Realty Income: An Outperformer in 2022
November 3, 2022
Image Source: Realty Income By Brian Nelson, CFA The equity REIT area continues to face considerable pressure during 2022, with the Vanguard Real Estate ETF (VNQ) down ~30% so far this year, but Realty Income (O), known prominently for its monthly dividends and dividend growth track record, has bucked the trend. With an estimated forward dividend yield of ~4.9%, Realty Income is down only ~14% so far this year, an enviable position relative to its peers. Realty Income reported third-quarter results for the period ending September 30, 2022, and they were pretty good. Adjusted funds from operations (AFFO) advanced 7.7%, while normalized FFO advanced 9%, during a period when the company declared its 100th consecutive quarterly dividend increase, a payout
ALERT: Replacing Qualcomm with McDonald’s in Dividend Growth Newsletter Portfolio
November 3, 2022
Image: The semiconductor space is experiencing a number of headwinds, and while we still like Qualcomm’s long-term prospects, we’re replacing it with McDonald’s in the simulated Dividend Growth Newsletter portfolio. Image Source: Qualcomm By Brian Nelson, CFA The technology industry has been wrecked during 2022, and the semiconductor space has been no exception. The VanEck Semiconductor ETF (SMH) is down ~41% so far this year, as many of its top holdings, including wireless technology giant Qualcomm (QCOM) languish. As we walk through our views in this work, please note that Qualcomm’s fiscal third-quarter 2022 is calendar second quarter and its fiscal fourth-quarter 2022 is calendar third quarter. We recently highlighted our expectations for near-term weakness across the semiconductor space in
Lumen’s Dividend Cut Highlights Effectiveness of Valuentum’s Dividend Methodology and Uniqueness of Dividend Cushion Ratio
November 3, 2022
Image Source: Valuentum By Brian Nelson, CFA The Dividend Cushion ratio considers the company’s net cash on its balance sheet (total cash less long-term debt) and adds that to its forecasted future free cash flows (cash from operations less capital expenditures) over a five-year period and divides that sum by the company’s future expected cash dividend payments over the next five years. At its core, the Dividend Cushion ratio tells investors whether the company has enough cash to pay out its dividends in the future, while considering its debt load (capital structure). If a company has a Dividend Cushion ratio above 1, it can cover its dividend, but if it falls below 1, trouble may be on the horizon. The
ALERT: Replacing DLR with XLE in DGN and HYDN Portfolios; Public Storage Remains One of Our Favorite REITs
November 2, 2022
“The REIT space has had a difficult time this year. Public Storage, which reported results November 1, remains one of our favorite REITs, but we are making a change to remove DLR in the simulated Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio and replace its “weighting” with the Energy Select Sector SPDR (XLE). The changes will be reflected upon the release of each newsletter’s next edition. We continue to monitor the REIT space cautiously as interest rates rise, and as investors seek out alternatives for income, including I-Bonds yielding 6.89% and certificates of deposit approaching 4% yields.” — Brian Nelson, CFA By Brian Nelson, CFA This year has not been kind to real estate investment trusts (REITs),
Phillips 66: A Huge Winner in 2022
November 1, 2022
Image Source: Phillips 66 By Brian Nelson, CFA The refining industry continues to mint profits these days, and Phillips 66 (PSX) has been no exception. We warmed up to the stock earlier this year, and we continue to like shares. The high end of our fair value estimate stands at $140 per share, and we would not be surprised to see the company reach those levels, given sentiment regarding energy equities these days. Phillips 66’s portfolio spans operations across ‘Midstream,’ ‘Chemicals,’ ‘Refining’ and ‘Marketing and Specialties,’ and the big driver in the company’s third-quarter report, released November 1, was its ‘Midstream’ division, which saw adjusted pre-tax income advance to $645 million from $292 million in the year-ago period. Though most
Enterprise Products Partners Reports Strong 3Q, Impressive ~7.5% Distribution Yield
November 1, 2022
Image Source: Enterprise Products Partners By Brian Nelson, CFA There are now only 15 holdings in the ALPS Alerian MLP ETF (AMLP) as the number of master limited partnerships (MLPs) on the market continues to shrink. According to data from ALPS Advisors, the Alerian MLP Infrastructure Index, on a total return basis, has advanced just 0.74% during the past 10 years. During the past half-decade or so, the group has undergone a considerable number of distribution cuts, as energy markets have waned. The ALPS Alerian MLP ETF is having a much better year during 2022, however. The performance so far during 2022 won’t make up for the collapse in the sector during the past decade, but it will help. Year-to-date,
Newmont Reports Challenging 3Q, But the Stock Is a Key Diversifier in the Dividend Growth Newsletter Portfolio
November 1, 2022
Image Source: Newmont Mining By Brian Nelson, CFA Gold has not necessarily lived up to its merits as an inflation hedge recently, with the SPDR Gold Trust ETF (GLD) falling nearly 10% so far this year, but that doesn’t mean it still doesn’t have valuable diversification qualities; the market, as measured by the SPDR S&P 500 Trust ETF (SPY), is down over 19% through November 1. Our favorite gold miner and Dividend Growth Newsletter portfolio holding, Newmont Corp (NEM) has fared worse this year, but we still like it as a key diversifier in the newsletter portfolio. Newmont Corp reported third-quarter results November 1 that weren’t great, but management noted that it remains on track to “achieve full-year guidance of
Recent Fair Value Estimate Changes
October 31, 2022
Let’s have a look at recent fair value estimate changes across our coverage universe. ——————————————— About Our Name But how, you will ask, does one decide what [stocks are] “attractive”? Most analysts feel they must choose between two approaches customarily thought to be in opposition: “value” and “growth,”…We view that as fuzzy thinking…Growth is always a component of value [and] the very term “value investing” is redundant. — Warren Buffett, Berkshire Hathaway annual report, 1992 At Valuentum, we take Buffett’s thoughts one step further. We think the best opportunities arise from an understanding of a variety of investing disciplines in order to identify the most attractive stocks at any given time. Valuentum therefore analyzes each stock across a wide spectrum of philosophies,
