The market has rallied since my last update; all sectors except for utilities are higher over the last five days. Materials, energy, financial and consumer discretionary stocks have led the rebound. That’s lifted some of our holdings that were struggling in recent weeks, like BB&T (BBT) and Ecolab (ECL).
At the same time, some of the investments that did best during October’s selloff continue to do well. Consumer staples stocks like McCormick (MKC) and Hormel (HRL), my latest addition, hit new 52-week highs this week.
While it’s certainly possible that the end of October marked the end of the correction, most corrections don’t end that neatly. More likely, we’ll see another leg down—or more—before the market’s long-term trend turns back up. So I’m not putting anything back on Buy today, although our portfolio contains plenty of good candidates for the honor—once the market convinces us this is the real thing.
HIGH YIELD TIER
HOLD – AllianceBernstein (AB 29 – yield 9.9%) – AB is bouncing around just above its 200-day moving average. The asset manager reported third-quarter earnings that beat estimates by a good margin two weeks ago, but like many stocks was still dragged down by the broad market. Revenue rose 9.7%, to $727.14 million, well more than expected. And adjusted EPS of $0.69 beat estimates by 11%. AB has solid support from its 200-day here, and the stock’s yield has risen to nearly 10% following the company’s 69-cent dividend last week. I’ll keep it on Hold for high-yield investors, and if the market remains healthy it could become a decent buy around these levels.
Next ex-div date: February 1, 2019 est.
HOLD – Community Health Trust (CHCT 30 – yield 5.5%) – Community Health Trust reported slightly lower-than-expected adjusted funds from operations of $0.40 per share yesterday. Revenue of $12.6 million was up 34% year-over-year but also a little lower than expected. The stock will probably open lower this morning, we’ll keep an eye on the 200-day line, currently at 27.91, to provide support. On the plus side, the company declared a fourth-quarter dividend payment of $0.405, up from $0.4025 last quarter.
Next ex-dividend date: November 15, 2018
HOLD – General Motors (GM 36 – yield 4.2%) – GM gapped up right through its 50-day line after reporting excellent earnings last Wednesday. Revenue rose 6.5%, nearly twice as much as expected, to $35.8 billion. Adjusted EPS were expected to decline slightly but instead rose to $1.87. The stock jumped on high volume and is now building a tight base at 36. GM also announced this week that they expect to launch their autonomous taxi fleet next year. The stock is looking healthier than it has in months. Hold.
Next ex-div date: est. December 6, 2018
HOLD – ONEOK (OKE 64 – yield 5.0%) – ONEOK has been flailing a bit since reporting mixed results last week. Management raised their full-year guidance, and EPS beat estimates, but revenue rose less than expected. The stock has responded with flip-flopping, first gapping up and then slicing through its 200-day on Friday. I’ll keep in on Hold for now; maybe the energy sector rebound can give the stock a boost this week.
Next ex-div date: February 2, 2019 est.
HOLD – STAG Industrial (STAG 26 – yield 5.4%) – STAG reported third-quarter results Thursday. Core FFO was up 4.3%, meeting estimates, and revenue rose 13.8%, beating estimates by $1.2 million. However, STAG has cooled off over the past week, pulling back to its 200-day line. The retreat isn’t too worrying, following three strong weeks of gains and coming as it does during a period of market rotation. High-yield investors can Hold.
Next ex-div date: November 29, 2018 est.
DIVIDEND GROWTH TIER
HOLD – American Express (AXP 105 – yield 1.3%) – Financials have done well over the past week, and American Express is bouncing nicely. The stock bounced off its 200-day line just as the market bottomed (for now) at the end of October. Hold.
Next ex-div date: January 4, 2019 est.
HOLD – BB&T Corp (BBT 50 – yield 3.0%) – BBT delivered a stellar performance this week, continuing the rally it started October 29 and meeting up with its 50-day line for the first time since September. The rally in financials helped, as did reports that regional banks may soon be getting some regulatory relief. BB&T’s latest earnings report was solid, and the bank should benefit from higher interest rates this quarter. Hold.
Next ex-div date: November 8, 2018
HOLD – Broadridge Financial Solutions (BR 105 – yield 1.8%) – Broadridge reported first-quarter earnings that beat estimates by a solid margin yesterday, but the stock dropped 12%. Adjusted EPS of $0.79 beat estimates by 11 cents, and revenue of $973 million beat by $2.9 million. Revenues were up 5%, and EPS were up 46%. Management said they’re on track to meet their 2019 guidance. Nevertheless, the stock dropped nearly 10% immediately after the open, and continued to lose ground (albeit more slowly) until 2 p.m. The stock rallied a bit into the end of the day. I’m surprised by the selloff and want to see what the stock does tomorrow before making any moves. Obviously if sellers remain in control we’ll respect the chart’s message and get out while the getting’s relatively good (we still have a 43% profit). But for now I’m going to keep BR on Hold.
Next ex-div date: est. December 17, 2018
BUY – CME Group (CME 186 – yield 1.5%) – CME has been on a tear ever since reporting earnings two weeks ago, closing higher on each of the past eight trading days. Market volatility is good for the financial exchange operator and the stock had a nice consolidation from March to August. I’ll keep CME on Buy. The company 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 70 – yield 1.3%) – CSX is looking healthier. After bouncing off its 200-day moving average a week and a half ago, CSX has bounced nicely over the past week. The company already reported earnings earlier this month, and although the stock’s reaction was negative, the results were excellent. Hold.
Next ex-div date: November 29, 2018
HOLD – Dunkin’ Brands (DNKN 73 – yield 1.9%) – DNKN looks decent, the stock is chopping around just under its 50-day line, but is still well above its 200-day. The company’s earnings were well-received; adjusted EPS rose 69% and revenue beat estimates nicely. Dunkin’s new menu strategy, which is simpler and more beverage-focused, contributed to improved profitability and will continue to be rolled out nationwide. Management also increased their full-year guidance, prompting a raft of upward analyst revisions; analysts are now expecting full-year sales growth of 55% and EPS growth of 17%. I’ll keep DNKN on Hold.
Next ex-div date: November 23, 2018
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 24 – yield 5.4%)
The two high-yield funds in our bond ladder, BSJK and BSJM, both pulled back fairly sharply last month due to a broader decline in the high-yield market. The stock market selloff, an Italian budget standoff and concerns about global economic growth were all cited as contributors to the selloff. However, the decline was much less severe than the losses in equity markets. I’ll keep all four bond funds on Buy; their defined-maturity features limit losses as long as they’re held until expiration (at which point Invesco disburses the net asset value, or NAV, of the ETF back to investors).
Next ex-div dates: December 3, 2018 est.
BUY – Consolidated Edison (ED 77 – yield 3.7%) – ConEd reported third-quarter results Thursday. Revenues of $3.33 billion beat the $3.19 billion estimate, and adjusted EPS of $1.57 beat estimates by 11 cents. But the stock usually reacts mildly, if at all, to earnings, and was dragged down by weakness in utility stocks over the past week. The stock is now back near its lows from September. Long-term investors can nibble here for safe income; ED has increased its dividend every year for 43 years.
Next ex-div date: November 13, 2018
HOLD – Ecolab (ECL 157 – yield 1.0%) – Ecolab has bounced strongly since the stock’s confused reaction to earnings last week and is now above both its 50- and 200-day moving averages. The company’s earnings met estimates and sales rose 5%, to $3.75 billion, $10 million above the consensus estimate. However, management lowered full-year expectations by 15 cents due to higher raw material costs and changes in exchange rates, triggering a short-term selloff in the stock. Investors appear to have come around to a longer-term view—and materials stocks have rebounded strongly over the past week—and ECL has now made up most of its losses from earlier in October. ECL is a Hold.
Next ex-div date: est. December 17, 2018
BUY – Hormel Foods (HRL 44 – yield 1.7%) – Despite the rebound in the market over the past week, my latest conservative pick, Hormel, continues to do very well. The stock hit a new 52-week high yesterday. Hormel will report fourth-quarter and full-year earnings November 20, before the market opens. For the quarter, analysts are expecting Hormel to report 2.9% revenue growth and 19.5% EPS growth. For the full year, analysts are expecting 4.7% revenue growth and 19.1% EPS growth. Buy on pullbacks.
Next ex-div date: January 2019
BUY – Invesco Preferred ETF (PGX 14 – yield 6.0%) – After a quick interest rate-related pullback early last month, PGX has been trading sideways for the past few weeks, and remains a decent store of value until the market improves. 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, but it’s a good source of regular income. Buy under 15.
Next ex-div date: est. December 14, 2018 est.
BUY – McCormick & Co (MKC 149 – yield 1.4%) – MKC was a standout during October’s correction, so it wouldn’t have been surprising to see the stock weaken a bit once the market rebounded. Instead, MKC continues to hit new highs. That lends credence to my thesis that consumer staples stocks are in the early stages of a longer-term upcycle, not just temporary beneficiaries of a market panic. Long-term investors can continue to Buy on pullbacks. The spices company is a Dividend Aristocrat and reported excellent third-quarter earnings three weeks ago, triggering a flurry of upward estimate revisions. For a similar investment, see this month’s new recommendation of Hormel (HRL).
Next ex-div date: December 28, 2018 est.
HOLD – UnitedHealth Group (UNH 264 – yield 1.4%) – UNH has switched from an uptrend to a sideways trend. The stock is chopping around between 255 and 275, currently just under its 50-day line. If you’re looking to reduce risk, you could take some profits here. We still only have an 18% profit, so I’ll continue to Hold. The 200-day moving average, currently around 247, will probably provide support if UNH gets that low. However, the stock has become less attractive short-term.
Next ex-div date: December 6, 2018 est.
BUY – Xcel Energy (XEL 49 – yield 2.9%) – XEL pulled back a bit with the rest of the utilities stocks this week and is back below its 50-day moving average. The most likely course of action now is that XEL keeps trading between about 46 and 50 for the time being. I think long-term safe income investors can Buy when the stock is close to the bottom of that range.
Next ex-div date: est. December 13, 2018
Prices as of November 6, 2018
