Stocks mostly declined the first half of the week, with the blue chips taking more hits than the NASDAQ. Then, most stocks posted modest gains on Thursday and Friday. Meanwhile, crude oil, per the benchmark West Texas Intermediate, continued on above the $70 level breached the prior week, ending at a high above $73 on Friday. This is the highest it has been in at least three years, if not longer. Of course, the action this past week was not in stocks, but rather took place in Washington D.C. Now commonly referred to as the circus, it appears that the show will extend performances for another week, since it has been so popular. Lost in the tumult was the fact that another incremental hike in the Federal Funds Rate occurred last week, putting the short-term rate at 2.125%, a new high since the 2008 financial crisis. There may be one more hike this year, if the economy continues to do well, per the current consensus.

Stocks on my lists going ex-dividend this week are listed following, by ex-dividend date. Assume payouts are quarterly unless otherwise noted.

Kimco Realty (KIM), yield 6.67%.

Cisco Systems (CSCO), 2.73%.

Universal Corp (UVV), 4.61%.

Not much dividend activity happening for the first week of October, I must say.

A couple of my stocks will be reporting earnings next week, as follows:

Paychex (PAYX) on 10/2/2018.

Pepsico (PEP) on 10/2/2018.

Upgrades / downgrades / initiations / reiterations coming out last week regarding my stocks were as follows:

AT&T (T) was reiterated at Hold at Deutsche Bank.

Blackstone Group LP (BX) was reiterated at Buy at Bank of America, at Market OutPerform at JMP Securities, and at OverWeight at Morgan Stanley.

Crestwood Equity Partners LP (CEQP) was downgraded to Hold at Stifel.

Darden Restaurants (DRI) was downgraded to UnderPerform at BMO Capital.

Emerson Electric (EMR) was reiterated at OverWeight at Barclays.

Exelon (EXC) was reiterated at OutPerform at Macquarie.

Plains All American Pipeline LP (PAA) was upgraded from Hold to Buy at Stifel.

Public Service Enterprise Group (PEG) was reiterated at OutPerform at Macquarie.

Barrick Gold (ABX) was upgraded from Neutral to Buy at Citigroup, and also was upgraded to Buy at TD Securities. The announcement that ABX will be acquiring Randgold Resources LTD (GOLD) to form an $18 Billion Gold-Mining Giant was favorably received by the market, as evidenced by these ratings upgrades.

Blackstone Group LP (BX) was reiterated Buy at both Argus and Citigroup.

Intel (INTC) was initiated at Sector Weight at KeyBanc, and downgraded from Market Perform to UnderPerform at Raymond James.

ConocoPhillips (COP) was reiterated at OverWeight at Morgan Stanley.

JM Smuckers (SJM) was downgraded from Peer Perform to UnderPerform at Wolfe Research.

Exelon (EXC) was reiterated at Equal Weight at Morgan Stanley.

Public Service Enterprise Group (PEG) was reiterated at OverWeight at Morgan Stanley.

United Parcel Service (UPS) was initiated at Sector Weight at KeyBanc Capital Markets.

Eaton (ETN) was reiterated at Buy at Deutsche Bank.

General Electric (GE) was reiterated at Hold at Deutsche Bank.

HCP Inc (HCP) was upgraded from Neutral to OverWeight at Cantor Fitzgerald.

3M Co (MMM) was reiterated at Hold at Deutsche Bank.

Pepsico (PEP) was reiterated at OutPerform at Macquarie.

Royal Dutch Shell (RDS.A, RDS.B) was initiated at OutPerform at Wolfe Research.

Note that on upgrades / downgrades, I provide the prior rating if available from my source.

September has concluded with stocks modestly higher than a month ago. As the mid-terms approach, the over-heating political environment will likely get even more intense. Barring some major, game-changing geo-political or other development, I expect October will be similar to September, as far as the markets are concerned. November may be a different story, especially if a “blue wave” occurs, threatening the current favorable business and investment climate. One thing I can predict with confidence is that it won’t be dull.

JT

Stocks last week followed the same script as the prior week, in that a decline on Monday was followed by substantial gains the rest of the week, all but Friday logging triple-digit advances on the Dow Industrials. There were no big surprises on the economic front, and a bump in oil prices boosted the energy sector. There was a surprise on the political front regarding the confirmation of Judge Kavanaugh, but we have reached a point in our national politics that a Republican-Democrat gunfight on Capital Hill by members of Congress probably would not have any effect on the markets. It would just be considered another, typical day!

Stocks on my lists going ex-dividend have an effect on my outlook, a favorable effect. These are listed following, by ex-dividend date. Assume payouts are quarterly unless otherwise noted.

9/24/2018

Eni S p A (E), yield 3.54%. Eni is based in Italy, and 26% withholding applies, so the actual yield is only about 2.5%. Eni pays out twice a year, and this is the second payment for 2018.

9/25/2018

Phillip Morris International (PM), yield 5.52%.

9/26/2018

PotlatchDeltic (PCH), yield 3.43%.

9/27/2018

AGNC Investment (AGNC), yield 11.51%. AGNC is a monthly payer.

STAG Industrial (STAG), yield 5.06%. STAG is also a monthly payer.

Enerplus (ERF), yield 0.78%. ERF pays monthly as well. With a payment of one cent CDN, this one-time high-yielding Canadian Trust is relegated to my Tier 4 list, no longer recommended.

Prospect Capital (PSEC), yield 9.74%. PSEC is another monthly payer.

Annaly Capital Management (NLY), yield 11.64%.

Nucor (NUE), yield 2.36%. NUE is a great company, but the gain in the stock price has resulted in a sub-3% yield. The cyclical nature of a steel company has prevented the dividend from keeping pace, which is understandable, but not much consolation.

National Health Investors (NHI), yield 5.29%.

9/28/2018

Ventas (VTR), yield 5.55%.

Realty Income (O), yield 4.62%. O pays monthly.

MFA Financial (MFA), yield 10.55%.

10/01/2018

Kimco Realty (KIM), yield 6.67%.

None of my stocks are scheduled to report in the week ahead.

Upgrades / downgrades coming out last week regarding my stocks were as follows:

General Mills (GIS) was resumed at Equal Weight at Morgan Stanley.

Kellogg (K) was resumed at Equal Weight at Morgan Stanley.

American Electric Power (AEP) was reiterated at OutPerform at Wells Fargo.

Exelon (EXC) was reiterated at Market Perform at Wells Fargo.

Duke Energy (DUK) was reiterated at Market Perform at Wells Fargo.

Entergy (ETR) was reiterated at OutPerform at Wells Fargo.

HCP Inc (HCP) was reiterated at Buy at Bank of America.

Alliant Energy (LNT), was reiterated at Market Perform at Wells Fargo.

NextEra Energy (NEE) was reiterated at OutPerform at Wells Fargo.

Newmont Mining (NEM) was reiterated at OverWeight at JP Morgan.

Realty Income (O) was reiterated at Neutral at JP Morgan.

Public Service Enterprise Group (PEG) was reiterated at OutPerform at Wells Fargo.

Colgate Palmolive (CL) was reiterated at Buy at Argus.

Ensco PLC (ESV) was initiated at Buy at BTIG Research.

Noble Corp PLC (NE) was initiated at Neutral at BTIG Research.

Transocean LTD (RIG) was initiated at Buy at BTIG Research.

Walmart (WMT) was initiated at OutPerform at BMO Capital.

Freeport-McMoRan (FCX) was reiterated at Buy at B. Riley FBR.

Noble Corp PLC (NE) was initiated at UnderWeight at Morgan Stanley.

Transocean LTD (RIG) was upgraded to OutPerform at Wells Fargo.

Transocean LTD (RIG) was initiated at OverWeight at Morgan Stanley.

Intel (INTC) was reiterated at Equal Weight at Morgan Stanley.

Legacy Reserves LP (LGCY) was initiated at Neutral at Seaport Global Securities. Note that LGCY was reorganized as a C-Corp from an MLP effective 9/21/2018, trading on the NASDAQ under the same symbol. Unit holders received one share of stock for each LP unit held.

Colgate Palmolive (CL) was initiated at Neutral at Atlantic Equities.

ConocoPhillips (COP) was downgraded from OutPerform to Sector Perform at RBC Capital.

Digital Realty (DLR) was initiated at Hold at Berenberg.

Kimberly Clark (KMB) was initiated at UnderWeight at Atlantic Equities.

Iron Mountain (IRM) was initiated at Buy at Berenberg.

Procter & Gamble (PG) was initiated at OverWeight at Atlantic Equities.

Noble Corp PLC (NE) was upgraded to OutPerform at RBC Capital.

Transocean LTD (RIG) was upgraded to OutPerform at RBC Capital.

Darden Restaurants (DRI) was reiterated at Buy at Canaccord Genuity and Mizuho, and at Equal Weight at Morgan Stanley.

Altria (MO) was reiterated at Neutral at Citigroup.

Phillip Morris (PM) was reiterated at Buy at Citigroup.

AT&T (T) was upgraded to Buy at UBS.

United Parcel Service (UPS) was initiated at Hold at Berenberg.

American Electric Power (AEP) was reiterated at OverWeight at Morgan Stanley.

Duke Energy (DUK) was reiterated at Equal Weight at Morgan Stanley.

Eaton (ETN) was upgraded to Buy at UBS.

Entergy (ETR) was reiterated at Equal Weight at Morgan Stanley.

Exelon (EXC) was reiterated at Equal Weight at Morgan Stanley.

NextEra Energy (NEE) was reiterated at OverWeight at Morgan Stanley.

Public Service Enterprise Group (PEG) was reiterated at OverWeight at Morgan Stanley.

Southern Company (SO) was reiterated at UnderWeight at Morgan Stanley.

Nothing much has changed regarding the outlook for stocks in the near future. There is generally a consensus that the market is fully-priced, with some issues priced for perfection or better, and that we are due for a significant decline at some point, but the gurus have been saying that for several years now. The circus in Washington D.C. seems to get worse every day, egged on by the mostly left-leaning news media, but the markets seem to be mostly ignoring the spectacle. Even the threat of tariffs causing an economic slowdown seems to have lost its effect. However, even as market favorites continue on up to nosebleed levels, perceived failures in expectations are quickly punished, examples being General Electric (GE) and General Mills (GIS). As always, there are some bargains here and there, but they involve more risk – that is why they are bargains.

I am tired of waiting for a stock market Armageddon to occur, sitting on the sidelines with excess cash earning zip. Over the next few months I am going to reduce cash by approximately 25% by deploying funds into selected high-yielding issues. I am still being very cautious, following an incremental acquisition strategy over a lengthy time period, with plenty in reserve just in case Armageddon arrives ahead of schedule. I will announce purchases as they occur. Some will be stocks not on my current lists, but which will be added.     

Purchases last week were:

Bought 50 shares of Ventas (VTR) at $57.65. VTR is on my Tier 2 list, and goes ex-dividend next week, yielding 5.55%, meaning I’ll be getting paid right away.

Bought 50 shares of B&G Foods (BGS) at $30.30. BGS will be added to my Tier 3 list. BGS goes ex-dividend next week also, yielding 6.16%. I owned BGS several years ago. I actually don’t remember why I sold, maybe just to take a profit. But I have followed it for a long time, and it seems like a reasonable risk for the yield offered.

Bought 100 shares of Spirit Realty Capital (SRC) at $8.20. SRC is a smaller REIT that is trying to duplicate the success of Realty Income (O), with emphasis on triple-net leasing arrangements. SRC goes ex-dividend next week, and yields 6.13%. Unlike O, SRC is a quarterly payer. I will be adding SRC to Tier 3.

Bought 50 shares of Pattern Energy Group (PEGI), a “Yieldco” involved in wind farms, at $20.45. You guessed it, PEGI goes ex-dividend next week, yielding 8.24%.

In addition to picking stocks that are not at all-time highs in favored sectors, and not buying a full position at the outset, you can see I have waited until just before an upcoming ex-dividend date to buy. Thus, I will be getting paid right away from each of the holdings. I will be adding PEGI to Tier 3.  

So far so good.

JT

Stocks dipped modestly on Monday last week, then progressed steadily the rest of the week, ending the week with gains on all the major averages. The economic data continues to point to a strong economy, and the Fed appears set to continue with gradual rate hikes, with one or even two more planned for 2018. The goal is an eventual return to “normalcy”, as far as interest rates are concerned. 

Meanwhile, steady dividend payers continuing to pay on schedule are the best indication of economic normalcy, as far as I’m concerned. Stocks on my lists going ex-dividend in the week ahead are as follows, in order by date:

Before I list this week’s payers, note that last week I missed PennantPark Investment (PNNT), which went ex-dividend 9/14/2018. The BDC yields 9.51%. 

Horizon Technology Finance (HRZN), yield 10.66%. Note that HRZN is a monthly payer.

Gladstone Investment (GAIN), yield 6.80%. This BDC is a monthly payer.

I listed General Mills (GIS) last week as going ex-dividend on this date, which was incorrect. GIS will be going ex-dividend next sometime in October. GIS will be reporting earnings on 9/18/2018, which is what caused the error.

Solar Capital (SLRC), yield 7.56%. SLRC is a general BDC, and does not limit investments to only solar energy firms.

Main Street Capital (MAIN), yield 7.56%. MAIN pays monthly. In addition to the regular monthly payout, MAIN also frequently makes special payouts, when conditions warrant. MAIN is considered to be one of the strongest BDCs.

Apollo Investment (AINV), yield 10.97%.

Total S A (TOT), yield 4.70%. Note that the yield is before 30% withholding paid to France, where TOT is based, so the actual yield is only about 3.5%.

Eni S p A (E), yield 3.63%. Eni is based in Italy, and 26% withholding applies, so the actual yield is only about 2.6%. Eni pays out twice a year, and this is the second payment for 2018.

Two of my stocks will be reporting earnings this week, General Mills (GIS) on 9/18/2018, and Darden Restaurants (DRI) on 9/20/2018.

Upgrades / downgrades coming out last week regarding my stocks were as follows:

Darden Restaurants (DRI) was downgraded from OutPerform to Neutral at Baird.

American Electric Power (AEP) was upgraded to Buy at Guggenheim, and reiterated at Neutral at Citigroup.

HCP Inc (HCP) was upgraded to Inline at Evercore ISI Group.

Intel (INTC) was reiterated at OutPerform at Wells Fargo.

Sanofi (SNY) was upgraded to Buy at Bank of America.

Novartis (NVS) was upgraded from UnderPerform to Buy at Bank of America.

Roche Holdings LTD (RHHBY) was downgraded from Buy to Neutral at Bank of America.

Vodafone Group PLC (VOD) was upgraded from Reduce to Buy at Standpoint Research.

Freeport-McMoRan (FCX) was downgraded from Buy to Neutral at Clarksons Platou.

American Electric Power (AEP) was reiterated at OverWeight at Morgan Stanley.

Chevron (CVX) was Initiated at Hold at Berenberg.

Eni S p A (E) was Initiated at Hold at Berenberg, and downgraded from Equal Weight to UnderWeight at Barclays.

Darden Restaurants (DRI) was upgraded to Buy at Goldman.

Duke Energy (DUK) was reiterated at Equal Weight at Morgan Stanley.

Entergy (ETR) was reiterated at Equal Weight at Morgan Stanley.

Exelon (EXC) was reiterated at Equal Weight at Morgan Stanley.

NextEra Energy (NEE) was reiterated at OverWeight at Morgan Stanley.

Royal Dutch Shell (RDS.B) was Initiated at Hold at Berenberg.

Total S A (TOT) was Initiated at Buy at Berenberg.

Exxon Mobil (XOM) was Initiated at Hold at Berenberg.

Exelon (EXC) was downgraded to Hold at SunTrust Robinson Humphrey.

McDonalds (MCD) was reiterated at Buy at Goldman.

Chevron (CVX) was upgraded from Hold to Buy at HSBC Securities.

Intel (INTC) was upgraded from UnderPerform to Market Perform at Northland Capital.

Darden Restaurants (DRI) was reiterated at Equal Weight at Morgan Stanley.

ONEOK (OKE) was reiterated at OutPerform at Wells Fargo.

Williams Companies (WMB) was reiterated at OutPerform at Wells Fargo.

Plains All American Pipeline L P (PAA) was initiated at Buy at Johnson Rice.

Coca Cola (KO) was initiated at Buy at Guggenheim.

Walmart (WMT) was resumed at Neutral at Goldman.

Pepsico (PEP) was initiated at Neutral at Guggenheim.

Hershey (HSY) was reiterated at Hold at Deutsche Bank.

Last week saw quite a few new ratings for just one week, an indication that summer vacation time is over, and the analysts have come back to work.

Following up on the social media giants coming before Congress, as mentioned last week, note that Facebook and Twitter responded with representatives coming before the committee, while Google declined to send a representative. A subsequent disturbing news flash provides some insight why, as it was revealed that Google apparently altered their search algorithms in an effort to help the Democratic candidate. The post-election mood at the firm was clearly bitter that, in spite of their efforts, their chosen candidate lost. One has to wonder what they will do next time to avoid a repeat. Some regulation of the social media giants is likely somewhere down the road, but how is the big question. When Standard Oil attained too much power in the late 1800’s, the solution was to break the company up into competing firms. What do you do with Google, or Facebook and Twitter for that matter, when you determine these firms have too much influence and may be able to swing elections their way using their platforms to silence or muzzle views that don’t conform to their view? I have no idea what to do, but whatever it is, it needed to be done yesterday, and certainly needs to be done ASAP.

JT

Stocks did not move much last week, but the action did serve to illustrate why market professionals dismiss the Dow Industrials Index as being representative of the market, even as the media and the public continue to follow it as such. The Dow Industrials declined only slightly on Tuesday, gained on Wednesday and Thursday, then declined on Friday, while all four of the other general stock indexes I track declined every day of the week. I consider the S&P 500 to be representative of the “blue chips”, the New York Composite to be representative of the market over-all, the NASDAQ to be representative of technology firms, and the Russell 2000 as representative of small caps. The “Dow”, frankly, is representative of the 30 stocks that make up the index, and not much else. But anyway, long story short, stocks moved very little last week, as the Kavanaugh “hearings”, if you want to be generous in your terminology, dominated the news cycle. Even another outstanding Monthly Jobs report on Friday failed to generate much enthusiasm.

As for me, I am definitely enthusiastic about the number of stocks on my lists going ex-dividend in the next few days, a list of which immediately follows, listed by ex-dividend date:

Medical Properties Trust (MPW), yield 6.68%.

Newmont Mining (NEM), yield 1.64%. NEM is a gold speculation, but it’s nice to receive a modest payout while waiting for the next uptick in precious metals pricing. It looks like it will be a long wait.

Coca Cola (KO), yield 3.41%.

Crown Castle International (CCI), yield 3.67%.

Digital Realty Trust (DLR), yield 3.25%.

PotlatchDeltic (PCH), yield 3.33%. Potlatch merged with Deltic Timber in early 2018 to form a new Timberland REIT and Wood Products Manufacturer, thus the new name.

Washington Real Estate Investment Trust (WRE), yield 3.78%.

Ares Capital (ARCC), yield 8.92%.  I’ve owned this BDC since 2007, with over $2000 of dividends received, and a stock price less than a buck under my purchase price per share. This is as good as it gets for a high-yielding BDC, a generous yet sustainable payout over the years and a stable share price.

Oxford Square Capital (OXSQ), yield 10.83%. Formerly TICC Capital (TICC), this is also a BDC. I started a small position in 2015, and since then have just sat on it.

Oaktree Specialty Lending (OCSL), yield 7.54%. OCSL acquired Fifth Street Finance (FSC), which I initially bought in 2011. A loss of capital has been offset by cumulative dividends received, which underscores that even with underperformance, a high yield stock can turn out OK if the payouts have occurred over a lengthy enough time period.

Altria Group (MO), yield 5.26%.

Monroe Capital (MRCC), yield 10.22%.

BlackRock Capital Investment (BKCC), yield 11.46%.

General Electric (GE), yield 3.84%. I didn’t think I needed to watch GE like a BDC, but the stock performance since early 2017 is like a BDC that made a string of losing bets, which frankly is what GE did.

Iron Mountain (IRM), yield 6.48%. If we are moving to a paperless society, you certainly wouldn’t know it from this document storage REIT’s business.

Greif (GEF), yield 3.17%.

Merck (MRK), yield 2.77%. This representative of “Big Pharma” has seen its stock price go on a rocket ride in 2018, with the dividend left behind, accounting for the sub-3% yield. My advice is to consider my maximum buy price before buying MRK.

Horizon Technology Finance (HRZN), yield 10.66%. Note that HRZN is a monthly payer.

I usually only look ahead through to the following Monday, but since I’m having so much fun, here are a few more dividends coming week after next:

General Mills (GIS), yield 4.17%.

Gladstone Investment (GAIN), yield 6.80%. This BDC is a monthly payer.

Solar Capital (SLRC), yield 7.56%. SLRC is a general BDC, and does not limit investments to only solar energy firms.

Main Street Capital (MAIN), yield 7.56%. MAIN pays monthly. In addition to the regular monthly payout, MAIN also frequently makes special payouts, when conditions warrant. MAIN is considered to be one of the strongest BDCs.

None of my stocks are scheduled to report next week.

It’s hard to separate the economic news from the political news even on a slow week, but last week it was doubly-difficult. From Nike’s business decision to feature NFL protester Colin Kaepernick in their new ad campaign, to Congressional hearings on how social media companies enable foreign influences to use their platforms for nefarious purposes, even as they restrict conservative viewpoints, the intersection of politics and business was where the action was last week. It is unlikely to get any better anytime soon, as the number one factor affecting the success or lack of same for all businesses is the actions or inactions of the government.

I believe the best approach is the one I espouse here, which is to be diversified and mostly only own dividend-paying stocks, be vigilant, and be ready with a higher than usual cash position to take advantage of opportunities that this dynamic environment may generate at any time. There are no “widow and orphan” stocks anymore, every business must compete to survive these days, as well as keep a sharp eye on Washington, which is where existential threats are most likely to come from.

JT

Vacations are nice, but it is time to get OPTIMUMSTOCKINVESTING.COM back on track. I have followed the markets during my four month hiatus, just have not updated the website during that time period. But now, I have updated everything that needed to be updated, beginning with the Stocks section, Tier1 through Tier4, moving some stocks from one list to another, plus adding and dropping some stocks altogether. I have also updated my Resources page to acknowledge some changes, including, regrettably, the demise of QuoteTracker. Finally, I have added a link to the Published Articles section to my latest Seeking Alpha article, the subject of which is the effects of the Tax Cuts & Jobs Act on investors.

As for the markets, all the major averages I track daily are up since I suspended the website at the end of April 2018. Specifically:

The Dow Industrials ($INDU) has advanced from 24163 to 25964.

The New York Composite ($NYA) has advanced from 12515 to 13017.

The S&P 500 ($SPX) has advanced from 2648 to 2901.

The NASDAQ Composite ($COMPQ) has advanced from 7066 to 8109.

The Russell 2000 Small Cap Index ($RUT) has advanced from 1542 to 1740.

Even though the market overall has gone up, individual stocks have not in some cases. Since I focus mainly on dividend paying stocks, I have seen two major sectors that feature a number of higher-yielding stocks suffer some declines in recent months, REITS and MLPs. As always, the key question to ask is whether such declines present buying opportunities or value traps. It is the former if the firm’s performance is not declining, and the stock is down only because of a sector decline, or the latter if the stock is down for good reasons, with a failing business model resulting in lack-luster performance.

Before getting into upcoming ex-dividend dates and earnings reports regarding the stocks on my lists, I will summarize the changes to the lists.

General Dynamics (GD), MicroSoft (MSFT), Raytheon (RTN), and Sysco (SYS) are all dropped because they have been huge outperformers, at least as far as the share prices are concerned, and the dividend payouts have not kept pace.  Once respectable yields have thus declined below 2%, and no reasonable entry point seems likely anytime soon for any of them. I can see no point in continuing to track them. Holders can either take the gains they have or continue to hold and be satisfied with the anemic payouts.

Scana (SCG) has been dropped for a different reason. SCG is embroiled in a major political dispute connected to a proposed acquisition by Dominion Energy (D). The stock has declined from over $70 to slightly less than $40 since 1/1/2017, and the dividend has been cut from $0.61 to $0.12. Time to bail and avoid the mess, the current yield of less than 2% is not worth holding on for, especially for a utility.

Altria (MO) and Phillip Morris (PM) have been moved from Tier1 to Tier2, based primarily on the fact that the tobacco business model is in a permanent long-term decline. Both have come off their 2017 highs, although not precipitously, reflecting the reality. Yields remain north of 5%, and dividends likely will continue. They had better, that’s all these names have to offer. Based on the long-term outlook, I don’t believe they belong on Tier1.

General Electric (GE) has been moved from Tier1 to Tier3. GE’s decline has been catastrophic, going from $30 or so to barely above $12 in the last 18 months. Holding on, or buying in at the current price, is a speculative bet on an eventual recovery, and Tier3 is where this type of stock belongs.  

ConAgra (CAG), ConocoPhillips (COP), Norfolk Southern (NSC), RPM International (RPM), and Valero (VLO) have all been dropped because of too low of a yield. In the case of CAG, NSC, RPM, and VLO, the share price just outpaced the dividend. COP, on the other hand, drastically cut the dividend in 2016, and the share price increase since mid-2017 has resulted in a yield under 2%, below what I can accept for a Tier2 dividend stock.

DrPepper Snapple (DPS) was acquired by Keurig (KDP) in early 2018. With the dividend policy going forward unclear, I’m dropping KDP for now. It may re-appear if a steady dividend payout with an adequate yield is established.

Energy Transfer Partners LP (ETP) is being acquired by the general partner Energy Transfer Equity LP (ETE), so ETP is dropped. ETE remains on Tier2. As an aside, with a near-$5 gain in one day after the announcement, I sold my ETP. I could have just held and eventually received units of ETE, but the ETE yield is not where ETP was, and besides, my philosophy is “when the market gives you a gift, take it, it doesn’t happen often”.

MO and PM moved to Tier2 from Tier1, as noted above.

Three new stocks have been added to Tier2, B&G Foods (BGS), yielding over 6%, Spirit Realty Capital (SRC), a REIT yielding nearly 6%, and Hoegh LNG Partners LP (HMLP), an MLP yielding over 9%. HMLP is poised to benefit from the export of natural gas via LNG facilities. 

Note that Statoil (STO) has a name and symbol change, and is now Equinor ASA SHS (STOHF).

Williams Partners (WPZ) has been acquired by the general partner Williams Companies (WMB), which will replace WPZ in Tier2.

Triangle Capital (TCAP) was acquired for stock and cash by Barings BDC (BBDC). The yield of BBDC is inadequate for inclusion on Tier3.

Kayne Anderson Energy Development (KED), a Closed-End Fund (CEF), has been folded into another CEF from the same group, Kayne Anderson MLP Midstream Investment (KYN). I am dropping the successor from Tier3 for now, although I will still hold it. In fact, I have several CEFs, and I intend to either add them later to Tier3, or perhaps establish another tier consisting of only CEFs. CEFs in general are appropriate for Tier3, in that they are high-yield, but payouts can and do change based on experience, and so are somewhat volatile. Regardless, listing CEFs in OPTIMUMSTOCKINVESTING is a future enhancement. As I gain more experience with them, I will share what I’ve learned via the website.

Archrock Partners LP (APLP) was acquired by Archrock Inc (AROC). The yield for AROC is above 4% and respectable, but not what I’m looking for in Tier3. I may add AROC to Tier2 later.

TICC Capital (TICC) is now Oxford Square Capital (OXSQ), and remains on Tier3.

Horizon Technology Finance (HRZN) has been added to Tier3. Actually, it was not there because of an oversight, I’ve owned it since 8/2016.

Washington Prime Group (WPG) was added to Tier3. WPG is a REIT yielding 13%. With a yield like that, I deem it a worthy speculation.

My disastrous foray into offshore drillers, Transocean LTD (RIG), Ensco PLC (ESV), and Noble Corp PLC (NE), and Seadrill (SDRL) has resulted in major losses on paper, plus one not on paper (SDRL bankruptcy). For now I will leave RIG, ESV, and NE on Tier3. These were substantial firms at the time of the speculation, selling for half or less of where they had recently been before the 2014-2015 oil crash, and like many I did not expect what came later regarding oil prices. They are all three in a recovery of sorts, and don’t appear to be about to go under, so I will keep tracking them for the time being.

Another speculative category that went south was precious metals mining firms. These firms are likewise showing survivability, and will remain on Tier3 for now. The firms are Barrick Gold (ABX), Newmont Mining (NEM), Freeport-McMoran (FCX), Pan American Silver (PAAS), and Wheaton Precious Metals (WPM). All have resumed their modest dividends, and none appear at risk of going bust anytime soon. 

Seadrill (SDRL) and Breitburn  (BBEPQ) completed bankruptcy, and are gone.

Boardwalk Pipeline Partners LP (BWP) was bought out by the general partner for $12.06 per unit, which is all the unit holders received.

Fifth Street Finance (FSC) was acquired by Oaktree Specialty Lending (OCSL), and will continue to be followed in Tier4

The remaining firms shown on Tier4 are all formerly-recommended stocks that continue to survive, and per my policy, will be followed for as long as they survive. Crestwood Equity Partners LP (CEQP) is actually a respectable MLP today, but for holders acquiring units from predecessor holdings, the cost per unit is an object lesson in how reorganizations, restructurings, and reverse splits destroy capital. Enerplus (ERF), the one-time high-flying Canadian trust, has recovered a lot from the 2016 lows, but with a dividend yield under 1%, is still a long way from its former glory.

Stocks on my lists going ex-dividend in the week ahead are as follows:

Annaly Capital Management (NLY), 9/5/2018, yield 11.26%.

Waste Management (WM), 9/6/2018, yield 2.05%.

Williams Companies (WMB), 9/6/2018, yield 4.58%.

Public Service Enterprise Group (PEG), 9/6/2018, yield 3.44%.

Pepsico (PEP), 9/6/2018, yield 3.31%.

Kimberly Clark (KMB), 9/6/2018, yield 3.50%.

Ensco PLC (ESV), 9/7/2018, yield 0.58%.

None of my stocks are scheduled to report next week.

My usual practice is to report any analyst ratings from the prior week that have come out on my stocks. Since I have been inactive for the past four months, I will resume reporting upgrades/downgrades, reiterations, initiations, and resumptions with my next posting, to capture all of the aforementioned activity regarding my stocks that occurred the first week of September.   

The “dog days of summer” are hopefully over. One interesting tidbit received last week from John Mauldin, noted economist and author, was his report from “Camp Kotok”, the annual economic conference / retreat held in Maine. The consensus of the gathered notables was that the oft-predicted recession was not as imminent as had been generally expected, but rather more likely to occur a year or two later than previous forecasts. While John was not entirely sold on this personally, he had to acknowledge the change in mood, given the stature of the attendees.

Of course, as with any economic and / or market forecast, there are numerous caveats and so on. Recall President Truman’s desire to be advised by a “one-armed economist”, since he was so tired of hearing the phrase, “on the other hand, etc.”   But anyway, the take-away for investors is that there may be a year or more to prepare for a market rout, if the new consensus view is correct. 

JT

For the first time since starting this blog in 2011, I will be suspending publication for a time. As a tax preparer, I was swamped with work and missed the weekly posting for the week beginning 4/16/2018, and the following weekend I determined that I would be moving. With a myriad of tasks to be done in connection with the move, I made the decision that I had to have a break from posting. I will continue to monitor the markets and the stocks on my lists, and the website will remain online. I intend to do a thorough review of the stocks on my lists, reorganize the lists, moving some stocks from one list to another, dropping some stocks, and updating buy and sell prices to reflect current realities. I remain convinced that the strategy espoused by OPTIMUMSTOCKINVESTING.COM remains the correct strategy for the patient investor, particularly if retired or nearing retirement. My anticipated time frame for restarting weekly posting is mid to late summer, or early fall at the latest. In closing, I will reiterate what the strategy espoused by this website is and what can be expected when I resume weekly posting.

What is WWW.OPTIMUMSTOCKINVESTING.COM all about?  Namely, to present a comprehensive approach to investing in stocks, with dividends as the foundation, complemented by occasional trades and speculations. A conservative approach to improving returns using options is also incorporated into the strategy. I have an identified subset of stocks I follow, categorized into four lists, or tiers. I originally decreed that the number of stocks followed would be capped at 100, but currently the total is closer to 120. Tier1 stocks are the safest, strongest firms, the least likely to cut their dividends or go bankrupt. Tier1 yields are usually in the low single digits. 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. For example, MLPs are by definition in this category, as they have a built-in risk factor of an adverse change in the tax code. 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. 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. There is even a remote chance a Tier4 stock may recover and get back to at least my Tier3 list. Also, occasionally a stock that is being acquired will move to Tier4, since it is no longer recommended, but will be followed for as long as it exists. 

My web site explains the approach I follow in detail, and contains a wealth of information and resources. My acquisition approach is based on the value investing approach outlined by Ben Graham in his classic works, updated a bit for the modern era, with just a hint of a trader’s mindset incorporated. I advocate acquiring a position in a stock incrementally, averaging down with subsequent acquisitions, and limiting holdings in any one stock or sector to a pre-defined maximum. The key take-away I want viewers to gain from my presentation is an understanding of the risks inherent in stocks, as well as the rewards, and the need for caution and diversification, and most of all, the realization that ANYTHING can happen, nothing is 100% safe or guaranteed!

The focus of my weekly postings, also shown on my Facebook Page, is to present new information regarding the stocks I follow, such as upcoming ex-dividend dates, earnings reports, analyst upgrades, downgrades, and reiterations of ratings, plus initiations and resumptions of coverage. I also highlight any other significant developments regarding the stocks on my lists. I  share information of moves I have made, in line with my strategy, and comment on other articles I have read that I feel are of interest.

Regarding analyst ratings,  my standard admonition is that while I’m always interested to learn of analysts’ opinions of stocks I follow, they are to be taken with a grain (or a whole shaker) of salt. That is, I do not treat analyst ratings as actionable advice. For one thing, the ratings changes usually come far too late to be useful. If you haven’t bought or sold by the time the ratings to do so are out, you are probably too late. Also, note that the ratings focus almost exclusively on the near-term expectation of the stock price movement, not the long-term value as an investment, with dividends considered. For upgrades and downgrades, I give the prior rating if available from my source.

The website provides a list of articles I have authored that are available on SEEKING ALPHA, with direct links. Also provided are the stocks on my lists, with a snapshot as of a given date of price, yield, buy price, and consider selling price. Other references are provided as well, including a detailed presentation of the investing approach, including use of options.

Until I Return,

JT