Investors Alley

Some of the dividend stocks below are the best dividendstocks while others require more research. Ticker Ex-Div Date Pay Date Amount Yield ARR 10/14/22 10/28/22 $0.10 22.68% MVO 10/14/22 10/25/22 $0.69 15.10% GNL 10/12/22 10/17/22 $0.40 14.71% SBR 10/14/22 10/31/22 $1.02 14.34% RTL 10/12/22 10/17/22 $0.21 14.20% OXLC 10/14/22 10/31/22 $0.08 13.90% PMT 10/13/22 10/28/22 …

10 Highest Yield Dividend Stocks Going Ex-Div This Week Read More »

I just stumbled on a stock that’s outperforming its sector and the S&P 500! The sector is down 13%… this stock is up 18%… S&P 500 has sunk 24%… again, this stock has stayed strong at 18%. It pays a dividend and the stock looks like it can still break higher even as markets hit …

This stock is outperforming everything Read More »

A very unusual options block trade hit the tape last week in Lithia Motors (LAD). The automobile dealership company typically trades about 200 options a day on average. However, a trader recently executed a 9,500-lot trade of November covered calls in LAD options. The trade could suggest there is both a floor and a ceiling …

Trade of the Week: Lithia Motors Read More »

Energy commodity markets have been focused on demand issues lately, but last week, OPEC announced a production cut, putting supply back in the spotlight.

This cut in oil production will result in higher energy prices. That’s going to be a change from the past several months, where gasoline prices, for example, have been falling.

As investors, we need to adapt. So today, let’s take a look at five investments that will benefit from higher energy prices…

The West Texas Intermediate (WTI) crude oil price peaked in early June at $122 per barrel. From there, a long, steady decline led to a late-September bottom at $77 per barrel.

The decline in the price of oil has been driven by many traders’ shared belief that demand will lessen due to the China lockdowns and a global recession. The fall was further helped by the Biden administration releasing one million barrels daily from the Strategic Petroleum Reserve (SPR).

But that trend is likely to turn soon, with crude oil moving higher. Last week OPEC announced a two million barrel-per-day reduction in production and oil sales. At the same time, the SPR has reached dangerously low levels, which will limit future releases. The administration may be forced to start buying oil to replenish the reserve.

Global oil consumption runs about 100 million barrels daily, with supply and demand closely balanced. Pulling up to three million barrels per day out of the supply can only lead to higher prices. This tight supply problem is one without an easy solution. Boosting production by adding drilling rigs takes a lot of money, government permits, and time. OPEC knows it can control prices by restricting output from its member countries.

Recently, Wells Fargo listed these energy companies as high-momentum stocks that should outperform if the energy sector moves higher:

APA (APA)Devon Energy (DVN)Marathon Petroleum (MPC)Marathon Oil (MRO)Occidental Petroleum (OXY)

Marathon Petroleum is a refining company; the rest of the companies listed here are upstream energy producers. I currently have two of these stocks in my Monthly Dividend Multiplier portfolio. To see how you can secure a rapidly rising dividend income today using Monthly Dividend Multiplier, see below.
We’re talking gains as high as 43% in one year! From now on, your dividends could grow every single month without you lifting a finger. Click here for details.

You may have heard the saying, often (mis-)attributed to Mark Twain, that history does not repeat, but sometimes it rhymes.

Well, I just saw a table of historical returns that shows how some historical rhyming will benefit our stock portfolios.

Let’s take a look…

This table comes from Charlie Bilello, founder and CEO of Compound Capital Advisors, via Twitter:

The Wilshire 5000 index covers basically all of the publicly traded U.S. stocks. The left side of the table shows that the first nine months of 2022 rates as one of the worst nine-month periods in stock market history.

The right side shows total returns after the nine-month declines. There is a lot of green, indicating positive returns on that table. I think the one-year column is the most revealing. In 18 of the previous 19 decline periods, the market was higher one year later, with an average gain of 12%.

The 28% gains from the “average of worst periods” show that the harder the market fell, the stronger the recovery. If you look at the numbers for the percentage drops similar to the 25.9% of 2022, you see that the 12-month recovery averaged pretty close to the amount of the decline.

These numbers mean the way to make money is to have a strategy to add shares during the downturn and recovery. That way, your wealth is much higher when share prices get back to pre-crash levels.

My Dividend Hunter strategy, which focuses on building a high-yield income stream, makes buying easier when share prices are down. You have regular dividends to reinvest, and if you can add more cash, each share you buy boosts your income stream.

While the focus always stays on growing your income, the strategy naturally builds your wealth when the market drops and recovers. To join in, see below.
What’s the one thing you need to stay retired? That’s right… cash. Money to pay the bills. Money to weather any financial crisis like the one we’re in now and whatever comes next. I’ve located three stocks that if you buy and hold them forever, they could serve as the backbone to your retirement. Click here for details.

It’s been a high volatility year in the financial markets. The VIX (Cboe S&P Implied Volatility Index) has been historically high for most of 2022. A large put sale in Proshares Ultra VIX Short Term Futures ETF (UVXY) suggests that volatility could remain at least moderately elevated into 2023.  UVXY is a popular short-term volatility …

Will Volatility Remain Elevated Into Next Year? Read More »

The global auto industry is in an all-out drive toward a cleaner and greener future.However, for some suppliers to the auto industry, it has not been a pleasurable joyride.

Instead, current conditions are more like driving on a icy, treacherous mountain road in the middle of a blizzard. Only the most skilled drivers will make it to the bottom of the metaphorical mountain intact.

Tough Sledding for Auto Suppliers

Most auto suppliers are already feeling a squeeze due to rising energy prices and rampant inflation in other parts of the supply chain. They have little choice but to shoulder most of the extra costs of making their components sustainable to help the automakers meet their environmental targets.

And make no mistake: the carmakers are pushing their suppliers hard. For example, Reuters reports that BMW expects all of its battery and many of its steel and aluminum providers to produce materials made using renewable energy, while Volvo Car is targeting 25% recyclable plastic in its cars by 2025.

Consequently, many suppliers to the automobile industry are making large investments to “green” their companies, doing everything from developing recyclable parts to using renewable energy.

Simultaneously, many of these same firms have little leeway to raise the prices they’re charging automakers, which are themselves focused on reducing costs. Automakers are spending tens of billions of dollars to shift their focus to producing electric vehicles.

This difficult situation faced by the auto parts industry was summed up nicely by Joe McCabe, CEO of the research firm AutoForecast Solutions, who told Reuters: “We use the term disruptive all the time, but it’s much more than just disruptive. We’re going to see a real big shakeout the next five, 10 years in the auto supply chain.”

In other words, the auto industry’s move to a greener future, alongside the supply-chain problems that began during the pandemic and soaring costs, has killed the profit margins for auto parts suppliers and created a perfect storm for the industry.

It is likely that only the strongest and shrewdest companies will survive this extinction event in the sector. The rest will go the way of the dinosaur.

One company that I believe will survive is TE Connectivity (TEL). It is able to pass along price increases to its customers, and it pays a dividend, too.

TE Connectivity

TE Connectivity is an American-Swiss technology company that designs and manufactures connectors and sensors able to withstand harsh environments for a number of industries. These industries include automotive, industrial equipment, communications, aerospace and defense, medical, energy, and consumer electronics.

Going green is costly for even the biggest suppliers, and TE Connectivity certainly isn’t immune. But it is a bit ahead of the curve, having launched its own sustainability drive in 2020. The company is presently working on recyclable products with automakers including Volkswagen, Volvo and BMW.

Of course, TE Connectivity continues to face supply chain challenges—but it seems to be navigating the headwinds well, as indicated by its continued price increases to customers that aid the company in offsetting inflationary pressures.

And the long-term thesis of growth that stems from increased vehicle electrification is holding up well, as management reaffirmed in its latest quarterly earnings results. Management expects electric vehicle production to be up more than 30% for the year, while the total automotive production environment is expected to remain flat.

The company’s third-quarter sales grew 7% year over year, and 2% sequentially, to $4.1 billion. Organic growth could be seen across all business segments.

Some of TE Connectivity’s other businesses, outside of automotive, did extremely well. Two of the largest growth areas were in the industrial equipment and data and devices end markets. Both grew at 27% on a year-over-year basis.

The industrial equipment segment saw continued benefits from increased factory automation applications, while the data and devices segment achieved its outperformance thanks to market share gains in artificial intelligence applications and high-speed cloud content growth.

TE Connects to the Future

The company’s balance sheet is sound, with very low net debt to EBITDA. That allows it to return an appropriate amount of capital to shareholders.

Management’s goal is to return two-thirds of free cash flow to shareholders, of which one third will fund the firm’s dividend (current yield is 2%) and the other third will be used for opportunistic share repurchases. However, this goal is often exceeded when management doesn’t find value-accretive deals for its cash.

TE Connectivity has raised its cash dividend every year since 2010. Over the past five years, the company has returned an average of more than 80% of its free cash flow to shareholders.

TE Connectivity has maintained a leading share of the global connector market for the last decade,

thanks to its dominance in the automotive connector market, from which it derives nearly 50% of its revenue. I do not expect the company to lose its dominant position. Morningstar reports: “While the firm’s entire business benefits from trends toward efficiency and connectivity, these are especially notable in cars, where shifts toward electric and autonomous vehicles provide lucrative opportunities.”

Just like other tech-related stocks this year, current market conditions have hit TE Connectivity, with a drop of 29%. It is a buy anywhere up to $120 per share.
It’s raised its dividend 37.5% on average, could be acquired, benefits from rising interest rates, trading at massive discount, and pays an 8% yield. This is my top pick for income during a rough market.Click here for details.

Stocks finally halted their selloff at the midpoint of last week, with the major indices all up at least 2% on the day. On that day, the iShares Russell 2000 ETF (IWM) was up over 3%, marking an outperformance from small cap stocks. A trader appears to have used the opportunity to place a 10,000-lot …

Trade of the Week: IWM Read More »

It is official: we are in a bear market.

What should we do now?

Sell stocks? Assume the fetal position and hide under the kitchen table with a death grip on a bottle of cheap tequila? Get a medical cannabis card to ease the pain of losing money? Buy gold and silver? Hide all our cash in a mason jar buried under the shed? Watch the financial and news media to get advice?

Too many people will go down one of more of these paths as the bear market sinks its teeth into their portfolios.

But history suggests that if you are still in the accumulation phase of life, you should probably start buying stocks. Warren Buffett is one of the richest men in the world because he mastered the skill of buying aggressively in bad markets.

I suspect this particular bear is going to hang around for a while. It will take the Federal Reserve some time to wrestle the inflation dragon back into its cage, and rates will go higher and stay there for longer than most traders active today have ever seen.

There will be some of those rip-your-face-off bear market rallies along the way, but in the meanwhile, we should have plenty of time to build significant positions in good companies at great prices.

Keep an eye on two particular groups of people here for ideas about which companies to buy. One is the activist investors that take positions in companies they think are undervalued and then push the management and board to make changes that can push the stock price higher.

The other is insiders. Managers and directors know more about the businesses they run than anyone else—so when several of them are buying stock in their own companies in the open market, it is a bold statement about what they think of the companies’ current valuations.

Following insiders in the 2020 sell-off helped me spot the opportunity in Matador Resources (MTDR) right before the natural gas company went on a run that took shares above $65

I have recently noticed that the officers and directors, including the CEO, have been buying shares of Hanesbrands (HBI), manufacturer of underwear and athletic clothing. The company may see some slowing in sales thanks to a weak economy, but there is little to no chance it will go out of business anytime soon.

If markets get bad enough, the company might even see a sudden increase in demand for one of its product lines!

Hanesbrands includes a fantastic collection of companies with household names. Hanes, for instance, is the leading manufacturer of men’s underwear, with twice the market share of its two closest competitors combined.

The company owns Champion, the company that invented the hoodie 80 years ago and still dominates the market, as well as Playtex, Bali, and Maidenform—three of the most dominant women’s undergarment manufacturers—and Bonds, the dominant men’s underwear company in Australia.

Hanesbrands also owns most of its production and supply chain facilities. In addition, it has local manufacturing in more than three dozen countries worldwide. Almost 80% of the more than two billion pieces of clothing Hanesbrands sells globally each year are produced in company-owned factories.

Seven different insiders have been buying shares in the open market this month.

The stock is trading at less than seven times sales and under $0.50 on the dollar of sales. That’s cheap for a company that is a leader in its industry.

The recent decline has made the shares a high-yielding stock, with a dividend yield of over 7.5%. Moreover, the payout ratio is just 0.47%, so I can see no danger of a dividend cut on the horizon. Hanesbrands has also been buying back stock over the past few years and still has $575 million to buy under the current buyback plan.

It is a bear market. The stock will probably move against you after you buy it.

You can buy in stages if you prefer. Buy a little now and add on every move down.

You may get frustrated because the stock won’t move higher, even though the business is clearly worth more than the current price. But that’s the nature of bear markets. Make this one work for you and not against you and scale into a decent-sized position in this market leader. The bear market will end at some point. When it does, I suspect patient-but-aggressive investors will be able to cash in their Hanesbrands positions for several multiples of the current stock price.
It’s raised its dividend 37.5% on average, could be acquired, benefits from rising interest rates, trading at massive discount, and pays an 8% yield. This is my top pick for income during a rough market.Click here for details.

There are two big forces at work that show why the inflation beast will not be easy to tame for the Federal Reserve.

First, although overall consumer demand is slowing, it still remains strong in many sectors. Second, many supply chain woes are still resolved.

Supply chain disruptions due to the coronavirus pandemic were expected to gradually subside as global restrictions were lifted. Yet, the supply chain situation has actually worsened because of increased geopolitical risk and ongoing lockdowns and restrictions due to China’s zero-tolerance COVID policy.

My contacts in the logistics industry tell me that supply chain problems may not be resolved until mid-decade… and with de-globalization fully underway, these some of these headaches may never be completely resolved!

In this brave new deglobalized world, you want to own sectors and companies that can prosper under these conditions.

One such sector—and one totally ignored by Wall Street—is the rail sector. Moving goods by rail is approximately four times more energy efficient (per ton-mile of freight) moving by truck. As inflation rises, the efficiency of railroads for moving freight is looking more and more attractive…and my favorite stock in the sector, Canadian Pacific Railway (CP), comes with another big plus.

Canadian Pacific Railway

Think about this…as the world continues to isolate Russia, Canada offers the best alternatives for many of the commodities and products most closely associated with Russia, including Canadian grains, potash, fertilizer, oil, coal and natural gas. In fact, even before the Ukraine invasion, CP was shipping a lot of potash for export to China.

Canadian Pacific offers the best rail network coverage from one end of North America to the other. Last December, the company completed its acquisition of Kansas City Southern Railway, subject to final regulatory approval. This acquisition creates the first rail network that spans Canada, the U.S. and Mexico—which will provide the company with a competitive market reach in the quickly evolving supply chain.

Here is just one example that Canadian Pacific has analyzed completely: in the freight markets connecting Mexico to the U.S. Midwest, each and every day prior to Canadian Pacific’s merger with Kansas City Southern, an armada of trucks set out to connect auto parts and auto assembly plants spread across the Midwest and Mexico.

These long hauls are naturally opportune situations for transport by rail. But since no single railroad connected these regions, manufacturers were forced to rely heavily on trucks. The merged Canadian Pacific rail network will be able to convert to rail shipments the 64,000 truck shipments that currently clog public highways and border crossings as they move between Mexico and the Great Lakes region.

Add to all of this the company’s sharp management.

The company’s change in fortunes began in 2012 with the appointment of railroading legend Hunter Harrison as CEO. Harrison and his successor, rail operations expert Keith Creel (who worked alongside Harrison for 20 years), have between them taken Canadian Pacific from having of the worst Class I railroad profit margins to among the best. Creel has further infused the company’s culture with precision-scheduled railroading principles, which is largely behind its progress.

CP’s Bright Future

Keep this one important fact in mind when thinking about rail stocks as an investment: the network of track and assets already in place because of North American Class I railroad companies—designated as such based on their revenue—is essentially impossible to replicate.

Sounds like a classic Warren Buffett moat to me. No wonder his Berkshire Hathaway (BRK.B or BRK.A) owns BNSF Railway.

I expect Canadian Pacific’s 2023 operating ratio to improve—volumes should have rebounded in the second half of 2022 thanks to recovering grain shipments as well as auto carloads. Pricing power should remain healthy as well. The late-2022 Canadian grain harvest is currently expected to be much better than last year’s—a key driver of carload volume recovery by late 2022 through early 2023.

Morningstar says that: “Longer term, we believe CP’s pricing power will prove sound (above rail inflation), as will its ability to neutralize diesel price shocks via surcharges.”

The publication adds: “CP is an incredibly well-run railroad with a highly talented leadership team and an excellent track record in terms of efficiency improvement over the past decade, thus we consider deal risk [Kansas City Southern] to be relatively modest. We also agree that the merger makes sense from a strategic perspective and believe the combined railroads will forge meaningful opportunities on the revenue front, thanks to adding new seamless single-line services.”

A nice summation that I totally agree with.

Canadian Pacific stock has handily outperformed the S&P 500 year-to-date, rising about 2% versus a loss of nearly 20% for the S&P 500. CP shares are a buy on any stock market weakness, on worries about the economy, anywhere in the low-to-mid $70s.
It’s raised its dividend 37.5% on average, could be acquired, benefits from rising interest rates, trading at massive discount, and pays an 8% yield. This is my top pick for income during a rough market.Click here for details.