Merry Christmas! My absence extended a bit longer than expected, but now I’m back and ready to get caught up with the stock market once again. Speaking of stocks, the “Trump Rally” has mostly continued during the time I was away, even threatening to pierce the 20,000 level for the Dow Industrials, before slowing over the final three trading days preceding Christmas. The fall-out from the election continues, as Obama tries to do as much damage as he can before he leaves, while the unrepentant Democrats continue to whine and make excuses for the loss, refusing to admit the policy errors that led to their new status as a fringe party. The expectation is that the business environment is going to improve, but just be aware there is a lot of damage to be repaired and regulations to rescind before any improvements can be realized.

This posting will address expected events regarding my stocks over the next two weeks, with my next update planned for the week beginning 01/09/2017. Additionally, as a catch-up exercise, I will first note any ex-dividend dates that occurred this month that have already gone by that were missed in my previous posting.

Ex-dividend dates not previously reported that have already passed by:

Kimberly Clark (KMB), 12/07/2016, yield 3.20%.

Solar Capital (SLRC), 12/13/2016, yield 7.72%.

Crown Castle International (CCI), 12/14/2016, yield 4.36%.

Greif (GEF), 12/15/2016, yield 3.23%.

Blackrock Capital Investment (BKCC), 12/15/2016, yield 11.59%.

Total S A (TOT), 12/16/2016, yield 5.42%.

Ventas (VTR), 12/16/2016, yield 5.07%.

Altria (MO), 12/20/2016, yield 3.61%.

Phillip Morris International (PM), 12/20/2016, yield 4.54%.

PennantPark Investment (PNNT), 12/20/2016, yield 14.18%.

General Electric (GE), 12/22/2016, yield 3.02%.

MFA Financial (MFA), 12/23/2016, yield 10.35%.

Ex-dividend dates announced upcoming in the next two weeks:

Enerplus (ERF), 12/28/2016, yield 0.95%. ERF pays one cent CAN monthly.

Main Street Capital (MAIN), 12/28/2016, yield 5.95%. MAIN pays monthly.

Windstream Holdings (WIN), 12/28/2016, yield 8.00%.

STAG Industrial (STAG), 12/28/2016, yield 6.03%. STAG pays monthly.

Prospect Capital (PSEC), 12/28/2016, yield 11.82%. PSEC pays monthly.

Annaly Capital Management (NLY), 12/28/2016, yield 11.64%.

Nucor (NUE), 12/28/2016, yield 2.45%.

AGNC Investment (AGNC), 12/28/2016, yield 11.89%. AGNC pays monthly.

National Health Investors (NHI), 12/28/2016, yield 4.96%.

Realty Income (O), 12/29/2016, yield 4.31%. O pays monthly.

Kimco Realty (KIM), 12/29/2016, yield 4.29%.

Raytheon (RTN), 12/30/2016, yield 2.04%.

Kayne Anderson Energy Development (KED), 01/04/2017, yield 9.88%. Note that KED is actually a Closed-End Investment Company (CEF), invested in MLPs and other energy-related issues.

Cisco Systems (CSCO), 01/04/2017, yield 3.41%.

Sysco (SYY), 01/04/2017, yield 2.35%.

Universal (UVV), 01/05/2017, yield 3.46%.

General Mills (GIS), 01/06/2017, yield 3.07%.

Darden Restaurants (DRI), 01/06/2017, yield 3.00%.

Verizon (VZ), 01/06/2017, yield 4.31%.

AT&T (T), 01/06/2017, yield 4.59%.

The only stock listed last time as expected to report, Greif (GEF), did so as scheduled 12/07/2016. In addition, another stock reported just this past week, ConAgra (CAG), on 12/22/2016.

The only stock on my lists scheduled to report in the next two weeks is RPM International (RPM), scheduled for 01/05/2017.

Upgrades / downgrades on my stocks during the three weeks just ended are listed below. The prior rating is noted if available from my source.

ENI S p A (E) was upgraded from UnderWeight to Equal Weight at Morgan Stanley.

Williams Partners (WPZ) was resumed at Equal Weight at Barclays.

Newmont Mining (NEM) was downgraded from Buy to Neutral at Citigroup.

General Dynamics (GD) was reiterated at Hold at Deutsche Bank.

McDonalds (MCD) was upgraded to Buy at Nomura.

Realty Income (O) was downgraded to Neutral at BofA/Merrill.

Raytheon (RTN) was reiterated at Hold at Deutsche Bank.

Consolidated Communications (CNSL) was upgraded from UnderPerform to Market Perform at Raymond James.

J M Smucker (SJM) was initiated at Neutral at BofA/Merrill.

Martin Midstream Partners L P (MMLP) was upgraded from Hold to Buy at Stifel Nicolaus.

Nucor (NUE) was upgraded from Hold to Buy at Berenberg.

Kellogg (K) was downgraded from OutPerform to Neutral at Credit Suisse.

Unilever (UL) was downgraded from OverWeight to Neutral at JP Morgan.

3M Co (MMM) was upgraded from UnderPerform to Sector Perform at RBC Capital Markets.

Digital Realty (DLR) was upgraded from Neutral to Buy at Citigroup.

AGNC Investment (AGNC) was downgraded to Neutral at Compass Point.

Eaton (ETN) was upgraded from Neutral to OverWeight at JP Morgan.

Plains All American Pipeline (PAA) was upgraded from Neutral to OverWeight at JP Morgan.

Sysco (SYY) was upgraded from Sell to Neutral at Goldman.

AT&T (T) was upgraded from Neutral to OutPerform at Robert W Baird.

Pepsico (PEP) was upgraded from Hold to Buy at Societe Generale.

ConocoPhillips (COP) was upgraded to OutPerform at Cowen & Co.

Medical Properties Trust (MPW) was downgraded from Market Perform to UnderPerform at Wells Fargo.

Senior Housing Properties Trust (SNH) was downgraded from Market Perform to UnderPerform at Wells Fargo.

Transocean (RIG) was upgraded from UnderWeight to Equalweight at Capital One.

Mid America Apartment Communities (MAA) was upgraded from Sector Perform to OutPerform at RBC Capital Markets.

Main Street Capital (MAIN) was downgraded from Neutral to Sell at National Securities.

CenturyLink (CTL) was initiated at Hold at SunTrust.

Coca Cola (KO) was downgraded from Buy to Hold at Deutsche Bank.

Realty Income (O) was upgraded from Equal Weight to OverWeight at Morgan Stanley.

Procter and Gamble (PG) was downgraded from Buy to Hold at Deutsche Bank.

Unilever (UL) was upgraded from Hold to Buy at Jeffries.

Emerson Electric (EMR) was upgraded from UnderPerform to Neutral at Buckingham Research.

Welltower (HCN) was downgraded from OutPerform to Market Perform at Wells Fargo.

Intel (INTC) was initiated at Buy at Loop Capital.

United Parcel Service (UPS) was initiated at Neutral at JP Morgan.

Crestwood Equity Partners L P (CEQP) was initiated at Buy at Goldman.

3M Co (MMM) was reiterated at Hold at Stifel Nicolaus.

General Mills (GIS) was downgraded from OutPerform to Sector Perform at RBC Capital Markets.

Magellan Midstream Partners L P (MMP) was upgraded from Neutral to Buy at Goldman.

Chevron (CVX) was upgraded from Neutral to OutPerform at Macquarie.

Southern Co was initiated at Sell at Citigroup.

AGNC Investment (AGNC) was downgraded from Neutral to UnderPerform at BofA/Merrill.

Annaly Capital Management (NLY), was downgraded from Neutral to UnderPerform at BofA/Merrill.

Buckeye Partners L P (BPL) was downgraded from Buy to Neutral at Goldman.

General Electric (GE) was upgraded from Market Perform to OutPerform at Bernstein.

Paychex (PAYX) was upgraded from Neutral to Buy at Goldman.

ConocoPhillips (COP) was downgraded from Buy to Neutral at Mizuho.

Coca Cola (KO) was downgraded from OverWeight to Equal Weight at Morgan Stanley.

Ensco (ESV) was downgraded from Buy to Neutral at Goldman.

Noble PLC (NE) was downgraded from Sector Perform to UnderPerform at RBC Capital Markets, and from Neutral to Sell at Goldman.

Transocean (RIG) was downgraded from Sector Perform to UnderPerform at RBC Capital Markets.

Crown Castle International (CCI) was initiated at Neutral at Guggenheim.

Darden Restaurants (DRI) was downgraded to Hold at Deutsche Bank.

Merck (MRK) was downgraded from Hold to UnderPerform at Jeffries.

Magellan Midstream Partners L P (MMP) was initiated at Buy at Ladenburg Thalmann.

Transocean (RIG) was resumed at Buy at Evercore ISI Group.

Public Service Enterprise Group (PEG) was upgraded to Buy at Deutsche Bank.

United Parcel Service (UPS) was initiated at Hold at Loop Capital.

Annaly Capital Management (NLY) was downgraded from OutPerform to Market Perform at FBR & Co.

Paychex (PAYX) was initiated at Equal Weight at Barclays.

Procter & Gamble (PG) was downgraded from Buy to Hold at Stifel Nicolaus.

Senior Housing Properties Trust (SNH) was initiated at OutPerform at FBR & Co.

Statoil (STO) was upgraded to Buy at UBS.

Barrick Gold (ABX) was downgraded from Buy to Hold at J D Securities.

General Mills (GIS) was reiterated at Equal Weight at Barclays.

Greif (GEF) was downgraded from Market Perform to UnderPerform at GMO Capital.

Procter & Gamble (PG) was downgraded from Buy to Hold at SunTrust.

Paychex (PAYX) was reiterated at UnderPerform at RBC Capital Markets, and a Sell at Compass Point.

MicroSoft (MSFT) was initiated at OverWeight at Piper Jaffray.

United Parcel Service (UPS) was initiated at Neutral at Aegis Capital.

ConAgra (CAG) was reiterated at Neutral at Credit Suisse.

After so many analyst actions, it seems appropriate to repeat my standard admonition on upgrades / downgrades. I only list these as entertainment, not as actionable advice. By the time downgrades occur, it is usually too late to sell, and by the time upgrades occur, it is usually too late to buy. Further, sometimes the recommendations seem to be the opposite of what one would expect. Also, note that the recommendations are almost totally based on expected near-term direction of the stock price, not on the long term value as an investment, with dividends considered. Still, it is interesting to see what an analyst has to say about a stock I follow, especially if I own some shares. Sometimes it is possible to view the complete analyst report, either via brokerage websites or online sleuthing, if a rating is of enough interest that one desires to determine what is behind the rating.

Well, here we are at the end of another year, with an unexpected rally upsetting all predictions for further doom & gloom, and sending precious metals prices, and stocks, into decline, as the end of the world is delayed once again. My view of the value of “reaching across the aisle” and “seeking to unify the country” remains the same, which is that the correct course of action is to “crush them while they’re down, be sure they never rise again”. The Obama administration actions in the waning moments, designed to make the transition as difficult as possible for the new administration, with still more tangled webs to be unwound, proves the point. As for the markets, my view is that volatility is likely to be extreme in 2017, as big changes are coming, with new winners and losers.  

JT

This will be my last posting for a while, perhaps as long as three weeks, as I will be doing some traveling over that time span. Now seems like a good time to reiterate, via a brief synopsis, what my website (www.optimumstockinvesting.com) is all about. Note that the associated Facebook page is a copy of my recurring blog (initially daily, now weekly) from the website. The purpose of the website is to present a comprehensive approach to investing in stocks, based primarily on dividend-paying stocks, acquired carefully at reasonable prices, with market fluctuations utilized to average down, or take profits from occasional trades. An approach to using options to juice returns is also presented. 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 134. 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. Rarely, but once in a while in reaction to extreme conditions, some names will appear on Tier3 which have  either no dividends or inconsequential yields, in which case these names are pure speculation on potential capital gains, and are a departure from my basic formula. Tier4 stocks are the “walking dead”, stocks previously on the other lists, but now are no longer recommended, even as pure speculation. If they ever had dividends, they are now absent or greatly 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 and are active firms, with their stocks still trading. There is even a remote chance they may recover and get back to at least my Tier3 list. My recurring blog, presented on the website and duplicated on the Facebook page, mostly consists of updates on happenings related to the universe of stocks I track, plus some general commentary on the state of the markets and the larger world situation which affects them.

My website explains the approach I follow in detail, and contains a wealth of information and resources. My basic 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. The key take-away I want viewers to gain from my creation 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!

Now, back to my regularly scheduled weekly presentation.

The major stock averages mostly just gyrated in place or declined slightly last week. The Dow Industrials (INDU) gained slightly, the New York Composite (NYA) and the S & P 500 (SPX) declined slightly, and the NASDAQ (COMPQ) declined a little more than slightly. Still, the market seems to be holding on to the gains made since November 8^th for the most part. The OPEC meeting concluded last week with a surprising tentative agreement, causing crude oil prices to spike, even as few expect the pact reached to be honored and the agreement to hold.

Dividends upcoming for my stocks are as follows, with the ex-dividend date and yield indicated, and also the frequency, if other than quarterly. I will list all that are known at this point for the next two weeks. Of course, the likelihood of missing one increases the further out you go, if a firm doesn’t announce at least two weeks in advance of the ex-dividend date.

Triangle Capital (TCAP), 12/5/2016, 9.43%.

Newmont Mining (NEM), 12/6/2016, 0.39%. Buying NEM is a gold miner speculation, since the dividend is so small. It is on my Tier4 list (not recommended).

Medical Properties Trust (MPW), 12/6/2016, 7.83%.

Public Service Enterprise Group (PEG), 12/7/2016, 4.00%.

Wal-Mart Stores (WMT), 12/7/2016, 2.83%.

SCANA (SCG), 12/8/2016, 3.28%.

Reynolds American (RAI), 12/8/2016, 3.41%.

Potlatch (PCH), 12/9/2016, 3.70%.

Dr Pepper Snapple Group (DPS), 12/9/2016, 2.49%.

Monroe Capital (MRCC), 12/13/2016, 9.21%. MRCC is a new BDC added to Tier3.

Ares Capital (ARCC), 12/13/2016, 9.48%.

Fifth Street Finance (FSC), 12/13/2016, 13.33%. FSC pays monthly.

Frontier Communications (FTR), 12/13/2016, 11.97%.

Iron Mountain (IRM), 12/13/2016, 6.77%.

Merck (MRK), 12/13/2016, 3.09%.

Digital Realty (DLR), 12/13/2016, 3.07%.

TICC Capital (TICC), 12/14/2016, 17.06%.

Gladstone Investment (GAIN), 12/16/2016, 9.16%. GAIN pays monthly.

Horizon Technology Finance (HRZN), 12/16/2016, 12.11%. HRZN pays monthly.

Apollo Investment (AINV), 12/19/2016, 11.59%.

Washington Real Estate (WRE), 12/19/2016, 3.91%.

Only one of my stocks is scheduled to report in the next two weeks, Greif (GEF), on 12/7/2016. GEF has had a great run since the start of 2016, advancing from the mid-20s to the mid-50s. The containers & packaging firm could be hurt if there is any drop-off in international trade. I’ll be paying attention to management’s outlook, assuming one is offered.

Upgrades / downgrades on my stocks during the week just ended are listed below. The prior rating is noted if available from my source.

Darden Restaurants was downgraded from Buy to Hold at Maxim Group.

ConocoPhillips (COP) was upgraded from Neutral to Buy at Goldman.

Darden Restaurants was downgraded to Neutral at Credit Suisse.

Greif (GEF) was downgraded to UnderWeight at KeyBanc.

Kimco Realty (KIM) was downgraded to Sell at Goldman.

Nucor (NUE) was downgraded to UnderPerform at Macquarie.

Pfizer (PFE) was upgraded to OverWeight at Barclays.

Altria (MO) was resumed at Equal Weight at Morgan Stanley.

Mid America Apartment Communities (MAA) was upgraded to OutPerform at BMO Capital.

Total S A (TOT) was downgraded from Hold to Sell at Berenberg.

Chevron (CVX) was upgraded from Neutral to Buy at Independent Research.

Darden Restaurants (DRI) was upgraded from Neutral to Buy at Guggenheim.

McDonalds (MCD) was downgraded from Buy to Neutral at Guggenheim.

Royal Dutch Shell (RDS.A) was upgraded to Buy at Independent Research. 

Total S A (TOT) was upgraded to Buy at Independent Research. 

Total S A (TOT) was downgraded to Neutral at Credit Suisse.

Freeport-McMoRan (FCX) was initiated at Buy at UBS.

Mid America Apartment Communities (MAA) was upgraded from Neutral to OutPerform at Robert W Baird.

Ensco (ESV) was initiated at OutPerform at Bernstein.

Noble PLC (NE) was initiated at Market Perform at Bernstein.

Pfizer (PFE) was initiated at Neutral at Guggenheim.

Transocean (RIG) was initiated at OutPerform at Bernstein.

Exxon Mobil (XOM) was initiated at Market Perform at BMO Capital.

AGNC Investment (AGNC) was downgraded from OutPerform to Neutral at Credit Suisse.

Digital Realty (DLR) was initiated at Neutral at Guggenheim.

The outlook for the rest of the year, considering the rally that has occurred since the election, is somewhat muddied. While the reason for the rally remains valid, that being there is some hope at last for an improved business climate under a Trump administration, the consensus seems to be that the market, as usual, has gotten ahead of itself, based solely on that hope. Relief from punishing regulations, especially on the fossil fuel energy industry, should certainly help, but over-hanging everything is the huge deficit and the burgeoning national debt. Untangling the health care mess will also help, but that is going to be a challenge, and will not occur overnight. The basic question is, can the American economic engine be restarted and revved up enough to pull us out of the mud, or is it going to be too little too late? Also, don’t forget, there are formidable forces lining up to fight every change tooth and nail. To repeat, right now there is hope, which is more than we had before November 8th, but nothing has changed yet. Further, Obama seems determined to drive us deeper into the muck, as much as possible, before he leaves office.

JT