Today, we’re buying a Florida utility, and selling two previous ideas.
Buy: NextEra Energy, Inc. (NEE)
From Cabot Dividend Investor
NextEra Energy is a formerly hot regulated and alternative energy utility that is having an awful year so far. NEE is down about 10% already in 2022. Part of the reason is that safe dividend stocks have been taking it on the chin as inflation and rising interest rates became the story. At the same time, NEE had a relatively uninterrupted run higher since October and was probably due for a consolidation. But the main story remains intact. So far, recent behavior appears to be a temporary aberration. Maybe the earnings report later this month can turn things around. BUY
Tom Hutchinson, Cabot Dividend Investor, cabotwealth.com, 978-745-5532, January 12, 2022
Sell ½ AGNC Investment Corp. (AGNC)
From Cabot Dividend Investor
Updated from WSBD 841, May 20, 2021
AGNC Investment Corp is a mortgage REIT that has found a new range between 15 and 16 per share. This is disappointing because the 10-year Treasury rate is on the rise and just hit new post-pandemic high at 1.77%. AGNC benefits from a steepening yield curve as it earns higher spreads. But it hasn’t reacted positively to the recent rise while other yield curve sensitive stocks, including U.S. Bancorp (USB), have.
It could be that the reduction of the Fed’s purchase of agency mortgage securities is offsetting the benefit. The anticipated event of rising rates is occurring, and the stock is not reacting positively. Therefore, the portfolio will sell half of the position now and give the other half a little more time to work. The remaining position will be reduced to a HOLD rating. SELL HALF
Tom Hutchinson, Cabot Dividend Investor, cabotwealth.com, 978-745-5532, January 12, 2022
Sell Compass Diversified (CODI)
From Cabot Dividend Investor
Updated from WSBD 847, November 11, 2021
Compass Diversified is an owner of small companies. It announced a dividend cut last week. It was cut from $0.3325 per quarter to $0.25. It reduces the yield from 4.7% to 3.5%. There is no coherent reason stated by the company for the cut. The payout ratio was reasonable, and earnings have been on the rise. Stocks generally don’t perform well after such cuts, and CODI also provides a smaller yield. There had to be a reason that hasn’t been declared yet. I don’t want to stick around and find out. It can’t be good. The stock is a small loss for us and there are better opportunities elsewhere. SELL
Tom Hutchinson, Cabot Dividend Investor, cabotwealth.com, 978-745-5532, January 12, 2022