JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of May 2019
Note: All previous month's posts are available in the archives, as noted above.
All postings for the month are available here, sorted in descending order - i.e. most recent at the top.
1st Posting for Week Beginning Monday 05/27/2019
Posted Sunday 05/26/2019 07:00 AM
The yoyo market continued last week, with three down days and two up days, but the trend to the downside continued, as the downs outdistanced the ups for the week. The vitriol in D.C. also continued last week, as momentum seems to be growing for an investigation into how the conspiracy began to take down a duly-elected President that the Federal bureaucracy, the news media, and the global elitists hated. Meanwhile, nothing is being done about our numerous pressing national problems. Unfortunately, it is unlikely that anything will change until after the 2020 Presidential election.
As the political storms rage, my dividend stocks continue to pay out. Stocks on my lists scheduled to go ex-dividend this coming week are as follows:
AGNC Investment (AGNC), 5/30/2019, yield 11.27%. AGNC pays monthly.
Kraft Heinz Co (KHC), 5/30/2019, yield 5.09%.
STAG Industrial (STAG), 5/30/2019, yield 4.82%. STAG also pays monthly.
Prospect Capital (PSEC), 5/30/2019, yield 10.65%. PSEC is another monthly payer.
Realty Income (O), 5/31/2019, yield 3.84%. O is the most famous monthly payer of all, referring to itself as “the monthly dividend company”. The yield is severely depressed, compared to historical levels, because the popularity of O has resulted in an extended stock price.
Safety Insurance Group (SAFT), 5/31/2019, yield 3.42%.
Kellogg (K), 5/31/2019, yield 3.92%.
Century Link (CTL), 5/31/2019, yield 10.35%. CTL still presents a very attractive yield, even after the recent dividend cut. Unfortunately, it is because the stock price has adjusted down substantially in response to the dividend reduction. CTL remains on my Tier3 list for now. It is probably a reasonable speculation at today’s price. Long-term holders are likely underwater, even with cumulative dividends included, unless they have been collecting for a very long time.
McDonalds (MCD), 5/31/2019, yield 2.33%. This stock continues to outperform, confirming that it is hard to fail when betting on Americans making terrible food choices, especially when offered at cheap prices.
NextEra Energy (NEE), 5/31/2019, yield 2.46%. NEE is no doubt a blue-chip utility, but the anemic yield is especially disappointing, considering it is a utility.
Washington Prime Group (WPG), 5/31/2019, yield 22.42%. You read that right, yield is over 20%. I have moved WPG to Tier4, even though the dividend continues, at least for a while longer. I have a small position, which I don’t plan to sell anytime soon, but in good conscience, I cannot recommend a 20% yielder, even as a speculation. A 20% yield lasting more than a cycle or two is definitely defying gravity, in a Wile E. Coyote cartoon fashion.
Only one of my stocks will be reporting this week, Hoegh LNG Partners LP (HMLP), on 5/29/2019.
Upgrades / downgrades and such that came out last week regarding stocks on my lists, at least those that I noticed, are as shown below. Note that my only resource these days for this section is ETrade, which provides a convenient format. MarketWatch never did provide the prior rating for upgrades and downgrades, and lately no longer provides the rating firm, so I have discontinued relying on this source. My Fidelity account provides all ratings available from several research firm, but the list is ALL current ratings, not just NEW ratings. As you might guess, the list generated is voluminous, and essentially worthless for my purpose. So basically, my list is mostly limited to the new ratings indicated by ETrade, occasionally augmented by a rating change on one of my stocks I have come across from a news source.
Crown Castle (CCI) was reiterated at OverWeight at Morgan Stanley.
Mid-America Apartment Communities (MAA) was reiterated at OutPerform at RBC Capital Markets.
Nucor (NUE) was reiterated at OverWeight at KeyBanc.
Phillip Morris (PM) was upgraded from UnderWeight to Equal Weight at Barclays.
Century Link (CTL) was upgraded from Sell to Neutral at Guggenheim.
Newmont Mining (NEM) was upgraded from Neutral to Buy at Citigroup. Barrick Gold (GOLD) was downgraded from Buy to Neutral at Citigroup.
Vodafone (VOD) was upgraded from Hold to Buy at HSBC Securities.
As we progress from spring into summer, the discord in our politics and our economy shows no sign of calming anytime soon. My personal view is that we are likely on the cusp of a major shake-up from the status quo on both fronts, political and economic, which are effectively the same front, since these two spheres intertwine completely. As a retired person seeking income from my investments, I look upon the current situation with a degree of anxiety. My current thinking is to NOT be 100% invested, but rather to maintain a cash cushion (now approaching 40%) to be in a position to take advantage of opportunities that may open up as events unfold. Thus, I am willing to forego some current income in order to retain flexibility. In addition, I am well-diversified, holding to my rules regarding concentration in any one security (no more than 5%, mostly 1% to 2%), and any one sector (20% max). I am also diversified by brokerage accounts, with four IRA accounts and three non-IRA accounts. I realize this level of account diversity is not for everyone, but I do recommend not being limited to just one, or even two. Some of Bernie Madoff’s clients would have been well served by not having everything with Madoff. I remember during the 2008 financial crises, some were predicting the demise of Etrade, which had some housing exposure with Etrade Bank. Even with the protection offered by the SIPC, if your brokerage becomes insolvent, your recovery may be limited, and definitely will not happen quickly. Another admonition is to monitor your holdings constantly, especially if it looks like “the wheels are starting to come off” of the economy. You don’t want to be NOT paying attention when opportunity or disaster, often both presented by the same event, strikes.
1st Posting for Week Beginning Monday 05/20/2019
Posted Sunday 05/19/2019 09:00 AM
Stocks dipped significantly on Monday, posted three recovery days in a row, then dipped again on Friday. The main driver was the presumed status of reaching a trade settlement with China. The latest thinking seems to be that a deal is not going to be reached soon, but it is not as consequential as the media and various pundits have made it out to be. The administration’s position is that no deal is better than a bad deal, or for that matter the status quo that was in effect prior to the tariffs. To me, that seems reasonable. It was high time for the U.S. to call China out for their outrageous practices, and overall, China will be hurt more than the U.S. if the tariffs continue or are increased.
Upcoming dividends on the stocks on my lists are as follows:
Pan American Silver (PAAS), 5/20/2019, yield 1.19%. PAAS is a Tier3 holding which is a speculation on silver.
Eni S.p.A. (E), 5/20/2019, yield 4.25%. E pays semi-annually.
Gladstone Investment (GAIN), 5/21/2019, yield 6.95%. GAIN pays monthly.
Wheaton Precious Metals (WPM), 5/23/2019, yield 1.81%. Both PAAS and WPM are Tier3 speculations on silver prices, but it is nice to get at least a nominal dividend payment while awaiting an expected rebound in silver.
3M Co (MMM), 5/23/2019, yield 3.35%.
Hershey Co (HSY), 5/23/2019, yield 2.25%.
Johnson & Johnson (JNJ), 5/23/2019, yield 2.75%. The yields for MMM, HSY, and JNJ reflect the fact that the prices for solid blue chips have reached stratospheric levels, thus pushing once-respectable yields down to lows not seen since before the 2008 financial crisis.
Pitney Bowes (PBI), 5/23/2019, yield 4.02%. PBI is a Tier4 issue, thus is no longer recommended, but still followed. I bought into the story that the postage meter stalwart was developing new business as a global technology company, and was a candidate for a rebound, but I finally got tired of waiting and relegated PBI to Tier4.
Only two of my fifteen CEFs will go ex-dividend this week:
Eaton Vance Tax Managed Dividend Equity Income Fund (ETY), 5/23/2019, yield 8.52%.
Miller Howard High Income Equity Fund (HIE), 5/23/2019, yield 11.88%.
Both of these CEFs pay monthly. Looking at these yields, it is obvious why I’m becoming enamored with CEFs. There is risk, no doubt, but in my opinion the risk is less than what it would be for any individual stock yielding at these levels.
Earnings season is not completely over for the entire market, as numerous stragglers will be reporting this week, but for the stocks I track, it IS over. None of the stocks on my lists will be reporting this week.
Analyst actions noted last week on my stocks, based on ETrade, were as follows:
Merck (MRK) was upgraded from Neutral to OverWeight at Atlantic Equities.
Royal Dutch Shell (RDS.B) was upgraded from Hold to Buy at Deutsche Bank, and also at HSBC Securities.
Chevron (CVX) was resumed at Buy at Citigroup.
Intel (INTC) was initiated at UnderPerform at RBC Capital.
Coca Cola (KO) was upgraded from Equal Weight to OverWeight at Morgan Stanley.
Gladstone Investment (GAIN) was downgraded from Buy to Neutral at Ladenburg Thalmann.
MFA Financial (MFA) was upgraded from Market Perform to OutPerform at Keefe Bruyette.
Phillip Morris was upgraded from UnderPerform to Neutral at Bank of America.
Walmart was upgraded from Hold to Accumulate at Gordon Haskett.
General Mills (GIS) and JM Smucker (SJM) were both reiterated at Neutral at Bank of America.
As I review the lists by date of equities going ex-dividend each week, as conveniently compiled by ETrade, I am struck by the domination of various funds, as opposed to individual stocks, on the lists. When you consider funds of all types, including traditional mutual funds, exchange traded funds (ETFs), exchange traded notes (ETNs), and closed end funds (CEFs), there are many more funds than stocks, particularly when you exclude stocks that do not pay dividends. Investors seeking recurring income from equities, i.e. dividends, are going to have a tough time of it if they only consider actual stocks, and exclude funds. As I look at the various fund types, I am much more attracted to CEFs, as opposed to the other types of funds, for all the reasons stated in my Seeking Alpha article on CEFs. I anticipate expanding my CEF list of fifteen CEFs to thirty or more in the coming months, and increasing the percentage of total capital allocated to CEFs from 15% or so to 30%, or even 40%.
Part of this renewed conservatism regarding individual stocks is based on my experiences. Any stock can “blow up”, no matter how much of a storied history it may have, or how impressive the major shareholders are. Examples abound, such as General Electric (GE), or Kraft Heinz (KHC). In fact, a “Black Swan” event can deal a major blow to a “can’t miss” stock that, based on the financials, seemed rock solid prior to the event. Boeing (BA) is a prime example. There just are no “widow and orphan” stocks anymore. The risks of complacency, inertia, managerial missteps, or unforeseeable events can threaten the most solid firms. Obsolescence, whether technological or changing cultural or social attitudes, is another huge risk for many household names. Big Pharma particularly is at risk of major technological breakthroughs disrupting their business models. As for cultural changes, witness the dramatic decline in smoking over the last 10 years, and the effect on the tobacco firms. Similarly, the changing attitudes toward healthy eating vs. soda drinks and salty snacks, plus the rebellion against preservatives and other enhancements that are resulting in the growing popularity of organic food choices are yet another example. I am coming to the conclusion that professional management and diversification, available through funds, is advisable for even the most devoted follower of stocks, markets, and economics. As noted, I believe CEFs are the superior fund type, which in addition to diversification and professional management, can benefit from leverage and/or options strategies, and often can be purchased at a discount to the value of the fund’s holdings.
So in summary, while I’m not giving up on individual, dividend-paying stocks, I am going to expand my CEF allocation, and will be following CEFs as well as stocks going forward.
1st Posting for Week Beginning Monday 05/13/2019
Posted Sunday 05/12/2019 09:00 PM
Stocks declined five or six trading days out of eight since the beginning of May, depending upon which major stock average is referenced. Of the various concerns weighing on the markets, the issue having the most effect currently is the state of the trade negotiations with China. Even the Trump haters will grudgingly admit that some practices engaged in by China are outrageous, and reform is needed. Whether anything can be accomplished is unknown, but continuing the status quo is not acceptable, which is the US position. Regardless of the outcome of the trade negotiations, the political wars seem to be getting worse, not better, and there is a rising chorus of market and economic prognosticators predicting an economic slowdown in late 2019 or certainly by 2020, which will result in a major market slide and probably a recession. For those of us paying attention, the debt overhang at all levels (Federal, State, Municipal, Corporate, and Individual) is the “elephant in the room” that, if not addressed, will eventually lead to an economic and market Armageddon not experienced since the 1930’s. One of the more reasonable views of the situation we are in is that advanced by economist John Mauldin, who predicts a “Great Reset” will be the endgame. Mauldin’s annual economic conference will be occurring in Dallas next week, with many distinguished speakers in attendance, offering their views and interpretations on what the future holds.
Anyway, back to the more mundane task of noting upcoming dividends expected on the stocks I follow. The following stocks are scheduled to go ex-dividend next week. The stock, ex-dividend date, and current annualized yield, per Friday’s closing price, are presented. Note that frequency is quarterly, unless otherwise indicated. Any of the fifteen Closed-End Funds (CEFs) shown on my new CEF list going ex-dividend next week are noted further down.
Welltower (WELL), 5/13/2019, 4.57%.
Paychex (PAYX), 5/14/2019, 2.94%.
Exelon (EXC), 5/14/2019, 2.97%.
Enbridge (ENB), 5/14/2019, 5.99%.
Chevron (CVX), 5/16/2019, 3.93%.
Emerson Electric (EMR), 5/16/2019, 2.93%.
Duke Energy (DUK), 5/16/2019, 4.27%.
Horizon Technology Finance (HRZN), 5/16/2019, 10.31%. HRZN pays monthly.
Royal Dutch Shell (RDS.B), 5/16/2019, 5.88%. RDS.B remains the highest-yielding oil major.
Smucker JM Co (SJM), 5/16/2019, 2.70%.
Equinor ASA (STOHF), 5/16/2019, 2.93%. Note that the Norwegian oil company was formerly named Statoil (STO).
United Parcel Service (UPS), 5/17/2019, 3.81%.
Southern Co (SO), 5/17/2019, 4.74%.
Main Street Capital (MAIN), 5/17/2019, 6.21%. MAIN pays monthly.
Buckeye Partners L P (BPL), 5/17/2019, 7.18%. This may be the final BPL distribution. See below update on BPL.
Pan American Silver (PAAS), 5/20/2019, 1.19%. PAAS is a Tier3 holding which is a speculation on silver.
Eni S.p.A. (E), 5/20/2019, 4.25%. E pays semi-annually.
CEFs on my CEF list going ex-dividend this upcoming week are as follows. All of those listed are monthly payers.
BlackRock Debt Strategies (DSU), 5/14/2019, 7.66%.
BlackRock Enhanced Equity Dividend Trust (BDJ), 5/14/2019, 6.45%.
Cohen & Steers MLP Income and Energy (MIE), 5/14/2019, 10.09%.
Cohen & Steers Quality Realty Income (RQI), 5/14/2019, yield 7.42%.
CBRE Clarion Global Real Estate Income (IGR), 5/17/2019, yield 8.21%.
Nuveen Real Asset Income and Growth (JRI), 5/14/2019, yield 7.89%.
Gabelli Utility Trust (GUT), 5/15/2019, yield 8.81%.
Gabelli Dividend & Income Trust (GDV), 5/15/2019, yield 6.17%.
BlackRock Energy & Resources Trust (BGR), 5/14/2019, yield 7.90%.
Earnings season is nearly over. Five stragglers reporting this week are as follows.
5/13/2019, Gladstone Investment (GAIN), Kraft Heinz (KHC).
5/15/2019, Cisco Systems (CSCO).
5/16/2019, Walmart (WMT), Apollo Investment (AINV).
Upgrades / downgrades I have noticed since the end of April are as listed. Note that as of now, the only actions I am picking up are from E-Trade. MarketWatch as a source has deteriorated such that it’s not worth viewing. Other resources are available, but all are too time-consuming to review. Thus, it is possible that analyst actions on my stocks are missed, if not reported on E-Trade.
McDonalds (MCD) was downgraded from Buy to Neutral at Longbow.
Merck (MRK) was reiterated at Buy at UBS.
ONEOK (OKE) was reiterated at Buy at Citigroup.
Hercules Capital (HTGC) was upgraded from Neutral to Buy at B.Riley FBR.
Unilever (UL) was upgraded from Neutral to OutPerform at Credit Suisse.
Walmart (WMT) was upgraded from Market Perform to OutPerform at Bernstein.
PennantPark Investment (PNNT) was downgraded from Buy to Neutral at Compass Point.
Hercules Capital (HTGC) was downgraded from OutPerform to Market Perform at Wells Fargo.
Eni S.p.A. (E) was downgraded from Buy to Neutral at Citigroup.
Total S A (TOT) was downgraded from Buy to Neutral at Citigroup.
Mid America Apartment Communities (MAA) was upgraded from Neutral to Buy at Mizuho.
Realty Income (O) was upgraded from UnderWeight to Equal Weight at Capital One.
Buckeye Partners (BPL) was upgraded from Sell to Hold at Zacks.
Total SA (TOT) was upgraded from Sell to Hold at Zacks.
Spirit Realty Capital (SRC) was downgraded from Buy to Hold at Deutsche Bank.
Walmart (WMT) was downgraded from Peer Perform to UnderPerform at Wolfe Research.
Chimera Investment (CIM) was downgraded from Hold to Sell at Zacks.
Century Link (CTL) was upgraded from Sell to Neutral at Citigroup.
Royal Dutch Shell (RDS.B) was upgraded from UnderWeight to Equal Weight at Morgan Stanley.
NextEra (NEE) was upgraded to OutPerform at Scotia Bank.
Intel (INTC) was downgraded from OutPerform to Market Perform at BMO Capital.
Tanger Factory Outlet Centers (SKT) was downgraded from Neutral to Sell at Goldman.
American Electric Power (AEP) was reiterated at Buy at UBS.
Intel (INTC) was reiterated at Market Perform at Deutsche Bank, and at Buy at Wells Fargo.
I had been watching Buckeye Partners LP (BPL) recently, trying to add to my position before the upcoming dividend. After seeing the price move ever further from my lo-ball bid, I had determined that on Friday I would raise my bid to get executed. Imagine my surprise as I learned early Friday morning that the stock had gone up more than nine dollars from where it closed the previous day. The cause was that IFM Global Infrastructure, an Australian-based firm, will be acquiring BPL at a buyout price of $40.50, roughly a 25% premium. The stock actually rocketed up above $42 temporarily, and stayed in the $41.50 to $41.80 range most of the day. The upcoming dividend of $0.75 will definitely be paid, and it likely will be the last. Since I could unload it a slight premium to the buyout price, I decided to go ahead and ring the cash register, and forego the dividend. BPL had recently concluded a strategic assessment, and the dividend, already reduced in August 2018, was targeted for further reduction, so it wasn’t looking good for BPL prior to the buyout announcement. While “it’s not over until it’s over”, I expect the deal to go through, and I doubt if further dividends will be forthcoming, so my recommendation is to take the money and run, if you hold BPL.
There may be some additional merger activity in the MLP space, as this beaten-down sector presents good value in an otherwise mostly over-valued market.
As I have noted, I am following CEFs much more closely these days, as high yields become harder to find, and usually involve even higher risk when found. Certainly, CEFs will decline along with their holdings in a general market decline, and payouts will be reduced as well if conditions deteriorate. But the long-term survivability for CEFs seems to me to be better than any individual high-yield stock, which is one reason why I’m moving in that direction.
1st Posting for Week Beginning Wednesday 05/01/2019
Posted Tuesday 04/30/2019 09:00 PM
I have returned and am ready to resume tracking the market and my stocks. I have reviewed all of my lists, or tiers, updating the values, and I have made a few changes, which are detailed further down. The state of the market is pretty much unchanged since I left in early February. At that time, a recovery was underway from the year-end market swoon, and it has continued to the present. Even though most market followers believe the bull run cannot continue much longer, along with the positive economic news, right now no one has any reason to complain. There will be a downturn sometime in the future, no doubt, but until then, I recommend heeding the words from the Janis Joplin classic, “Get It While You Can”.
Stocks on my lists scheduled to go ex-dividend over the next several days, from now through May 13, are as follows:
Eaton (ETN), 5/2/2019, yield 3.38%.
Unilever PLC (UL), 5/2/2019, yield 3.00%.
HCP Inc (HCP) 5/3/2019, yield 5.01%.
Energy Transfer LP (ET), 5/6/2019, yield 8.00%.
Intel (INTC), 5/6/2019, yield 2.47%.
NGL Energy Partners LP (NGL), 5/6/2019, yield 10.74%.
Magellan Midstream Partners LP (MMP), 5/7/2019, yield 6.49%.
NuStar Energy LP (NS), 5/7/2019, yield 8.81%.
Martin Midstream Partners LP (MMLP), 5/7/2019, yield 12.64%.
Crestwood Equity Partners LP (CEQP), 5/7/2019, yield 6.54%.
Entergy (ETR), 5/8/2019, yield 3.83%.
Hoegh LNG Partners LP (HMLP), 5/8/2019, yield 8.84%.
Walmart (WMT), 5/9/2019, yield 2.09%.
American Electric Power (AEP), 5/9/2019, yield 3.19%.
Pfizer (PFE), 5/9/2019, yield 3.64%.
Exxon Mobil (XOM), 5/10/2019, yield 4.35%.
As we enter into another earnings season, a number of my stocks are scheduled to report during my “look-ahead” time frame, which for this posting is May 1 through May 13. The firms for each date are as follows:
Mid America Apartment Communities (MAA), Realty Income (O), Magellan Midstream Partners LP (MMP), Southern Company (SO), Entergy (ETR), Enterprise Products Partners LP (EPD), GlaxoSmithKline PLC (GSK), HCP Inc (HCP), Noble Corp PLC (NE), Annaly Capital Management (NLY), Williams Companies (WMB), BlackRock Capital Investment (BKCC), Chimera Investment (CIM), Pitney Bowes (PBI), Windstream Holdings (WINMQ),
Kellogg (K), Alliant Energy (LNT), Public Service Enterprise Group (PEG), Royal Dutch Shell PLC (RDS.B), B&G Foods (BGS), Buckeye Partners LP (BPL), Exelon (EXC), Medical Properties Trust (MPW), Kimco Realty (KIM), Spirit Realty Capital (SRC), Hercules Capital (HTGC).
Legacy Reserves (LGCY).
Tanger Factory Outlet Centers (SKT), Solar Capital LTD (SLRC).
Prospect Capital (PSEC), Hi Crush Partners LP (HCLP), Emerson Electric (EMR), National Health Investors (NHI), Plains All American Pipeline LP (PAA), Omega Health Investors (OHI), MFA Financial (MFA), Monroe Capital (MRCC).
Park Hotels Resorts (PK), Pattern Energy Group (PEGI), Wheaton Precious Metals (WPM), Oaktree Specialty Lending (OCSL), Barrick Gold (GOLD), Century Link (CTL), Energy Transfer LP (ET).
NuStar Energy LP (NS), Duke Energy (DUK), Main Street Capital (MAIN), PennantPark Investment (PNNT), Senior Housing Properties Trust (SNH).
Enbridge (ENB), Pan American Silver (PAAS), Enerplus (ERF).
Gladstone Investment (GAIN).
At this point in my weekly update, I normally present analyst ratings changes from the prior week. While I did track these during my absence, there are far too many to list. Next week I will resume the practice of presenting the prior week’s upgrades / downgrades / initiations / resumptions / reiterations of coverage on my stocks.
Now, a brief recap of changes to my stock lists (Tiers) follows.
Tier1 stocks are the safest, strongest firms, the least likely to cut their dividends or go bankrupt, and to experience precipitous declines. Tier1 yields are usually in the low single digits. The only change to Tier1 is I have dropped Waste Management (WM), as the yield has fallen below 2%. The reason is not because of any negative developments, such as a dividend cut, but rather that the stock has gone stratospheric. I sold long ago, when the yield dropped below 3%, but if I still owned it today, I would sell and put the proceeds into something with a higher yield.
Tier2 stocks are less safe, with risk factors that Tier1 stocks do not have, and while dividend cuts may occur, the firms are unlikely to go bankrupt, barring a severe economic downturn, or more likely, disastrous management decisions, such as an ill-advised acquisition. MLPs are by definition in this category, as they have a built-in risk factor of an adverse change in the tax code, and other limitations.
Changes here are:
Amerigas Partners LP (APU) is being acquired by UGI Corp, at a slight premium to the market price where APU was trading prior to the announcement. UGI is not a dividend stock of any significance. I recommend not waiting around, but selling now, which I did with my own holding.
B&G Foods (BGS) has been a disappointment since I bought it last fall, dropping in sympathy with Kraft Heinz (KHC), I guess. I haven’t given up on it, and it has stabilized, but it seems more like a Tier3 stock than a Tier2 stock, so it has been demoted to Tier3.
Speaking of Kraft Heinz (KHC), which has given up 2/3 of its value since being formed by the merger of Kraft and Heinz, it definitely is worthy of demotion to Tier3. I do believe it has stabilized, and will recover some of the lost ground, while still paying out a decent dividend, so I’m holding for now. But KHC is now in Tier3.
NuStar Energy LP (NS) and Plains All American Pipeline LP (PAA) are both MLPs that have seen better days. Both have cut their payouts, but even so, yields are still generous. I just don’t see them as solid as I once believed they were, so they move to Tier3. I have held NS for over 8 years, and at this point I’m holding. I traded PAA successfully in 2015, when it was really down, but decided I had too much MLP exposure at that point, so I sold. PAA has done well for a couple of years now, so it is a viable Tier3 holding.
Omega Healthcare Investors (OHI) is a solid healthcare REIT with a yield exceeding 7%, and at this point is a very attractive holding, so it is added to Tier2.
Tier3 stocks are either high-yield or high potential for capital gains, and can do very well if the economy remains strong or the fundamentals change for the better in their sector. Included here are BDCs, MREITs, rural telecoms, metals miners, and less substantial MLPs. Obviously, if hard times strike, these firms will cut or eliminate their dividends, and may go bankrupt.
As noted, BGS, KHC, NS, and PAA have all been moved to Tier3.
The stock symbol for Barrick Gold changed from ABX to GOLD.
Apollo Investment (AINV) split 1:3, but the dividend increased proportionally, so unlike most reverse splits, it has not been a negative development.
Martin Midstream LP (MMLP) and Century Link (CTL) both cut their dividend, but are still paying out at a decent yield, so they remain on Tier3.
A rare reinstatement from Tier4 back to Tier3 is Crestwood Equity Partners LP (CEQP). While the memory of a crushing reverse split from 2015 lingers, CEQP has maintained stability and payouts since then, and has earned its way back to Tier3.
Several other Tier3 holdings are hereby demoted to Tier4, stocks no longer recommended at any price.
These gems are:
Consolidated Communications (CNSL), dividend eliminated. This rural telecom defied the odds for many years, but the expected cut was reflected in the price, and the ax finally fell. The firm does not appear to be going away soon, but with no dividend, it is going away to Tier4, in my scheme at least.
Pitney Bowes (PBI) may still continue it’s five cent dividend a while yet, having paid it just this past March, but the prospects for the revival of PBI are dim indeed, time to move it to Tier4.
American Midstream Partners LP (AMID) has languished for months as a five dollar stock, and thus it will ever be, as it will be acquired by ArcLight Energy for $5.25 per unit. AMID will thus exist for only a little while on Tier4, before it is gone and forgotten.
Two more demotions to Tier4 are two REITs, Senior Housing Properties Trust (SNH) and Washington Prime Group (WPG). SNH reduced its dividend to 15 cents, while WPG hasn’t yet reduced the dividend, but with a 22% yield, it seems likely to happen soon.
Tier4 stocks are the “walking dead”, stocks previously on the other lists, but now their dividends are absent or reduced, and bankruptcy is a real possibility. I have given up on these firms, but I will continue to track them as an exercise in masochism, as long as they continue to hang on.
As noted, new members of the Tier4 “legion of the damned” are CNSL, PBI, SNH, and WPG.
Other Tier4 developments are the merger of Ensco and Rowan into Ensco Rowan, which will retain the Ensco symbol ESV. A concurrent 4:1 reverse split completes the action. A 4 cent quarterly dividend is still being paid, generating a yield of 1.15%. While none of the offshore drillers (ESV, NE, RIG) that I speculated in are going out of business anytime soon, it is hard to visualize any of these firms ever returning to their glory days.
The last Tier4 development is definitely least. Windstream Holdings (WIN) has gone bankrupt, and the symbol is now WINMQ.
I have become intrigued in recent years by Closed-End Funds (CEFs) as an asset class. CEFs have advantages over individual stocks, and also over traditional mutual funds. To learn more, see my recent article on CEFs. The article also points the reader towards two closed end fund websites, www.cefa.com and www.cefconnect.com, which have a lot of helpful information. CEFs can be challenging to evaluate, but the advantages are worth it. I have a new “Tier” list of CEFs, which I have named simply CEFs. To begin, I have listed 15 CEFs I own. These are not recommended as the “best”, as I hesitate to recommend a small subset as such, but the list is representative. Some of them may be the “best”, it’s hard to say. I have around 15% of my worth invested in CEFs, and I plan to expand that percentage. I have owned some CEFs since 2006, as per my article, but I have increased my CEF holdings starting in 2016, and as noted, I plan to allocate more to this asset class.
My next update will be Monday 5/13/2019.