The stock market slump that started last week has intensified in recent days, bringing the major indexes back to their October lows. But growth stocks have been the worst hit, and many conservative investments—like those in our Safe Income Tier—are actually holding up well.
I do have one rating change today—I’m selling another third of Broadridge Financial (BR), our lone tech stock, as it continues to slide along with the market. But after the housekeeping we did during last month’s selloff, the rest of our portfolio is in fine shape.
Utilities and REITs continue to do well, as do health care stocks and many financials. And stocks that have lagged so far this year, such as General Motors (GM), aren’t seeing much selling either.
The best thing a stock can do is go up, but when that’s hard to come by, the second best thing they can do is not go down. So I’m fairly content with our portfolio this week.
The market will be closed tomorrow for Thanksgiving, and only open for a quiet half day Friday. I’ll be back with your full December issue next week. Until then, enjoy the holidays.
HIGH YIELD TIER
HOLD – AllianceBernstein (AB 29 – yield 9.8%) – AB continues to bounce around between its 200-day and 50-day moving averages, currently at 28.52 and 29.86. The asset manager’s assets under management declined in October due to the stock market rout, but net inflows were positive firmwide. In addition, AB is buying Autonomous Research, an institutional research firm, for an undisclosed amount. High-yield investors can Hold.
Next ex-div date: February 1, 2019 est.
HOLD – Community Health Trust (CHCT 30 – yield 5.4%) – CHCT looks healthy. Community Health Trust is a REIT that owns health care buildings in non-urban areas. After finding support at its 200-day moving average for a second time last week, the REIT bounced back above its 50-day yesterday. REITS are benefitting from a decline in interest rates; the 10-year Treasury yield hit its lowest level in six weeks this Monday. Hold.
Next ex-dividend date: February 2019
HOLD – General Motors (GM 35 – yield 4.3%) – GM is ignoring the market pullback. The stock gapped up on great volume three weeks ago and is now building a slightly declining but tight base at 36. The Trump Administration is expected to hold off on new auto tariffs for a while, and GM recently announced that it will begin allowing non-GM cars in its Maven ridesharing fleet in mid-2019. Longer term, GM’s investments in autonomous cars are promising. GM’s revenues rose nearly twice as much as expected in the latest quarter, and the stock is looking healthier than it has in months. Hold.
Next ex-div date: est. December 6, 2018
HOLD – ONEOK (OKE 60 – yield 5.3%) – OKE has mostly traded sideways since our last update. The stock is affected by energy sector moves, but ONEOK is in the natural gas business, so oil prices aren’t a major performance driver. However, the stock is below its 200-day moving average and in a medium-term downtrend, so it’s one of the weaker holdings in our portfolio. We’ll Hold for now.
Next ex-div date: February 2019
HOLD – STAG Industrial (STAG 26 – yield 5.4%) – STAG is looking solid, etching a nice base just above its 200-day line. The industrial REIT owns properties in 37 states that are mostly used as warehouses and fulfillment centers. High-yield investors can Hold.
Next ex-div date: November 29, 2018 est.
DIVIDEND GROWTH TIER
HOLD – American Express (AXP 106 – yield 1.3%) – AXP closed below its 50-day line yesterday, and if the stock market correction continues the stock may pull back to its 200-day moving average, currently at 101. But the stock still looks healthy long term, and analyst estimates are rising. Hold.
Next ex-div date: January 4, 2019 est.
HOLD – BB&T Corp (BBT 51 – yield 2.9%) – BBT remains strong. After bottoming October 29, the stock has advanced for three straight weeks. Analyst updates are rising and regional banks have gotten a boost from rumors of regulatory relief. BB&T is a large regional bank operating in the mid-Atlantic, Southeast, Midwest and Texas. Hold.
Next ex-div date: February 2019
SELL HALF – Broadridge Financial Solutions (BR 98 – yield 2.0%) – BR continues to be dragged down by the selloff in tech stocks, and I’m going to sell half our shares today. I already sold one-third of our shares for a 47% profit back in August, so this latest sale will bring our position size down to one third. I expect to book a total return of about 37% on the sale. BR has been trending down since mid-September, and has failed to find support at any of the expected levels. Although analyst estimates haven’t budged, a longer-term selloff in tech stocks could weigh heavily on Broadridge. Sell Half.
Next ex-div date: December 13, 2018
BUY – CME Group (CME 192 – yield 1.5%) – CME hit a new 52-week high Monday. The company runs financial exchanges where traders buy and sell derivatives on everything from equity indexes to interest rates, so revenues rise when market volatility picks up. The stock had a nice long consolidation from March to August, so I’ll keep CME on Buy for now. 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: December 7, 2018
HOLD – CSX Corp. (CSX 69 – yield 1.3%) – After a three-week rally, CSX pulled back a bit yesterday. The stock could revisit its 200-day moving average down at 65 again if the market correction continues, but overall CSX still looks healthy. The company is a major freight railroad, whose network stretches from Florida to Montreal and from the Atlantic to the Mississippi. Hold.
Next ex-div date: November 29, 2018
HOLD – Dunkin’ Brands (DNKN 71 – yield 1.9%) – DNKN looks decent; the stock is chopping around right around its 50-day line, and is still well above its 200-day. Once the market environment improves, this consolidation could provide a good launchpad for the stock’s next advance. Analysts are expecting the coffee and donut chain to report full-year sales growth of 55% and EPS growth of 17%, and management is improving profitability by simplifying menus and focusing on growth areas. DNKN is a Hold.
Next ex-div date: November 23, 2018
SAFE INCOME TIERBUY – Invesco BulletShares 2019 Corporate Bond ETF (BSCJ 21 – yield 1.4%)
BUY – Invesco BulletShares 2020 High Yield Corporate Bond ETF (BSJK 24 – yield 4.9%)
BUY – Invesco BulletShares 2021 Corporate Bond ETF (BSCL 21 – yield 2.4%)
BUY – Invesco BulletShares 2022 High Yield Bond ETF (BSJM 24 – yield 5.5%)
The high-yield Bulletshares funds dropped again this week, reflecting a general rotation out of riskier investments. High-yield bonds, often referred to as “junk” bonds, usually decline during stock market corrections, because they represent riskier debt issued by less-secure companies. Falling oil prices can also affect the sector, since small energy companies are some of the most prolific issuers of junk debt. High-yield bonds had been holding up relatively well to the stock market selloff so far, but finally succumbed to selling pressure this week. 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 78 – yield 3.7%) – Utilities remain a preferred safe haven for investors fleeing the riskier sectors of the stock market, and ED is up 1.4% over the past five trading days. Consolidated Edison provides electricity and gas to the New York City area and is a reliable source of annual dividend increases and single-digit earnings growth. Long-term investors can nibble here for safe income.
Next ex-div date: February 2019
HOLD – Ecolab (ECL 156 – yield 1.1%) – ECL has spent the past two weeks consolidating, following a brief rally to all-time highs at the start of the month. ECL is now above both its 50- and 200-day moving averages, and analyst estimates are firm. The company produces cleaning chemicals and other products used in a variety of industries, generating non-cyclical cash flow and fueling reliable annual dividend increases. Hold.
Next ex-div date: est. December 17, 2018
BUY – Hormel Foods (HRL 45 – yield 1.7%) – Hormel reported adjusted fourth-quarter EPS of $0.51 yesterday, up 24% year-over-year and well above estimates. However, fourth-quarter revenue growth of 1.2%, to $2.52 billion, missed estimates. Full-year EPS of $1.86 per share also fell slightly short of analysts’ estimates, but rose 18% year-over-year. Strong growth in refrigerated foods was partially offset by weakness in commodity profits and higher transport costs. In 2019, management expects growth to be led by new products and brands like Wholly Guacamole, Applegate, Jennie-O and SPAM. Management also plans to deliver $75 million in cost reductions, to achieve EPS growth of 0% to 3%. Management also raised the dividend by 12%, bringing the stock’s yield to 1.9% and marking Hormel’s 53rd annual dividend increase in a row. HRL opened almost 2% lower but made up most of the losses during the day yesterday; the flight-to-safety effect may be overpowering stock-specific factors for now. I’ll keep HRL on Buy if it continues to hold up.
Next ex-div date: January 11, 2019
BUY – Invesco Preferred ETF (PGX 14 – yield 6.1%) – PGX has dropped to 13.70 over the past week. 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, though it hasn’t been tested during a prolonged period of rising interest rates. I’d expect the fund to hold up relatively well during a stock market correction though. Buy under 15.
Next ex-div date: est. December 14, 2018 est.
BUY – McCormick & Co (MKC 147 – yield 1.4%) – MKC has spent the past two weeks consolidating, after rallying to new 52-week highs earlier this month. Consumer staples stocks are a traditional safe haven during market corrections, because spending on groceries and other staples is so reliable. McCormick makes spices as well as numerous brand-name sauces, seasonings and condiments. Long-term investors can continue to Buy on pullbacks.
Next ex-div date: December 28, 2018 est.
HOLD – UnitedHealth Group (UNH 262 – yield 1.4%) – After hitting a new 52-week high two weeks ago, UNH has pulled back normally, and is trading near its 50-day line. One of the largest health insurers in the U.S., UNH is a reliable long-term safe income investment with an eight-year history of dividend growth. Hold.
Next ex-div date: November 30, 2018
BUY – Xcel Energy (XEL 52 – yield 2.8%) – XEL closed at its highest level of the year yesterday, and is close to a new 52-week high. The stock is benefitting from a rotation into utilities, and has also received several analyst upgrades in recent weeks. Based in Minnesota, Xcel is a leading provider of wind power in the U.S., as well as a conventional electric utility. The company has increased its dividend every year since 2004. Long-term safe income investors can buy on pullbacks.
Next ex-div date: est. December 13, 2018
Prices as of November 20, 2018
