Markets remain strong. The major stock market indexes all ended last week in the black and, after a brief pause Monday, advanced strongly yesterday. Elsewhere, oil prices have pulled back enough to shake energy stocks a bit, while interest rates remain subdued.
Most important, earnings season has started in earnest. UnitedHealth Group (UNH) reported yesterday morning, American Express (AXP) will announce after the close today and BB&T (BBT) will report tomorrow morning. I provide earnings dates and expectations for most of our other stocks below.
Finally, I’m putting McGrath RentCo (MGRC) on Hold today, after it violated its 50-day moving average.
HIGH YIELD TIER
BUY – AllianceBernstein (AB 30 – yield 8.7%) – AB pulled back this week after announcing a slight decrease in assets under management Wednesday. Although firmwide net inflows were positive in June, declines in bond prices and changes in foreign exchange rates reduced the value of overall assets. But the stock has rebounded over the past three days and is back near its 52-week highs. The asset manager will report second-quarter earnings Thursday, June 26, before the open. Analysts’ estimates currently predict revenue growth of 6%, to $849 million, and EPS growth of 20%, to $0.59 per share. Risk-tolerant high yield investors can Buy here; just remember that the distributions are variable and don’t qualify for the lower dividend tax rate.
Next ex-div date: August 2, 2018 est.
BUY – Community Health Trust (CHCT 29 – yield 5.4%) – CHCT is consolidating just under its recent all-time high. The healthcare REIT will report second-quarter earnings August 7, after the close. The stock is in a steady uptrend and is buyable right here for risk-tolerant investors looking to add yield to their portfolio.
Next ex-dividend date: August 16, 2018 est.
HOLD – General Motors (GM 40 – yield 3.8%) – GM will report second-quarter earnings before the market opens next Wednesday, July 25. Analysts are expecting revenue to rise 0.1%, to $37.03 billion, but EPS are expected to fall 1.6%, to $1.86 (from $1.89 in second quarter 2017.) GM continues to muddle around between 39 and 40, just below its 50-day moving average. Hold.
Next ex-div date: September 6, 2018 est.
BUY – ONEOK (OKE 70 – yield 4.5%) – ONEOK will report second-quarter earnings after the close July 31, and hold the earnings call the next day. Analysts are currently expecting the company to report 31% revenue growth, while EPS are expected to more than double. The stock is trading just under 52-week highs, and the energy sector remains strong. Note that although ONEOK owns pipelines (as well as natural gas storage and processing facilities) it’s not a master limited partnership (or MLP). The company is organized as a corporation and dividends qualify for the lower dividend tax rate. High yield investors can Buy here.
Next ex-div date: August 3, 2018 est.
BUY – STAG Industrial (STAG 27 – yield 5.2%) – STAG is pulling back normally from the year-to-date highs it hit two weeks ago. The industrial REIT is in a steady uptrend and enjoying a supportive environment for REITs and other high yield investments, although it may take a breather here if more growth-oriented names begin leading the market higher. The company will report second-quarter 2018 results on July 31, after the close. High-yield investors looking for monthly dividends can buy some here, or try to wait for a pullback to the 50-day, currently at 26.
Next ex-div date: July 30, 2018
DIVIDEND GROWTH TIER
BUY – American Express (AXP 101 – yield 1.4%) – American Express will report earnings after the close today. Analysts are expecting the credit card company to report EPS of 1.82, up 23.8% (from 1.47 per share in the same quarter last year). Revenue is expected to hit $10.08 billion, up 21.4% from $8.31 billion in the same quarter last year. AXP still looks healthy and is back above its 50-day moving average, and just below its recent highs. An earnings beat (plus a supportive market) could be the catalyst AXP needs to finally break out past resistance at 102.50, but we’ll see. Regardless, I’ll keep AXP on Buy for steady dividends and growth.
Next ex-div date: October 4, 2018 est.
HOLD – BB&T Corp (BBT 52 – yield 2.9%) – Bank stocks pulled back after Citigroup and Wells Fargo missed estimates Friday. The pullback dragged BBT back below its 200-day moving average, but the stock popped back above the support line yesterday. The company will report second-quarter results before the open tomorrow, July 19. Analysts are currently expecting to see 31.2% earnings growth, from 0.77 per share to 1.01 per share (with a big boost from the tax bill). Revenues are expected to rise a more modest 0.8%, from $2.90 billion to $2.92 billion. We’ll hold for now.
Next ex-div date: August 8, 2018 est.
BUY – Broadridge Financial Solutions (BR 118 – yield 1.2%) – BR continues to behave well, trending up gradually just above its 50-day line. Broadridge is an investor communications firm, and trades more in line with the tech sector than with financials, despite its name. Most importantly, the stock has low volatility, and is a steady grower that has increased its dividend every year for 10 years. Investors looking for steady capital gains and dividend growth can Buy BR right here.
Next ex-div date: September 14, 2018 est.
HOLD – CME Group (CME 169 – yield 1.7%) – CME will report second-quarter earnings before the open July 26. Analysts are currently predicting that EPS will hit 1.73, up from 1.23 last year (40.7% growth), thanks in part to changes in the tax code. Revenues are expected to rise 14.3%, from $925 million to $1.06 billion. Last quarter, international volume on CME’s exchanges rose 13%, the company announced Sunday. The stock has advanced on each of the last seven trading days, bringing CME back above its 50-day moving average. However, Hold remains the appropriate rating until the stock can surmount overhead resistance around 171.
Next ex-div date: September 7, 2018 est.
HOLD – Intel (INTC 52 – yield 2.3%) – Intel still looks okay; the stock is trading under its 50-day moving average but above its 200-day line. The company will report earnings July 26, after the close, and estimates have been moving up. Analysts are now expecting 31.9% EPS growth, to $0.95 per share from $0.72 last year, and 13% revenue growth, to $16.73 billion from $14.76 billion. Intel is still on the chopping block—in addition to the CEO’s unexpected resignation the company is also facing increasing competition and some analysts are predicting a downturn in semiconductor stocks—but for now we’ll Hold.
Next ex-div date: August 3, 2018 est.
BUY – Occidental Petroleum (OXY 83 – yield 3.7%) – Occidental increased their dividend by 1.3% last week, bumping up the quarterly payout to 78 cents per share. However, the stock is back near the bottom of its trading range, and below its 50-day line. Other energy stocks have also pulled back as oil prices slide below $70/barrel again. I’ll keep the stock on Buy for now, although you may want to keep positions smaller than usual until after earnings, for which OXY hasn’t announced a date yet.
Next ex-div date: September 7, 2018 est.
SAFE INCOME TIER
BUY – Invesco BulletShares 2019 Corporate Bond ETF (BSCJ 21 – yield 1.4%)
BUY – Invesco BulletShares 2020 High Yield Corporate Bond ETF (BSJK 24 – yield 4.8%)
BUY – Invesco BulletShares 2021 Corporate Bond ETF (BSCL 21 – yield 2.4%)
BUY – Invesco BulletShares 2022 High Yield Bond ETF (BSJM 25 – yield 5.3%)
The BulletShares funds make up our bond ladder, which is a conservative strategy for generating a steady income stream by buying a series of individual bonds or defined-maturity bond funds that mature in successive years. Because the BulletShares funds are short-term and mature at the end of the year in their name (at which point Invesco disburses the net asset value, or NAV, of the ETF back to investors), they are a good store of value even when interest rates rise. And if you reinvest the proceeds of the maturing fund in a new, longer-dated holding every year, you can secure a rising income stream as rates rise. You can construct your own ladder with either the investment-grade or high-yield funds, or a mix, as we’ve done. Invesco is also introducing a new series of BulletShares funds that hold municipal bonds, which may be of interest to some investors.
Next ex-div dates: est. August 1, 2018 est.
HOLD – Consolidated Edison (ED 79 – yield 3.6%) – ED has recovered from last Monday’s one-day pullback, triggered by a particularly strong day for the rest of the stock market. The utility will report second-quarter earnings August 2, after the close. Analysts are expecting EPS of $0.57, down 1.7% from $0.58, and revenue of $2.65 billion, up just 0.5% from $2.63 billion. ED isn’t a fast grower, but the dividend is as stable as they come. The stock will probably chop around some more short-term, but it remains a solid long-term Hold for safe income.
Next ex-div date: August 13, 2018 est.
HOLD – Ecolab (ECL 144 – yield 1.1%) – ECL has recovered nicely since its big pullback a few weeks ago, and is almost back to its 50-day moving average, currently at 144. The stock has shown unusual volatility since the start of the year, but the Dividend Aristocrat is still a solid holding for long-term income investors. A long-term chart of the stock shows a clear, steady uptrend, notwithstanding the gyrations of the last two quarters. The company makes chemicals and cleaning products widely used in the industrial, healthcare and hospitality industries, among others. Its high percentage of recurring revenue means cash flows are very predictable, and the company has increased its dividend every year since 1987. If the market’s primary trend turns more bullish I’ll put ECL back on buy for long-term investors. Ecolab will report second-quarter earnings July 31, before the open. Analysts are currently expecting EPS to hit $1.27, up 12% from $1.13 in second quarter 2017, while revenues are expected to rise to $3.7 billion, a 7% gain from last year.
Next ex-div date: September 14, 2018 est.
BUY – Invesco Preferred ETF (PGX 15 – yield 5.7%) – PGX is an ETF that holds preferred shares and pays monthly distributions. The fund has low volatility but no capital appreciation potential; it generally trades between 14 and 16, depending on the direction of interest rates. Buy under 15 for a good store of value and regular income.
Next ex-div date: August 15, 2018 est.
HOLD – McGrath RentCorp (MGRC 61 – yield 2.2%) – MGRC has pulled back since our last update, slicing through its 50-day line for the first time since February and declining on each of the last six trading days. It’s still probably just a normal pullback, but the break through the moving average is a yellow flag, so I’m going to put MGRC on Hold for now. The company will report second-quarter earnings July 31, after the market closes. Analysts are currently expecting a big EPS bump of 33%, thanks in part to MGRC’s new lower tax rate, and slower but steady 3% growth in revenues. McGrath has beat earnings estimates by more than 20% in each of the last four quarters, and gapped up following its last earnings report.
Next ex-dividend date: October 15, 2018 est.
BUY – UnitedHealth Group (UNH 250 – yield 1.4%) – UnitedHealth fell back to its 50-day line after reporting second-quarter results yesterday morning. The health insurer reported revenues of $56.1 billion, up 12% and in line with estimates. Adjusted EPS of $3.14 were up 28% year-over-year and well above estimates. Management also raised their full-year guidance to $12.50 to $12.75 per share, compared with the previous consensus estimate of $12.63. However, the stock dropped 2.6% yesterday. Analysts may have been disappointed by how much UnitedHealth spent on providing healthcare, as well as how much of earnings growth was thanks to non-operating factors like lower taxes. The stock’s pullback isn’t overly concerning; UNH is still above its 50-day line and in line with its long-term trend. I’ll keep UNH on Buy for Safe Income.
Next ex-div date: September 6, 2018 est.
HOLD – Xcel Energy (XEL 46 – yield 3.1%) – XEL will report second-quarter earnings July 26, before the open. Analysts are expecting EPS of $0.47, up from $0.45 last year (4.4%) and revenues of $2.62 billion, down from $2.64 (-0.8%). The stock is choppy, but remains a decent long-term Hold for Safe Income.
Next ex-div date: September 11, 2018 est.
Closing prices as of July 17, 2018
