Interest rates fell back this week after the odds of a December rate hike briefly fell below 90% (they’ve since rebounded). The trigger was a September inflation data release that showed consumer prices excluding food and energy rising just 1.7% year-over-year, and only 0.1% since August. Janet Yellen said over the weekend that she still expects inflation to pick up next year, driving rate hike odds back up, but treasury yields haven’t made up all of their slide. The yield on the 10-year briefly fell as low as 2.27%, and is now 2.33%. As a result, financials are lower since our last update and REITs have made up some ground lost earlier this month.
Elsewhere, third quarter earnings season has begun, with the big financials reporting this week. Below, I provide earnings dates and expectations for our companies that are reporting in the next two weeks.
HIGH YIELD TIER
BUY – General Motors (GM 45 – yield 3.4%) – GM’s uptrend faced its first real test last week, when The Wall Street Journal reported that the automaker will be closing the Detroit-Hamtramck assembly plant for about six months due to low demand for the models made there. The stock passed the test with flying colors, making up for its initial 1% decline within two days, showing that the recent rally in GM is quite resilient. Analyst upgrades continue to roll in, and one analyst recently raised his price target to a whopping $134. GM announced yesterday that it will begin testing self-driving cars in Manhattan early next year, adding to excitement about the company’s forward-looking endeavors. GM will report third-quarter earnings this Tuesday, October 24. Analysts are currently expecting EPS of $1.15 (down 33%) and sales of $33.6 billion, down 22% year-over-year. GM has beaten estimates in each of the last four quarters. I’ll keep GM on Buy for high-yield investors; try to start new positions on pullbacks.
Next ex-div date: December 4, 2017 est.
BUY – Pembina Pipeline (PBA 34 – yield 5.1%) – Pembina is a Canadian pipeline company. After making a higher high at the end of September, PBA pulled back early this month, bounced, and is now trading around 34. The stock is in the upper half of its trading range and trending slightly up. Pembina will report third-quarter results on November 2 after the close. Analysts are expecting 37% revenue growth, to $1.07 billion, and 60% EPS growth, to $0.32. High yield investors can buy PBA for the monthly dividend and medium-term capital gains.
Next ex-div date: October 24, 2017
HOLD – Welltower (HCN 68 – yield 5.1%) – HCN is a healthcare REIT that owns senior housing, post-acute care and outpatient medical facilities. The company’s properties are mostly private-pay, so they don’t have a lot of exposure to Medicare or Medicaid reimbursement levels. However, as a REIT, HCN can be negatively impacted by increases in interest rates, which caused the stock’s recent selloff. HCN has found support when rates peaked last week, and has traded sideways since our last update. We could see more volatility ahead of the Fed’s December meeting, but will hold as long as the stock remains above its first-quarter support level, around 65. Set your own loss limit in your portfolio.
Next ex-div date: November 3, 2017 est.
DIVIDEND GROWTH TIER
BUY – BB&T Corp (BBT 47 – yield 2.8%) – BB&T Corp is a regional bank offering a broad range of financial services in the South, the mid-Atlantic region, Texas and some of the Midwest. The slide in interest rates after Friday’s inflation release triggered a slight selloff in financials, including BBT. More importantly, BB&T will report third-quarter earnings tomorrow, October 19, before the open. Analysts are expecting 6.8% EPS growth, to $0.78 from $0.73, and revenues of $2.84 billion, up 0.8%. Dividend growth investors can buy BBT on pullbacks for long-term gains and steady dividends.
Next ex-div date: November 8, 2017 est.
BUY – Broadridge Financial Solutions (BR 83 – yield 1.6%) – Broadridge is a tech company that provides information and services to financial companies. The stock is hitting 52-week highs and looks very healthy. Dividend growth investors who don’t own it can buy a little here.
Next ex-div date: December 12, 2017 est.
HOLD – Carnival (CCL 68 – yield 2.1%) – CCL continued its rebound this week and is now back above its 50-day moving average. Caribbean cruise demand is returning to pre-hurricane levels, according to industry analysts. Hold.
Next ex-div date: November 21, 2017
BUY – CME Group (CME 136 – yield 1.9%) – CME Group, which owns options, commodity and other financial exchanges, is the latest addition to our portfolio. The stock has been acting well since we added it to the Dividend Growth Tier on October 2. CME Group will announce third-quarter earnings next Thursday, October 26, before the open. Analysts are expecting 6.2% revenue growth, to $894 million, and 10.5% EPS growth, to $1.16. Dividend growth investors can buy now for steady growth, regular dividends and the annual special dividend.
Next ex-div date: December 7, 2017 est.
BUY – Cummins (CMI 175 – yield 2.5%) – Cummins makes heavy-duty engines for trucks, ships, mining equipment and more. CMI is in a strong uptrend and hit a new 52-week high on Monday. Cummins will announce third-quarter earnings on October 31. Dividend growth investors who don’t own CMI yet can buy a little here.
Next ex-div date: November 16, 2017
BUY – Wynn Resorts (WYNN 146 – yield 1.4%) – Wynn owns two casino resorts in Macau and two in Las Vegas, and is building the first major casino in the Boston area. WYNN bounced off its 50-day moving average last week and started to rebound after Deutsche Bank raised its price target this week. Dividend growth investors can buy a little here.
Next ex-div date: November 7, 2017 est.
SAFE INCOME TIER
BUY – 3M (MMM 218 – yield 2.2%) – 3M is a diversified provider of consumer and industrial technology and products. The company has paid dividends for 100 years. MMM hit a new 52-week high on Friday. The stock remains a long-term Buy, especially on pullbacks, for safe income and dividend growth investors.
Next ex-div date: November 15, 2017 est.
BUY – Consolidated Edison (ED 84 – yield 3.3%) – ConEd is a New York-area utility. The stock pulled back just over 4% in September as interest rates rose, found support around 80 at the end of the month, and is now rebounding. More interest-rate related volatility is likely ahead of the Fed’s December meeting, but this looks like a decent entry point for long-term investors who don’t own ED yet. Long-term income investors can buy a little here.
Next ex-div date: November 13, 2017 est.
HOLD – Ecolab (ECL 133 – yield 1.1%) – Ecolab provides cleaning, efficiency and sustainability technology and services to a wide variety of industries. ECL has rebounded nicely since the start of the month, making up for its three-month slide in only three weeks. On Friday, the stock got within a few cents of its 52-week high from June. A Dividend Aristocrat, ECL is a solid long-term hold for income investors. I’ll put it back on buy if it can break out past 135.
Next ex-div date: December 15, 2017 est.
BUY – Guggenheim BulletShares 2018 High Yield Corporate Bond ETF (BSJI 25 – yield 4.0%)BUY – Guggenheim BulletShares 2019 Corporate Bond ETF (BSCJ 21 – yield 1.8%)
BUY – Guggenheim BulletShares 2020 High Yield Corporate Bond ETF (BSJK 25 – yield 4.8%)
BUY – Guggenheim BulletShares 2021 Corporate Bond ETF (BSCL 21 – yield 2.3%)
Next ex-div dates: all November 2, 2017 est.
BUY – PowerShares Preferred Portfolio (PGX 15 – yield 5.6%) – I put PGX back on Buy last week when the interest rate spike caused the preferred share ETF to trade briefly below 15. I’ll keep it on Buy for now for investors who want to add a source of reliable monthly income to their portfolios. The ETF doesn’t have capital appreciation potential, but it trades in a low-volatility range between 14 and 16 and pays monthly dividends of about seven cents per share.
Next ex-div date: November 15, 2017 est.
HOLD – Xcel Energy (XEL 49 – yield 3.0%) – Xcel Energy is a Minnesota-based utility and one of the largest producers of wind power in the U.S. After declining about 4% in September, XEL is already bouncing back. I’d consider putting XEL back on Buy on a pullback to the stock’s 200-day, currently around 45. Long-term safe income investors who already own the stock can continue to hold.
Next ex-div date: December 19, 2017 est.
Closing prices as of October 18, 2017.
