Note: I have added a new video Quick Start Guide to Cabot Income Advisor, in which I take you on a guided video tour through the various features of this service, including Issues, Updates, & Alerts and where to email me with questions. Newer subscribers, in particular, may find it helpful. You can find the Quick Start Guide on the right rail of the Cabot Income Advisor main screen.
Bank on This Proven Winner
It’s been a good market. The S&P 500 is up 11.3% so far this year after returning 21.9% in 2023. The index is also up 30% since late October.
The S&P has been mostly driven higher by the technology stocks. Artificial intelligence has added a powerful growth catalyst that has been powering that sector higher. But it hasn’t been nearly as good a market for the other sectors. Income stocks have notably struggled in recent years, particularly the defensive and interest rate-sensitive ones.
Utilities and REITs had a rough couple of years in 2022 and 2023 as interest rates soared to multi-decade highs because of inflation. Although those sectors have recovered since the end of October, it’s still been bouncy. These stocks tend to get knocked around with the interest rate narrative. When rates are falling and expected to fall further, the stocks rally. When rates and expectations rise, things get ugly again.
While I believe interest rates, the Fed Funds and 10-year Treasury rates, have likely peaked for this cycle, you never know. It only takes a bad inflation number or a hawkish tone from the Fed to sour the narrative. Even if interest rates have peaked, I doubt the up-and-down interest rate expectations saga is over. And most interest rate-sensitive stocks are unlikely to muster a sustained rally until interest rates come down in a sustained and significant way. That probably won’t happen this year.
But it’s a great time to generate income. The market is at an all-time high. The May through November period is historically a more lackluster period for stocks. Income generation is an ideal strategy right now. But not if the stocks generating the income get knocked down by rising rates.
There is a great answer: midstream energy stocks. These are companies that transport and store oil and gas for a fee. The subsector is among the highest yielding of all income generating stocks. And unlike many dividend stocks, they have thrived over the last few years of rising interest rates. For the most part, these stocks are not interest rate sensitive and can endure inflation or recession. They have proven to be the perfect sector to generate a high income in this market environment.
In this issue, I highlight a stock that has been the very best income generator in the Cabot Income Advisor portfolio. It has been held profitably in the portfolio on three past occasions. Each time it delivered a positive total return along with several covered calls for huge income. It’s a tested and true income-generating superstar.
What to Do Now
In many ways, this is an ideal time to sell covered calls. The market is at an all-time high, and positive stock momentum generates high call prices while the higher strike prices lock in a high total return if the stocks are called. The market is also highly uncertain heading into the worst time of the year for stocks. Who knows what the next turn of the ongoing interest rate saga will be?
At the same time, there are two portfolio positions that are screaming to sell a covered call, NextEra Energy (NEE) and Qualcomm (QCOM). NEE is up 40% since March and 64% from the 52-week low. And it’s a utility. QCOM is up 35% in the last five weeks and has been making new all-time highs all month. QCOM has already delivered a nearly 70% total return in addition to the two calls already sold in the position.
But NEE and QCOM keep going higher every week and I don’t want to interrupt them. Momentum is a powerful force and as long as it lasts and delivers consistently higher prices, I don’t want to try to outsmart the market. I was tempted to sell calls on QCOM two weeks ago and it has moved 14% higher since.
But eventually the surges in these stocks will end and there will be great call writing opportunities. Keep an eye out in the issues and updates as well as Trade Alerts in your email.
The rest of the portfolio has not delivered high enough returns and doesn’t have enough momentum to generate high-priced covered calls. Main Street Capital (MAIN) and FS KKR Capital Corp. (FSK) were added very recently. And several other positions are coming off a move lower. However, Brookfield Infrastructure Corporation (BIPC) is generating a good call premium and a call is highlighted below.
Monthly Recap
May 14
Sold Xcel Energy (XEL) - $55.56
May 17
WMB May 17 $35 calls at $2.00 – Expired
The Williams Companies (WMB) stock – Called
May 29
Buy ONEOK, Inc. (OKE)
Sell BIPC Sep 20 $35 calls at $3.00 or better
Featured Actions
Buy ONEOK, Inc. (OKE)
Yield: 4.9%
ONEOK is a large U.S. midstream energy company specializing in natural gas. It owns one of the nation’s premier natural gas liquids (NGLs) systems connecting NGL supply in the Rocky Mountains, midcontinent, and Permian regions in key market centers, and has an extensive network of natural gas gathering, processing, storage and transportation assets. A whopping 10% of U.S. natural gas production uses ONEOK’s infrastructure.
Here are some things to like about the company and stock.
- Investment grade rated debt
- 85% of earnings fee-based
- 27 years of stable and growing dividends
- C corporation structure (generates a 1099 and not a K-1).
Earnings are resilient because ONEOK operates in the best segments and is well-positioned in the high-growth shale regions. Natural gas is a rapidly growing fuel source that is much cleaner burning than oil or coal. NGL is by far the fastest growing fossil fuel source. During the pandemic, in one of the worst years ever for the energy industry, ONEOK’s NGL and dry natural gas volumes both continued to grow anyway.
This stock has been owned and successful in the portfolio on three prior occasions. The first time the stock was held for nine months. The stock provided a total return (appreciation and dividends) of 19.6%. In that time, three covered calls were sold for a total of $8.50 per share, which provided a 16.2% income in addition to the 19.6% stock return in nine months.
The second time the stock was held for 8 months before it was called. It provided a 2.66% stock return plus a 10.9% income return from two covered calls. The third time OKE was held for 6 months before being called. It provided a 9.72% total stock return and a 9.7% income return from two covered calls.
OKE tends to attract higher covered call premiums than other midstream company stocks because it is more volatile. The prospect for midstream companies is excellent for the rest of the year and I’m confident that this will be another successful holding period with a high income and total return.
OKE pays a stellar 4.9% yield. That payout is safe for several reasons. The company has grown or maintained the payout for 27 straight years that include recession and terrible energy environments. It has also grown the dividend at a better than 6.4% average annual clip for the last 10 years.
Why buy it now?
Midstream energy companies are among the most attractive income generators on the market. They tend to pay much higher dividends than other sectors. Plus, given the short supply of natural gas in the world, the demand should be stable and growing and recession resistant. It’s also worth noting that this subsector behaved very well during the inflation and rising rate environment of the past couple years while most other dividend-paying sectors got clobbered.
OKE returned a solid 16.46% in 2022, 16.3% in 2023, and 16.9% YTD. OKE is also one of very few energy companies that has eclipsed the pre-pandemic high. It provides a high income, predictable earnings, and ONEOK is one of very few companies that can thrive in an environment of inflation and/or recession.
ONEOK, Inc. (OKE)
Next ex-div date: July 31, 2024, est.
Sell BIPC Sep 20 $35 calls at $3.00 or better
Expiration date: September 20
Strike price: $35
Call price: $3.00
Brookfield Infrastructure Corporation (BIPC)
The reliable revenue and earnings generating infrastructure company stock has bounced around with the interest rate narrative for the past several years. Before inflation and rising rates, it had been a stellar performer. The price is near the highest level it has been at so far this year. The May through November period is typically worse for the overall market. Let’s grab some income on this stock in a lackluster period when the price is right.
Here are the three scenarios.
1. The stock closes above the $35 strike price at expiration.
Call premium: $3.00
Dividends: $0.81
Appreciation: $2.36 ($35 strike price minus $32.64 purchase price)
Total: $6.17 (total return will be 18.9% in 7 months)
2. The stock price closes below but near our $35 strike price.
Call premium: $3.00
Dividends: $0.81
Total: $3.81 (total income of 11.7% in 7 months)
3. The stock price declines.
There will be $3.81 in income to offset the decline. Plus, the original purchase price was $2.36 per share below the strike price.
Portfolio Recap
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Alexandria Real Estate Eq. | ARE | 12/19/23 | $129.54 | $118.40 | $140.00 | 4.29% | -6.78% |
| American Tower Corp. | AMT | 1/23/24 | $202.26 | $185.93 | $220.00 | 3.49% | -7.24% |
| Brookfield Infrstr. Cp. | BIPC | 2/27/24 | $32.64 | $35.54 | $40.00 | 4.56% | 7.31% |
| Enterprise Product Ptnrs. | EPD | 2/27/24 | $27.61 | $28.21 | $30.00 | 7.30% | 4.01% |
| FS KKR Capital Corp. | FSK | 4/23/24 | $19.42 | $20.11 | $20.50 | 14.43% | 3.81% |
| Main Street Capital Corp. | MAIN | 3/26/24 | $46.40 | $48.55 | $50.00 | 8.30% | 5.66% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $76.61 | $65.00 | 2.69% | 1.51% |
| ONEOK, Inc. | OKE | 5/29/24 | $80.85 | $84.00 | 4.90% | ||
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $210.36 | $165.00 | 1.62% | 66.88% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $52.18 | $62.00 | 5.91% | -8.69% |
| Call Trades | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| BIPC Sep 20 $35 call | BIPC240920P00035000 | Sell Pending | $3.00 | $3.00 | 9.19% | ||
| as of close on 05/24/2024 | |||||||
| SOLD STOCKS | |||||||
| X | Ticker Symbol | Action | Entry Date | Entry Price | Sale Date | Sale Price | Total Return |
| Innovative Industrial Props. | IIPR | Called | 6/2/20 | $87.82 | 9/18/20 | $100 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95 | 7.30% |
| U.S. Bancorp | USB | Called | 7/22/20 | $36.26 | 9/18/20 | $38 | 3.42% |
| Brookfield Infras. Ptnrs. | BIP | Called | 6/24/20 | $41.92 | 10/16/20 | $45 | 8.49% |
| Starbucks Corp. | SBUX | Called | 8/26/20 | $82.41 | 10/16/20 | $88 | 6.18% |
| Visa Corporation | V | Called | 9/22/20 | $200.56 | 11/20/20 | $200 | 0.00% |
| AbbVie Inc. | ABBV | Called | 6/2/20 | $91.04 | 12/31/20 | $100 | 12.43% |
| Enterprise Prod. Prtnrs. | EPD | Called | 6/24/20 | $18.14 | 1/15/21 | $20 | 15.16% |
| Altria Group | MO | Called | 6/2/20 | $39.66 | 1/15/21 | $40 | 7.31% |
| U.S. Bancorp | USB | Called | 11/25/20 | $44.68 | 1/15/21 | $45 | 1.66% |
| B&G Foods Inc, | BGS | Called | 10/28/20 | $26.79 | 2/19/21 | $28 | 4.42% |
| Valero Energy Inc. | VLO | Called | 8/26/20 | $53.70 | 3/26/21 | $60 | 11.73% |
| Chevron Corp. | CVX | Called | 12/23/20 | $85.69 | 4/1/21 | $96 | 12.95% |
| KKR & Co. | KKR | Called | 3/24/21 | $47.98 | 6/18/21 | $55 | 14.92% |
| Digital Realty Trust | DLR | Called | 1/27/21 | $149.17 | 7/16/21 | $155 | 5.50% |
| NextEra Energy, Inc. | NEE | Called | 2/24/21 | $73.76 | 9/17/21 | $80 | 10.00% |
| Brookfield Infras. Ptnrs. | BIP | Called | 1/13/21 | $50.63 | 10/15/21 | $55 | 11.65% |
| AGNC Investment Corp | AGNC | Sold | 1/13/21 | $15.52 | 1/19/22 | $15 | 5.92% |
| ONEOK, Inc. | OKE | Called | 5/26/21 | $52.51 | 2/18/22 | $60 | 19.62% |
| KKR & Co. | KKR | Sold | 8/25/21 | $64.52 | 2/23/22 | $58 | -9.73% |
| Valero Energy Inc. | VLO | Called | 11/17/21 | $73.45 | 2/25/22 | $83 | 15.53% |
| U.S Bancorp | USB | Sold | 3/24/21 | $53.47 | 4/13/22 | $51 | -1.59% |
| Enterprise Product Ptnrs | EPD | Called | 3/17/21 | $23.21 | 4/14/22 | $24 | 11.25% |
| FS KKR Capital Corp. | FSK | Called | 10/27/21 | $22.01 | 4/14/22 | $23 | 13.58% |
| Xcel Energy Inc. | XEL | Called | 10/12/21 | $63.00 | 5/20/22 | $70 | 12.66% |
| Innovative Industrial Props. | IIPR | Sold | 3/23/22 | $196.31 | 7/20/22 | $93 | -51.23% |
| One Liberty Properties | OLP | Sold | 7/28/21 | $30.37 | 8/24/22 | $25 | -12.94% |
| ONEOK, Inc. | OKE | Called | 5/25/22 | $65.14 | 1/20/23 | $65 | 2.66% |
| Xcel Energy, Inc. | XEL | Called | 10/26/22 | $62.57 | 1/20/23 | $65 | 4.67% |
| Realty Income Corp. | O | Called | 9/28/22 | $60.37 | 2/17/23 | $63 | 5.41% |
| Medical Properties Trust | MPW | Sold | 1/24/23 | $13.22 | 3/21/23 | $8 | -38.00% |
| Brookfield Infrastructure Cp. | BIPC | Called | 11/9/22 | $42.43 | 7/21/23 | $45 | 8.72% |
| Star Bulk Carriers Corp. | SBLK | Sold | 6/1/22 | $33.30 | 8/8/23 | $18 | -31.38% |
| Visa Inc. | V | Called | 12/22/21 | $217.16 | 8/18/23 | $235 | 9.16% |
| Global Ship Lease, Inc. | GSL | Sold | 2/23/22 | $24.96 | 8/29/23 | $19 | -13.82% |
| ONEOK, Inc. | OKE | Called | 3/28/23 | $60.98 | 9/15/23 | $65 | 9.72% |
| Hess Corporation | HES | Called | 6/6/23 | $132.25 | 10/20/23 | $155 | 17.87% |
| Tractor Supply Company | TSCO | Sold | 9/26/23 | $203.03 | 11/28/23 | $200 | -1.02% |
| Digital Realty Trust | DLR | Called | 7/18/23 | $117.31 | 1/19/24 | $135 | 17.16% |
| Intel Corporation | INTC | Called | 7/27/22 | $40.18 | 1/19/24 | $43 | 9.76% |
| AbbVie Inc. | ABBV | Called | 7/25/23 | $141.63 | 3/15/24 | $160 | 15.11% |
| Marathon Petroleum Corp. | MPC | Called | 10/24/23 | $149.45 | 3/28/24 | $165 | 12.06% |
| The Williams Companies, Inc. | WMB | Called | 8/24/22 | $35.58 | 5/17/24 | $35 | 7.14% |
| EXPIRED OPTIONS | |||||||
| Security | In/out money | Sell Date | Sell Price | Exp. Date | $ return | Total % Return | |
| IIPR Jul 17 $95 call | out-of money | 6/3/20 | $3.00 | 7/17/20 | $3.00 | 3.40% | |
| MO Jul 31 $42 call | out-of-money | 6/17/20 | $1.60 | 7/31/20 | $1.60 | 4.03% | |
| ABBV Sep 18 $100 call | out-of-money | 7/15/20 | $4.60 | 9/18/20 | $4.60 | 5.05% | |
| IIPR Sep 18 $100 call | in-the-money | 7/22/20 | $5.00 | 9/18/20 | $5.00 | 5.69% | |
| QCOM Sep 18 $95 call | in-the-money | 6/24/20 | $4.30 | 9/18/20 | $4.30 | 4.82% | |
| USB Sep 18 $37.50 call | in-the-money | 7/22/20 | $2.00 | 9/18/20 | $2.00 | 5.52% | |
| BIP Oct 16 $45 call | in-the-money | 9/2/20 | $1.95 | 10/16/20 | $1.95 | 4.65% | |
| SBUX Oct 16 $87.50 call | in-the-money | 10/16/20 | $3.30 | 10/16/20 | $3.30 | 4.00% | |
| V Nov 20 $200 call | in-the-money | 9/22/20 | $10.00 | 11/20/20 | $10.00 | 4.99% | |
| ABBV Dec 31 $100 call | in-the-money | 11/18/20 | $3.30 | 12/31/20 | $3.30 | 3.62% | |
| EPD Jan 15 $20 call | in-the-money | 11/23/20 | $0.80 | 1/15/21 | $0.80 | 4.41% | |
| MO Jan 15 $40 call | in-the-money | 11/25/20 | $1.90 | 1/15/21 | $1.90 | 4.79% | |
| USB Jan 15 $45 call | in-the-money | 11/25/20 | $2.00 | 1/15/21 | $2.00 | 4.48% | |
| BGS Feb 19 $27.50 call | in-the-money | 12/11/20 | $2.40 | 2/19/21 | $2.40 | 8.96% | |
| VLO Mar 26 $60 call | in-the-money | 2/10/21 | $6.50 | 3/26/21 | $6.50 | 12.10% | |
| CVX Apr 1 $95.50 call | in-the-money | 2/19/21 | $4.30 | 4/1/21 | $4.30 | 5.02% | |
| AGNC Jun 18 $17 call | out-of-money | 4/13/21 | $0.50 | 6/18/21 | $0.50 | 3.21% | |
| KKR Jun 18 $55 call | in-the-money | 4/28/21 | $3.00 | 6/18/21 | $3.00 | 6.25% | |
| USB Jun 16 $57.50 call | out-of-money | 4/28/21 | $2.80 | 6/18/21 | $2.80 | 5.24% | |
| DLR Jul 16 $155 call | in-the-money | 6/16/21 | $8.00 | 7/16/21 | $8.00 | 5.36% | |
| AGNC Aug 20 $17 call | out-of-money | 6/23/21 | $0.50 | 8/20/21 | $0.50 | 3.00% | |
| OKE Aug 20 $57.50 call | out-of-money | 6/23/21 | $3.50 | 8/20/21 | $3.50 | 6.67% | |
| NEE Sep 17 $80 call | in-the-money | 8/11/21 | $3.50 | 9/17/21 | $3.50 | 4.75% | |
| BIP Oct 15 $55 call | in-the-money | 9/1/21 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24/21 | $2.30 | 11/19/21 | $2.30 | 4.30% | |
| OKE Nov 26 $65 call | out-of-money | 10/20/21 | $2.25 | 11/26/21 | $2.25 | 4.28% | |
| KKR Dec 17 $75 call | out-of-money | 10/26/21 | $3.50 | 12/17/21 | $3.50 | 5.42% | |
| QCOM Jan 21 $185 Call | out-of-money | 11/30/21 | $9.65 | 1/21/22 | $9.65 | 7.17% | |
| OLP Feb 18 $35 Call | out-of-money | 11/19/21 | $1.50 | 2/18/22 | $1.50 | 4.94% | |
| OKE Feb 18 $60 Call | in-the-money | 1/5/22 | $2.75 | 2/18/22 | $2.75 | 5.24% | |
| USB Feb 25 $61 call | out-of-money | 1/13/22 | $2.50 | 2/25/22 | $2.50 | 4.68% | |
| VLO Feb 25 $83 call | in-the-money | 1/18/22 | $4.20 | 2/25/22 | $4.20 | 6.13% | |
| EPD Apr 14th $24 call | in-the-money | 3/2/22 | $1.25 | 4/14/22 | $1.25 | 5.69% | |
| FSK Apr 14th $22.50 call | in-the-money | 3/10/22 | $0.90 | 4/14/22 | $0.90 | 4.09% | |
| XEL May 20th $70 call | in-the-money | 3/30/22 | $3.00 | 5/20/22 | $3.00 | 4.76% | |
| SBLK July 15th $134 call | out-of-money | 6/1/22 | $1.60 | 7/15/22 | $1.60 | 4.80% | |
| OKE Oct 21st $65 call | out-of-money | 8/24/22 | $3.40 | 10/21/22 | $3.40 | 5.22% | |
| OKE Jan 20th $65 call | In-the-money | 11/25/22 | $3.70 | 1/20/23 | $3.70 | 5.68% | |
| XEL Jan 20th $65 call | in-the-money | 11/25/22 | $5.00 | 1/20/23 | $5.00 | 7.99% | |
| O Feb 17th $62.50 call | in-the-money | 12/28/22 | $3.00 | 2/17/23 | $3.00 | 4.97% | |
| QCOM Sep 16th $145 call | out-of-money | 7/20/22 | $11.75 | 9/16/22 | $11.75 | 8.73% | |
| V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/23 | $12.00 | 5.51% | |
| OKE May 19th $65 call | out-of-money | 4/11/23 | $2.70 | 5/19/23 | $2.70 | 4.43% | |
| V Jun 2 $230 call | out-of-money | 4/21/23 | $10.50 | 6/2/23 | $10.50 | 4.82% | |
| BIPC $45 July 21st call | in-the-money | 5/23/23 | $3.25 | 7/21/23 | $3.25 | 7.66% | |
| V $235 Aug 18th call | in-the-money | 7/11/23 | $9.00 | 8/18/23 | $9.00 | 4.13% | |
| GSL $20 Aug 18th call | out-of-money | 7/11/23 | $1.25 | 8/18/23 | $1.25 | 5.00% | |
| OKE $65 Sep 15 call | in-the-money | 9/15/23 | $3.20 | 7/25/23 | $3.20 | 4.92% | |
| INTC $35 Oct 20th call | out-of-money | 9/8/23 | $3.78 | 10/20/23 | $3.78 | 9.41% | |
| HES $155 Oct 20th call | in-the-money | 9/8/23 | $9.00 | 10/20/23 | $9.00 | 6.81% | |
| DLR $135 Jan 19th call | in-the-money | 11/22/23 | $6.00 | 1/19/24 | $6.00 | 5.11% | |
| INTC $42.50 Jan 19th call | in-the-money | 11/29/23 | $3.50 | 1/19/24 | $3.50 | 8.71% | |
| ABBV $160 Mar 15th call | in-the-money | 1/10/24 | $7.00 | 3/15/24 | $7.00 | 4.94% | |
| MPC $165 Mar 28th call | in-the-money | 2/14/23 | $10.00 | 3/28/24 | $10.00 | 6.69% | |
| QCOM $170 Apr 26th call | out-of-money | 3/12/24 | $10.00 | 4/26/24 | $10.00 | 7.42% | |
| WMB $35 May 17th call | in-the-money | 3/12/24 | $2.00 | 5/17/24 | $2.00 | 5.62% | |
Alexandria Real Estate Equities, Inc. (ARE)
Yield: 4.3%
The recent good interest rate news hit a wall over the past couple of weeks. After bouncing around with the interest rate narrative for the past few years, this one-of-a-kind life science property REIT was having a good month in May. But it has given up most of the gains. This is a solid REIT that reported strong earnings and raised the dividend in the last quarter. ARE will likely bounce around somewhat at the mercy of the interest rate narrative and not significantly surge higher until rates muster a sustained move downward. But there is the dividend and there should be a covered call opportunity even during the interest rate rollercoaster. BUY
Alexandria Real Estate Equities, Inc. (ARE)
Next ex-div date: June 27, 2024, est.
American Tower Corporation (AMT)
Yield: 3.5%
Ditto what I said about ARE for AMT. It too has been bouncing around with interest rates. But the cell tower REIT struggled a little more because of a dividend cut (which was not impactful in a meaningful way) so AMT is still far from the 52-week high. American tower rallied strongly after the REIT beat estimates on both revenue and earnings with 9.8% adjusted funds from operations per share growth over last year’s quarter. The REIT also raised guidance for 2024. It’s a solid REIT with stronger growth than most of its peers but interest rates will be the biggest determinant of performance in the near term. BUY
American Tower Corporation (AMT)
Next ex-div date: June 14, 2024
Brookfield Infrastructure Corp. (BIPC)
Yield: 4.5%
It’s been a wild ride on the current interest rate narrative for this infrastructure company. It was an awful first half of April as the stock fell about 20% in the first two weeks. But Brookfield reported strong earnings and the company has rallied to make up for all of that dip since. It’s up 23% since April 16. Funds from operations grew 11% over last year’s quarter as new assets came online. The company also raised the next quarterly dividend by 6%. Solid earnings and a dividend raise are indicative of a company that is operationally strong. BUY
Brookfield Infrastructure Corporation (BIPC)
Next ex-div date: May 31, 2024
Enterprise Product Partners L.P. (EPD)
Yield: 7.3%
This midstream energy partnership has pulled back somewhat over the last couple of months. But it is still in a slow uptrend that began almost four years ago. It hasn’t really pulled back but rather stopped going higher for now. Enterprise reported solid earnings with profits per share in line with estimates and revenues a lot better as new projects came to fruition and the distribution is well covered. The earnings didn’t reflect much change in an already solid story with good stock performance. I expect EPD to continue to pay the massive distribution and trend higher at a snail’s pace. (This security generates a K-1 form at tax time.) BUY
Enterprise Product Partners L.P. (EPD)
Next ex-div date: July 31, 2024, est.
FS KKR Capital Corporation (FSK)
Yield: 14.4%
A stratospheric dividend and a stable price is what we signed up for and so far we’re getting it. The ultra-high-yielding Business Development Company reported solid earnings that were roughly in line with estimates. FS also announced a second-quarter regular dividend of $0.70 per share and supplemental dividend of $0.05, reflecting confidence in the BDC’s ability to cover the pay out and support shareholders. The market seems to have liked it and the stock is up since the earnings report. I’m hopeful the position will provide a great dividend income combined with covered call premiums soon. BUY
FS KKR Capital Corp. (FSK)
Next ex-div date: August 14, 2024, est.
Main Street Capital Corporation (MAIN)
Yield: 8.3%
This Business Development Company reported stellar earnings that handily beat estimates. It paid regular monthly dividend of $0.72 per share in the second quarter, marking a 6.7% increase year-over-year, as well as a $0.30 supplemental dividend. But the stock has pulled back a couple of percentage points since the report and is several dollars lower for the month of May. Perhaps there is some selling after the dividend and some good news. MAIN has also shown resilience in the tough markets. The safe and high yield pays dividends every single month with a strong possibility of supplemental dividends over the course of the year as well. BUY
Main Street Capital Corporation (MAIN)
Next ex-div date: June 6, 2024
NextEra Energy, Inc. (NEE)
Yield: 2.7%
After two years of subpar performance amid inflation and rising interest rates, this combination regulated and alternative energy utility is back. NEE is making up for lost time with a 40% upside move since early March and a 64% move from the October low. That’s not too shabby for a utility stock. The stock has continued to move higher after a solid earnings report in the recent quarter. The strong growth utility story is still very much alive. NEE had been a superstar performer before inflation and rising interest rates. It provides both safety from its best-in-class regulated utility business and growth from its considerable clean energy business. BUY
NextEra Energy, Inc. (NEE)
Next ex-div date: June 3, 2024
Qualcomm Corp. (QCOM)
Yield: 1.6%
Where it stops nobody knows. The mobile device chip maker is continuing its torrid advance since the earnings report earnings last month. QCOM has soared over 35% since April 19. Earnings beat estimates and the company raised earnings guidance for 2024. But the real excitement is the growing talk about artificial intelligence coming to smartphones and Qualcomm as a major beneficiary of the upgrade cycle. It has been a while since phones had a significant upgrade and sales growth has been dwindling. But more analysts are contending that an AI-driven super cycle is coming soon. Qualcomm is at the leading edge of chips that enable AI for smartphones and PCs and should benefit mightily. BUY
Qualcomm Inc. (QCOM)
Next ex-div date: May 30, 2024
Realty Income Corp. (O)
Yield: 5.9%
O has also been bouncing around with the interest rate narrative but with less success than the other REITs in the portfolio. The floundering income REIT reported solid earnings last week with 33% revenue growth due to a recent acquisition and adjusted funds from operations growth of 5%. Metrics were solid across the board with high occupancy rates of about 105% average recapture on renewed leases. O didn’t get much of a bump from the report, but it has been trending higher since the middle of April. The last two years have been among the worst in this stock’s history, which makes it dirt cheap ahead of an environment that will get better eventually. BUY
Realty Income Corporation (O)
Next ex-div date: May 31, 2024
Income Calendar
Ex-Dividend Dates are in RED and italics. Dividend Payments Dates are in GREEN. Confirmed dates are in bold, all other dates are estimated. See the Guide to Cabot Income Advisor for an explanation of how dates are estimated.
The next Cabot Income Advisor issue will be published on June 25, 2024.
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