Since 1928, the Santa Claus rally has been positive 79% of the time. For this year, the stock market is shaping up to post the best Santa Claus Rally returns since 2000-2001, when the S&P 500 rose 5.7%.
The term was coined by Yale Hirsch, the founder of the Stock Trader’s Almanac, and one of my contributors to my Wall Street’s Best Digest newsletter. The definition: the markets tend to rise over a stretch of time right before and after the calendar flips to the new year. Specifically, the rally involves the last five trading sessions of the year and the first two of the new year.
And that’s really good news! With the pandemic and the omicron variant still weighing on us, any good news is heartily welcomed! But that’s not all that is glittering this holiday season. Home prices, while still rising, are certainly moderating, which should continue to keep the housing market strong. And, indeed, you can see the strength by the uptick in both existing homes (6.46 million) and new home sales (744,000).
Also, durable goods sales are up, and jobless claims have declined.
I’d say that’s a great start to the new year! We are still bullish, with a dose of caution, so stock picking continues to be of critical importance in growing and maintaining your portfolio.
This month, I’m going with another Real Estate Investment Trust, which pays a hefty dividend to add to your cash flow.
Please let me know if you have any questions; I always look forward to your emails.
Happy Investing!
State of the Markets
The broad market averages—the Dow Jones Industrial Average, the S&P 500, and the Nasdaq—have rebounded very nicely this month. And the VIX, or CBOE Volatility Index, has smoothed out, hopefully, ushering in a bit less volatility for the near future.
Dow Jones Industrial Average
S&P 500
Nasdaq Composite Index
Feature Recommendation
Medical Properties Trust is a Real Estate Investment Trust (REIT). We have two in our portfolio right now, National Storage Affiliates Trust (NSA) and Spirit Realty Capital (SRC)—both of which are performing very well for us.
Medical Properties is the second-largest non-government owner of hospitals in the world, with gross assets totaling $21.4 billion. It is the only pure-play hospital REIT in the market. It operates hospitals, inpatient rehabilitation centers and behavioral health facilities worldwide, including 442 medical properties with 46,000 licensed beds across 34 states and nine other countries on four continents. Some of the European countries in which it operates are Germany, Italy, the U.K. and Australia. Its primary business is owning and operating acute care hospitals, worth about $21.4 billion.
Since 2019, the REIT has acquired $11.8 billion of properties, which has contributed to its average 15%+ growth over the past five years. Adding to its coffers, Medical Properties just signed a new 15-year lease to HCA Healthcare for five hospitals the trust owns in Utah. As you can see, the REIT’s tenants are well-diversified, geographically and by blue-chip medical providers. And its leases are long-term leases to blue-chip medical providers.
Its largest operator is Steward Health Care, accounting for 2.6% of the REIT’s assets.
This table shows you its top five operators:
The REIT is expected to post funds from operations (FFO) of $1.81 to $1.85 on $1.53 billion in revenues for 2021.
Medical Properties recently undertook a new strategy, forming a joint venture with Macquarie Asset Management, a private equity fund, to own eight of its hospitals. The value of the deal is $1.78 billion. That’s a nice return: 48% above what the REIT paid for them in 2016.
The company has increased its dividend for eight consecutive years. It’s currently paying an annual yield of 4.86%. It last raised the dividend in March of 2021, so don’t be surprised to see another increase in the first quarter.
One important note: with inflation beginning to rise, it’s good to know that more than 90% of Medical Properties Trust’s leases are linked to the CPI.
The company feels that there are significant opportunities for acquisitions and growth around the world, due to:
- Substantial domestic and international potential acquisition targets
- Estimated $500-$750 billion of operator-owned hospital real estate in the U.S.
- Consolidation of hospital systems globally
- A growing acceptance of sale-leaseback models for not-for-profit operators (more than 75% of all community hospitals in the U.S.)
Lastly, the shares of Medical Properties are trading at a vast discount. Its Price-Earnings ratio, at 24, is substantially lower than the sector’s 33.
When you add the average 15% growth rate of earnings to the almost-5% dividend yield, our return is expected to be around 20% annually. I recommend that you buy the shares of MPW.
Medical Properties Trust, Inc. (MPW) 52-Week Low/High: $19.39 - 23.35 Shares Outstanding: 596.3M Institutionally Owned: 83.44% Market Capitalization: $13.924B Dividend Yield: 4.86%Website: medicalpropertiestrust.com | Why Medical Properties Trust
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Top Institutional Holders
Top Institutional Holders | ||||
Holder | Shares | Date Reported | % Out | Value |
Vanguard Group, Inc. (The) | 85,509,316 | 29-Sep-21 | 14.34% | 1,716,171,972 |
Blackrock Inc. | 81,505,304 | 29-Sep-21 | 13.67% | 1,635,811,451 |
Wellington Management Group, LLP | 30,091,369 | 29-Sep-21 | 5.05% | 603,933,775 |
State Street Corporation | 25,655,923 | 29-Sep-21 | 4.30% | 514,914,374 |
Principal Financial Group, Inc. | 20,443,067 | 29-Sep-21 | 3.43% | 410,292,354 |
Bank of New York Mellon Corporation | 15,172,459 | 29-Sep-21 | 2.54% | 304,511,252 |
FMR, LLC | 9,733,338 | 29-Sep-21 | 1.63% | 195,348,093 |
CenterSquare Investment Management LLC | 9,252,093 | 29-Sep-21 | 1.55% | 185,689,506 |
Geode Capital Management, LLC | 8,894,066 | 29-Sep-21 | 1.49% | 178,503,904 |
Dimensional Fund Advisors LP | 8,268,020 | 29-Sep-21 | 1.39% | 165,939,161 |
Source: Yahoo! Finance
Technical Analysis
The shares of Medical Properties Trust are trading below their 14-day RSI and above both their 50-day and 200-day moving averages. I expect a short-term boost to the $25 level, and then a slower climb to my target price.
Price Target: $30.50
Stop Loss: $18.00
Portfolio Updates
Conservative Stocks
As a conservative investor, you are less willing to accept market swings and significant changes in the value of your portfolio in the short or long term. Capital preservation is your primary goal, and you may plan on using the principal from your investments in the near term, preferably as a steady income stream. The average level of return you expect to see is 5%-10%, annually.
The Coca-Cola Company (KO)
A perennial Buffett favorite is Coca-Cola, which is up 45% in our portfolio.
It’s been a great recovery for the company, post-pandemic (almost post-pandemic!) Coke’s profit margin, 23%, is very strong; its net operating revenue for the first three quarters of 2021 is up 20% over last year.
The company is still in the acquisition mode, having acquired the remaining 85% stake in BodyArmor, illustrating its “thirst” for more business in the sports drink category.
And with a 2.85% dividend that adds to your cash flow, I continue to like KO. For now, continue to Hold.
Sun Life Financial Inc. (SLF)
Shares of Sun Life were just upgraded at Zacks to “Buy,” due to rising earnings estimates. The company announced that its subsidiary, Sun Life Assurance Company of Canada will divest the sponsored markets business to Canadian Premier Life Insurance Company. That deal is expected to close in the first part of 2023.The reason for the divestiture is to focus on Sun Life’s core group benefits business. The company expects a one-time after-tax gain of about $65 million from the deal.
The shares are still a Buy.
Mueller Water Products, Inc. (MWA)
Hedge funds are loading up on Mueller Water Products, with 23 now holding the shares in their portfolios. I think they’re on the right track. Buy.
TC Energy Corporation (TRP)
TC Energy recently commented that it expects the use of natural gas in the U.S. to grow. The company also said it will continue to expand its portfolio increasingly toward renewables, hydrogen as well as carbon capture, utilization and storage.
Right now, TC Energy expects its capital spending to total C$21 billion this year, which should contribute to a 5% CAGR for EBITDA through 2026.
Lastly, the company is expected to raise its dividend payout by 3-5%. The current dividend yield is 5.92%.
Our shares are up 15%. Hold.
Moderate Stocks
As a moderate investor, you seek longer-term investment gains. You are comfortable with some swings in your portfolio’s performance, but generally seek to invest in more conservative stocks that build wealth over a substantial period of time. The average level of return you expect to see is 10%-25% annually.
National Storage Affiliates Trust (NSA)
NSA has a habit of positive earnings surprises, so I’m looking forward to the REIT’s next report. Analysts are forecasting EPS for the year of $1.47 on revenues of $540.6 million, and six analysts have recently increased their estimates.
Our shares are up 156%. Continue to Hold.
Spirit Realty Capital, Inc. (SRC)
Spirit Realty Capital’s shares are also hot with hedge funds, with 23 holding the stock—up from 19 in June.
Our shares are up 17%. Continue to Buy.
The Toronto-Dominion Bank (TD)
Toronto-Dominion will increase its dividend by 12.7%, on January 31. The bank also said it will buy back up to 2.7% of outstanding shares.
The increase in consumer spending led the bank to a better fourth quarter. It reported adjusted net income of C$2.09 a share, beating the analyst estimate of C$1.96.
The bank’s Canadian division outpaced the U.S. segment, where personal loans increased in the third quarter. Our shares are up 91%. If you don’t own it, it’s ok to Buy a little here. Otherwise, Hold.
Aggressive Stocks
As an aggressive investor, you primarily seek capital appreciation and are open to more risk. Swings in the market, whether short term or long term, do not impact your investment decisions and you have confidence that volatility is necessary to achieve the high return on investment you are looking for. You typically expect a 25%+ return, annually, though you do not need your principal investment immediately.
Evolent Health, Inc. (EVH)
Hedge funds also like Evolent Health. The shares are now in 33 hedge funds’ portfolios—an all-time high. Buy.
Entravision Communications Corporation (EVC)
Entravision remains undervalued, by many measures. The company is forecast to grow earnings by 15.9% next year. Buy.
OneMain Holdings, Inc. (OMF)
OneMain Holdings has boosted its share repurchase authorization to $300 million from the previously announced $200 million. Our remaining shares have gained 103%, but I think we have more room to grow. Buy.
Textainer Group Holdings Limited (TGH)
Textainer remains undervalued. I am putting the shares back on Buy status.
ETFs & Mutual Funds
This month, our leading ETFs and Funds are SPDR S&P 500 ETF Trust (SPY), up 111%, and Consumer Discretionary Select Sector SPDR Fund (XLY), up 74%. Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is also performing well, up 58%.
There’s still time to buy: Invesco Aerospace & Defense (PPA) and Invesco S&P Global Water Index (CGW). Buy
We’ll let all our other funds and ETFs ride for now. Hold.
Current Portfolio
Wall Street’s Best Stocks Portfolio | ||||||||
Conservative Stocks | Symbol | Date Bought | Price Bought | Price on 1/3/22 | Dividends YTD | Div Freq. | Gain/ Loss % | Rating |
The Coca-Cola Company | KO | 2/2/21 | 41.90 | 59.30 | 1.68 | Quarterly | 46% | Hold |
Mueller Water Products, Inc. | MWA | 8/3/21 | 14.93 | 14.25 | 0.11 | Quarterly | -4% | Buy |
Sun Life Financial Inc. | SLF | 6/2/21 | 54.08 | 55.77 | 0.96 | Quarterly | 5% | Buy |
TC Energy Corporation | TRP | 2/2/21 | 42.73 | 47.02 | 2.09 | Quarterly | 15% | Hold |
Moderate Stocks | Symbol | Date Bought | Price Bought | Price on 1/3/22 | Dividends YTD | Div Freq. | Gain/ Loss % | Rating |
National Storage Affiliates Trust | NSA | 2/2/21 | 27.39 | 67.34 | 1.14 | Quarterly | 150% | Hold |
Spirit Realty Capital | SRC | 2/2/21 | 42.27 | 47.87 | 1.25 | Quarterly | 16% | Buy |
The Toronto-Dominion Bank | TD | 2/2/21 | 40.82 | 77.76 | 1.89 | Quarterly | 95% | Hold |
Aggressive Stocks | Symbol | Date Bought | Price Bought | Price on 1/3/22 | Dividends YTD | Div Freq. | Gain/ Loss % | Rating |
Entravision Communications Corporation | EVC | 9/7/21 | 7.45 | 6.84 | 0.03 | Quarterly | -8% | Buy |
Evolent Health, Inc. | EVH | 10/5/21 | 32.20 | 27.96 | 0.00 | — | -13% | Buy |
OneMain Holdings, Inc. | OMF | 2/2/21 | 29.49 | 50.52 | 9.55 | Quarterly | 104% | Buy |
Textainer Group Holdings | TGH | 4/1/21 | 28.77 | 36.56 | 0.25 | Yearly | 28% | Buy |
ETFs | Symbol | Date Bought | Price Bought | Price on 1/3/22 | Dividends YTD | Div Freq. | Gain/ Loss % | Rating |
Cohen & Steers REIT and Preferred Income | RNP | 2/2/21 | 23.34 | 29.08 | 1.24 | Monthly | 30% | Hold |
Consumer Discretionary Select Sector SPDR | XLY | 2/2/21 | 116.94 | 210.31 | 0.79 | Quarterly | 81% | Hold |
First Trust Dow Jones Global Select Dividend Index Fund | FGD | 5/5/21 | 26.11 | 25.31 | 0.75 | Quarterly | 0% | Hold |
Invesco Aerospace & Defense ETF | PPA | 4/1/21 | 72.87 | 72.72 | 0.11 | Quarterly | 0% | Buy |
Invesco S&P Global Water Index ETF | CGW | 6/2/21 | 54.03 | 60.21 | 0.00 | Yearly | 11% | Buy |
SPDR S&P 500 ETF Trust | SPY | 2/2/21 | 218.25 | 477.71 | 4.08 | Quarterly | 121% | Hold |
Vanguard Dividend Appreciation Index | VIG | 2/2/21 | 105.13 | 171.19 | 1.89 | Quarterly | 65% | Hold |
Mutual Funds | Symbol | Date Bought | Price Bought | Price on 1/3/22 | Dividends YTD | Div Freq. | Gain/ Loss % | Rating |
Artisan Mid Cap Fund Investor Class | ARTMX | 2/2/21 | 37.29 | 44.52 | 0.00 | Yearly | 19% | Hold |
Fidelity Balanced | FBALX | 2/2/21 | 23.88 | 30.37 | 0.19 | Quarterly | 28% | Hold |
Sold Positions | ||||||||
Stocks | Symbol | Date Bought | Date Sold | Price Bought | Price Sold | Div Freq. | Dividends YTD | Gain/ Loss % |
cbdMD, Inc. | YCBD | 2/2/21 | 3/31/21 | 2.25 | 4.06 | — | 0.00 | 80% |
Clean Ener-gy Fuels Corp. | CLNE | 2/2/21 | 3/2/21 | 2.63 | 13.66 | — | 0.59 | 442% |
Conagra Brands, Inc. | CAG | 2/2/21 | 8/3/21 | 29.87 | 33.33 | Quarterly | 0.14 | 12% |
Investors Bancorp, Inc. | ISBC | 7/6/21 | 8/3/21 | 13.90 | 13.72 | Quarterly | 0.14 | 0% |
Orange S.A. | ORAN | 5/4/21 | 7/7/21 | 12.61 | 11.16 | Semi Annually | 0.14 | -10% |
Primoris Services | PRIM | 3/2/21 | 12/8/21 | 34.98 | 23.96 | Quarterly | 0.18 | -31% |
Unilever PLC | UL | 2/2/21 | 5/3/21 | 42.84 | 59.12 | Quarterly | 0.00 | 38% |
ETFs | Symbol | Date Bought | Date Sold | Price Bought | Price Sold | Div Freq. | Dividends YTD | Gain/ Loss % |
Technology Select Sector SPDR | XLK | 2/2/21 | 3/2/21 | 42.01 | 133.88 | Quarterly | 0.00 | 219% |
Mutual Funds | Symbol | Date Bought | Date Sold | Price Bought | Price Sold | Div Freq. | Dividends YTD | Gain/ Loss % |
T. Rowe Price Blue Chip Growth | TRBCX | 2/2/21 | 4/1/2021 | 90.40 | 169.55 | Yearly | 0.00 | 88% |
Needham Small Cap Growth Retail Class | NESGX | 2/2/21 | 5/5/2021 | 14.61 | 27.28 | Yearly | 0.00 | 87% |
Fidelity Select Industrials Portfolio | FCYIX | 3/2/21 | 6/2/21 | 37.95 | 37.66 | Quarterly | 0.73 | 1% |
Cohen & Steers Infrastructure Fund, Inc | UTF | 2/2/21 | 6/24/21 | 37.95 | 27.85 | Monthly | 0.62 | -25% |
The More You Know
I don’t know about you, but I like free money. Who doesn’t, right? Many shareholders were happy to put a few extra dollars in their pockets last year in the form of special dividends. Annually, investors around the globe receive billions of dollars in special dividends.
Ian Wyatt, editor of Dividend Confidential, a newsletter that tracks special dividends, reported on companies with special dividends that ranged from $1.25 to $27.40 per share. Here are the top three:
- VMware (VMW), paid $27.40
- Shenandoah Telecommunications (SHEN), paid $18.75
- Park Aerospace (PKE), paid $5.25
Although still far behind the amount of regular dividends paid out, special dividends can greatly enhance your total returns.
I’ll share a few more that are already scheduled in a moment, but first, let’s take a peek at the world of special dividends.
Why Do Companies Issue Special Dividends?
A special dividend is just what it sounds like—a payment made to shareholders that is separate from its regular dividend cycle. Most of the time it is a one-off. However, that’s not always the case.
Some years ago, I read about a $4 special dividend that was going to be paid by Saks Incorporated (no longer a public company). I wasn’t a Saks shareholder at the time, but since the shares were trading in the teens, I figured an additional $4 would be a pretty nice return.
I bought the stock and cashed it in as soon as I received the special dividend. However, my friend decided to hold onto his shares for a while and was again rewarded with a $4 per share special dividend a few months later. Not too shabby!
There are several reasons why a company might pay a special dividend, including:
- Corporate restructuring, with a selloff of large assets. That was the reason for Saks’ first special dividend in 2006—the company sold off its Bon-Ton stores.
- Loads of cash on hand—Saks’ reason for its second special dividend.
- Cyclical earnings or a large non-recurring capital gain—Ford, for example.
- Tax policy. For example, if a lower-than-current dividend tax rate is expiring.
Special Dividends Can Have Tax Implications
Most regular dividends are taxed as qualified dividends or long-term capital gains. However, special dividends may be a combination of capital gains, ordinary income and returns of capital. Most are considered return of capital, but pay attention to the 1099-DIV forms you receive from your investments, so that you know exactly how the special dividend is being treated. Of course, you should have some idea prior to tax time because the company should advise shareholders at the time of the dividend.
A Special Dividend Often Causes Share Prices to Decline
Because special dividends decrease the company’s book value—at least temporarily—you might see the share price decline upon the payment of the dividend. That happened with Saks, too, but I was able to sell my shares immediately upon the dividend payment.
To Buy or Not to Buy
Honestly, I was lucky with the Saks’ special dividend—I made a lot of money in a short period of time. But, realistically, a special dividend is a starting place to determine if a stock is the right one for you. I’m a long-term investor, and the majority of my recommendations in Wall Street’s Best Digest are ideas for the long term.
If you are interested in researching additional stocks with upcoming special dividends, here’s a partial list of what’s on the schedule:
Company | Symbol | Dividend Est. | Dividend Date |
Saga Communications | SGA | $0.50 | January 14, 2022 |
Waterstone Financial | WSBF | $0.50 | February 1, 2022 |
Landstar System | LSTR | $0.50 | January 21, 2022 |
As always, these are just ideas. Please do your research to determine if they are good fits for your portfolio.
The next Wall Street’s Best Stocks issue will be published on February 1, 2022.