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Income Advisor
Conservative investing. Double-digit income.

Cabot Income Advisor Issue: May 25, 2022

It’s too soon to buy new stocks aggressively. But there is a safer place in the meantime to generate a high yield without much downside in the near term.
In this issue, I highlight a stock from the energy sector, the only market sector having a good year. Yet, the stock is not overvalued or overpriced. It provides a high yield without much downside if the market decline continues. And the price is likely to trend higher over the rest of the year.

Cabot Income Advisor Issue: May 25, 2022

On the Brink of a Bear Market
The market is getting dangerously close to bear market territory. The crossing of that psychologically important level will likely prompt further selling.

The S&P 500 closed last week less than 1.5% shy of an official bear market, or down 20% or more from the high on a closing basis. The index rallied strongly on Monday and then sold down again Tuesday morning. That’s been the story of late. It’s one step forward and two steps back.

The market could be near the low or it could be on the cusp of a much uglier situation. The last bull market suggests we might be near the low. On two occasions (in 2011 and 2018), the S&P went to a similar cusp. Both those times, the index stayed out of official bear territory and went on to rally strongly.

But it might be different this time.

On the two occasions mentioned above, the central issue driving stocks lower was alleviated. In 2011, the risk of recession declined. In 2018, the aggressive Fed reversed itself. This time, the main problem is high and persistent inflation and a Fed that will have to be aggressive to tame it. But it’s highly unlikely that inflation will significantly retreat anytime soon.

There are bargains out there after such a down year so far. But the market can’t seem to generate any lasting upside traction while investors look ahead toward inflation, rising rates, and a deteriorating economy. That’s why the index has closed lower for seven straight weeks, the longest such streak since 2001.

Anything is possible, of course. And the market has a long history of confounding even the most well thought out projections. But it appears that there is a greater chance that things will get worse before they get better. The market will turn around and rally eventually—it always does. But probably not yet.

What to Do Now
There are currently only five positions remaining in the portfolio. Several well-performing stocks that have been bucking current trends have had covered calls sold and were called away. Other stocks we’ve sold outright as market conditions have changed.

In addition, there are no more calls outstanding. The recent steady market decline has reduced call premiums as fewer investors are willing to speculate on higher prices in the future. It’s been a market where the favored stocks continue to perform well, and the out-of-favor stocks decline even further. The remaining portfolio is comprised of those stocks that have been declining.

All the positions have strong upside potential. They are at bargain prices from a longer-term perspective and are likely to sell at a much higher price six months to a year from now. But they could fall further if the market slips into bear territory.

It’s too soon to buy new stocks aggressively. And low call premiums at strike prices below the purchase price are not an ideal situation. But there is a safer place in the meantime to generate a high yield without much downside in the near term.

In this issue, I highlight a stock from the energy sector, the only market sector having a good year. Yet, the stock is not overvalued or overpriced. It provides a high yield without much downside if the market decline continues. And the price is likely to trend higher over the rest of the year.

The current bleak situation will change at some point. When it does and opportunities arise, we can buy stocks or sell calls via weekly updates or Trade Alerts in your email. Great opportunities are emerging. But it’s still too soon to get aggressive.

Monthly Recap

May 20th

XEL May 20 $70 calls at $3.00 – Expired
Xcel Energy Inc. (XEL) stock – Called

May 25th
Buy ONEOK, Inc. (OKE)

Featured Action

Buy ONEOK, Inc. (OKE)
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 also 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
  • 26 years of stable and growing dividends
  • C corporation structure (generate 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 volumes continued to grow anyway. Natural gas transportation volumes also continued to grow in the pandemic.

The Dividend
OKE pays a stellar 5.9% yield. That’s not too good to be true, for several reasons. The company has grown or maintained the payout for 26 straight years that include recession and terrible energy environments. It has also grown the dividend at a better than 8% average annual clip for the last five years.

The History
OKE was in this portfolio from May of last year until February of this year. The stock was called away at 60 per share when a call sold expired in February (the price is currently around 62.75 per share). During its less than nine months in the portfolio, the stock position generated a total return of 19.62% (between dividends and appreciation).

There were also three calls sold on the position that generated $16.19 in total call premiums for an options income of better than 16% of the original purchase price. Thus., OKE generated more than 32% in total return between dividends, call premiums and appreciation in less than nine months.

The Timing
Why buy it again now?

The YTD return is a little over 11%, which is far lower than the energy sector as well as the midstream energy subsector. This year’s relative underperformance is for two reasons. One, OKE returned over 68% in 2021 and didn’t have as much ground to make up. Two, earnings aren’t growing as strongly as much of the sector because they never decreased very much last year.

But despite higher earnings and better prospects, OKE still sells below the pre-pandemic high. Demand for natural gas is steady and solidly growing and is resilient in any economy. OKE is a safe stock in a rough market that should continue to perform well while paying a high and safe income.

Security type: Common stock
Industry: Energy infrastructure
Price: $62.91
52-week range: $48.51- $75.07
Yield: 5.88%
Profile: ONEOK is a large U.S. midstream energy company with a vast array of natural gas and natural gas liquids assets.


  • NGL and natural gas volumes are in a secular growth trend.
  • Recent expansions will provide the ability to grow earnings without investing more.
  • The stock sells at a reasonable valuation with more upside potential than downside risk.


  • The company has a somewhat high level of debt and payments will hold back earnings growth.
  • A bear market and recession could take energy stocks down with it.

ONEOK, inc. (OKE)
Next ex-div date: July 29, 2022, est.

Portfolio Updates

Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
Qualcomm Inc.QCOM5/5/21$134.65$132.12$140.002.27%-0.14%
One Liberty PropertiesOLP7/28/21$30.37$26.03$33.006.92%-10.58%
Visa Inc.V12/22/21$217.96$207.56$225.000.75%-4.43%
Global Ship Lease, Inc.GSL2/23/22$24.96$22.69$28.006.74%-7.59%
Innovative Industrial Props.IIPR3/23/22$196.31$128.99$210.005.38%-33.73%
ONEOK, Inc.OKE$63.00$65.005.89%
Open RecommendationsTicker SymbolIntial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
as of close on 5/23/2022
SecurityTicker Symbol ActionEntry DateEntry PriceSale DateSale PriceTotal Return
Innovative Industrial Props.IIPRCalled6/2/20$87.829/18/20$100.0015.08%
U.S. BancorpUSBCalled7/22/20$36.269/18/20$383.42%
Brookfield Infras. Ptnrs.BIPCalled6/24/20$41.9210/16/20$458.49%
Starbucks Corp.SBUXCalled8/26/20$82.4110/16/20$886.18%
Visa CorporationVCalled9/22/20$200.5611/20/20$2000.00%
AbbVie Inc.ABBVCalled6/2/20$91.0412/31/20$10012.43%
Enterprise Prod. Prtnrs.EPDCalled6/24/20$18.141/15/21$2015.16%
Altria GroupMOCalled6/2/20$39.661/15/21$407.31%
U.S. BancorpUSBCalled11/25/20$44.681/15/21$451.66%
B&G Foods Inc,BGSCalled10/28/20$26.792/19/21$284.42%
Valero Energy Inc.VLOCalled8/26/20$53.703/26/21$6011.73%
Chevron Corp.CVXCalled12/23/20$85.694/1/21$9612.95%
KKR & Co.KKRCalled3/24/21$47.986/18/21$5514.92%
Digital Realty TrustDLRCalled1/27/21$149.177/16/21$1555.50%
NextEra Energy, Inc.NEECalled2/24/21$73.769/17/21$8010.00%
Brookfield Infras. Ptnrs.BIPCalled1/13/21$50.6310/15/21$5511.65%
AGNC Investment CorpAGNCSold1/13/21$15.521/19/22$155.92%
ONEOK, Inc.OKECalled5/26/21$52.512/18/22$6019.62%
KKR & Co.KKRSold8/25/21$64.522/23/22$58-9.73%
Valero Energy Inc.VLOCalled11/17/21$73.452/25/22$8315.53%
U.S BancorpUSBSold3/24/21$53.474/13/22$51-1.59%
Enterprise Product PtnrsEPDCalled3/17/21$23.214/14.2022$2411.25%
FS KKR Capital Corp.FSKCalled10/27/21$22.014/14/22$2313.58%
Xcel Energy Inc.XELCalled10/12/21$63.005/20/22$7012.66%
SecurityIn/out moneySell DateSell PriceExp. Date$ returnTotal % Return
IIPR Jul 17 $95 callout-of money6/3/20$3.007/17/20$3.003.40%
MO Jul 31 $42 callout-of-money6/17/20$1.607/31/20$1.604.03%
ABBV Sep 18 $100 callout-of-money7/15/20$4.609/18/20$4.605.05%
IIPR Sep 18 $100 callin-the-money7/22/20$5.009/18/20$5.005.69%
QCOM Sep 18 $95 callin-the-money6/24/20$4.309/18/20$4.304.82%
USB Sep 18 $37.50 callin-the-money7/22/20$2.009/18/20$2.005.52%
BIP Oct 16 $45 callin-the-money9/2/20$1.9510/16/20$1.954.65%
SBUX Oct 16 $87.50 callin-the-money10/16/20$3.3010/16/20$3.304.00%
V Nov 20 $200 callin-the-money9/22/20$10.0011/20/20$10.004.99%
ABBV Dec 31 $100 callin-the-money11/18/20$3.3012/31/20$3.303.62%
EPD Jan 15 $20 callin-the-money11/23/20$0.801/15/21$0.804.41%
MO Jan 15 $40 callin-the-money11/25/20$1.901/15/21$1.904.79%
USB Jan 15 $45 callin-the-money11/25/20$2.001/15/21$2.004.48%
BGS Feb 19 $27.50 callin-the-money12/11/20$2.402/19/21$2.408.96%
VLO Mar 26 $60 callin-the-money2/10/21$6.503/26/21$6.5012.10%
CVX Apr 1 $95.50 callin-the-money2/19/21$4.304/1/21$4.305.02%
AGNC Jun 18 $17 callout-of-money4/13/21$0.506/18/21$0.503.21%
KKR Jun 18 $55 callin-the-money4/28/21$3.006/18/21$3.006.25%
USB Jun 16 $57.50 callout-of-money4/28/21$2.806/18/21$2.805.24%
DLR Jul 16 $155 callin-the-money6/16/21$8.007/16/21$8.005.36%
AGNC Aug 20 $17 callout-of-money6/23/21$0.508/20/21$0.503.00%
OKE Aug 20 $57.50 callout-of-money6/23/21$3.508/20/21$3.506.67%
NEE Sep 17 $80 callin-the-money8/11/21$3.509/17/21$3.504.75%
BIP Oct 15 $55 callin-the-money9./01/2021$2.0010/15/21$2.003.95%
USB Nov 19 $60 callout-of-money9/24.2021$2.3011/19.2021$2.304.30%
OKE Nov 26 $65 callout-of-money10/20/21$2.2511/26/21$2.254.28%
KKR Dec 17 $75 callout-of-money10/26/21$3.5012/17/21$3.505.42%
QCOM Jan 21 $185 Callout-of-money11/30/21$9.651/21/22$9.657.17%
OLP Feb 18 $35 Callout-of-money11/19/21$1.502/18/22$1.504.94%
OKE Feb 18 $60 Callin-the-money1/5/22$2.752/18/22$2.755.24%
USB Feb 25 $61 callout-of-money1/13/22$2.502/25/22$2.504.68%
VLO Feb 25 $83 callin-the-money1/18/22$4.202/25/22$4.206.13%
EPD Apr 14th $24 callin-the-money3/2/22$1.254/14/22$1.255.69%
FSK Apr 14th $22.50 callin-the-money3/10/22$0.904/14/22$0.904.09%
XEL May 20th $70 callin-the-money3/30/22$3.005/20/22$3.004.76%

Global Ship Lease, Inc. (GSL)
Yield 6.9%
This container ship company stock and superstar performer of the last several years took a big hit in the latest market down leg. It’s the global growth concerns that have turned performance sour. And the stock could be under more pressure as long as investors panic over slower growth in China and the consequences of the Fed’s aggressive rate hikes.

But profitability will remain high even if shipping rates fall from here because contracts have been renewed, and new ones established on the rapidly expanding fleet, at much higher rates than in the past. Plus, container shipping will likely also remain strong in all but a severe global recession. This stock should come back when markets stabilize; it always has in the recent past. BUY


Global Ship Lease, inc. (GSL)
Latest ex-div date: May 23, 2022

Innovative Industrial Properties, Inc. (IIPR)
Yield 5.4%
The selling of IIPR has been overdone in this ugly market. Growth companies and stocks that were superstars of last year have been in the crosshairs. But IIPR is down 50% YTD while its first-quarter earnings increased 34% and the company forecasted 37% growth for the full year.

True, there has been some speculation about the financial health of its tenants. But this stock plunge has already more than accounted for that risk. Innovative also grew the last dividend 17% and it has grown 63% over the past three years with a still-low payout ratio for a REIT. It could fall further in the near term, but the stock can move higher fast. It should trade at a much higher price later this year. BUY


Innovative Industrial Properties, Inc. (IIPR)
Next ex-div date: June 30, 2022, est.

One Liberty Properties, Inc. (OLP)
Yield 6.9%
REITs have been in the crosshairs of the recent market tumult. The real estate sector is actually the second worst performing of the 11 S&P 500 sectors over the last month, down 13%. Rising interest rates threaten the relative attractiveness of the yields and raise the cost of debt while many REITs have a sizable debt load. But REITs are also a good place to be during inflation. And several REITs, including OLP, are very capable of thriving despite higher rates. One Liberty is still doing all the things that made it a star before. The position just has to endure the current environment and should be in good shape on the other side. BUY


One Liberty Properties, Inc. (OLP)
Next ex-div date: June 23, 2022, est.

Qualcomm Corp. (QCOM)
Yield 2.3%
Revenues and earnings continue to grow at a fever clip and will likely continue to do so for the rest of the year at least. It’s just a sector getting a long overdue drubbing that’s probably overdone. But the company continues to deliver despite supply disruptions and other concerns and sells at a cheap valuation considering the growth rate. The selling pressure may last longer. But a strong technology stock is not going out of style for very long. In six months or a year QCOM should be a lot higher priced than it is now. It’s a great stock for the longer haul. HOLD


Qualcomm Inc. (QCOM)
Next ex-div date: June 1, 2022

Visa (V)
Yield 0.8%
V has certainly been under pressure in the recent market tumult. The stock has spent most of the last several weeks below 200 per share. But earnings blew away expectations with YOY revenue growth of 25% and 30% earnings growth as the profit boost it gets globally from the removal of Covid restrictions easily outweighs slower global growth or war issues. The problem is that Visa get lumped in as a cyclical international stock that gets hit when investors panic about slowing growth ahead.

Rising profits have a way of fixing things. V also tends to rally when panic wanes about the global economy. While a severe global recession would be an issue for the stock, that doesn’t seem likely in the foreseeable future. What is much more likely is that the market will bottom eventually, and V will be one of the stronger performers in the recovery. HOLD


Visa Inc. (V)
Next ex-div date: August 12, 2022, est.

Existing Call Trades
Sell XEL May 20th $70 calls at $3.00 – Expired
XEL has been one of the strongest non-energy stocks in the recent market. True, it has leveled off since the high of early April. But it hasn’t pulled back as it normally does after a surge. The market has been abnormally ugly and XEL has offered a safe haven, even at the higher price. That’s why it remained above the strike price at expiration and was called. That’s OK. We generated a high total return and a strong income in a down market and raised cash for the eventual market turnaround.

Call premium: $3.00
Dividends: $0.975 (1-20, 4-20)
Appreciation: $7.00 ($70.00 strike price minus $63.00 purchase price)
Total: $10.98 (total return 17.4% in 7 months)

We sold these calls at a strike price below the current market on the anticipation of a pullback after a big surge in the stock. But, as I mentioned above, XEL isn’t pulling back. It is unlikely at this point that the stock falls $5 per share below the strike price by options expiration on Friday. But we’ll get a great income and total return in a relatively short time in an ugly market.

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 22, 2022.

About the Analyst

Tom Hutchinson

Tom Hutchinson is the Chief Analyst of Cabot Dividend Investor, Cabot Income Advisor and Cabot Retirement Club. He is a Wall Street veteran with extensive experience in multiple areas of investing and finance.

His range of experience includes specialized work in mortgage banking, commodity trading and in a financial advisory capacity for several of the nation’s largest investment banks.

For more than a decade Tom created and actively managed investment portfolios for private investors, corporate clients, pension plans and 401(K)s. He has a long track record of successfully building wealth and providing a high income while maintaining and growing principal.

As a financial writer, Tom’s byline has appeared in the Motley Fool, StreetAuthority, NewsMax, and more. He has written newsletters and articles for several of the nation’s largest online publications, conducted seminars and appeared on several national financial TV programs.

For the past seven years, Tom has authored a highly successful dividend and income portfolio with a stellar track record of success. At Cabot, Tom provides monthly Cabot Dividend Investor issues, regular weekly updates on every portfolio position and a weekly podcast discussing goings-on in the market.