After a fierce six-day selloff, the stock market managed to find its footing Friday, and is rebounding this week. But don’t get greedy—things are still dicey. It’s smart to be defensive until we get confirmation that the market’s short-term trend has turned back up.
Most of the higher-risk names in our portfolio are already on Hold, but I’m taking a couple more defensive moves today, moving STAG Industrial (STAG) to Hold and selling half of McGrath RentCo (MGRC), which continues to decline.
However, our safe income stocks look great: McCormick (MKC) and UnitedHealth (UNH) just hit new 52-week highs.
Finally, earnings season is getting properly underway this week, and I provide earnings dates and estimates for most of our holdings below.
HIGH YIELD TIER
HOLD – AllianceBernstein (AB 31 – yield 8.4%) – I moved AB to Hold in Thursday’s special bulletin, after the stock plunged through its 50-day line. However, the stock found support at its 200-day and has already rebounded nicely, making up for the losses over the past three trading days. AB is back above its 50-day line and likely to continue trading between about 30 and 31 if the market can keep it together. The asset manager will report third-quarter earnings on October 24. Analysts are expecting revenue of $707.56 million, down 13%, and earnings of $0.62 per share, down 18%. Hold.
Next ex-div date: November 1, 2018 est.
HOLD – Community Health Trust (CHCT 29 – yield 5.6%) – CHCT pulled back to its 200-day moving average before finding support yesterday. REITs usually underperform when rates are rising, but the stock has solid support here, so I’ll keep it on Hold for high yield investors. Community Health Trust will report third-quarter earnings November 6, after the close.
Next ex-dividend date: November 15, 2018 est.
HOLD – General Motors (GM 32 – yield 4.7%) – GM will release third-quarter earnings October 31, before the market open. Analysts are expecting the automaker to report a 3.6% bump in sales, to $34.84 billion, and EPS of $1.25, down 5.3%. The stock is near 52-week lows, but I still think it’s a good long-term investment for yield and, eventually, capital gains.
Next ex-div date: est. December 6, 2018
HOLD – ONEOK (OKE 67 – yield 4.7%) – OKE dropped briefly to its 200-day during last week’s market selloff, but rebounded yesterday and is back above its 50-day line. ONEOK will report third-quarter earnings after the market closes on October 30. Analysts are expecting to see 7.3% sales growth, to $3.12 billion, and 61% EPS growth, to $0.69. Natural gas prices remain near their highest levels since January, boosting ONEOK’s business.
Next ex-div date: November 2, 2018 est.
HOLD – STAG Industrial (STAG 26 – yield 5.4%) – After bouncing off its 200-day moving average early last week, STAG broke through the trendline during Thursday’s selloff. However, the stock has rebounded, and closed above the 200-day yesterday. I am going to put the stock on Hold for now though, given its downward momentum. STAG will report third-quarter results November 1, after the close. Analysts’ average revenue estimate is $74.81 million, up 13.9% over the same quarter last year.
Next ex-div date: October 30, 2018
DIVIDEND GROWTH TIER
BUY – American Express (AXP 104 – yield 1.3%) – American Express will report third quarter earnings tomorrow, October 18, after the close. Analysts are expecting the company to deliver 19.0% revenue growth, to $10.04 billion, and 17.3% EPS growth, to $1.76. The stock looks pretty healthy; buyers stepped in before the market pullback ended Thursday, stopping AXP’s slide short of its 200-day moving average. I’ll keep AXP on Buy for now.
Next ex-div date: January 4, 2019 est.
HOLD – BB&T Corp (BBT 47 – yield 3.2%) – BB&T will report third-quarter earnings tomorrow, October 18. Analysts are expecting the bank to report EPS of $1.00, up 35%, and revenue of $2.92 billion, up 2.4%. The stock is trading near its lows from a year ago, and below its 50- and 200-day lines. It hasn’t bounced much this week, so it could be time to cut it loose, but I’ll keep it on Hold until after earnings.
Next ex-div date: November 7, 2018 est.
BUY – Broadridge Financial Solutions (BR 119 – yield 1.6%) – After a fairly orderly descent, BR found support just above its 200-day last week. I’ll keep BR on Buy for now, but don’t go overboard until the broad market stabilizes. Broadridge is the largest investor communications firm in the U.S., and delivers steady single-digit sales growth every year.
Next ex-div date: est. December 17, 2018
BUY – CME Group (CME 178 – yield 1.6%) – CME Group will report third-quarter results October 25, before the open. Analysts currently expect the company to report EPS of $1.43, up 20.2%, and revenue of $918.65 million, up 3.1%. CME owns exchanges where derivatives are traded, so the company benefits from market volatility and the stock has been performing well. Dividend Growth investors can Buy on normal pullbacks. Now is a great time to get into the stock: CME pays a large special dividend at the end of each year, which can more than double its normal yield.
Next ex-div date: est. December 7, 2018
HOLD – CSX Corp. (CSX 72 – yield 1.2%) – CSX reported excellent earnings after the close yesterday. Revenue rose 14% and EPS rose 106%, both beating analyst estimates. I put CSX on Hold in Thursday’s special bulletin, after the stock dropped 7%, plunging through its 50-day line. However, buyers stepped in even before yesterday’s results, and I think the stock will probably earn back its Buy rating next week.
Next ex-div date: November 29, 2018
BUY – Dunkin’ Brands (DNKN 74 – yield 1.9%) – DNKN looks okay; the stock is trading sideways right around its 50-day moving average. Bill Ackman’s announcement of his big investment in Starbucks (SBUX) helped both stocks ride out last week’s correction with minimal damage. Dunkin’ will report third-quarter earnings October 25, before the open. Analysts are currently expecting EPS of $0.73 and sales of $342.84 million, up 20% and 53%, respectively.
Next ex-div date: November 23, 2018 est.
HOLD – Occidental Petroleum (OXY 73 – yield 4.2%) – Following last week’s pullback to its 200-day, Occidental dropped another 4% Monday after the company announced it will allow its lease on a Qatari oil field to expire. The company’s 25-year lease on the 100,000-barrel-a-day Idd El-Shargi North Dome field expires in 2019, and Occidental announced Monday that it will allow the lease to expire and hand the field over to the Qatari government. The move is part of OXY’s strategy to direct capital toward its much faster-growing assets in the U.S. However, the move still surprised many investors, triggering the selloff. I’ll keep OXY on Hold for now and we’ll see if it can rebound quickly. The company will report third-quarter results November 5, after the market closes.
Next ex-div date: December 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 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.
Next ex-div dates: October 4, 2018 est.
BUY – Consolidated Edison (ED 76 – yield 3.8%) –ED still looks okay; the turmoil in the stock market seems to have sent some investors fleeing toward utilities. The stock is trading near the bottom of its range and has decent support. Long-term investors can Buy for safe income.
Next ex-div date: November 13, 2018 est.
BUY – Ecolab (ECL 148 – yield 1.1%) – ECL dropped sharply through its 50-day line last week, but is still above its 200-day. I think this is a decent buying opportunity; the stock is conservative and still in a gradual uptrend. Ecolab makes cleaning chemicals and other products that generate reliable recurring revenues and has paid dividends for 32 years. Buy on pullbacks for capital appreciation and safe income.
Next ex-div date: est. December 17, 2018
BUY – Invesco Preferred ETF (PGX 14 – yield 6.0%) – PGX pulled back as interest rates spiked, but has support near these levels. PGX is an ETF that holds preferred shares (a type of debt) and pays monthly distributions. The fund has low overall volatility and usually trades between 14 and 16. Note that PGX offers no capital appreciation potential; instead, it’s a good store of value and source of regular income. Buy under 15.
Next ex-div date: est. December 14, 2018 est.
BUY – McCormick & Co (MKC 137 – yield 1.5%) – MKC still looks stupendous; the stock closed at a new 52-week high yesterday. The spices company reported excellent third-quarter earnings three weeks ago, triggering a flurry of upward estimate revisions, and the stock is benefitting from a rotation into conservative sectors. Buy on pullbacks for dividends and capital gains.
Next ex-div date: October 8, 2018
SELL HALF – McGrath RentCorp (MGRC 51 – yield 2.7%) – MGRC earned a stay of execution with a decent performance relative to the rest of the market last week. But the stock is still trending down, and is below is 50- and 200-day moving averages. With no obvious support level in sight, I’m going to reduce our risk today by selling half our position. We’ll hold the rest for now. McGrath will announce third-quarter results October 30, after the close, and analysts are expecting EPS of $0.90 and revenue of $139.87 million, up 30.4% and 3.3% respectively.
Next ex-dividend date: January 2019
BUY – UnitedHealth Group (UNH 273 – yield 1.3%) – UnitedHealth reported excellent earnings yesterday morning, and jumped 5% to more than make up for last week’s pullback. Third-quarter revenues rose 12% and adjusted EPS jumped 28%, both beating estimates. Even better, UnitedHealth raised their full-year guidance, and now expects full-year adjusted earnings of $12.80 per share, up 27%. UNH is very healthy and Safe income investors can start positions in UNH here. The company has an eight-year history of dividend growth and has increased its dividend by 26% per year, on average, over the past five years.
Next ex-div date: December 6, 2018 est.
BUY – Xcel Energy (XEL 48 – yield 3.0%) – Xcel will report third-quarter results before the market opens on October 25. Analysts are expecting 19% revenue growth, to $3.58 billion, and 1% EPS growth, to $0.98. The stock looks healthy can be bought here for safe income.
Next ex-div date: est. December 13, 2018
Prices as of October 16, 2018
