Tuesday, May 29, 2018

4 Stocks to Buy With Dividends Yielding More Than 4%

With interest rates rising, income-seeking investors have more options to choose from as bank CDs and government bonds are paying more now than they have in years. In fact, with many one-year CD's yielding more than 2%, investors can collect a bigger income stream with a lot less risk than they could from the average stock in the S&P 500, which currently yields 1.8%. However, for those seeking more income, and willing to take on some additional risk, there are several compelling high-yield options out there.

Four that stand out are Crestwood Equity Partners (NYSE:CEQP), TerraForm Power (NASDAQ:TERP), Brookfield Infrastructure Partners (NYSE:BIP), and W.P. Carey (NYSE:WPC). Not only does each currently offer more than double the yield of the average bank CD and stock in the S&P, but those income streams are likely to grow in the coming years.

A roll of $100 bills next to a sign reading dividends.

Image source: Getty Images.

A high yield for a value price

Crestwood Equity Partners operates oil and gas pipelines as well as related infrastructure, which energy companies pay fees to use so that they can transport, process, and store their production. The company's fee-based business model provides it with a relatively steady income stream, the bulk of which it distributes to investors via a payout that right now yields an eye-popping 7.6%.

That attractive income stream is only part of Crestwood's draw. That's because the company has several expansion projects underway that will begin to materially increase cash flow later this year and into 2019, with it on pace to grow cash flow at a 15% compound annual rate through 2020. That near-term growth, when combined with�strong financials�and undervalued price, makes it an excellent option for investors seeking a high-yielding opportunity with ample upside.

Making green by going green

TerraForm Power also operates in the energy sector, though it owns wind farms and solar panels that generate renewable power. The company sells this electricity to end users under long-term contracts, collecting steady cash flow in the process, which it uses to support its 6.9%-yielding dividend.

As lucrative as that income stream is these days, it's only the beginning. That's because TerraForm Power is working on a multipronged growth strategy that should supply it with enough cash flow so that the company can increase its payout at a 5% to 8% annual rate over at least the next five years. That visible income growth makes TerraForm an ideal high-yield stock to own for the long haul.

Solar panels with the sun setting in the background.

Image source: Getty Images.

Boring businesses but great income

Brookfield Infrastructure Partners operates ports, powerlines, pipelines, toll roads, and cell towers. While those aren't exactly the most exciting businesses to be in, these assets do generate very predictable cash flow that's mainly supported by long-term contracts. That money helps sustain Brookfield Infrastructure's 4.9%-yielding payout.

However, like the others on this list, Brookfield's current income stream is just the starting point. The company has several expansion projects in progress, which along with contract escalators and the embedded growth within its legacy assets should provide the cash flow to increase its payout at a 5% to 9% annual rate over the next several years. Meanwhile, Brookfield is also pursuing multiple acquisition opportunities�that could provide even more fuel for distribution growth in the coming years. That visible growth with upside makes Brookfield Infrastructure another great option for income seekers.�

The lazy way to be a landlord

W.P. Carey is one of the largest owners of net lease real estate assets in the world, which are properties rented out to a single tenant that pays virtually all the building's expenses. Overall, the company owns nearly 900 properties that it has leased to more than 200 tenants on contracts that have an average remaining term of almost 10 years. These agreements provide a very stable revenue stream, the bulk of which is sent back to investors via a dividend that currently yields 6.2%

Since going public,�W.P. Carey has increased its dividend every year by using its retained cash flow and balance sheet strength to build and buy additional properties that increase cash flow. With ample financial firepower to continue expanding, it should be able to keep raising its payout each year. That makes it a great investment option for investors who want to earn some passive income from real estate without having to be a landlord.

Income with upside

What makes this quartet of high-yield stocks worth buying isn't just their well-above-average yields but the fact that each one appears poised to increase those payouts in the years to come. That growth potential should enable these stocks to provide investors with a lucrative income stream along with some capital gains. This higher potential reward makes the added risk well worth it in my opinion.

Monday, May 28, 2018

Zacks: Brokerages Anticipate Paccar (PCAR) Will Announce Earnings of $1.43 Per Share

Equities research analysts expect Paccar (NASDAQ:PCAR) to report earnings per share of $1.43 for the current fiscal quarter, Zacks Investment Research reports. Seven analysts have made estimates for Paccar’s earnings. The highest EPS estimate is $1.50 and the lowest is $1.39. Paccar reported earnings of $1.06 per share during the same quarter last year, which indicates a positive year over year growth rate of 34.9%. The business is scheduled to issue its next earnings report on Tuesday, July 24th.

On average, analysts expect that Paccar will report full-year earnings of $5.63 per share for the current financial year, with EPS estimates ranging from $5.32 to $5.95. For the next year, analysts anticipate that the business will report earnings of $5.76 per share, with EPS estimates ranging from $5.30 to $6.25. Zacks’ EPS calculations are an average based on a survey of analysts that cover Paccar.

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Paccar (NASDAQ:PCAR) last issued its earnings results on Tuesday, April 24th. The company reported $1.45 earnings per share for the quarter, topping the consensus estimate of $1.31 by $0.14. Paccar had a net margin of 8.99% and a return on equity of 21.26%. The company had revenue of $5.32 billion for the quarter, compared to analyst estimates of $5.01 billion. During the same period in the prior year, the business posted $0.88 earnings per share. The firm’s revenue for the quarter was up 35.2% compared to the same quarter last year.

PCAR has been the topic of several recent analyst reports. Longbow Research upgraded shares of Paccar from a “neutral” rating to a “buy” rating and set a $85.00 target price on the stock in a research report on Tuesday, March 6th. ValuEngine upgraded shares of Paccar from a “hold” rating to a “buy” rating in a research report on Thursday, March 1st. Zacks Investment Research upgraded shares of Paccar from a “hold” rating to a “buy” rating and set a $78.00 target price on the stock in a research report on Wednesday, April 18th. Stifel Nicolaus restated a “hold” rating and set a $77.00 target price on shares of Paccar in a research report on Tuesday, January 30th. Finally, Susquehanna Bancshares set a $78.00 target price on shares of Paccar and gave the stock a “hold” rating in a research report on Friday, March 9th. Two analysts have rated the stock with a sell rating, sixteen have assigned a hold rating and five have given a buy rating to the company’s stock. Paccar has an average rating of “Hold” and a consensus price target of $74.47.

Paccar traded down $0.59, hitting $64.64, on Friday, according to Marketbeat.com. 911,065 shares of the company were exchanged, compared to its average volume of 1,878,655. The company has a current ratio of 2.45, a quick ratio of 2.29 and a debt-to-equity ratio of 0.69. Paccar has a fifty-two week low of $60.36 and a fifty-two week high of $79.69. The firm has a market capitalization of $22.95 billion, a P/E ratio of 15.17, a PEG ratio of 1.19 and a beta of 1.24.

The firm also recently declared a quarterly dividend, which will be paid on Tuesday, June 5th. Shareholders of record on Tuesday, May 15th will be issued a $0.28 dividend. This represents a $1.12 annualized dividend and a dividend yield of 1.73%. The ex-dividend date of this dividend is Monday, May 14th. This is an increase from Paccar’s previous quarterly dividend of $0.25. Paccar’s dividend payout ratio is 26.29%.

In related news, VP C Michael Dozier sold 13,348 shares of the company’s stock in a transaction that occurred on Monday, May 14th. The shares were sold at an average price of $63.45, for a total transaction of $846,930.60. Following the transaction, the vice president now owns 8,860 shares of the company’s stock, valued at $562,167. The sale was disclosed in a legal filing with the Securities & Exchange Commission, which is accessible through this link. Also, insider T. Kyle Quinn sold 9,964 shares of the company’s stock in a transaction that occurred on Monday, May 7th. The shares were sold at an average price of $64.69, for a total transaction of $644,571.16. Following the transaction, the insider now directly owns 32,000 shares in the company, valued at approximately $2,070,080. The disclosure for this sale can be found here. 2.64% of the stock is owned by corporate insiders.

Several institutional investors and hedge funds have recently made changes to their positions in PCAR. BlackRock Inc. lifted its stake in shares of Paccar by 8.9% during the fourth quarter. BlackRock Inc. now owns 29,378,299 shares of the company’s stock valued at $2,088,211,000 after buying an additional 2,401,617 shares during the period. Two Sigma Advisers LP lifted its stake in shares of Paccar by 1,334.1% during the fourth quarter. Two Sigma Advisers LP now owns 1,936,530 shares of the company’s stock valued at $137,649,000 after buying an additional 1,801,500 shares during the period. Summit Trail Advisors LLC lifted its stake in shares of Paccar by 5,414.0% during the first quarter. Summit Trail Advisors LLC now owns 1,540,398 shares of the company’s stock valued at $1,540,000 after buying an additional 1,512,462 shares during the period. Viking Global Investors LP purchased a new position in shares of Paccar during the fourth quarter valued at approximately $80,152,000. Finally, Fulcrum Capital LLC purchased a new position in shares of Paccar during the fourth quarter valued at approximately $52,026,000. 63.19% of the stock is currently owned by institutional investors and hedge funds.

About Paccar

PACCAR Inc designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks in the United States, Europe, and internationally. It operates in three segments: Truck, Parts, and Financial Services. The Truck segment offers trucks that are used for the over-the-road and off-highway hauling of commercial and consumer goods.

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Earnings History and Estimates for Paccar (NASDAQ:PCAR)

Thursday, May 24, 2018

Gilead: Novartis's Kymriah Is Coming To America

From the movie "Coming To America." Source: Amazon.com

Gilead (NASDAQ:GILD) acquired Kite Pharma for $12 billion, and the novel CAR-T therapy received FDA approval within months. For a while, it seemed like Gilead would have the U.S. CAR-T market all to itself. However, Novartis's (NYSE:NVS) Kymriah was recently approved by the FDA to treat large B-cell lymphoma:

U.S. regulators approved Novartis�� cell therapy Kymriah for treatment of patients with a second type of blood cancer, large B-cell lymphoma, that has worsened despite two or more earlier lines of therapy, the Swiss drugmaker said on Tuesday.

The new indication puts Kymriah in direct competition with Gilead Sciences�� Yescarta, which was approved by the U.S. Food and Drug Administration in October for treatment of adults with diffuse large B-cell lymphoma who have failed to respond to other treatments.

Both Kymriah and Yescarta are chimeric antigen receptor T-cell therapies, or CAR-Ts, which reprogram the body��s own immune cells to recognize and attack malignant cells.

Kymriah, given as a one-time treatment, was approved in August for patients up to age 25 with acute lymphoblastic leukemia, the most common form of childhood cancer in the United States.

Kymriah could stymie sales of Yescarta, one of the few remaining catalysts Gilead possesses. Below, I will parse through the implications of Kymriah's U.S. arrival.

The Situation

The Kite Pharma acquisition received a lot of fanfare from GILD bulls. When the deal was completed in August 2017, Kite's revenue was expected to be approximately $200 million in 2018 and to grow to about $1.2 billion by 2021. Yescarta's $1.2 billion of peak annual revenue paled in comparison to Gilead's HCV revenue, which was generating $2.9 billion per quarter. I thought Gilead's prospects were still dim amid its shrinking HCV franchise.

Yescarta is expected to be available for critically care cancer patients for whom other treatments may not have worked. In some respects, Yescarta could be their last option. In Q4 2017, Cowen estimated about 5,300 patients would be good candidates for Yescarta annually. However, given the need for Gilead to roll out commercial centers capable of treating patients, only about 1,200 patients were likely to be treated by Yescarta this year.

Another potential bottleneck could be the cost of in-hospital stays versus outpatient treatment, and how much of the tab Medicare will pick up. We need more clarity from Gilead's management on these issues given their complexities.

Kymriah Could Stymie Yescarta Sales

In Q1 2018, Yescarta delivered in spades with revenue of $40 million. Management intimated there was an increase in patient enrollment, and that the company was "on track to have enough centers certified to treat 80% of Yescarta-eligible patients in the United States by the middle of the year." If that means Gilead will have the capacity to treat 4,000 patients per year, then it could equate to annual revenue of about $1.5 billion. This would exceed the $884 million in HCV revenue the company generated in Q1.

However, it may have to share that $1.5 billion revenue potential with Novartis. Kymriah generated $12 million in revenue in Q1 2018. I understand that (1) the treatment is priced at $475,000 for pediatric leukemia patients, and (2) Novartis bills for Kymriah only if patients respond within 30 days of treatment. Pursuant to lymphoma patients, Novartis is expected to match Yescarta's $373,000 price point with no outcome-based concessions.

In effect, the two treatments will go head-to-head at the same price point. Yescarta's Q1 revenue puts it on an annual run rate of $160 million. It could exceed its current trajectory, yet may have to share a large part of an annual $1.5 billion market with Kymriah.

Will Biktarvy Step Up?

Gilead's Q1 2018 total revenue of $5 billion down 14% sequentially. HCV sales fell 33% due to an onslaught from AbbVie's (NYSE:ABBV) Mavyret. AbbVie's total HCV revenue grew 80% sequentially in Q1, and that likely came out of Gilead's hide. Even more shocking was that Gilead's non-HCV revenue fell 10% Q/Q, and that included the $40 million contribution from Yescarta.

The company's latest HIV treatment, Biktarvy, could change that. The single-tablet regimen received FDA approval only in February 2018, yet still managed to generate $35 million in revenue during the quarter. Biktarvy is expected to compete head-to-head with GlaxoSmithKline's (NYSE:GSK) two-drug HIV combo. The lion's share of Biktarvy sales came from Genvoya switches and certain HIV drugs from GSK. That said, Biktarvy and Yescarta will likely drive the narrative in Q2.

Conclusion

Yescarta and Biktarvy will grow, but can they replace HCV's huge margins? GILD is up 6% Y/Y, but until the company can put its $32 billion cash hoard to work, the stock remains a Sell.

Disclosure: I am/we are short GILD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Wednesday, May 23, 2018

Auto stocks rise after China says it will cut tariffs on car parts and vehicles

Auto stocks rose Tuesday after China said it will slash tariffs on some car parts and vehicles as part of ongoing trade negotiations with the United States.

The Chinese Finance Ministry said tariffs on certain vehicles will come down to 15 percent from as much as 25 percent while levies on some parts will be brought down to 6 percent effective July 1.

Shares of Ford, General Motors and Tesla all rose on the news, gaining about 1 percent in premarket trading Tuesday.

China is a big market for these automakers. GM sold more than 4 million cars in China last year for the first time, while Tesla doubled its revenue from China to $2 billion in 2017. Ford, meanwhile, sold 1.19 million vehicles in China in 2017, a 6 percent slowdown from the previous year.

"We welcome China's announcement to reduce auto import tariffs," a Ford spokesperson told CNBC.

China's announcement comes after Treasury Secretary Steven Mnuchin told CNBC on Monday the U.S. has made "very meaningful progress" with China on trade matters, noting: "Now it's up to both of us to make sure that we can implement it."

Mnuchin's comments followed remarks he made over the weekend when he said the prospect of a trade war between the U.S. and China was "on hold" as the two countries worked to smooth out trade relations.

The remarks pushed U.S. equities higher on Monday, with the Dow Jones industrial average rallying nearly 300 points to close above 25,000 for the first time since March.

Tuesday, May 22, 2018

Is This Low-Risk Investment Looking Smart Right Now?

The stock market has finally seen some long-awaited volatility so far in 2018, with market indexes like the Dow Jones Industrials (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) having climbed to all-time record highs before putting in a major correction for the first time in a long while. Amid increasing turmoil, investors are starting to turn to tried-and-true favorites for preserving their capital during rough markets. Yet before jettisoning a strategy that's worked well for nearly a decade, smart investors are rightfully thinking carefully before moving to what many perceive as safer alternatives to stocks.

One investment that's been around for decades is the savings bond. With a long history that dates back to World War I and beyond, savings bonds have a reputation for being the gift that a grandmother or grandfather gives to grandkids to help them start a long-term savings strategy. As interest rates start to move higher and stocks have seen ongoing pressure, some believe that now might be the time to take a closer look at savings bonds and how they can add diversification to an overall investment portfolio.

Savings bonds piled up in a way that only lets you see the top line of each bond.

Image source: Getty Images.

2 types of savings bonds

Savings bonds are debt obligations issued by the federal government. Just like Treasury bonds and other national obligations, savings bonds are backed by the full faith and credit of the U.S. government, making them effectively free of default risk.

Savings bonds come in two basic types. Series EE bonds pay a fixed rate of interest that's determined at the time that you buy the bond. The rate is based on prevailing market interest rates at the time of purchase, and the Treasury changes the rate on new bonds every six months. Unfortunately, the Treasury has set those rates at such low levels that series EE bonds aren't worth investing in. Currently, the rate is just 0.1%, and that's been the rate since 2015. However, there's one aspect of EE bonds that can make them slightly more attractive: If you hold them for 20 years, you're guaranteed to double your money. Even then, though, that works out to a long-term rate of just 3.5% -- a pretty modest return for such a long-term investment, although admittedly it's higher than what Treasury bonds currently pay.

Series I bonds are more intriguing. The value of these bonds is tied to inflation, with a fixed rate of interest added on top of whatever change in inflation occurs during the period as measured by the U.S. Consumer Price Index. So for example, if inflation rises 1% during a certain six-month period -- or an annualized rate of inflation of about 2% -- then the interest rate for the following six months will be roughly 2% plus the specified fixed rate. The current rate on I bonds purchased from now until Oct. 31, 2018 is 2.52%, based on a 0.3% fixed rate and a semiannual inflation rate of 1.11%. Again, that's not a huge rate for the long run, but it beats short-term savings account and CD rates right now.

Can savings bonds work for you?

Savings bonds aren't meant to be short-term investments. You have to wait a full year before you can redeem savings bonds at all, and until you've held it five years, you'll forfeit three months' worth of interest if you cash them in. So if you want quick availability of your cash, savings bonds won't typically be a smart move.

However, as alternatives to other fixed-income securities, savings bonds do have some advantages. Although they accrue interest, savings bonds don't require you pay to tax on that interest until you actually cash them in. There are even some provisions of the tax code that can let you treat the interest as tax-free if you use the proceeds for certain purposes. Moreover, unlike Treasury bonds, savings bonds never go down in value, and even if there's a major deflationary event, I bond rules prevent price adjustments from sending interest rates below zero. That might not seem like that big a deal, but with rates on the rise and bond prices falling, many investors are learning the hard way that bonds aren't as safe as they originally thought.

Savings bond purchases are capped at $10,000 annually per person for each individual series, or a total of $20,000 if you buy both Series EE and Series I bonds. That emphasizes the small-investor focus of the program, and it also prevents investors with larger portfolios from overly taking advantage of their unique provisions.

If you want to give a child or grandchild an investment that will truly grow over time, a gift of stock will work much better than a savings bond. But for those looking to diversify their portfolios with a fixed-income investment that has some favorable traits, Series I savings bonds are worth a closer look right now.

Sunday, May 20, 2018

Walmart (WMT) Stake Boosted by Mitchell Capital Management Co.

Mitchell Capital Management Co. increased its holdings in Walmart (NYSE:WMT) by 107.9% in the 1st quarter, according to the company in its most recent Form 13F filing with the Securities & Exchange Commission. The institutional investor owned 10,386 shares of the retailer’s stock after acquiring an additional 5,390 shares during the period. Mitchell Capital Management Co.’s holdings in Walmart were worth $924,000 at the end of the most recent quarter.

Several other hedge funds have also added to or reduced their stakes in WMT. Amundi Pioneer Asset Management Inc. grew its holdings in shares of Walmart by 955.2% in the fourth quarter. Amundi Pioneer Asset Management Inc. now owns 4,668,539 shares of the retailer’s stock valued at $461,019,000 after acquiring an additional 4,226,117 shares in the last quarter. Fisher Asset Management LLC grew its holdings in Walmart by 43.5% during the fourth quarter. Fisher Asset Management LLC now owns 8,706,981 shares of the retailer’s stock valued at $859,814,000 after purchasing an additional 2,637,516 shares during the period. Thomaspartners Inc. bought a new position in Walmart during the first quarter valued at $229,117,000. Two Sigma Advisers LP grew its holdings in Walmart by 74.7% during the fourth quarter. Two Sigma Advisers LP now owns 1,622,473 shares of the retailer’s stock valued at $160,219,000 after purchasing an additional 693,899 shares during the period. Finally, Teachers Advisors LLC grew its holdings in Walmart by 20.4% during the fourth quarter. Teachers Advisors LLC now owns 3,963,476 shares of the retailer’s stock valued at $391,393,000 after purchasing an additional 672,033 shares during the period. 30.00% of the stock is owned by institutional investors.

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Walmart opened at $83.64 on Friday, according to Marketbeat Ratings. Walmart has a twelve month low of $73.13 and a twelve month high of $109.98. The company has a current ratio of 0.76, a quick ratio of 0.20 and a debt-to-equity ratio of 0.46. The stock has a market cap of $255.15 billion, a price-to-earnings ratio of 18.92, a PEG ratio of 2.98 and a beta of 0.54.

Walmart (NYSE:WMT) last released its quarterly earnings results on Thursday, May 17th. The retailer reported $1.14 earnings per share for the quarter, beating the Zacks’ consensus estimate of $1.12 by $0.02. Walmart had a return on equity of 16.85% and a net margin of 1.97%. The business had revenue of $122.69 billion for the quarter, compared to the consensus estimate of $119.29 billion. During the same quarter last year, the business posted $1.00 earnings per share. The company’s revenue for the quarter was up 4.4% on a year-over-year basis. analysts predict that Walmart will post 4.89 EPS for the current fiscal year.

The company also recently declared a quarterly dividend, which will be paid on Wednesday, January 2nd. Shareholders of record on Friday, December 7th will be given a dividend of $0.52 per share. The ex-dividend date of this dividend is Thursday, December 6th. This represents a $2.08 dividend on an annualized basis and a yield of 2.49%. Walmart’s payout ratio is 47.06%.

Several equities analysts have weighed in on the company. Barclays increased their price objective on Walmart to $120.00 and gave the company an “overweight” rating in a report on Friday, January 26th. ValuEngine raised Walmart from a “hold” rating to a “buy” rating in a report on Friday, February 2nd. Vetr raised Walmart from a “hold” rating to a “buy” rating and set a $110.28 price objective for the company in a report on Thursday, February 1st. JPMorgan Chase reissued a “neutral” rating on shares of Walmart in a report on Tuesday, January 23rd. Finally, Zacks Investment Research lowered Walmart from a “buy” rating to a “hold” rating in a report on Sunday, January 21st. Nineteen equities research analysts have rated the stock with a hold rating, fifteen have assigned a buy rating and two have given a strong buy rating to the company’s stock. The company has an average rating of “Buy” and a consensus target price of $96.56.

Walmart Profile

Walmart Inc engages in the retail and wholesale operations in various formats worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, drugstores, and convenience stores; membership-only warehouse clubs; e-commerce Websites, such as walmart.com, jet.com, hayneedle.com, shoes.com, moosejaw.com, modcloth.com, bonobos.com, and samsclub.com; and mobile commerce and voice-activated commerce applications.

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Institutional Ownership by Quarter for Walmart (NYSE:WMT)