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Dividend Investor
Safe Income and Dividend Growth

April 7, 2021

How about this market? Even with the technology sector still in a funk and the huge energy sector rally abating, the S&P 500 just made a new all-time high anyway.

A Resilient Bull Market
How about this market? Even with the technology sector still in a funk and the huge energy sector rally abating, the S&P 500 just made a new all-time high anyway.

The studs are out of the game, but no problem. The rest of the team is getting the job done. The cyclical rally is still proceeding even though energy stocks are consolidating. Sectors like finance, materials, consumer discretionary and industrials didn’t get as overextended as energy and are still on the vaccine bender.

And previously neglected stocks and sectors have come alive. The best performing sector of the S&P 500 over the past month is real estate, and the utility sector isn’t far behind. These sectors had been left out of the cyclical rally and investors are coming back to them now. That’s good news for several of the positions in this portfolio.

This is normally a time where the market pulls back a little and consolidates. But this is no normal market. It just wants to go higher.

Yeah, the market may be due for a bigger pullback at some point after the ferocious rally in the past months and year. But investors can’t resist the appeal of a pending booming full recovery amidst trillions in stimulus. It’s also true that money has no place else to go but stocks to fetch a decent return.

We are at a weird point in history right now. The world was thrust into a global pandemic that is on its way out. And the economy will likely boom and make up for lost time. For good measure, there will be trillions in stimulus floating around and interest rates are still very low. That’s an unusual situation. But it’s unusually good for stocks, at least for the foreseeable future.

High Yield Tier
Rating change “HOLD” to “Sell ½”
Altria (MO – 6.7%) – It’s decision time for this cigarette maker stock. The stock has performed well lately, after abysmal performance for the prior four years. MO had been on a downtrend since 2017 but has spiked more than 40% higher since the end of October to a new post-pandemic high. The stock has since stopped moving higher and has been consolidating around the low 50’s per share range for the past couple weeks.

Where does it go from here? The recent surge could wind up being MO’s shining moment for the year from which it pulls back, or it could trend still higher from this level on the strength of the dividend and the market’s underestimation of Altria’s ability to offset down-trending smoking sales with other sources. I don’t know. So, we’ll cut it down the middle and sell half and hold onto half. SELL 1/2

Realty Income (O – 4.3%) – The time may be finally arriving for this legendary income REIT. It’s had a 10% move higher over the last month and is very close to a post-pandemic high. It helps that REITs have been the top-performing market sector over the last month. Realty is still a value at a price well below the pre-pandemic high with strong and rebounding earnings. Hopefully, it can keep going. BUY

STAG Industrial (STAG – 4.2%) – I like it. REITs are coming back into vogue and cyclical REITs are in the sweet spot. This previously floundering industrial REIT has been busting a move and is up 17% since the beginning of February. It just made a new all-time high and could have more room to run. BUY

Verizon Communications (VZ – 4.2%) – It might be decision time for this wireless giant too in the weeks ahead. VZ has been a very range-bound stock for past few years, regardless of what the overall market does. It’s now approaching the high point of that range in the low 60’s per share. If VZ does indeed ride this recent rally back to the high point, we might sell some of the position and leave the rest to see if the stock gets a boost from 5G. HOLD

Dividend Growth Tier
AbbVie (ABBV – 4.9%) – The bad news is that ABBV has been going sideways since December. The good news is that it’s been trending sideways at the top of the recent range. Health care has been on the outs in the recent cyclical rally. But despite that, ABBV is hanging tough and not falling into the recent pattern of pulling back after a surge higher. It really looks like it’s forming a base from which to soar higher when the going gets good again. The stock also sells at a very cheap valuation with a high dividend. HOLD

Broadcom Inc. (AVGO – yield 3.1%) – This semiconductor and business software giant is looking good so far. Technology stock really haven’t had a good time of it in the months since AVGO was added to the portfolio. But the position has still managed to return 8% so far. It’s well set up to benefit from 5G and has a strong and growing order backlog that should keep earnings growing. It also pays a nice dividend. And technology stocks will shine again before long. BUY

Brookfield Infrastructure Partners (BIP – yield 3.7%) – This desirable infrastructure gem looks to be finally breaking out. It had gotten cast aside for prettier girls during the market’s cyclical stock bender. It had gone nowhere since mid-January and pretty much nowhere since early November. But BIP just broke out to a new high on positive news about the Inter Pipeline acquisition.

Brookfield made a bid for a hostile takeover of $5.65 billion in order to pick up a sizable North American energy asset on the cheap after a tough year. The company originally balked, and investors feared Brookfield would respond by paying a lot more. But BIP stuck to their guns and Inter indicated it would accept the offer and the stock spiked on the news. The deal should be a needle mover for BIP, and the market is taking notice. BUY

Chevron Corp. (CVX – yield 4.9%) – This best-in-class energy giant has a huge spike when energy got hot in the six weeks from the beginning of February to mid-March. The sector has pulled back but CVX pulled back a lot less. It’s still well below the pre-pandemic high ahead of a very promising rest of the year. After this necessary consolidation it should be on the move again. HOLD

Digital Realty Trust (DLR – yield 3.2%) – After being hated by the last two market phases, the data center REIT might finally be coming out of its coma. It’s up 15% since early March. Technically, DLR isn’t out of the woods yet because it hasn’t broken out of the recent lower range. But it’s a great growth business and REITs are coming back into favor. Hopefully, it finally gets going. BUY

Eli Lilly and Company (LLY - yield 1.9%) – This biopharmaceutical giant was smoking hot after a plethora of good news in December and January. Then health care went out of favor, but it held its gain. Then it got a badly perceived trial result from its potential mega-blockbuster Alzheimer’s drug and pulled back. None of these developments changes the fact that this is one of the very best big pharma companies with a spectacular pipeline. And the stock has a history of pulling back after a big surge. You should get further rewarded by being patient with LLY. HOLD

KKR & Co. Inc. (KKR – yield 1.1%) – This is a great company in the right place at the right time. Financial stocks didn’t get overextended like energy during the cyclical rally and are still trending higher. The rest of the year looks promising for the sector and KKR is in a strong growth area. It should keep trending higher. BUY

Qualcomm Inc. (QCOM – yield 1.9%) – Once the tech sector sorts out its business, QCOM should be in a great position. The rapid ascent halted after it announced that slower than expected 5G phone sales will last through the first half of this year because of industry-wide supply issues. But the market looks ahead and that issue is fading into the rearview mirror. I expect QCOM to make up for lost time in the months ahead. It’s been trending higher from the short-term bottom in early March. The reawakening may have already commenced. HOLD

U.S. Bancorp (USB – 3.1%) – The economy is gaining steam and should take off in the months ahead after the vaccine is widely distributed. Interest rates are trending higher. USB is still cheap and selling below the pre-pandemic high. It has good momentum. That’s the story. And it’s a good one. BUY

Valero Energy Corp. (VLO yield 5.3%) – This refiner stock is reflective of the energy sector, squared. It rose more and is pulling back more in the sector consolidation. It was bound to pull back after a huge six-week move of 50%. But the full recovery is still coming and the refining busines will benefit mightily. Meanwhile, VLO is still well below pre-pandemic levels, and things kind of stunk for refiners then. VLO may continue to consolidate for a while, but the stock should be back in business before too long. HOLD

Safe Income Tier
Invesco BulletShares 2021 Corporate Bond ETF (BSCL – yield 2.0%) – This short-term bond fund is a safe port. While the market is promising for the rest of the year, there are still a lot of uncertainties out there. It’s nice to have something in the portfolio that you don’t have to worry about. That said, the bonds in this ETF mature at the end of this year. HOLD

Invesco Preferred ETF (PGX – yield 5.1%) – This preferred stock ETF is much less volatile than the stock market while providing a big yield. It also adds diversification as preferred stock performance is historically not correlated to the stock and bond markets. It’s a great place to generate a solid yield while rounding out your portfolio. HOLD

NextEra Energy (NEE – yield 2.0%) – This combination regulated and alternative energy utility stock had a rare selloff during the cyclical rally in February and early March. I had been waiting for an opportunity to raise NEE to a BUY for a long time. But it was an up-trending juggernaut that never showed any weakness until now. Everything that was true about the company when it was flying high is still true. And I expect alternative energy to be a hot ticket in the market going forward. BUY

Xcel Energy (XEL – yield 2.7%) – Most of what I said about NEE is true for this alternative energy utility, except it moved down sooner and more and has recovered sooner and steeper. XEL is up almost 20% since early March, and it looks like it still wants to run higher. I like this for both the short and long term. BUY

High Yield Tier
Security (Symbol)Date AddedPrice AddedDiv Freq.Indicated Annual DividendYield On CostPrice on
Total ReturnCurrent YieldDiv Safety RatingDiv Growth RatingCDI OpinionPos. Size
Altria (MO)12-20-1850Qtr.3.446.9%5123%6.7%8.57.9SELL 1/21
Realty Income (O)11-11-2062Monthly2.814.5%655%4.3%9.39.8BUY1
STAG Industrial (STAG)03-21-1824Monthly1.456.0%3470%4.2%5.25.9BUY1/2
Verizon Communications (VZ)02-12-2058Qtr.2.514.3%596%4.2%8.69.2HOLD1
Current High Yield Tier Totals:5.4%26.0%4.9%
Dividend Growth Tier
AbbVie (ABBV)01-28-1978Qtr.5.206.7%10552%4.9%108.6HOLD2/3
Broadcom Inc. (AVGO)01-14-21455Qtr.14.403.2%4798%3.1%BUY1
Brookfield Infrastucure Ptrs (BIP)03-26-1941Qtr.2.045.0%5562%3.7%6.58.6BUY2/3
Chevron Corporation (CVX)02-10-2190Qtr.5.165.7%10414%4.9%HOLD1
Digital Realty Trust (DLR)09-09-20147Qtr.4.643.2%1431%3.2%6.810.0BUY1
Eli Lily and Company (LLY)08-12-20152Qtr.3.402.2%18122%1.9%10.48.3HOLD2/3
KKR & Co. Inc. (KKR)03-09-2148Qtr.0.581.2%519%1.1%BUY1
Qualcomm (QCOM)11-26-1985Qtr.2.603.1%13969%1.9%8.09.0HOLD1/3
U.S. Bancorp (USB)12-09-2045Qtr.1.683.7%5725%3.1%BUY1
Valero Energy Corp (VLO)06-26-1984Qtr.3.924.7%75-3%5.3%6.48.6HOLD1/2
Current Dividend Growth Tier Totals:3.9%25.9%3.3%
Safe Income Tier
BS 2021 Corp Bond (BSCL)08-30-1721Monthly0.422.0%218%2.0%9.04.0HOLD1/2
Invesco Preferred (PGX)04-01-1414Monthly0.745.3%1554%5.1%6.31.1HOLD1/2
NextEra Energy (NEE)11-29-1844Qtr.1.543.5%7785%2.0%9.48.0BUY1/2
Xcel Energy (XEL)10-01-1431Qtr.1.835.9%68174%2.7%9.57.0BUY2/3
Current Safe Income Tier Totals:4.2%80.3%3.0%