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Dividend Investor
Safe Income and Dividend Growth

April 21, 2021

The market still looks strong. But it’s getting a little harder to figure out.


The Market Bumbles Higher
The market still looks strong. But it’s getting a little harder to figure out.

The S&P 500 is within bad breath distance of the all-time high. Another new one was made just a few days ago. But despite the continuing higher trend, there isn’t really any leadership.

Technology stocks have been strong since the selloff in February. But every time the sector starts to get some real traction, it gets knocked back. Cyclicals are hot one day, then cold the next. Meanwhile, defensive stocks in the utility and health care sectors have been strong, but not really strong enough to drive the market higher.

At the same time, it’s earnings season. But it’s a weird quarter. The market has been rallying in anticipation of the full economic recovery brought on by the vaccines and the likely end of most lockdowns and restrictions. But that hasn’t really happened yet. First-quarter earnings won’t reflect the most important market driver.

Sure, earnings will provide insight into certain stocks. And they will give a sense of how this recovery is progressing. But if the market is looking to first-quarter earnings for guidance, it probably won’t get it.

In the CDI portfolio, just about everything but the energy and technology stocks are trending higher. Financial stocks continue to look strong. Now, the health care stocks (ABBV and LLY) are starting to put together a rally. Long neglected REITs are also busting a move. And the utility stocks (NEE and XEL) are looking strong.

The energy stocks, particularly VLO and CVX, have been pulling back from the furious rally earlier this year. But the stocks are still below pre-pandemic levels ahead of an environment that is likely to be much better. I don’t know how much longer the energy consolidation will last. But patience should pay off in the months ahead.

High Yield Tier
AGNC Investment Corp. (AGNC – yield 8.3%) – This monthly income paying REIT and newest portfolio addition continues to forge relentlessly higher but at a slow pace. Although AGNC has trended higher for over a year, it’s still below the pre-pandemic high. The environment of a full recovery and booming economy along with rising interest rates is ideal and the stock should continue to trend higher going forward. BUY

Altria (MO – yield 7.3%) – After trending higher for many months, the cigarette maker stock fell back about 10% over the last week. The issue is that the FDA has announced its intention to limit nicotine levels in cigarettes all the way down to nonaddictive levels. On the surface, this is terrible news for Altria. However, the proposal is not new and would likely take as many as five to 10 years or more to implement.

This portfolio sold half of the MO position close to the recent high a couple of weeks ago. The pullback is a result of headline risk, which is always a factor with this stock. We’ll see how the stock reacts after the market absorbs this latest news. But for now, the remaining half-position is still rated HOLD. HOLD

Enterprise Product Partners (EPD – yield 7.9%) – I know. The recent performance has been disappointing. EPD didn’t go up nearly as much as the overall energy sector during the rally earlier this year. But it is still on an uptrend. And it didn’t get overextended. Plus, the price is still way below pre-pandemic levels ahead of a booming economy and increased demand for oil and gas. It’s a great value trending higher with a stratospheric and safe yield. BUY

Realty Income (O – yield 4.1%) – Finally, this legendary income stock is getting a move on. After doing nothing for eons, O is up 12% over the last month. 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’s breaking out of a nine-month funk. It’s still a good value ahead of better times. BUY

Rating change “BUY” to “HOLD”

STAG Industrial (STAG – yield 4.0%) – This one too is back in the saddle with the resurgence of REITs. It’s not at a new all-time high. As a cyclical industrial REIT, STAG should get more leverage than the overall group with the rebounding economy. While I expect the stock to continue to run higher from here in the months ahead, it’s moved above the optimal BUY range, so the rating is being lowered to HOLD. HOLD

Verizon Communications (VZ – yield 4.4%) – This wireless giant that has morphed into a utility-like performed has sputtered a bit lately on its journey back to the high point of the range, around 60 per share. The company just reported earnings today that slightly beat estimates on both revenue and EPS. The market is yawning and the stock is off a few cents so far on the day. We’ll see if it gets a boost as 5G becomes a bigger story in the market beyond the pandemic. HOLD

Dividend Growth Tier
AbbVie (ABBV – yield 4.8%) – The stock has been moving higher as health care sector stocks are outperforming lately. The move is encouraging but ABBV still hasn’t broken out of the sideways range that’s existed since January. It hung tough near the top of the recent range after a big surge a few months ago. It didn’t follow the recent pattern of pulling back but rather consolidated at the higher level. It appears poised to break higher again but I’m not sure if this is the beginning of that move. We’ll see. HOLD

Broadcom Inc. (AVGO – yield 3.2%) – The technology sector can’t seem to get any real traction. The sector has performed well since the selloff in February, but it keeps getting knocked back every time it looks like it’s breaking out. But I don’t expect technology to be down for long, and AVGO is a stellar stock to own. This semiconductor and business software giant should be a phenomenal holding as technology proliferates at ever higher rates and 5G will enable a host of new technologies. BUY

Brookfield Infrastructure Partners (BIP – yield 3.7%) – This infrastructure partnership is a great place to be right now. It’s near the all-time high and still trending higher ahead of what is likely to be rising earnings and greater popularity with the new administration in Washington. But it’s sort of like rooting for a turtle in a race. It moves so slow that you have to look at a chart to realize it’s trending higher. That okay. It’s going in the right direction. BUY

Chevron Corp. (CVX – yield 5.0%) – I don’t think energy is done yet. Sure, the torrid advance of the sector in past months couldn’t last without a consolidation. We are likely headed to an energy Promise Land as GDP grows the most in decades as people taste freedom again. Plus, all those trillions in stimulus are likely to cause some commodity price inflation. Chevron, as perhaps the very best large company player in the space, should certainly benefit. I don’t know when CVX will start moving higher again, but it should be worth the wait. HOLD

Digital Realty Trust (DLR – yield 3.3%) – REITs have been so strong that even DLR is moving higher. This one has been out-of-favor seemingly since before electricity. It didn’t deserve to get so shunned. Data center properties are a growth business and Digital continues to expand its footprint with acquisitions all over the world. But after going nowhere for about a year, DLR is busting a move. It’s up over 20% since early March. Let’s hope the good times continue. BUY

Eli Lilly and Company (LLY – yield 1.8%) – This biopharmaceutical giant has been a ride since being in the portfolio. It soared on good news and then pulled back as health care stocks went out of favor and it got some bad news on drugs to boot. But it has broken out of the sideways funk over the past couple of weeks. It’s a great company and the stock should be destined for more good things over time. We’ll have to see if this latest move amounts to anything. HOLD

KKR & Co. Inc. (KKR – yield 1.1%) – The market may be getting trickier and more confusing. But KKR isn’t. It just keeps trending slowly higher because it’s in the wheelhouse of this market. The financial sector is ideally positioned ahead of a booming economy and rising interest rates. And KKR is in a very high-growth segment of the financial sector. BUY

Qualcomm Inc. (QCOM – yield 2.0%) – The stock has been getting knocked around with the technology sector. It also never really recovered from the last earnings report because of the semiconductor supply shortages and the negative affect on 5G smartphone sales. The upcoming earnings report for Qualcomm as well as other semiconductor companies will shed some light on the industry supply situation in the next couple of weeks. We’ll see what happens. HOLD

U.S. Bancorp (USB – yield 3.0%) – The bank reported solid quarterly results last week that beat on earnings and missed on revenues. Earnings were $1.45 per share versus consensus estimates of $0.92 and $0.72 earnings per share in last year’s first quarter. The biggest boost was lower provisions for loan losses as the environment turned out better than expected. Revenues were disappointing primarily because of lower net interest income, which should correct itself with higher rates in future quarters. The main driver is the economic recovery that should take hold in future quarters. BUY

Valero Energy Corp. (VLO – yield 5.7%) – The same general dynamic that I mentioned about CVX applies to this refiner stock, except to a larger degree. It pulls back more than the energy sector when it consolidates and soars higher and faster when it gets back on track. The full recovery is still coming and the refining business will benefit mightily. Meanwhile, VLO is still well below pre-pandemic levels while the environment ahead is likely to be a lot better. It may continue to consolidate for a while longer, but the stock should be back in business before too long. HOLD

Safe Income Tier
Invesco BulletShares 2021 Corporate Bond ETF (BSCL – yield 1.9%) – 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 5.0%) – 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. Since falling sharply in the worst of the bear market, the fund price has recovered to pre-pandemic levels and then leveled off. It should continue to be a solid holding from here, even with interest rates rising. HOLD

NextEra Energy (NEE – yield 1.9%) – This superstar combination regulated and alternative energy utility stock experienced a rare pullback during the market’s cyclical stock bender over the last few months. NextEra reported earnings today that soundly beat estimates with 14% year-over-year earnings growth. The stock had been trending higher already and it should get a shot in the arm with strong earnings, although the stock is down today. BUY

Xcel Energy (XEL – yield 2.6%) – This alternative energy utility went out of favor before NEE, and it’s rebounded first and by more so far. XEL has been on a bit of a tear, up 24% since early March. Utilities have been strong performers over the last couple of months and XEL has done even better because of its emphasis on alternative energy. 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
AGNC Investment Corp.04-14-2117Monthly1.448.5%170%8.3%BUY1
Altria (MO)12-20-1850Qtr.3.446.9%4813%7.3%8.57.9HOLD1/2
Enterprise Product Partners (EPD)02-25-1928Qtr.1.806.40%23-5%7.9%8.37BUY1
Realty Income (O)11-11-2062Monthly2.814.5%6910%4.1%9.39.8BUY1
STAG Industrial (STAG)03-21-1824Monthly1.456.0%3780%4.0%5.25.9HOLD1/2
Verizon Communications (VZ)02-12-2058Qtr.2.514.3%586%4.4%8.69.2HOLD1
Current High Yield Tier Totals:5.6%20.8%5.5%
Dividend Growth Tier
AbbVie (ABBV)01-28-1978Qtr.5.206.7%11159%4.8%108.6HOLD2/3
Broadcom Inc. (AVGO)01-14-21455Qtr.14.403.2%4572%3.2%BUY1
Brookfield Infrastucture Ptrs (BIP)03-26-1941Qtr.2.045.0%5461%3.7%6.58.6BUY2/3
Chevron Corporation (CVX)02-10-2190Qtr.5.165.7%10311%5.0%HOLD1
Digital Realty Trust (DLR)09-09-20147Qtr.4.643.2%1515%3.3%6.810.0BUY1
Eli Lily and Company (LLY)08-12-20152Qtr.3.402.2%19127%1.8%10.48.3HOLD2/3
KKR & Co. Inc. (KKR)03-09-2148Qtr.0.581.2%5312%1.1%BUY1
Qualcomm (QCOM)11-26-1985Qtr.2.603.1%13564%2.0%8.09.0HOLD1/3
U.S. Bancorp (USB)12-09-2045Qtr.1.683.7%5725%3.0%BUY1
Valero Energy Corp (VLO)06-26-1984Qtr.3.924.7%70-11%5.7%6.48.6HOLD1/2
Current Dividend Growth Tier Totals:3.9%25.5%3.4%
Safe Income Tier
BS 2021 Corp Bond (BSCL)08-30-1721Monthly0.422.0%218%1.9%9.04.0HOLD1/2
Invesco Preferred (PGX)04-01-1414Monthly0.745.3%1555%5.0%6.31.1HOLD1/2
NextEra Energy (NEE)11-29-1844Qtr.1.543.5%7892%1.9%9.48.0BUY1/2
Xcel Energy (XEL)10-01-1431Qtr.1.835.9%71188%2.6%9.57.0BUY2/3
Current Safe Income Tier Totals:4.2%85.8%2.9%