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Income Advisor
Conservative investing. Double-digit income.

July 2, 2024

The market continues to hover near the all-time high. The S&P 500 finished the first half of the year up 14.5%. That’s a not-too-shabby 29% annual pace.

As I mentioned earlier, I believe it is unlikely that the S&P will finish the year up 29%. That means market returns must at least flatten out somewhat going forward. It’s also true that the technology rally has petered out in the last few weeks.

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The Market Stays Afloat Without Technology

The market continues to hover near the all-time high. The S&P 500 finished the first half of the year up 14.5%. That’s a not-too-shabby 29% annual pace.

As I mentioned earlier, I believe it is unlikely that the S&P will finish the year up 29%. That means market returns must at least flatten out somewhat going forward. It’s also true that the technology rally has petered out in the last few weeks.

If the tech rally continues to sputter, what will drive the market higher? The S&P gains have been driven by the technology sector and without that propulsion, if indeed tech stocks continue to wane, the rally will have to broaden and include previously neglected sectors.

That could be very good news for some of the income stocks in the portfolio as investors seek alternatives to generate strong returns in the months ahead. Midstream energy company stocks have already been benefitting from the stall in technology. Those stocks have started moving higher again as the high yield and inflation protection are attracting investors.

For that reason, the most timely purchases in the portfolio right now are Enterprise Product Partners (EPD) and ONEOK, Inc. (OKE). It’s also a good time to sell covered calls with the market near the high and technology teetering.

The newly targeted calls for Brookfield Infrastructure Corporation (BIPC) and NextEra Energy (NEE) didn’t reach the target price and never went off. Those call trades have been removed. But we still have existing calls on Qualcomm (QCOM), which has moved back below the strike price, and Main Street Capital (MAIN), which were just sold this past week.

Past Month Activity

June 5th
Sold QCOM July 19th $200 calls at $12.00

June 11th
NextEra Energy, Inc. (NEE) – Rating change “BUY” to “HOLD”
Sell NEE SEP 20th $77.50 calls at $4.40 or better
Realty Income Corp (O) – Rating change “BUY” to “HOLD”

June 25th
Sell NEE SEP 20th $77.50 calls at $4.40 – Removed
NextEra Energy, Inc. (NEE) – Rating change “BUY” to “HOLD”

June 27th
SOLD MAIN September 20th $49.40 calls at $2.00 or better

July 2nd
Sell BIPC Sep 20th $35 calls at $3.00 or better – Remove

Portfolio Recap

Alexandria Real Estate Equities, Inc. (ARE)
Yield: 4.5%

This life science specialty REIT was up a little over the past week. The improved interest rate outlook should be good for ARE but it hasn’t moved higher yet. The REIT has been bouncing around all year and is currently at the low range of the bounces. Hopefully, it can catch a wave in the weeks ahead. This is a solid REIT that reported strong earnings and raised the dividend again this 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. BUY

American Tower Corporation (AMT)
Yield: 3.3%

AMT had a good month of May and then pulled back a little in June. But the price remains right near the May high. As with ARE, better interest rate news should be good for this cell tower REIT. It too has been bouncing around with interest rates. But 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

Brookfield Infrastructure Corp. (BIPC)
Yield: 4.8%

Just when this one starts to get some upside traction, it reverts to its recent meandering ways. This infrastructure company that used to be a market superstar in years past has been going sideways since the end of last year. The operational performance has been sound. Brookfield reported strong earnings, and the company rallied strongly off the early April dip. The company also raised the quarterly dividend by 6%. During sideways periods you still get the dividend and there could be a big move in store if interest rates trend significantly lower. BUY

Enterprise Product Partners L.P. (EPD)
Yield: 7.3%

This midstream energy partnership pulled back a little bit from the high of early April but mostly it has just stopped going higher for now. The energy sector has been weaker because of falling oil prices, but prices have spiked higher in June. We’ll see if it is just a bounce or more of a sustained move. Earnings again showed Enterprise is solid operationally and that huge distribution yield is safe. I expect EPD to continue to pay the massive distribution and trend higher at a snail’s pace. (This security generates a K1 form at tax time). BUY

FS KKR Capital Corporation (FSK)
Yield: 14.3%

The massive-yielding BDC pulled back last month after the quarterly payout went ex-dividend. When a yield is this high and this important to the stock, the ex-date has a noticeable impact. FSK has moved off the recent lows and may start to trend higher again and create a call writing opportunity. So far, FSK is delivering as advertised. It’s continued to pay the massive dividend and the price has appreciated since it was added to the portfolio. FSK will pay a second-quarter regular dividend of 0.70 per share and supplemental dividend of 0.05, reflecting confidence in the BDCs ability to cover the payout and support shareholders. BUY

Main Street Capital Corporation (MAIN)
Yield: 5.7%

This Business Development Company pulled back somewhat after making a high in early May, but it moved higher again in June and may be on its way back to the high. It’s still in an uptrend that began last fall and has been steady for weeks. MAIN paid the 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. The current yield is reflected above as 5.9% because I only include the regularly scheduled dividend. Including the supplemental dividends, the yield is 8.4%. BUY

NextEra Energy, Inc. (NEE)
Yield: 2.9%

After a huge run higher from March until the end of May, NEE is having a comeuppance in June. After a 40% run higher the stock pulled back 11% in June. The story hasn’t changed. It’s just that the rally had to run out of gas at some point. The quite long-in-the-tooth rally is the main reason NEE was downgraded to a HOLD last month. But NextEra posted solid earnings in the recent quarter, which also added to the stock’s revitalization. NEE had been a superstar performer before inflation and rising interest rates. I expect solid performance going forward over the longer term. HOLD

Yield: 4.9%

This is an amazing midstream energy company. Earnings are rock solid with inflation protection and recession resilience. After a rare period of weakness between the middle of May and the middle of June, as investors focused on AI, OKE appears to be on its way back to the high. The high yield should be at a premium in a likely more sideways market going forward. It is a more volatile stock than the other midstream companies that have been in the portfolio. That has been a good thing in a strong energy market. The higher volatility also provides for high call premiums, which have already benefited the OKE portfolio positions during earlier holding periods. BUY

Qualcomm Corp. (QCOM)
Yield: 1.6%

It’s been a rough few weeks of comeuppance for the mighty AI stocks. QCOM soared 39% from May 1 to June 18th. But it has fallen 12% in the last few weeks. Not to worry, it was only down 2% for June. The recent stock performance reflects profit-taking in the AI space after a big surge from the last round of earnings reports. But QCOM should continue to deliver as several analysts see a major smartphone upgrade cycle for AI next year. Qualcomm is at the leading edge of chips that enable AI for smartphones and should benefit mightily. The good news about the recent weakness is that it might not be called away on our options expiration date later this month. BUY

Realty Income Corp. (O)
Yield: 6.0%

Realty has historically been a legendary income stock that has raised the monthly payout every year since 1969. It had also been one of the best REITS to own. But that has not been the case for a while. Sure, it’s been a tough market for REITs these past couple of years, and fortunes change. But O has continually underperformed its peers and the REIT index in good times and bad for a long time now. The stock is downgraded to HOLD but it will still be held in the portfolio because of the high monthly income it offers. The stock will be held in the portfolio, for now. HOLD

Existing Call Trades

BIPC Sep 20th $35 calls at $3.00 – Remove

The stock has floundered since these calls were highlighted and the premium never hit the target price. The options have also lost nearly a month of time value since the calls were targeted. It happens. BIPC will likely muster another strong run before long and we will target a call at that time.

Sell QCOM July 19th $200 calls at $12.00 or better

Wow. QCOM appeared to be running away. The calls were targeted at the high, but the stock had another rally left in it. But it has pulled back to below the strike price with only a couple of weeks until expiration. This would be a good stock to keep.

Sell MAIN September 20th $49.40 calls at $2.00 or better

This is a great income stock with an effective yield of about 8.3% that pays monthly. But the market is near the high and likely won’t stay there. These called embellish an already stellar income.

Current Recommendations

Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
Alexandria Real Estate Eq.ARE12/19/23$129.54$119.00$140.004.27%-6.31%
American Tower Corp.AMT1/23/24$202.26$195.74$220.003.31%-2.35%
Brookfield Infrstr. Cp.BIPC2/27/24$32.64$34.45$40.004.70%5.24%
Enterprise Product Ptnrs.EPD2/27/24$27.61$28.50$30.007.23%5.08%
FS KKR Capital Corp.FSK4/23/24$19.42$20.50$20.5013.66%5.82%
Main Street Capital Corp.MAIN3/26/24$46.40$49.00$50.008.45%6.64%
NextEra Energy, Inc.NEE4/25/23$77.50$79.50$65.002.57%6.02%
ONEOK, Inc.OKE5/29/24$79.59$81.00$84.004.89%1.77%
Qualcomm Inc. QCOM5/5/21$134.65$204.05$165.001.67%62.54%
Realty Income Corp.O6/27/23$60.19$52.80$62.005.81%-7.15%
Call Trades
Open RecommendationsTicker SymbolInitial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
QCOM July 19 $200 callQCOM240719C00200000Sell6/5/24$12.00$4.50$12.008.91%
MAIN Sep 20 $49.40 callMAIN240920C00049400Sell6/27/24$2.00$2.06$2.004.31%
as of close on 06/28/2024
XTicker Symbol ActionEntry DateEntry PriceSale DateSale PriceTotal Return
Innovative Industrial Props.IIPRCalled6/2/20$87.829/18/20$10015.08%
U.S. BancorpUSBCalled 7/22/20$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 CorporationVCalled 9/22/20$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 GroupMOCalled 6/2/20$39.661/15/21$407.31%
U.S. BancorpUSBCalled 11/25/20$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 Ptnrs EPDCalled3/17/21$23.214/14/22$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%
Innovative Industrial Props.IIPRSold3/23/22$196.317/20/22$93-51.23%
One Liberty PropertiesOLPSold7/28/21$30.378/24/22$25-12.94%
ONEOK, Inc.OKECalled5/25/22$65.141/20/23$652.66%
Xcel Energy, Inc.XELCalled10/26/22$62.571/20/23$654.67%
Realty Income Corp. OCalled9/28/22$60.372/17/23$635.41%
Medical Properties TrustMPWSold1/24/23$13.223/21/23$8-38.00%
Brookfield Infrastructure Cp.BIPCCalled11/9/22$42.437/21/23$458.72%
Star Bulk Carriers Corp.SBLKSold6/1/22$33.308/8/23$18-31.38%
Visa Inc.VCalled12/22/21$217.168/18/23$2359.16%
Global Ship Lease, Inc.GSLSold2/23/22$24.968/29/23$19-13.82%
ONEOK, Inc.OKECalled3/28/23$60.989/15/23$659.72%
Hess CorporationHESCalled6/6/23$132.2510/20/23$15517.87%
Tractor Supply CompanyTSCOSold9/26/23$203.0311/28/23$200-1.02%
Digital Realty TrustDLRCalled7/18/23$117.311/19/24$13517.16%
Intel CorporationINTCCalled7/27/22$40.181/19/24$439.76%
AbbVie Inc.ABBVCalled7/25/23$141.633/15/24$16015.11%
Marathon Petroleum Corp. MPCCalled10/24/23$149.453/28/24$16512.06%
The Williams Companies, Inc.WMBCalled8/24/22$35.585/17/24$357.14%
SecurityIn/out moneySell DateSell PriceExp. Date$ 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-money9/1/21$2.0010/15/21$2.003.95%
USB Nov 19 $60 callout-of-money9/24/21$2.3011/19/21$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%
SBLK July 15th $134 callout-of-money6/1/22$1.607/15/22$1.604.80%
OKE Oct 21st $65 callout-of-money8/24/22$3.4010/21/22$3.405.22%
OKE Jan 20th $65 callIn-the-money11/25/22$3.701/20/23$3.705.68%
XEL Jan 20th $65 callin-the-money11/25/22$5.001/20/23$5.007.99%
O Feb 17th $62.50 callin-the-money12/28/22$3.002/17/23$3.004.97%
QCOM Sep 16th $145 callout-of-money7/20/22$11.759/16/22$11.758.73%
V Mar 17th $220 callout-of-money1/24/23$12.003/17/23$12.005.51%
OKE May 19th $65 callout-of-money4/11/23$2.705/19/23$2.704.43%
V Jun 2 $230 callout-of-money4/21/23$10.506/2/23$10.504.82%
BIPC $45 July 21st callin-the-money5/23/23$3.257/21/23$3.257.66%
V $235 Aug 18th callin-the-money7/11/23$9.008/18/23$9.004.13%
GSL $20 Aug 18th callout-of-money7/11/23$1.258/18/23$1.255.00%
OKE $65 Sep 15 callin-the-money9/15/23$3.207/25/23$3.204.92%
INTC $35 Oct 20th callout-of-money9/8/23$3.7810/20/23$3.789.41%
HES $155 Oct 20th callin-the-money9/8/23$9.0010/20/23$9.006.81%
DLR $135 Jan 19th callin-the-money11/22/23$6.001/19/24$6.005.11%
INTC $42.50 Jan 19th callin-the-money11/29/23$3.501/19/24$3.508.71%
ABBV $160 Mar 15th callin-the-money1/10/24$7.003/15/24$7.004.94%
MPC $165 Mar 28th callin-the-money2/14/23$10.003/28/24$10.006.69%
QCOM $170 Apr 26th callout-of-money3/12/24$10.004/26/24$10.007.42%
WMB $35 May 17th callin-the-money3/12/24$2.005/17/24$2.005.62%

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