Strong Performance Continues by Brian Nelson, CFA
The month of May was another great month for dividend growth investors, and we trust you continue to be very happy with the performance of the Dividend Growth portfolio (please see page 5).
The next couple weeks for portfolio holding Apple (AAPL) will be busy. The iPhone-maker’s Worldwide Developers Conference is this week, and we’re expecting some big needle-moving announcements (please see page 16). Shares have rallied to ~$630 each at the time of this print, and we continue to anticipate material upside on the basis of the company’s fundamentals and cash flow. Investors should expect Apple’s previously-announced 7-for-1 stock split to go into effect June 9. The firm currently yields ~2% (not stellar as a result of its rapid share-price rise), but we have a high degree of the confidence the iPad maker is a Dividend-Aristocrat-to-be with decades of dividend growth ahead of it.
Portfolio holding Altria (MO) continues to execute fantastically, and its share price has benefited from ongoing talks of consolidation across the tobacco industry (please see page 17) and strong financials and global growth prospects of brewer SABMiller, of which it owns ~27%. The market has just started to come around to recognizing this “hidden” asset on Altria’s books and the substantial financial flexibility that it provides for continued dividend expansion. Altria is one of the highest-yielding corporations (non-MLP, non-REIT) on the market today at ~4.6%, and while shares may face some profit-taking in coming weeks (given its recent strong share-price gains), the quarterly dividend checks are quite nice.
In this newsletter edition, we explain why we’ve chosen Chevron (CVX) as our favorite dividend growth idea among the energy majors (please see page 7). We’re not saying that the other majors are poor dividend growth ideas, but we think it’s important to share why we think Chevron is the most resilient through the course of the energy cycle. This edition also addresses why we think the Monthly Dividend Company, Realty Income (O), is getting a bad rap with respect to the risks related to its rental portfolio (see page 9).
We also expand upon the three main risks of dividend growth investing, beginning on the next page. Though we know many are aware of these risks, for many of our new members, we wanted to share a number of the key issues to be cognizant of with this strategy and investing, in general. We think the article can serve as a good resource for investors of all levels. Most of all, I hope you enjoy the June edition of the Dividend Growth Newsletter!
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INSIDE THIS ISSUE
1 Strong Performance Continues
2 The Risks of Dividend Growth Investing (see article for tickers)
5 Our Dividend Growth Portfolio
7 Why We’re Keeping Chevron As Our Favorite Dividend Growth Idea in Big Oil (ticker: CVX)
9 Realty Income: Portfolio Risks Are Exaggerated (ticker: O)
10 Stocks with High VBI Ratings and Strong Dividend Growth Prospects (see article for tickers)
11 Our Dividend Growth Watch List
12 Yields to Avoid
16 More Excitement from Apple (ticker: AAPL)
17 Reynolds American and Lorillard Looking to Join Forces (tickers: RAI, LO, MO)
18 Cisco’s Fiscal Third-Quarter Results Better-Than-Feared (ticker: CSCO)
19 About Our Dividend Cushion™
22 MLP Showcase: ETP, HEP, KMP, SEP
26 Valuentum Definitions