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Category: Dividend Stock (Page 1 of 2)

Invest in Energy with LPs

I’ve been looking at Energy stocks as I think the quarter will be bullish for them as oil prices go up. As I further my search, I noticed that the smaller companies do pay a substantial dividend. These companies usually have a higher deviation and move up and down more violently which puts bigger risk as well.

On April 18, USA Compression Partners, LP (USAC) announced a dividend of $0.525 for shareholders on record on April 29, 2019. This is a substantial dividend of over 13% per year from their market price. Stifel Nicolaus also gave a price target of $18 a few weeks ago which the stock is close to hitting soon. Also, the past year, six other brokerage companies gave a price target ranging from $18-22 which bodes well for future growth while collecting the dividend.

USAC only has a small market cap of 1.68B. This is much smaller than other LP companies and this gives them substantial chance of being bought out if they can succeed moving forward. Energy Transfer, LP (ET) owns 39.7 million shares of USAC which gives them 23% ownership of the company. You can bet that ET will increase their ownership on success and most likely lead to a buyout.

There are definitely other energy stocks that have potential for success. For example, Energy Transfers has a substantial dividend almost at 8%. I believe the Energy sector will perform this quarter and possibly the next but having a nice 13% dividend gives you some assurance that if things get worse you have a bit of a hedge. You also have the opportunity to invest in some growth with this smaller unknown LP.

REITs with BIG Dividend

CBL & Associates Properties Inc (CBL) and Washington Prime Group (WPG) are both mall REITs that pay a substantial dividend since their stock price has plummetted over the past year. As this time, WPG offers a 16.5% dividend while CBL is offering 18.45% dividend.  Both stocks were able to beat and surpass the earnings guidance for the past quarter.  This is the first time they have done it in the past couple years so their stock prices have appreciated in the past month.

Out of the two, CBL & Associates Properties Inc (CBL) is valued lower in the two because the CEO last year mentioned that they would need to cut the dividend which caused a big price drop.  Therefore, on a stock price basis, CBL is the cheaper of the bunch.  Both invest in malls throughout the United States and both carry substantial risk but if you feel the retail apocalypse is over then it should be a good time to pick either stock up.

Mall REITs still a Good Buy

As I mentioned in the previous post, mall REITs continue to be a good buy.  First it was JCPenney that had a bad quarter.  Then, Foot Locker also showed a bad quarter that also caused a drop in retail stocks and mall REITs.  WPG, Washington Prime Group, had plenty of cash flow to cover these retail shops revenue drop.  This includes paying the dividend to investors.  There is always the challenge in playing defensive in this space.  I believe playing defensive means making sure you have the cash flow to back up any investment that you take in.  This is especially true in this cycle in the stock market where things are all overvalued.  You want to find industries that are weak where there is an opportune time to purchase and that you know in the long-term will be valued correctly.

This is why Mall REITs are a good investment but the reason I recommend WPG is that it pays a strong dividend that is over 10%.  It also is a small mall REIT that are mostly based outdoors and have a strong diverse base of retail restaurants and shops that will be able to take on the downturn that some of the retail stores that will affect its sales.  It also is taking steps to transition stores like Sears, JcPenney, and Foot Locker to more stable tenants.  I believe the dividend will keep you protected in the long run as well.

Outside the mall REITs, Target had a good quarter recently.  It is a bigger player and a challenger to Amazon.  It isn’t without the risk but it does pay a nice 4% dividend.  Having been able to turn a nice quarter in a dismal retail quarter for most companies shows that Target is able to withstand the market issues and handle the situation.

I recommend investors look at both WPG and TGT for long-term buy and hold plays.  I do own both in a retirement account.

Dividend Stock with over 10% Interest

Washington Prime Group (WPG) was once a dividend darling at 12% dividend.  It still sports a high dividend but that is expected to become lower as the price of the stock continues to appreciate.  This stock is an REIT that was hit hard when Macy’s couldn’t hit quarterly numbers including the numerous other mall stores that missed target as well.  These bad earning reports included store closures that affected REITs.  In May, Washington Prime Group hit an stock low below $7.50 which would have given you a nice 13% dividend.

Since May, this stock has had a steady appreciation with it recently going over $9.  Washington Prime Group is a unique REIT that caters to smaller retail plazas that are mostly in outdoor settings.  The Fairholme Fund run by billionaire Bruce Berkowitz invested millions in WPG recently.

For someone that has an IRA, 401k, and another tax-deferred stock account, this stock makes for a nice play.  As much as Amazon has taken so much market share in the retail space, Amazon (AMZN) has also proven that they need to be in brick-and-mortar when they announced that they are purchasing Whole Foods Market (WFM) for $13 billion.

There are other REITS in the similar mall industry that should continue to grow as the fallout disappears and investors see the true value of these mall REITs.  This stock should be a part of an investors’ portfolio for long-term growth in dividend and appreciation.

I plan to purchase shares in any dips in price but I do not own any at this time.

Short-Term Bottom on Omega Healthcare

With almost a 8% dividend (7.8% at the time of this writing), Omega Healthcare (OHI) makes a nice stock to own in your retirement portfolio.  It recently hit a short-term bottom at $32 and has been slowly moving back up.  There is plenty of noise about buyers trying to get in at $28 which would be a great level but highly unlikely to get to that point.  Yellen has mentioned that she plans to raise rates in September which should be a tiny raise and should not affect the pricing of this stock.  Remember, the baby boomer generate is continuing to retire and move into senior housing which will benefit this stock.

Best Company to Own in Oil Stocks

The oil stocks have all made a nice bullish rise in the past year.  Part of the reason was the election of Donald Trump and adding the previously CEO of Exxon to his cabinet staff.  This gives investors a more bullish outlet on the oil sector and their oil investments.

This also made huge gains in Exxon Mobile (XOM) and Chevron (CVX) stock price in the past few months.  British Petroleum (BP) also went up but it didn’t have the same appreciation gain.  BP also still wields at 6.7% dividend at the current stock price.  Exxon Mobile and Chevron hold less than a 4% dividend at their current stock price.

You should remember that British Petroleum has finalized the settlement with the government.  They have already sold the necessary assets to make the payments.  They are actually quite conservative compared to the other oil companies which I believe is a good thing as it is challenging to forsee the oil prices going forward.

You might have remembered an earlier blog post that I said BP follows a Plan B strategy.  This means the company believes that oil prices will remain stagnant so they are strategizing their oil investments for low oil prices.  This is counter to Exxon and Chevron which are building their portfolio to account for higher oil prices.

With a nice dividend and a undervalued outlook, British Petroleum (BP) should be on your radar for a nice oil company.  I do believe Exxon Mobile and Chevron (CVX) are a bit overvalued at their current price as well.  I am a holder in Chevron but I will be looking for a time in the immediate future to move some of those holdings to BP where I see much better chance at appreciation in the future.

Dividend Stocks Have Dropped!

As expected, with the rate hike yesterday, dividend stocks have took a drop in prices.  The two REITs that I mentioned earlier are both discounted for and you should briefly have some time today to take advantage.  You can get Omega Healthcare Investors (OHI) for less than $30 a share.  New Senior Investment Group (SNR) also is going for less than $10 a share.

I would recommend the Omega Healthcare Investors (OHI) as the market cap of $5.7B is much bigger than SNR’s market cap as less than $1B.  It could be argued that New Senior Investment Group has more potential to go appreciate but I also like knowing that there are multiple hedge funds already in OHI and I’ve already seen it start its move back up in the technical front.  SNR has continued to go down since I first started looking at it which makes me rather wait on that one until I see a bottoming pattern.

The Allure of Dividend Stocks

When I first started investing, I was never really was interested in dividend stocks.  I wanted appreciation.  I wanted to find the next Google (GOOG), Apple (APPL), Microsoft (MSFT), that next stock that will leap 1000% in appreciation retuns.  The further I have gone into stock investing the more I understood that its rare to find these good stocks.  I also know for retirement accounts which do not get hit with capital gain taxes when you sell that they are perfect for dividend stocks.

If I have a choice to a brokerage account or retirement account, you always want to invest the dividend stocks into the retirement account.  You get the interest without any of the taxes involved.  If I had bought the dividend stock in my normal after-tax brokerage account, I would have to pay taxes on the interest.  Therefore, I rather load up my retirement accounts with dividend stocks that will pay for the long-term.  This means I am looking for dividend stocks that have continued to raise their dividend year-after-year and they have a long-term track record of stock rising.  It doesn’t matter that it appreciates only a little at a time because I am getting the nice dividends.

In the past year, I have advocated oil stocks like Chevron (CVX).  It pays a nice dividend but it also has appreciated rapidly since my recommendations.  The price makes it more tough to recommend such a stock since that means the dividend percentage is lower when you purchase at the price currently at $113 which gives it a 3.87% dividend.  This isn’t bad but I also think the price is a little high.

I rather look at stocks that are weak now and undervalued.  With the Fed planning to meet in the middle of December, there is a high chance that they will raise interest rates.  This means strong dividend stocks will most likely get sold off.  I am setting my radar on Omega Healthcare Investors (OHI) which pays over 8% dividend.  I am also looking at New Senior Investment Group (SNR) which pays over 10% dividend.  I have discussed them in the past article and I think they will be nice long-term holds that will continue to pay the dividend and hopefully raise it long term.

What’s to buy these days? Dividend Healthcare REIT?

With the stock market reaching new highs, its tough finding good deals.  I haven’t bought anything recently but I still hold stocks that I bought cheap and continue with buy and hold.  For those that are looking to invest money on the sideline, I would recommend you stick with dividend stocks for your retirement funds since you are not paying any tax on that.

HCP, a healthcare REIT,  currently yields over a 6% dividend that has a stock price that has remained fairly steady for half a decade.  Even though the stock price didn’t move much, you had a nice dividend that is much better than a savings account getting less than 1%.  This stock has underperformed in analysts books and it even went as low as $26 earlier this year.

HCP is planning to spinoff part of its real estate portfolio into another REIT.  Shareholders of HCP will get shares in the new spinoff that will consist of senior housing and post-acute real estate.  HCP will become a stronger more stable REIT after the spinoff since the new REIT SpinCo is considered more risky.

The baby boomers are reaching senior age.  The percentage of senior population is expected to rapidly increase in the following years.  With the advances in healthcare, you can expect people to be living longer which means more demand for senior housing.  This should help HCP in the long-term.

In the short term, HCP has had bad management and it has poorly used shareholder capital.  The SpinCo REIT will get rid of its bad assets.  Many investors thing that HCP might be worth looking into investing after the spinoff which is another play on the stock pick.

I personally think that the spinoff would help both companies.  The SpinCo REIT would be more interesting to investors with a stronger aptitude for risk and gains.  It would also mean a cash infusion to HCP.  I do expect that HCP’s stock price will eventually start moving up again which would mean you would continue to get the dividend and a nice appreciation on the stock price.

Chevron for Future Growth

Chevron is a major oil & gas play that has seen bad times in a couple recent quarters.  It has a yearly high of $112.20.  It has dropped more than 20% since that high and even reached lows at $69.58.  For the long-term investor, expect this stock to eventually reach the highs and surpass it.  In the recent times, you can even get a nice dividend of almost 5%.

It’s not possible to get that dividend in your savings account.  You can expect this stock to only to continue to move up as the economy improves globally.  Oil is still the main resource used for energy and it will only to continue to be used more in the future.  You can be patient with this stock and I actually would just hold on to it.  I have no reason to sell when I get a nice dividend and fundamentally sound stock like Chevron.

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