their massive data center needs. The purchase puts Constellation even more in the cat bird’s seat of a massive trend. HOLD

Digital Realty Trust, Inc. (DLR – yield 2.8%) This data center REIT made a huge jump after the company stated that demand for data center AI space is booming in the last earnings report. DLR was downgraded to a HOLD last month on price alone. The stock has pulled back since but it’s still up 54% since being added to the portfolio in July of 2023. DLR doesn’t trade with the ebb and flow of the interest rate narrative like most REITs. It trades more like a tech stock because of the AI growth catalyst. The future still looks bright as data centers are booming. HOLD

Eli Lilly and Company (LLY – yield 0.8%) – The superstar drug company stock fell 6% on Tuesday morning after the company pre-announced lower-than-expected fourth-quarter revenue ($13.5 billion vs. $14 billion). The culprit is the weight-loss drugs as demand was less than the market anticipated, and supply issues also had an impact. The drugs still generated $5.4 billion for the quarter. But $7.4 billion was expected. The company said it expected higher demand in December as patients normally double up prescriptions for the holidays. But that didn’t happen. On a positive note, Lilly raised guidance for 2025. I consider the news a blip that doesn’t change the great story. BUY

McKesson Corporation (MCK – yield 0.5%) – McKesson recovered all of the summer and fall dip in a very short time, but it resumed a funk in December. The pharmaceutical distributor took a plunge after second-quarter earnings missed because of supply disruptions. But the third-quarter earnings alleviated that concern, and the stock took off again. The healthcare sector is reeling somewhat from the RFK nomination right now. But hopefully, MCK will get back to slowly trending ever higher in the year ahead as its customer base grows all by itself because of the aging population. BUY

Qualcomm Inc. (QCOM – yield 2.2%) QCOM fell back in the summer and has been stuck in the mud near recent lows since. It’s way below the June high and still the same price it was last spring. It’s worth being patient because when this stock moves it easily makes up for lost time. And it will take off at some point. The market wants to see strong U.S. smartphone sales from an AI upgrade cycle. Although that hasn’t happened yet, it could become a catalyst sometime this year. BUY

Rating change – “BUY” to “HOLD”

Toll Brothers, Inc. (TOL – yield 0.6%) The housing market is being riddled with bad news. There are industry-wide affordability concerns as mortgage rates have risen back near the highs. The stock is down 30% from the late-November high, although Toll has bounced sharply off the recent low this week. The stock will likely need better news on the interest rate front to significantly rally from here. Things could get even worse this week so TOL will be downgraded to a HOLD out of caution. Although Toll Brothers’ results have been stellar as luxury homes are somewhat insulated from the trends, you can’t fight an ornery market. HOLD

UnitedHealth Group Inc. (UNH – yield 1.6%) After soaring to a new high in early November, it’s been one thing after another for this health insurer. The stock was down 16% in December and returned -4.74% in 2024. UNH initially fell because of trepidation over the RFK nomination. Then the CEO was assassinated. Then, President-elect Trump made comments about “eliminating the middleman” in the healthcare industry. On a positive note, UNH has rallied 11% in the past month. It also reports fourth-quarter earnings this week. Hopefully, the report will get the stock back on track. BUY

Safe Income Tier

NextEra Energy (NEE – yield 3.1%) – This is a great stock to own right now. It’s cheap and well-positioned as interest rates should at least not go much higher, and electricity demand is booming. NEE was a superstar stock until 2022 when inflation and rising interest rates kicked in. But it recovered in 2024 and returned about 20%. Although the recent souring of the interest rate narrative is causing downside for NEE in the short term, the stock should be in good shape looking at the entirety of 2025. The recent volatility is from the macro environment and not the internal operations of the company. The regulated and clean energy utility is doing great. NextEra expects to deliver 10% average earnings and dividend growth over the next several years. BUY

USB Depository Shares (USB-PS – yield 5.8%) – Longer-term interest rates have been soaring with the 10-year Treasury up to 4.8% from 3.6% in September. The rise had put pressure on the share price. If rates should test the peak of 5% there could be a lot more price pressure. That said, this preferred stock has endured a tough bond market very well and should likely continue to hold its own. Plus, rates are still more likely to trend lower from here in the year ahead. BUY

Vanguard Long-Term Corp. Bd. Index Fund (VCLT – yield 5.2%) – Ditto for VCLT. The long-term corporate bond ETF loves falling interest rates and hates rising ones. There will be more price pressure if rates continue to rise. But the situation over the course of the year should be good. BUY

High Yield Tier

Security (Symbol)Date AddedPrice AddedDiv Freq.Indicated Annual DividendYield On CostPrice on Close 1/13/25Total ReturnCurrent YieldCDI OpinionPos. Size
AGNC Investment Corp. (AGNC)9/11/2410Qtr.1.4414.20%9-6%15.80%BUY1
Brookfield Infrastructure Ptnrs. (BIP)3/29/1924Qtr.1.626.80%3157%5.20%BUY2/3
Cheniere Energy Partners, L.P. (CQP)11/13/2452Qtr.3.476.70%569%6.10%BUY1
Enterprise Product Partners (EPD)2/25/1928Qtr.2.17.50%3378%6.60%BUY1
FS KKR Capital Corporation (FSK)5/8/2419Qtr.2.814.40%2123%13.10%BUY1
Main Street Capital Corp. (MAIN)3/13/2446Monthly4.149.00%5835%7.10%BUY1
ONEOK Inc. (OKE)5/12/2153Qtr.3.967.50%104142%3.80%BUY1
The Williams Companies, Inc. (WMB)8/10/2233Qtr.1.95.80%5692%3.40%BUY1
Current High Yield Tier Totals:9.00%54%7.60%

Dividend Growth Tier

AbbVie (ABBV)1/28/1978Qtr.6.568.40%177196%3.70%BUY1
Ally Financial Inc. (ALLY)12/11/2438Qtr.1.23.20%35-9%3.40%BUY1
Broadcom Inc. (AVGO)1/14/2146Qtr.2.124.60%225449%1.20%HOLD1
Cheniere Energy, Inc. (LNG)7/10/24175Qtr.21.10%22932%0.90%BUY1
Constellation Enery Corp. (CEG)8/14/24186Qtr.1.411.00%27950%0.50%HOLD1
Digital Realty Trust, Inc. (DLR)7/12/23118Qtr.4.884.10%17253%2.80%HOLD1
Eli Lilly and Company (LLY)8/12/20152Qtr.63.90%797452%0.80%BUY1
McKesson Corporation (MCK)10/11/23457Qtr.2.840.60%58529%0.50%BUY1
Qualcomm (QCOM)11/26/1985Qtr.3.44.00%157109%2.20%BUY1
Toll Brothers, Inc. (TOL)10/9/24151Qtr.0.920.60%126-16%0.60%HOLD1
UnitedHealth Group Inc. (UNH)4/12/23521Qtr.8.41.60%5417%1.60%BUY1
Current Dividend Growth Tier Totals:3.00%122%1.70%

Safe Income Tier

NextEra Energy (NEE)11/29/1844Qtr.2.064.70%6775%3.10%BUY1
U.S. Bancorp Depository Shares (USB-PS)10/12/2219Qtr.1.136.10%1917%5.80%BUY1
Vanguard LT Corp. Bd. Fd. (VCLT)1/11/2380Monthly3.64.50%730%5.20%BUY1
Current Safe Income Tier Totals:5.10%31%4.70%



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Tom Hutchinson is the Chief Analyst of Cabot Dividend Investor, Cabot Income Advisor and Cabot Retirement Club. He is a Wall Street veteran with extensive experience in multiple areas of investing and finance.