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Dividend Investor
Safe Income and Dividend Growth

December 22, 2021

Bring it on. Persistent high inflation, a rapid Fed tightening cycle, and the explosion of Omicron have barely mussed the bull’s hair.

Nothing Can Slay this Bull
Bring it on. Persistent high inflation, a rapid Fed tightening cycle, and the explosion of Omicron have barely mussed the bull’s hair.

Despite the recent blitzkrieg of party-pooper issues, the S&P 500 is hovering within bad breath distance of the all-time high. I guess it will take a lot more than just pestilence and an inflationary spiral to stop this bull market.

The lure of a strong economy with still low interest rates and stellar earnings is running over even these formidable foes. Investors may get spooked for a few days. But the fear wanes quickly. And when it does, investors realize that stocks are the only game in town to earn a decent return. The prospects of strong earnings make that an easier bet.

Of course, problems could get worse. Inflation probably will continue to get worse before it gets better. And the virus will probably hang around for at least another month or so. But the bulls appear to have the upper hand, at least for now.

The situation is setting up an interesting dynamic. The virus stuff is likely to be temporary while the other problems, inflation and Fed tightening, will be much longer term. Sure, the virus will be in news and probably be a big deal in January. But it will fade. The other issues will be around for all of 2022.

The virus is knocking back cyclical stocks in the energy and financial sectors ahead of what is a very promising year. These sectors should thrive amidst inflation and rising interest rates. Sure, the stocks might get knocked around a little more. But they are holding their buy range ahead of a likely stellar year.

High Yield Tier
AGNC Investment Corp. (AGNC – 9.5%) – This floundering mortgage REIT dipped broke below the 15 per share level in Monday’s market hysteria over the virus but has gotten it back and moved well above 15 since. The stock is weak because interest rates have been moving lower. But it is likely that inflation and the strong economy will drive rates higher after the virus fades and AGNC will benefit. BUY

Blackrock Enhanced Capital and Income Fund (CII – 5.8%) – This covered call ETF is a good place to be looking ahead to a more choppy and sideways market in the New Year. It provides a higher level of income at the expense of capital appreciation potential. This should be a good trade. Plus, the more defensive nature and high dividend should be attractive to investors in 2022. BUY

Compass Diversified (CODI – 4.7%) – This superstar Business Development Company (BDC) has been very bouncy on an uptrend. CODI had a big down move over the last couple of weeks but had a big up day yesterday. Small companies tend to thrive in a strong economy but are more vulnerable to inflation and rising rates. The uptrend is still intact for now and CODI should have some good quarters ahead. BUY

Enterprise Product Partners (EPD – yield 8.6%) – It’s been a good year for energy stocks, but a mediocre one for EPD. The midstream energy partnership continues to flounder aimlessly after the surge in October. But the intermediate term dynamics should favor EPD. Energy demand should remain strong. The valuation is dirt cheap. And the distribution is rock solid. This stock should have another surge in the not-too-distant future. BUY

ONEOK Inc. (OKE – yield 6.6%) – This midstream energy stock is down lately. It’s down about 15% from the recent high. It has fallen in sympathy with the overall energy sector on virus concerns. But even after the recent dip, OKE has returned over 57% YTD. And it is still price below the pre pandemic high despite having much higher earnings now. It’s still a value with a great dividend and business should continue to be strong with solid energy demand. BUY

Realty Income (O – 4.4%) – This is a solid income and defensive play that has been trending higher for a long time and should have further to go. But it has been floundering a bit lately as cyclical stocks and retail stocks have been taking it on the chin. It’s still set up well going into the New Year as investors are likely to gravitate towards income and safety in a flatter market. HOLD

STAG Industrial (STAG – 3.2%) – This industrial REIT has been a solid performer all year long. It had gone straight up until early September. Since then, it has surged and then pulled back on a still upward trend. It recently made another new all-time high and is not far from that level right now. While the market is busy freaking out over Omicron and the Fed, STAG is making new all-time highs. Business is good for the REIT and will likely stay that way whether the virus or inflation wins in the next few months. HOLD

Dividend Growth Tier
AbbVie (ABBV – 4.3%) – The biopharmaceutical giant has really caught fire this month in a choppy market. It’s up about 15%. It has also soared to a new 52-week and finally eclipsed the all-time high from 2018. Fantastic earnings recovered the stock from a selloff in late summer over the FDA announcement of a warning label for one of its most promising drugs. Plus, Healthcare stocks have been top performers recently. The stock still sells at a very cheap valuation a might have more to go on this run. HOLD

Broadcom Inc. (AVGO – yield 2.5%) – This technology stock has been sizzling hot despite a tough environment for technology stocks. It’s hovering right about at the all-time high. It’s up 17% already this month and over 36% since early October. It recently got a huge boost from a stellar earnings report and a raising of the dividend. The stock is making up for lost time after a mostly lackluster year and may have further to run. BUY

Brookfield Infrastructure Partners (BIP – yield 3.5%) – This infrastructure partnership is in an unmistakable longer-term uptrend, albeit a bouncy one. It soars to new highs and then pulls back, rinse and repeat. At this point, BIP is near the low after the retreat from recent highs. But this is likely short-term noise, considering business is solid and growing. Earnings should accelerate in the quarters ahead because of a recent acquisition. HOLD

Chevron Corp. (CVX – yield 4.6%) – After a big September and October, energy stocks have faltered. The sector was consolidating, and then Omicron pushed it lower. But it didn’t seem to bother CVX. This resilient energy titan is within bad breath distance of the high. But I love the way things are setting up for CVX. Oil prices are high, and demand is still booming. Chevron is the most highly leveraged to oil prices of the oil majors and the company should kill over the next few quarters. As well, this virus is likely to be temporary and energy should be hot again. HOLD

Eli Lilly and Company (LLY - yield 1.5%) – The big pharma company stock has cooled off after soaring to new highs after the company raised revenue and profit forecasts for 2021 and 2022. That’s big, especially considering the prospects of approval in the New Year of a new Alzheimer’s drug that could be a mega blockbuster. This stock always seems to pull back after a surge, but the trend remains terrific. HOLD

KKR & Co. Inc. (KKR – yield 0.8%) – The alternative investment asset manager stock pulled back 15% from the high made at the very end of October. It was due for a consolidation and then pressure recently from the rest of the financial sector amidst virus worries. But even with the recent pullback, KKR has still returned about 55% since being added to the portfolio in March. Business is still booming at this company and current virus concerns are likely to give way to a strong recovery in the early part of next year. I don’t think the superstar is nearly done yet. HOLD

Qualcomm Inc. (QCOM – yield 1.5%) – The chip maker stock has cooled off since the remarkable 40% in a month. It has since faced external pressures as the tech sector has struggled. But it is still hanging tough and not that far from the high. It looks like a stock that wants to continue higher once the technology environment at least neutralizes. It still sells at a cheap valuation and prospects are stellar. HOLD

Spectrum Brands Holdings, Inc. (SPB – yield 1.7%) –This stock pulled back recently. After a huge boost from earnings last month, SPB has lost nearly all of the gains. Consumer stocks have been under pressure lately. But There really isn’t a good reason for the pullback. It sells home products. If the virus gets bad and results in more lockdowns, sales will likely go higher. Inflation is a bigger worry. But the company seems to be handling it well. HOLD

U.S. Bancorp (USB – 3.4%) – The yield curve has been going the wrong way, and so has USB. Although, most elements of the bank’s business are booming, the most important one, net interest income, has been weaker. But, as I mentioned above, the pressures of inflation and a strong economy combined with the Fed tapering is likely to put upward pressure on rates next year. That missing piece of the puzzle should drive the stock higher. HOLD

Valero Energy Corp. (VLO yield 5.7%) – This refiner stock is a high leverage play on the energy sector. That’s been a bad thing of late because of virus worries. But, as I mentioned, the virus stuff is likely to be temporary and well outlasted by inflation and a recovering economy. In short, this stock is being held back and even getting cheaper ahead of boom times next year. The stock is well off the 52-week high and light years from the all-time high with a lot more room to run. HOLD

Visa Inc. (V yield 0.7%) – This company makes money every time its cards are swiped. And its cards comprise about a 50% share of all cards issued worldwide. It’s one of the best financial stock to own. And the best days of the recovery are ahead. The international recovery has yet to catch up to the U.S. This stock has been moving up fast after being knocked back in minor issues. BUY

Safe Income Tier
Invesco Preferred ETF (PGX – yield 4.9%) – After falling during the pandemic, this preferred stock ETF has recovered. This preferred stock ETF is much less volatile than the stock market while providing a big yield. It also adds diversification as preferred stock performance is historically not correlated to the stock and bond markets. HOLD

NextEra Energy (NEE – yield 1.7%) – After having a crummy year as investors focus on cyclical stocks and conventional energy, this alternative energy utility has been on a tear. It has shot nearly 20% higher in the past few months and is back near the all-time high. NEE is benefiting from a flight to safety. Longer term it should make up for lost time when alternative energy stocks come back into vogue. BUY

Xcel Energy (XEL – yield 2.7%) – Despite a dip earlier this week, this alternative energy utility is still on an uptrend. It had been up 10% in December. The normally strong performing utility has had a lousy year. But things are changing. It may be lagging the NEE situation. Utilities have been getting stronger lately. Plus, alternative energy stocks have floundered this year despite huge growth in the sector as investors focused on the revitalized conventional energy sector. But things change and XEL is still a great way for conservative investors to play the growth in alternative energy. BUY

High Yield Tier
Security (Symbol)Date AddedPrice AddedDiv Freq.Indicated Annual DividendYield On CostPrice on
Total ReturnCurrent YieldCDI OpinionPos. Size
AGNC Investment Corp. (AGNC)04-14-2117Monthly1.449.10%15-7%9.5%BUY1
Blackrock Enhanced Cap & Inc. (CII)07-13-2121Monthly1,125.6%213%5.8%BUY1
Compass Diversified (CODI)10-13-2131Qtr.1.445.0%30-1%4.7%BUY1
Enterprise Product Partners (EPD)02-25-1928Qtr.1.808.30%21-8%8.6%BUY1
ONEOK Inc. (OKE)05-12-2153Qtr.3.746.00%5814%6.6%BUY1
Realty Income (O)11-11-2062Monthly2.814.2%6917%4.4%HOLD1
STAG Industrial (STAG)03-21-1824Monthly1.453.3%45126%3.2%HOLD1/2
Current High Yield Tier Totals:5.5%37.3%5.7%
Dividend Growth Tier
AbbVie (ABBV)01-28-1978Qtr.5.204.8%13294%4.3%HOLD2/3
Broadcom Inc. (AVGO)01-14-21455Qtr.14.402.6%59047%2.5%BUY1
Brookfield Infrastucture Ptrs (BIP)03-26-1941Qtr.2.043.6%5876%3.5%HOLD2/3
Chevron Corporation (CVX)02-10-2190Qtr.5.164.7%11831%4.6%HOLD1
Eli Lily and Company (LLY)08-12-20152Qtr.3.401.3%24578%1.5%HOLD2/3
KKR & Co. Inc. (KKR)03-09-2148Qtr.0.580.8%7454%0.8%HOLD1/2
Qualcomm (QCOM)11-26-1985Qtr.2.601.5%184123%1.5%HOLD1/3
Spectrum Brands Holdings, Inc. (SPB)08-11-2181Qtr.1.681.6%9921%1.7%HOLD1
U.S. Bancorp (USB)12-09-2045Qtr.1.683.2%5626%3.4%HOLD1
Valero Energy Corp (VLO)06-26-1984Qtr.3.925.7%72-3%5.7%HOLD1/2
Visa Inc. (V)12-08-21209Qtr.1.500.7%2153%0.7%BUY1
Current Dividend Growth Tier Totals:2.8%40.3%2.7%
Safe Income Tier
Invesco Preferred (PGX)04-01-1414Monthly0.744.9%1556%4.9%HOLD1/2
NextEra Energy (NEE)11-29-1844Qtr.1.541.7%91119%1.7%BUY1/2
Xcel Energy (XEL)10-01-1431Qtr.1.832.8%67172%2.7%BUY2/3
Current Safe Income Tier Totals:3.1%115.7%3.1%

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