Please ensure Javascript is enabled for purposes of website accessibility
Dividend Investor
Safe Income and Dividend Growth

December 2, 2020

The final tally is in, and it was a November for the ages. The Dow Jones Industrial average was up 11.8% for November, making it the best month for the index since 1987. The S&P 500 climbed 10% while the Nasdaq gained another 11% for the month. History clearly shows that November was a spectacular month. What happened?


A November to Remember

The final tally is in, and it was a November for the ages.

The Dow Jones Industrial average was up 11.8% for November, making it the best month for the index since 1987. The S&P 500 climbed 10% while the Nasdaq gained another 11% for the month. History clearly shows that November was a spectacular month. What happened?

At the end of October, the market was staring ahead to two big risks, the election and the virus. Those issues are getting resolved in a positive way, in the eyes of the market. The election gave the market what it really wanted – divided government. Then, the long awaited coronavirus vaccines have arrived and will likely be available in some capacity before the end of the year.

A vaccine means the end of the pandemic sooner rather than later. The end of the pandemic means a full recovery and a booming economy. The market tends to look ahead six months or so, and it’s reveling in the economic glory now, despite the fact that the virus is getting worse in the near term.

The end-of-the-pandemic rally is happening now. In six months or so when the pandemic actually ends the market will have already moved on and will be fretting about the prospects for 2022.

The good news isn’t so much that the market indexes got a big move, they were kind of high already. The interesting thing about the recent rally is that it’s being led by previously downtrodden sectors that were still wallowing in a bear market. These stocks and sectors are being reborn. Energy and financial stocks have been on fire, but it’s just the begging. These stocks still have a long way to go to get back to pre pandemic levels. For many stocks it’s April again.

That’s great news for dividend investors. It means that a lot of stocks that are still cheap in an expensive market now have upward momentum in addition to value. Many of these cheap stocks pay great dividends with sky-high yields.

The market recovery up until November had mostly benefited technology and other growth oriented stocks. The next leg of the recovery is likely to deliver a disproportionate benefit to us dividend investors. It will be glorious.

High Yield Tier
B&G Foods (BGS – yield 6.9%) – In the short term, BGS seems to be a pandemic play, but longer term it’s a much improved defensive and high dividend paying stock. It’s improved because business will remain better than before the pandemic for a long time. The stock peaked in September, then it fell back, and it’s gone sideways since. It has strong fundamentals and sells at a good value. This should be a winner over time. In the meantime, enjoy the dividend. HOLD

Brookfield Infrastructure Partners (BIP – yield 3.9%) – This operator of infrastructure assets had a nice 16% pop in November. I’m not sure why. It could be that it is well set up for the post pandemic world. It is accumulating assets on the cheap during the recession. And it’s also true that the infrastructure subsector has become increasingly popular and could get renewed focus as the pandemic goes away. But, whatever the market thinks, earnings are growing and the future looks bright as this company likely improved its future prospects with great acquisition during this downturn. BUY

Enterprise Product Partners (EPD – yield 8.9%) –The midstream energy company has finally come back to life. EPD moved over 17% higher in November. It is moving higher with the energy sector, but earnings have been much better than the overall sector. At under 20 per share, the stock still has miles to go to get to the pre-pandemic high of over 30. Hopefully, this strong momentum continues through the rest of the year and beyond. In the meantime, the distribution is safe. This is a timely stock right now because of the still obscenely low valuation, safe yield, and newfound momentum. BUY

STAG Industrial (STAG – 4.8%) – This monthly-paying industrial REIT, like so many other REITs, has been in a funk since the summer. It makes sense. When the highest yielding sectors start moving higher investors neglect the other dividend stocks. But this is also and E-commerce stock because of its warehouse properties. And E-commerce is having an epic year. STAG may continue to go sideways for a while but it pays you to hang in there. And the stock should be a winner longer term. HOLD

Verizon Communications (VZ – 4.1%) – This wireless giant also got a pop in November and seems poised to eclipse the pre pandemic high of 62. I’ve always believed that after the pandemic 5G will be a big story in the market. I think investors are anticipating that and rewarding stocks that will benefit as vaccines promise to end the pandemic next year. Verizon is a stodgy income stock that is getting injected with a growth catalyst from 5G. We’ll see how much the market is willing to reward the stock in the months ahead. HOLD

Dividend Growth Tier
AbbVie (ABBV – 5.0%) – Round and round she goes, where she stops nobody knows. Since ABBV was unjustifiably knocked down on fears of Humira competition, it has established a pattern. It had a huge rally before the pandemic, and then got knocked back with the rest of the market. It then came back to a new recent high in the summer, and then got knocked back. ABBV is in the midst of another run higher and has made a new recent high. The stock has been going up and down on an upward trend since the summer of 2019. It probably has further to go on this latest upward surge. BUY

Altria (MO – 8.5%) – This has been a crummy stock, but it sure pays a sweet dividend. It’s like a rotten job that pays well. The longer term prognosis remains in doubt as Altria still does not have a bankable offset to the increasingly downward trend in cigarette smoking. But in the near term, it’s a spectacular income stock. The market is already factoring in long-term failure. Any surprise from here is likely to be to the upside. It still makes sense to own here. BUY

Digital Realty Trust (DLR – yield 3.1%) – This data center REIT has had a big downward move over the last couple of months. While this up and down trend is normal, DLR is in the midst of a bigger downward move than usual. There is no fundamental problem and the latest move likely got exaggerated by the pandemic market that has shunned a lot of strong pandemic market performers. This is most likely a great buying opportunity for DLR, in an overdone near-tem downward move. But I will continue to watch it closely for any signs of further deterioration in the stock or in the fundamental story. BUY

Eli Lilly and Company (LLY - yield 2.0%) – I’m disappointed in the recent performance of this health care juggernaut. Sure, it got a big bounce after the election as divided government all but eliminated the possibility of a draconian health care overhaul. But that’s been the only positive move for the stock since the summer. Meanwhile, health care is an ideal sector with defensive earnings and strong growth as the aging population will continues to present a huge tailwind. Lilly is one of the best health care companies in the business. Eventually the stock will move to reflect that fact. BUY

Innovative Industrial Properties (IIPR – yield 3.0%) – This marijuana farm REIT is a huge winner in the portfolio. It’s up over 100% in less than a year. And it’s had a huge run over the past month. It’s practically begging us to take a profit. But it hasn’t pulled back after the upward move. It’s consolidating at the higher level. Technically, the stock looks positive, not dangerous. IIPR is very much indicating that the next significant move will be to the upside. For now, it’s worth holding. Of course, if things change, we’ll take profits, but not yet. HOLD

Qualcomm Inc. (QCOM – yield 1.7%) – This chip maker stock is another huge winner. And everything I said about IIPR is true for QCOM too. The thing to remember is that despite the recent surge, up 70% YTD and 80% over the last year, it’s still fairly cheap for a technology stock with strong prospects. At just 21 times forward earnings, it is a cheap tech stock that can certainly move higher. And good news is likely to continue as QCOM reaps a better than expected bounty from 5G royalties. HOLD

Realty Income (O – 4.6%) – O has historically been one of the very best income stocks on the market, and it’s still cheap after the pandemic knocked it back unjustifiably. Despite pain in certain retail areas, the vast majority of Realty’s portfolio is doing fine, and the company still grew earnings over last year in the first nine months of the year. As the pandemic inevitably fades next year, this stock is likely to come back in vogue with yield-hungry investors. It’s a good price with a great dividend. BUY

Valero Energy Corp. (VLO yield 7.3%) – What a change in fortune. This refiner stock went from being a dog with flees to one of the hottest tickets of the vaccine era. VLO had a huge 50% move off the bottom, and it’s likely only the beginning. The full recovery that the market is already pricing in must include a recovery in demand for refined product, and a huge boost in fortunes for VLO. This is a high leverage vaccine play right now. The stock can still bounce around in the near term, but it’s a great bet that the stock price is a lot higher than it is now in six months. HOLD

Safe Income Tier
Invesco BulletShares 2021 Corporate Bond ETF (BSCL – yield 2.3%) – This short-term bond ETF is a beautiful thing in uncertain markets. It’s nice to have something in the portfolio that you don’t have to worry about. It still has a yield that’s better than you’ll get in most traditional safe haven investments. It’s nothing to get excited about. But boredom has a beauty of its own. BUY

Invesco Preferred ETF (PGX – yield 5.2%) –This preferred stock ETF has been rock-solid. PGX has been consistently trending back toward the high, and the desire for income will probably edge it over the top. It is less volatile than the market in general and provides a high yield and excellent diversification from both the stock and bond markets. HOLD

NextEra Energy (NEE – yield 1.9%) – The pandemic will come and go. Markets will always go up and down. After the vaccine and full recovery, what’s next? Who knows? But regardless of what twists lie ahead, NEE will continue to be popular with investors and likely trend ever higher. Alternative energy continues to get ever cheaper to produce while demand for it continues to increase with no end in sight. Reliable revenues never go out of style either. If NEE was cheaper it would be a perfect stock. But its only great right now. HOLD

Xcel Energy (XEL – yield 2.5%) – This smaller alternative energy utility has pulled back recently while remaining in an upward trend. The euphoria of the vaccine has left XEL behind temporarily while the losers of yesterday get all the love. But this cold shoulder won’t last. Alternative energy is growing like crazy while getting cheaper to produce at the same time. And XEL is a conservative way to play the trend. HOLD