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Wells Fargo: 2 Big 16% Dividend Stocks to Buy (And 1 to Avoid)

Wells Fargo: 2 Big 16% Dividend Stocks to Buy (And 1 to Avoid)



The coronavirus epidemic, and the economic and society lockdowns put in place to combat it, have body-slammed the financial world; the S&P 500 is still down 13% even after a 5 week rally, while oil prices are stuck in a doldrums, with Brent trading at just $30 and WTI at $25. Corporate earnings season has been grim, and some 120 S&P companies have rescinded their 2020 guidance while others have canceled dividend payments or stock buybacks.

So, investors are confused; they aren’t seeing the usual signals that indicate what the market may do, and opinions are deeply divided on whether we’ll see a true rally or a long-term bear cycle.

Writing from Wells Fargo, head of equity strategy Chris Harvey has come down on the bearish side, but with a caveat. “A near-term equity market pullback should not be unexpected – but we believe selloffs will be much shallower than those in the recent past,” he says, and goes on to add, “There still is substantial uncertainty, and the path forward is not set in stone. Market participants are deciphering shades of gray and for now we are accepting of data that is merely less bad.”

Looking at possible ways forward, Harvey expects that the ‘shallower’ selloff will find support from dividend stocks. He’s predicting that the equity market’s current upward trend has pushed the dividend future contract up towards $50. He does not expect dividend stocks to falter in CY20; they are the logical defensive move for investors seeking to remain in the market while protecting their income stream.

Harvey’s colleagues at Well Fargo are extrapolating from his general stance, and applying it to individual stocks. In a series of reports, the firm’s stock analysts outlined some low-cost, high-return dividend stocks that investors need to consider – and also one that may be too risky to try. We’ve pulled the details from the TipRanks database, so let’s find out what makes these stock moves so compelling.

Energy Transfer LP (ET)

We’ll start in the energy sector, where strong dividends are common. The collapse of oil prices – America’s WTI benchmark dipped into negative territory for the first time ever on April 20 – hurt the industry, but there is still some resilience there. Energy is a non-negotiable requirement in modern society, and there is always current demand for hydrocarbon products. Energy Transfer, a midstream company, is well positioned to take advantage of hydrocarbon demand; it controls pipelines, terminals, and storage tanks for both crude oil and natural gas in 38 states. The company operates mainly in the Texas-Oklahoma-Louisiana and Midwest-Appalachian regions.

ET finished 2019 with a solid earnings report, beating both the EPS and revenue expectations while growing both metric year-over-year. Heading into Q1, the company had also increased its distributable cash flow by 2%, to $1.55 billion, an excellent signal for dividend investors. The company will report Q1 this evening, and the outlook is for 32 cents EPS, down 15.7% sequentially. At the same time, the revenue forecast is looking at a 6.8% yoy increase to $14.02 billion.

The cash flow is likely to be the more important figure, as far as investors are concerned. ET has been keeping up reliable payments for the last eleven years, and the current quarterly dividend, of 30.5 cents, is set for payment on May 19. The current payout ratio is high but still affordable – and even if earnings drop to the expected 32 cents, the company will still be able to cover the dividend payment. And at 16%, the dividend yield is simply stellar – far higher than the 2% average among S&P listed companies.

Analyst Michael Blum reviewed this stock for Wells Fargo, and took a clearly bullish position. Blum rates ET shares a Buy, with a $12 price target that suggests an impressive 59% upside potential for the coming year. (To watch Blum’s track record, click here)

Supporting his stance on ET, Blum looks to the long-term and writes, “[H]ydrocarbon use will [not] dramatically decrease within the next ten years (and beyond) and thus, [we are] not concerned with obsolescence risk for its pipeline assets. The company would consider renewable investments if they met ET’s return thresholds. However, to date, returns for renewable projects are below that of midstream.”

Overall, the analyst consensus on ET is a Moderate Buy, based on 13 recent reviews. The breakdown among those reviews skews positive, with 8 Buys versus 5 Holds. Shares are selling for $7.64, and the average price target of $11.85 implies an upside of 55%. (See ET stock analysis on TipRanks)


Staying in the energy industry, we’ll look at MPLX. This company was spun off of Marathon Petroleum in 2012, to handle the oil giant’s midstream operations. Marathon still holds a controlling interest in MPLX, which in turn owns and operates assets in pipelines, terminals, inland river shipping, and refineries. MPLX operates in both the petroleum and natural gas midstream segments.

MPLX has a seven-year history of growing its dividend, and the current payment of 68.75 cents per quarter is due out on May 15. Annualized, the dividend comes to $2.75 and gives a yield of 16%. Compared to current interest rates, which have been slashed to the bone in an attempt to counter the economic hit from the coronavirus shutdowns, this yield is a clear attraction for investors.

The dividend is supported by a cash-rich business model. MPLX generated $4.1 billion in net cash during calendar year 2019, and returned $2.8 billion to shareholders through dividends and buybacks. The company has reduced its capital spending for 2020 to compensate for reduced income during the 1H20 economic downturn. The company a heavy net loss for Q1, of $2.7 billion, but still was able to generate $1 billion net cash.

Michael Blum, quoted above, also cast his gaze on MPLX. He wrote, “We entered 2020 with a defensive mindset... We continue to expect near-term volatility as crude storage fills and WTI oil prices likely head lower… the sector is technically oversold, which should create long-term buying opportunities for investors that have the wherewithal to step in... for investors with a bit more risk appetite, [MPLX] appears attractive on a multi-year time horizon…”

In line with this stance, Blum gives MPLX a Buy rating. His $24 price target implies a strong upside potential here of 38%.

For the most part, Wall Street appears to agree with Blum on MPLX. The stock has received 11 recent reviews, of which 8 are Buys and 3 are Holds, making the analyst consensus rating a Moderate Buy. Shares are currently trading for $17.72, while the average price target of $21.80 suggests a one-year upside potential of 23%. (See MPLX stock analysis on TipRanks)

Bain Capital Specialty Finance (BCSF)

The world of business development companies (BDCs) has long sparked the interest of investors. These companies invest capital into the business world, earning their own profits on the returns. Bain has $105 billion in assets under management, in real estate, venture capital, and both private and public equity. Current economic conditions have hit Bain hard, as many of the company’s portfolio assets are underperforming due to the coronavirus shutdowns.

Despite volatile earnings, Bain is maintaining its dividend. The 41-cent dividend is sustainable at current earnings levels, and has been held steady for the past six quarter – but the payout ratio of 93% indicates that there is not much slack here. The yield, however, is 15.6%, so for investors willing to shoulder the risk, the reward may be substantial.

Well Fargo analyst Finian O’Shea sees too much risk here to justify the possible reward. The analyst points out that BCSF has started process to open up a rights offering, putting common stock at a discount. This is a move to raise new capital fast, and shows softness in the stock’s position. O’Shea writes, “…this is the first of what the market speculates as a wave of below-NAV issuance in the BDC industry. We don’t see a big wave noting BCSF was more leveraged, at 1.72x net including revolvers as of 12/31 – so there was not a lot of mark to market leeway.”

To this end, O’Shea rates the stock a Sell, predicting it will underperform in the coming year. In line with this, O’Shea cut the price target by nearly half, to $9.50, suggesting an 11% downside from current levels. (To watch O’Shea’s track record, click here)

The Wall Street analyst corps, generally, are cautious on this stock. The consensus rating, a Hold, is based on a single Buy along with 2 Holds and 1 Sell. The upside is also modest; the average price target of $10.67 indicates room for just 0.66% growth from the $10.60 share price. (See Bain Capital stock analysis on TipRanks)

To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

The post Wells Fargo: 2 Big 16% Dividend Stocks to Buy (And 1 to Avoid) appeared first on TipRanks Financial Blog.

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Costco Tells Americans the Truth About Inflation and Price Increases

The warehouse club has seen some troubling trends but it’s also trumpeting something positive that most retailers wouldn’t share.



Costco has been a refuge for customers during both the pandemic and during the period when supply chain and inflation issues have driven prices higher. In the worst days of the covid pandemic, the membership-based warehouse club not only had the key household items people needed, it also kept selling them at fair prices.

With inflation -- no matter what the reason for it -- Costco  (COST) - Get Free Report worked aggressively to keep prices down. During that period (and really always) CFO Richard Galanti talked about how his company leaned on vendors to provide better prices while sometimes also eating some of the increase rather than passing it onto customers.

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That wasn't an altruistic move. Costco plays the long game, and it focuses on doing whatever is needed to keep its members happy in order to keep them renewing their memberships.

It's a model that has worked spectacularly well, according to Galanti.

"In terms of renewal rates, at third quarter end, our US and Canada renewal rate was 92.6%, and our worldwide rate came in at 90.5%. These figures are the same all-time high renewal rates that were achieved in the second quarter, just 12 weeks ago here," he said during the company's third-quarter earnings call.

Galanti, however, did report some news that suggests that significant problems remain in the economy.

Costco has done an incredibly good job at holding onto members.

Image source: Xinhua/Ting Shen via Getty Images

Costco Does See Some Economic Weakness

When people worry about the economy, they sometimes trade down when it comes to retailers. Walmart executives (WMT) - Get Free Report, for example, have talked about seeing more customers that earn six figures shopping in their stores.

Costco has always had a diverse customer base, but one weakness in its business may be a warning sign for its rivals like Target (TGT) - Get Free Report, Best Buy (BBY) - Get Free Report, and Amazon (AMZN) - Get Free Report. Galanti broke down some of the numbers during the call.

"Traffic or shopping frequency remains pretty good, increasing 4.8% worldwide and 3.5% in the U.S. during the quarter," he shared.

People shopped more, but they were also spending less, according to the CFO.

"Our average daily transaction or ticket was down 4.2% worldwide and down 3.5% in the U.S., impacted, in large part, from weakness in bigger-ticket nonfood discretionary items," he shared.

Now, not buying a new TV, jewelry, or other big-ticket items could just be a sign that consumers are being cautious. But, if they're not buying those items at Costco (generally the lowest-cost option) that does not bode well for other retailers.

Galanti laid out the numbers as well as how they broke down between digital and warehouse.

"You saw in the release that e-commerce was a minus 10% sales decline on a comp basis," he said. "As I discussed on our second quarter call and in our monthly sales recordings, in Q3, big-ticket discretionary departments, notably majors, home furnishings, small electrics, jewelry, and hardware, were down about 20% in e-com and made up 55% of e-com sales. These same departments were down about 17% in warehouse, but they only make up 8% in warehouse sales."

Costco's CFO Also Had Good News For Shoppers

Galanti has been very open about sharing information about the prices Costco has seen from vendors. He has shared in the past, for example, that the chain does not pass on gas price increases as fast as they happen nor does it lower prices as quick as they sometimes fall.

In the most recent call, he shared some very good news on inflation (that also puts pressure on Target, Walmart, and Amazon to lower prices).

"A few comments on inflation. Inflation continues to abate somewhat. If you go back a year ago to the fourth quarter of '22 last summer, we had estimated that year-over-year inflation at the time was up 8%. And by Q1 and Q2, it was down to 6% and 7% and then 5% and 6%," he shared. "In this quarter, we're estimating the year-over-year inflation in the 3% to 4% range."

The CFO also explained that he sees prices dropping on some very key consumer staples.

"We continue to see improvements in many items, notably food items like nuts, eggs and meat, as well as items that include, as part of their components, commodities like steel and resins on the nonfood side," he added.


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“What’s More Tragic Is Capitalism”: BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

"What’s More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years…



"What's More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years ago, I wrote columns about companies pouring money into Black Lives Matter to establish their bona fides as “antiracist” corporations. The money continued to flow despite serious questions raised about BLM’s management and accounting. Democratic prosecutors like New York Attorney General Letitia James showed little interest in these allegations even as James sought to disband the National Rifle Association (NRA) over similar allegations. At the same time, Black Lives Matter co-founder Patrisse Cullors cashed in with companies like Warner Bros. eager to give her massive contracts to signal their own reformed status. It now appears that BLM is facing bankruptcy after burning through tens of millions and Warner Bros. cut ties with Cullors after the contract produced no — zero — new programming.

Some states belatedly investigated BLM as founders like Cullors seemed to scatter to the winds.

Gone are tens of millions of dollars, including millions spent on luxury mansions and windfalls for close associates of BLM leaders.

The usual suspects gathered around the activists like former Clinton campaign general counsel Marc Elias, who later removed himself from his “key role” as the scandals grew.

When questions were raised about the lack of accounting and questionable spending, BLM attacked critics as “white supremacists.”

Warner Bros. was one of the companies eager to grab its own piece of Cullors to signal its own anti-racist virtues.  It gave Cullors a lucrative contract to guide the company in the creation of both scripted and non-scripted content, focusing on reparations and other forms of social justice. It launched a publicity campaign for everyone to know that it established a “wide-ranging content partnership” with Cullors who would now help guide the massive corporation’s new programming. Calling Cullors “one of the most influential thought leaders in American public life,” Warner Bros. announced that she was going to create a wide array of new programming, including “but not limited to live-action scripted drama and comedy series; longform/event series; unscripted docuseries; animated programming for co-viewing among kids, young adults and families; and original digital content.”

Some are now wondering if Warner Bros. ever intended for this contract to produce anything other than a public relations pitch or whether Cullors took the money and ran without producing even a trailer for an actual product. Indeed, both explanations may be true.

Paying money to Cullors was likely viewed as a type of insurance to protect the company from accusations of racial insensitive. After all, the company was giving creative powers to a person who had no prior experience or demonstrated talent in the area. Yet, Cullors would be developing programming for one of the largest media and entertainment companies in the world.

One can hardly blame Cullors despite criticizism by some on the left for going on a buying spree of luxury properties.

After all, Cullors was previously open about her lack of interest in working with “capitalist” elements. Nevertheless, BLM was run like a Trotskyite study group as the media and corporations poured in support and revenue.

It was glaringly ironic to see companies like Warner Bros. falling over each other to grab their own front person as the group continued boycotts of white-owned businesses. Indeed, if you did not want to be on the wrong end of one of those boycotts, you needed to get Cullors on your payroll.

Much has now changed as companies like Bud Light have been rocked by boycotts over what some view as heavy handed virtue signaling campaigns.

It was quite a change for Cullors and her BLM co-founder, who previously proclaimed “[we] are trained Marxists. We are super versed on, sort of, ideological theories.” She denounced capitalism as worse than COVID-19. Yet, companies like Lululemon rushed to find their own “social justice warrior” while selling leggings for $120 apiece.

When some began to raise questions about Cullors buying luxury homes, Facebook and Twitter censored them.

With increasing concerns over the loss of millions, Cullors eventually stepped down as executive director of the Black Lives Matter Global Network Foundation, as others resigned.  At the same time, the New York Post was revealing that BLM Global Network transferred $6.3 million to Cullors’ spouse, Janaya Khan, and other Canadian activists to purchase a mansion in Toronto in 2021.

According to The Washington Examiner, BLM PAC and a Los Angeles-based jail reform group paid Cullors $20,000 a month. It also spent nearly $26,000 on meetings at a luxury Malibu beach resort in 2019. Reform LA Jails, chaired by Cullors, received $1.4 million, of which $205,000 went to the consulting firm owned by Cullors and her spouse, according to New York magazine.

Once again, while figures like James have spent huge amounts of money and effort to disband the NRA over such accounting and spending controversies, there has been only limited efforts directed against BLM in New York and most states.

Cullors once declared that “while the COVID-19 illness is tragic, what’s more tragic is capitalism.” These companies seem to be trying to prove her point. Yet, at least for Cullors, Warner Bros. fulfilled its slogan that this is all “The stuff that dreams are made of.”

Tyler Durden Sun, 05/28/2023 - 16:00

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Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Discriminating against fat people is now illegal in New York City, after…



Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Discriminating against fat people is now illegal in New York City, after Mayor Eric Adams on Friday signed off on a ban that will affect not only employment, but also housing and access to public accommodations -- a term that encompasses most businesses. 

We're in safe company using the word "fat," as champions of the cause refer to themselves as "fat activists." With the mayor's signature, two more categories -- both weight and height -- are added to New York City's list of protected personal attributes, which already included race, gender, age, religion and sexual orientation. 

As Mayor Adams signs the law, self-described (and everyone else-described) fat activist Tigress Osborn consumes more than her share of the backdrop (James Messerschmidt for NY Post)

Embracing one of 2023's innumerable strains of Orwellian brainwashing, Adams declared, "Science has shown that body type is not a connection to if you’re healthy or unhealthy. I think that’s a misnomer that we’re really dispelling.”

Even the Centers for Disease Control and Prevention say obesity is an invitation to a host of maladies, including to high blood pressure Type 2 diabetes, coronary heart disease, stroke, gall bladder disease, many types of cancer, mental illness and difficulty with physical functioning. 

“Size discrimination is a social justice issue and a public health threat," said Councilmember Shaun Abreu, who introduced the measure. "People with different body types are denied access to job opportunities and equal wages — and they have had no legal recourse to contest it," said Abreu. "Worse yet, millions are taught to hate their bodies." 

A full 69% of American adults are overweight or obese, but our woke overlords would have us believe the real "public health threat" is a nice restaurant that doesn't want Two-Ton Tessie working the reception desk, or a landlord who's leary of a 400-pound man breaking a toilet seat or collapsing a porch.  

The enticingly-named Tigress Osborn, who chairs the National Association to Advance Fat Acceptance, said New York's ban "will ripple across the globe" -- perhaps something like what would happen if the hefty Smith College Africana Studies graduate were dropped into a swimming pool.  

Councilmember Shaun Abreu said he gained 40 pounds during the pandemic lockdowns and noticed people treated him differently

The New York Times reports that witnesses who testified as the measure was under consideration included "a student at New York University said that desks in classrooms were too small for her [and] a soprano at the Metropolitan Opera [who] said she had faced body shaming and pressure to develop an eating disorder." 

Some have dared to speak out against the measure. “This is another mandate where enforcement will be primarily through litigation, which imposes a burden on employers, regulators and the courts,” said Kathryn S. Wylde, president of the Partnership for New York City, speaking in April. 

Implicitly putting the weight ordinance in the same category as Brown vs Board of Education, Abrue said, “Today is a monumental advancement for civil rights, size freedom and body positivity and while our laws are only now catching up to our culture, it is a victory that I hope will cause more cities, states and one day the federal government to follow suit.” 

Taking effect in six months, the law has an exemption for employers "needing to consider height or weight in employment decisions" -- but "only where required by federal, state, or local laws or regulations or where the Commission on Human Rights permits such considerations because height or weight may prevent a person from performing essential requirements of a job." 

We pray there's a federal exemption for employers of strippers and lap dancers. 

Think we're joking? We remind you that the chair of the National Association to Advance Fat Acceptance is named "Tigress" -- and this is her Twitter profile banner photo:

via Tigress @iofthetigress
Tyler Durden Sun, 05/28/2023 - 15:30

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