The Great AI Utility Transformation
Unreal. Stocks made yet another new high this week. The S&P 500 is now up over 17% year to date with more than two months left in 2025.
There is a good chance that the index delivers another 20%-plus return year, making it three consecutive years of such returns for the first time in nearly 30 years. Sure, we’re in a Fed rate-cutting cycle, and the economy is nowhere near recession. The market likes that. But artificial intelligence is the main force driving the market higher.
Technology stocks, which now comprise more than a third of the S&P index, have driven the market higher for most of this three-year-old bull market. While AI is the primary driver of the market, it isn’t about just technology stocks anymore. The AI catalyst is driving other sectors higher.
In this issue, I identify a stock in a sector that is transforming into something far better than ever before. Unfortunately, dividend stocks still generally get a bad rap. Many of today’s investors came of age in the technology bull markets of past decades, where companies grew from nothing into the largest companies that ever existed. Investors want the next Amazon (AMZN) or Nvidia (NVDA).
Many view dividend stocks as boring investments that your grandfather was into. But that isn’t true. Stocks of companies that consistently pay and grow dividends have vastly outperformed non-dividend payers over time as a group. The big returns are there too. Long-time Cabot Dividend Investor portfolio positions Eli Lilly (LLY) and Broadcom (AVGO) have returned 475% and 769% respectively over the last five years.
Of course, the stereotypical modern investor is kind of right about dividend stocks when it comes to utilities. They are boring, grandfatherly stocks. Utilities are companies that provide water, energy, and electricity to homes and businesses. They operate monopolies or near monopolies in their areas and the rates they charge are usually determined by regulatory bodies.
They usually pay strong dividend yields and provide highly defensive earnings that continue in any kind of economy. But, aside from the dividend and defensive characteristics, they’ve typically offered little else. Good stocks tend to outperform the indexes in flat or down markets and underperform them in bull markets. They are the market sector that most closely resembles bonds.
But that’s not a bad thing. Utilities offer diversification and stability to a portfolio. Markets don’t always go higher. It’s nice to have utilities in the portfolio when other stocks sputter. They make the ride to longer-term success easier and less bumpy.
But AI is transforming the utility sector. Now, the best stocks are all that I mentioned above, plus a lot more. After being stagnant for decades, electricity demand is exploding. AI requires enormous amounts of electricity for the data centers that house the computer components. Electric vehicle proliferation and rapidly growing onshoring of manufacturing are also juicing demand.
Skyrocketing demand is making electric utilities growth businesses as well. The changing environment is adding another hugely positive dimension to these underrated stocks. That’s why utilities are the top-performing S&P 500 sector over the past month. But the trend is still in its early stages, and there is still time to get in.
This unprecedented environment is transforming the market’s most defensive sector into one that also offers exciting growth. The combination of defense and growth is unbeatable.
Recent Activity
October 7
Remove ALLY Nov 21st $42 call at $4.00 or better
October 17
ABBV October 17 $200 call at $13.00 – Expired
AbbVie Inc. (ABBV) stock – Called
October 21
Sell NEE January 16th $85 call at $4.60 or better - PENDING
October 28
Buy American Electric Power Company, Inc. (AEP)
Sell O January 21st $62.50 call at $4.00 or better
What to Do Now
As I mentioned, the market still looks great. It is likely that the market is higher at the end of the year than it is now. It has been a mistake to bet against the market’s resiliency. But you never know.
The market is perched at an all-time high while a lot of uncertainty continues to swirl around. Intense trade negotiations with China over the next few weeks could end badly. The government shutdown has already lasted more than three weeks with no end in sight. The economy is also a question. Investors want an economy strong enough to juice earnings but weak enough that the Fed continues to lower rates. It could disappoint investors in several different ways.
The high market creates a great opportunity for income. A rising market and investor optimism about the future increase prices for call premiums. High stock prices also create the possibility of strong total returns, in addition to income, if the shares are called.
Two calls are currently being targeted in the portfolio: NEE January 16 $85 calls at $4.60 or better and O January 21 $62.50 calls at $4.00 or better. Both positions, NextEra Energy (NEE) and Realty Income (O), have provided disappointing returns over the past few years. But things are changing, and these stocks can now provide great income and opportunities.
Featured Actions
Buy American Electric Power Company, Inc. (AEP)
American Electric Power Company, Inc. (AEP)
Security type: Common Stock
Sector: Utility (electric)
Price: $113
52-week range: $89.91 - $115.36
Yield: 3.3%
Profile: American Electric is a large U.S. utility with the number one transmission network and the number two distribution network in the country, with more than 5 million customers in 11 states.
Positives
- Skyrocketing demand for electricity will provide a higher level of growth for many utilities.
- American’s high voltage transmission lines are unmatched and a huge competitive advantage.
- The utility has already secured a huge increase in load demand, and there should be a lot more in the years ahead.
Risks
- Regulatory bodies can be unpredictable, especially in a changing industry.
- The utility will have to make significant capital investments, and interest rates are high.
American Electric Power is one of the largest regulated utilities in the U.S., with over $20 billion in annual revenue. It provides electricity generation, transmission, and distribution to 5.6 million retail and wholesale customers in 11 states.
The utility currently generates 29 gigawatts (GW) annually. A gigawatt is a unit of power equal to one billion watts of electricity and is often used to describe large-scale electricity generation. American Electric currently generates electricity from the following sources: Coal (42%), natural gas (27%), renewables and hydro (21%), nuclear (8%), and demand response (2%).
Although the electricity generation is significant, American earns the bulk of revenues from transmission and distribution. It has the largest transmission network in the U.S., with 40,000 transmission lines. It also operates the second-largest distribution network in the country, covering 22,000 distribution miles and 5.6 million customers. The overall system currently deals with a total of over 37 GW of electricity.
The transmission business is a distinguishing characteristic of American Electric Power, currently accounting for 55% of operating earnings. Customers are drawn to its services because of its advanced network, capable of delivering large amounts of power consistently. The company owns more of the highest-voltage transmission lines (765-kV lines) than all other U.S. utilities combined. These lines transmit huge amounts of electricity, primarily bulk power from generation sources to distribution centers, over long distances with far greater efficiency and reliability compared to lower-voltage lines.
The network of high-voltage lines is in high and increasing demand because of rapidly growing needs for massive amounts of electricity that can be moved around cheaply, faster, and more efficiently. The network is also highly difficult to duplicate by competitors. Building these lines requires agreement between utilities, regulators, and landowners with competing interests and can take huge amounts of time and money to erect. Having an already existing vast network that can also be more easily added to is a massive competitive advantage.
Historically, AEP has been a solid utility stock that delivered as advertised. It has provided a strong dividend yield with much lower volatility than the overall market. It has a beta of just 0.39, meaning it is only 39% as volatile as the S&P 500. It generally does what utilities are supposed to do, outperform the S&P in flat and down markets and underperform it in bull markets. But there are good reasons to believe that performance could be much better going forward because of a much higher level of growth.
Greater growth is being driven by the rapidly increasing electricity demand in the country. The company operates in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, West Virginia, and Virginia. These states are considered prime areas for data centers. The growth isn’t conjecture either. American Electric Power has already secured an additional 24 GW of incremental load growth through 2029 with signed customer financial agreements.
About 75% of the demand is from data centers. That’s a big increase to the current 37 GW system. About 75% of the demand is from data centers. And this is just the beginning. The utility said that it has inquiries about new load demand totaling 190 GW.
The company is currently operating under a five-year plan for $54 billion in capital expenditures to accommodate the load growth. The capex allocation includes 63% for wire and 26% for new generation. The new generation investments include natural gas and renewables, with a goal of reducing coal generation from 42% to 18% by the next decade. American anticipates that the next investment plan will be $70 billion.
American Electric is a regulated utility, meaning it operates a monopoly or near-monopoly in its areas, and rates are determined by a regulatory body. Despite the high growth of the business, earnings won’t explode because they can’t charge exorbitant rates regardless of the demand/supply dynamic. However, a higher level of growth than historical averages is highly likely. And that should result in better stock performance.
The utility currently has an earnings growth target of 6% to 8% from 2026-29 and expects the high end of the range. That’s above the historical average, and growth could be higher. Earnings grew 14% over last year’s quarter in the second quarter as weather-normalized peak load grew 12% from a year earlier.
The stock is picking up already. AEP had lagged the S&P 500 returns over the past three- and five-year periods. But it has a YTD return of over 25%.
The Dividend
Dividends are important for any utility stock. AEP currently pays a $0.93 quarterly dividend, which translates to $3.72 per year and a 3.2% yield at the current price. That dividend is well secured by solid financials. The utility expects to have five times cash flow coverage of interest payments through 2029. It also has investment-grade ratings, a solid 60% total debt/capital ratio, and a 54% payout ratio.
AEP has raised the dividend for 15 consecutive years. It has grown by an average of 5.8% per year for the last 10 years. Stocks of companies that consistently grow the dividend have outperformed every other stock group over time.
The solid dividend yield is a good thing. But covered calls offer the best income opportunity. Utilities are hot stuff in the market now. That investor optimism is well reflected in call premiums. AEP is currently generating big fat call premiums, and I expect that situation to last for a while.
American Electric Power Company, Inc. (AEP)
Next ex-div date: November 10, 2025
Sell O January 21st $62.50 call at $4.00 or better
Expiration date: January 21st
Strike price: $62.50
Call price: $4.00
Realty Income Corporation (O)
Here are the three scenarios.
1. The stock closes above the $62.50 strike price at expiration.
Call premium: $4.00
Dividends: $8.16
Appreciation: $2.31 ($62.50 strike price minus $60.19 purchase price)
Total: $14.47 (total return will be 24.4% in two and a half years)
2. The stock price closes below but near our $62.50 strike price.
Call premium: $4.00
Dividends: $8.16
Total: $12.16 (total income of 20.2% in two and a half years)
3. The stock price declines.
There will be $12.16 in income to offset the decline. Plus, the original purchase price is more than $2 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 |
| AGNC Investment Corp | AGNC | 9/24/24 | $10.47 | $10.20 | NA | 14.12% | 14.58% |
| Ally Financial Inc. | ALLY | 11/26/24 | $39.42 | $41.81 | NA | 2.87% | 8.75% |
| American Electric Power | AEP | 10/28/25 | $115.98 | $120.00 | 3.72% | ||
| Cheniere Energy Partners | CQP | 7/22/25 | $52.38 | $54.40 | $60.00 | 6.01% | 5.42% |
| Eli Lilly and Company | LLY | 4/22/25 | $827.54 | $825.45 | $900.00 | 0.73% | 0.16% |
| Enterprise Product Ptnrs. | EPD | 9/16/25 | $31.77 | $30.99 | $34.00 | 7.03% | -2.46% |
| Fidelity National Fin. Inc. | FNF | 8/26/25 | $60.39 | $57.12 | $70.00 | 3.50% | -4.61% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $84.41 | $80.00 | 2.68% | 16.83% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $59.99 | NA | 5.39% | 13.61% |
| Toll Brothers, Inc. | TOL | 10/22/24 | $148.02 | $137.92 | NA | 0.73% | -6.02% |
| The Williams Companies | WMB | 9/23/25 | $61.39 | $57.48 | $66.00 | 3.48% | -6.37% |
| Open Recommendations | Ticker Symbol | Initial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| NEE Jan 16 $85 call | NEE260116C00085000 | Sell Pending | $4.05 | $4.60 | 5.94% | ||
| O Jan 21 62.50 call | O280121C00060000 | Sell Pending | $3.95 | $4.00 | 6.65% | ||
| as of close on 10/24/2025 | |||||||
| 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 | $100.00 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95.00 | 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% |
| Main Street Capital Corp. | MAIN | Called | 3/26/24 | $46.40 | 9/20/24 | $49 | 10.91% |
| Brookfield Infrastructure Cp. | BIPC | Called | 2/27/24 | $32.64 | 9/20/24 | $35 | 11.00% |
| American Tower Corp. | AMT | Called | 1/23/24 | $202.26 | 9/20/24 | $210 | 5.43% |
| ONEOK, Inc. | OKE | Called | 8/27/24 | $79.59 | 10/18/24 | $88 | 11.18% |
| Alexandria Real Estate Eq. | ARE | Sold | 12/19/23 | $129.54 | 11/19/24 | $108 | -12.82% |
| FS KKR Capital Corp. | FSK | Called | 4/23/24 | $19.42 | 12/20/24 | $20 | 14.06% |
| Enterpise Product Ptnrs. | EPD | Called | 2/27/24 | $27.61 | 1/17/25 | $29 | 12.60% |
| Cheniere Energy Prtns. | CQP | Called | 1/22/25 | $53.04 | 3/21/25 | $60 | 14.67% |
| Cheniere Energy, Inc. | LNG | Called | 2/25/25 | $216.04 | 6/20/25 | $230 | 6.69% |
| Constellation Energy Corp. | CEG | Called | 8/27/24 | $196.14 | 7/18/25 | $290 | 48.40% |
| Broadcom Inc. | AVGO | Called | 1/28/25 | $207.36 | 7/18/25 | $250 | 21.13% |
| ONEOK, Inc. | OKE | Sold | 2/25/25 | $95.77 | 7/22/25 | $81 | -14.61% |
| Oracle Corporation | ORCL | Called | 5/28/25 | $163.85 | 8/15/25 | $210 | 28.47% |
| Qualcomm Inc. | QCOM | Called | 5/5/21 | $134.65 | 8/15/25 | $150 | 21.21% |
| AbbVie Inc. | ABBV | Called | 12/17/24 | $175.38 | 10/17/25 | $200 | 18.71% |
| 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 $200 July 19th call | out-of-money | 6/5/24 | $12.00 | 7/19/24 | $12.00 | 8.91% | |
| MAIN $49.4 Sep 20th Call | in-the-money | 6/27/24 | $2.00 | 9/20/24 | $2.00 | 4.31% | |
| BIPC $35 Sep 20th Call | in-the-money | 7/16/24 | $3.00 | 9/20/24 | $3.00 | 9.19% | |
| AMT Sep 20 $210 call | in-the-money | 7/30/24 | $15.00 | 9/20/24 | $15.00 | 7.42% | |
| OKE Oct 18 $87.50 call | in-the-money | 8/27/24 | $3.50 | 10/18/24 | $3.50 | 4.40% | |
| FSK Dec 20 $20 call | in-the-money | 10/25/24 | $0.95 | 12/20/25 | $0.95 | 4.89% | |
| CEG Dec 29 $260 call | out-of-money | 9/25/24 | $24.00 | 12/20/24 | $24.00 | 12.24% | |
| EPD Jan 17 $29 call | in-the-money | 11/12/24 | $2.00 | 1/17/25 | $2.00 | 6.34% | |
| CEG Mar 21 $20 call | Buyback | 1/7/25 | $20.00 | 3/4/25 | $16.50 | 8.41% | |
| CQP Mar 21 $60 call | in-the-money | 1/22/25 | $3.00 | 3/21/25 | $3.00 | 5.66% | |
| QCOM Mar 21 $160 call | out-of-money | 1/7/25 | $10.00 | 3/31/25 | $11.00 | 8.17% | |
| ABBV June 20 $210 call | out-of-money | 4/1/25 | $9.50 | 6/20/25 | $9.50 | 5.42% | |
| LNG June 20 $230 call | in-the-money | 5/7/25 | $15.00 | 6/20/25 | $15.00 | 6.64% | |
| CEG July 18 $290 call | in-the-money | 5/20/25 | $24.00 | 7/18/25 | $24.00 | 12.24% | |
| AVGO July 18 $250 call | in-the-money | 6/3/25 | $16.00 | 7/18/25 | $16.00 | 7.72% | |
| ORCL Aug 15 $210 call | in-the-money | 6/18/25 | $13.00 | 8/15/25 | $13.00 | 7.93% | |
| QCOM Aug 15 $150 Call | in-the-money | 6/24/25 | $10.00 | 8/15/25 | $10.00 | 7.43% | |
| ABBV Oct 17 $200 Call | in-the-money | 9/3/25 | $13.00 | 10/17/25 | $13.00 | 7.41% | |
AGNC Investment Corp. (AGNC)
Yield: 14.1%
After a big up-and-down move in September, the mortgage REIT is back on the upward trend line established in April and has again broken above 10 per share. AGNC had a rough few years during inflation and rising rates. But this Fed rate-cutting cycle should get the price moving higher. Lower short-term rates will lower costs for AGNC and raise profit margins. Lower rates will also have a positive effect on net asset value (NAV), which tends to dictate the stock price. Hopefully, the already long uptrend established earlier this year will continue. The mortgage REIT reports earnings at the end of this week. HOLD
AGNC Investment Corp. (AGNC)
Next ex-div date: October 31, 2025
Ally Financial Inc. (ALLY)
Yield: 2.9%
This online banker stock was riding so high earlier this month that I tried to sell a call against it. But ALLY quickly tumbled after that, and the call was never written. ALLY has recovered over the past couple of weeks, and better things may be in store in the months ahead. The online banker reported strong earnings earlier this month that soundly beat expectations, and the stock has rallied since. There had been concern about rising credit delinquencies generally and in the auto loan market specifically. Delinquencies are near a historic high in the auto market. But none of that applies to Ally. In fact, loan delinquencies at the company have declined since last year’s quarter. The company credits the aberration to the fact that it makes very few loans to subprime borrowers and has tight underwriting standards. Business is solid, and Ally is navigating the market very well. It should be in good shape unless the economy has trouble. HOLD
Ally Financial Inc. (ALLY)
Next ex-div date: October 31, 2025
Cheniere Energy Partners, L.P. (CQP)
Yield: 6.0%
The natural gas liquids partnership price had fallen to the lowest level in almost a year but sharply recovered over the past week. Energy stocks rallied after new sanctions were announced on Russia. Oil prices drifted to the lowest level in four years before last week. Natural gas prices have also fallen and taken CQP lower with them. Increased production and a weaker global economy belie the price decline. But the price weakness is likely a temporary issue. The new deal with the EU features Europe buying $750 billion worth of U.S. energy over three years, the bulk of which will be natural gas. The longer-term situation is strong, and the yield is safe in the meantime. (This security generates a K1 form at tax time.) BUY
Cheniere Energy Partners, L.P. (CQP)
Next ex-div date: November 10, 2025, est.
Eli Lilly and Company (LLY)
Yield: 0.7%
LLY spiked higher after clarity arrived on the tariff and pricing issues that had been holding the sector back. LLY soared about 18% following the news at the beginning of the month. Despite the recent move, it’s been a rough patch for this health care juggernaut. It’s still down 7% for the past year. But there are good reasons why LLY is still well worth owning. Lilly’s last earnings results were spectacular, and the pharmaceutical giant reports this quarter at the end of next week. Existing weight-loss drugs, Mounjaro and Zepbound, are killing it with over $8 billion in combined revenue in the last quarter. With an estimated 30% of Americans overweight, there should be a long runway for continued growth. BUY
Eli Lilly and Company (LLY)
Next ex-div date: November 17, 2025, est.
Enterprise Product Partners L.P. (EPD)
Yield: 7.0%
The midstream energy partnership had been wallowing near the lowest price of the past year, along with the rest of the energy sector, before recovering sharply last week after the spike in oil prices. Although revenues are not tied to volatile commodity prices, EPD tends to move in sympathy with the overall energy sector in the short term. But things should get better. Enterprise has $6 billion in new projects coming online in the second half that are sure to boost growth. The growth bump should be reflected in the earnings report that comes out at the end of this month. In addition, the trade deal with Europe should ensure high NGL volumes for years to come. EPD is a great buy while it’s still sleeping (with a big fat yield) ahead of likely better days. (This security generates a K1 form at tax time.) BUY
Enterprise Product Partners L.P. (EPD)
Next ex-div date: October 31, 2025
Fidelity National Financial, Inc. (FNF)
Yield: 3.5%
The title insurance company stock has pulled back this month amid housing market concerns. The housing world took another hit after a research firm had negative things to say about the state of the current market. The negative perception has become the accepted norm, and only earnings reports can turn things around. We’ll see the real state of things when homebuilders start reporting.
Fidelity should benefit from Fed rate cuts and, hopefully, a reduction in mortgage rates. Business is affected by the housing market as more home purchases result in more business. And the biggest impediment right now is high mortgage rates and housing affordability. It will likely be range-bound until there is some significant improvement in the mortgage rate/housing market situation. Perhaps the situation will improve because it can’t get much worse. BUY
Fidelity National Financial, Inc. (FNF)
Next ex-div date: December 15, 2025, est.
NextEra Energy, Inc. (NEE)
Yield: 2.7%
NEE has broken out of the old range and hit a brand new 52-week high last week. For most of the year, every time NEE got above 75 per share, it pulled back. But it looks like this time might be the charm, as the price has moved all the way above 84 per share. We are in a Fed rate-cutting cycle. Electricity demand is booming. NEE is undervalued. The nation’s largest electric utility has a lot going for it right now. NextEra expects 8% earnings growth through at least 2027 and annual 10% dividend hikes. And the future should be bright, as falling rates and opportunities for higher growth for the alternative energy segment should provide a great tailwind. NextEra reports earnings later this week and could, hopefully, get a nice price bump after the report. BUY
NextEra Energy, Inc. (NEE)
Next ex-div date: November 28, 2025, est.
Realty Income Corp. (O)
Yield: 5.4%
Fed rate cuts are a welcome development for this legendary income REIT. O had gone mostly sideways all year but recently broke out to the highest price in nearly a year, before pulling back. The table should be set going forward. Earnings were solid, and the REIT slightly raised guidance. Realty also just closed a $9.5 billion acquisition that adds 15,600 commercial properties to the portfolio. O is still attractively valued and, although it certainly hasn’t made up for lost time yet, it should have some pent-up upside if and when interest rates decline significantly. It’s also defensive and a nice stock to have in case the market turns south. HOLD
Realty Income Corporation (O)
Next ex-div date: October 31, 2025
Toll Brothers, Inc. (TOL)
Yield: 0.7%
The homebuilder company stock isn’t out of the woods yet. TOL had mustered a sustained upside move from April until pulling back in early September. It had a big down move early this month, and it wasn’t only because of the market. Research firm Evercore ISI downgraded the stock last week on concerns that weak homebuying demand continues, despite lower mortgage rates and a housing shortage. It was the first negative news for the housing market in a while, and the market took notice. But it’s earnings season again, and reports from homebuilders will be more important. HOLD
Toll Brothers, Inc. (TOL)
Next ex-div date: January 10, 2026, est.
The Williams Companies, Inc. (WMB)
Yield: 3.5%
The midstream energy stock had defied a weak energy market and was hovering near the high with impressive YTD returns until last week. The price fell 8% last week after unexpected high inventories of natural gas were reported. It shouldn’t matter. Williams generates revenues from fees for storing and transporting gas, not selling it. It appears to be a big overreaction in the market, and the price is now much more attractive than it was a week ago
Williams has a resilient business that should continue to generate reliable revenue and earnings growth in just about any kind of environment. It also pays a solid dividend. WMB would be a good holding with the market at highs under normal circumstances. But these aren’t normal circumstances. Huge demand growth for natural gas from utilities and exporters is a growth catalyst that isn’t reflected in the historical performance of the stock. BUY
The Williams Companies, Inc. (WMB)
Next ex-div date: December 15, 2025, est.
Existing Covered Call Trades
Sell NEE January 16th $85 call at $4.60 or better - PENDING
We didn’t get the targeted 4.60 per call price over the last week. But the target remains, and we will try to get to that price this week. NEE has spiked beyond the old range and to a new 52-week high. There was a hiccup last week, and there is a good chance NEE recovers in the days ahead and we get the 4.60 target price.
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 November 25, 2025.
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