If you are looking to generate powerful "income via growth" (i.e. selling some of your long-term winners to generate spending cash) this stock remains an attractive buying opportunity. It is one of the largest, well-diversified global SaaS companies. It has an attractive subscription-based business model that leads to stable and predictable cash flow generation. It also has a wide competitive moat to ensure future earnings growth. Further, it continues to deliver strong and consistent top and bottom-line growth (not to mention its robust balance sheet position, and significant FCF generation). This report reviews the business, COVID-19 impacts, competition and concludes with our opinion on investing.
Spirit Realty: High Income Options Trade, Preferred Shares and Common Stock
Spirit Realty Capital (SRC) is a leading self-managed net-lease REIT that owns single-tenant commercial (mostly retail) real estate properties across the US. Investor sentiment turned sharply negative in February due to the Covid-19 outbreak, but the shares have experienced a marginal recovery in recent weeks. In this report, we consider the common shares, the preferred shares and the relative attractiveness of generating upfront income by selling out-of-the-money put options for investors fearing a second wave coronavirus sell off. In particular, we consider the business, Covid-19 impacts, ability to meet financial obligations, dividend and income prospects and finally conclude with our views on investing.
E-Commerce REIT: Sturdy 6.4% Yield, Risk May Boost Upside
This small cap industrial REIT is well positioned to keep benefiting from its high exposure to ecommerce logistics. The dividend is very well-covered, and management remains highly confident. However, its relatively high leverage and exposure to one big risk in particular is important to consider. In this article, we review the business, dividend safety, valuation, and conclude with our opinion on why the company’s biggest risk may actually provide an additional boost to the share price as the economy emerges from the most challenges stages of the global coronavirus pandemic.
CareTrust: Financially Strong, Despite the Pandemic
For years, investors have chased healthcare REITs with tenants funded by “private pay” because they feared ongoing government pressure on reimbursement rates. However, in this pandemic, it turns out they had it all wrong. CareTrust (CTRE) is a “mostly skilled nursing facilities” healthcare REIT, and it has benefited from generous government support during this pandemic. And on top of that, the CEO claims COVID hasn’t been as economically devastating as narratives suggest. This article reviews the health of the business, valuation, risks, dividend safety (it yields around 4.8%), and concludes with our opinion on investing.
Oaktree BDC: Disproportionate Sell-Off Provides a Window of Opportunity
This particular Oaktree BDC invests primarily in high-yield, first lien, liquid, middle-market debt. And even though its share price has been hit hard by the COVID-19 pandemic (as most BDCs have been), Oaktree has been positioning the portfolio and balance sheet conservatively for multiple years in anticipation of stressed market conditions (such as the current market environment), so it can not only weather the storm, but also so it has the financial wherewithal to be opportunistic when other BDCs cannot. This is also a big part of the reason OCSI recently proactively reduced its dividend—a smart thing for new investors, in our view. This report reviews the business, COVID-19 impacts, dividend prospects, valuation and risks. We conclude with our opinion about the attractiveness of this 8.0% yield BDC.
Owl Rock’s 10% Dividend: Different Than Other BDCs
The negative impacts of COVID-19 have been particularly pronounced for many Business Development Companies (“BDCs”). Owl Rock Capital Corp (ORCC) is one example where the share price has been pushed lower and the dividend yield has mathematically risen to over 10% (over 12.5% if you count the recently declared special dividend). Owl Rock’s strong liquidity position will help it whether the current storm and take on attractive new opportunities once it has addressed the most pressing liquidity needs of its existing portfolio companies. This article reviews the health of Owl Rock’s business, valuation, risks, dividend safety, and concludes with our opinion about why it may be worth considering if you are a long-term income-focused investor.
Gladstone: Danger Ahead for this Popular 9.0% Yield BDC
If you count the recently declared ordinary and supplemental dividends, popular Business Development Company (“BDC”) Gladstone Investment Corp (GAIN) yields approximately 9.0%. And this is tempting to a lot of investors considering it pays monthly, the price is still down, and it appears to be in a strong liquidity position. However, GAIN’s portfolio of middle market companies is at risk of being negatively impacted by the coronavirus—more so than other BDCs. In this report, we analyze Gladstone’s business model, the coronavirus impacts, valuation, dividend safety and additional risks. We conclude with our opinion about investing.
Portfolio Tracker Tool Note
Main Street Capital: Dividend Uncertain, Upside Clear
Income investors had grown to love Main Street Capital’s (MAIN) big, safe, monthly dividend so much that its share price had risen to a dramatic premium relative to its net asset value (“NAV”). Then the coronavirus hit. The share price plunged, once loved supplemental dividends have been suspended, and even the “sacred” regular dividend is now at risk. In this report, we analyze the company’s background, impacts of the coronavirus on its business, earnings power, the dividend, valuation and risks to understand whether now is the right time to establish or add to existing positions.
Ares 12% Yield: It Sticks Out Like A Sore Thumb
Ares Capital (ARCC) is a big-dividend business development company (“BDC”) that has sold off hard during the pandemic because of its exposure to small (“middle-market”) businesses (i.e. the business than have been hit particularly hard). In this article we review the business (including important sector exposures), the balance sheet liquidity (to deal with the crisis), dividend safety, valuation and risks, and then conclude with our opinion on why this particular BDC stands out like a sore thumb.
Two (2) Preferred Stock CEFs: Big Monthly Income, On Sale
The preferred shares of many companies are now trading at attractively discounted prices as the COVID-19 pandemic has stoked fear among investors. And in many cases, this fear is unwarranted. One attractive way to play this opportunity is through closed-end funds (“CEFs”) that focus primarily on preferred stocks. This article highlights two compelling closed-end funds, offering big monthly income payments to investors (they yield 7.6% and 7.8%, respectively), and they’re currently trading at attractively discounted prices (thereby providing an opportunity for some price appreciation—in addition to big monthly income).
Triton Preferred Shares: Post-Pandemic Reality
Triton International (TRTN) is an intermodal shipping container company, and the big-yield common and preferred shares have been impacted dramatically by the worldwide COVID-19 pandemic. The company just released earnings, and gave us some important new insights. This report reviews the impacts of the economic slowdown on Triton’s business, its financial wherewithal (particularly cash), the competitive dynamics of the industry (and what might happen if Triton can weather the COVID-19 storm), valuation and risks. We conclude with our opinion about investing in the common (7% yield) and preferred (+9% yield) shares.
NuStar Preferreds Yield +15%: Real Risks, Big Rewards
NuStar Energy is a US based oil and natural gas midstream service provider. And despite the notion that its business is immune to energy price fluctuations (because of its long-term take or pay contracts) the recent crash in oil prices will inevitably have a significantly negative impact on NuStar because many of its customers are increasingly at risk of bankruptcy. In this report, we analyze the company’s business mix, income potential, its ability to meet financial obligations, and finally conclude with our opinion on whether the company’s common and preferred units offer an attractive balance between risks and rewards.
Realty Income: COVID-19 Big Loser or Big Winner? Here's Our Opinion
Realty Income, self-proclaimed “The Monthly Dividend Company,” is a revered dividend aristocrat with a 5.2% dividend yield and it has delivered for many investors for decades. But it’s still a retail REIT, and the impacts of COVID-19 social distancing are different than anything the company has experienced in the past. The shares have sold off hard, and some investors are left wondering if this a big warning or a big opportunity? This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion on investing.
Facebook: Money Printing Machine, On Sale
From time to time, we like to share attractive “Income via Growth” stocks. These are stocks that don’t necessarily pay big dividends, but they do provide the potential for diversified long-term high income from price gains (i.e. selling some of your winners to generate income). And the stock we review today is an absolute money printing machine, trading at a very compelling price thanks to the coronavirus sell off. Specifically, this company is a fast grower, with a wide moat, high margins, no debt and lots of cash. Simply put, it’s a money printing machine.
Paylocity: Attractive Business, Attractive Price, Powerful Upside
At Blue Harbinger, we make it a point to diversify our holdings across attractive opportunities among different styles and sectors. This diversification not only reduces risks, but it opens up more attractive opportunities. This article focuses on a cloud-based payroll processing company that can provide investors powerful long-term income through price appreciation. We’ve owned this stock since 2015, and believe the current market selloff makes the upside potential (i.e. income via growth) extraordinarily attractive in the quarters and years ahead.
Double-Digit Yields: Natural Gas and The Companies that Move It
The volume of natural gas demanded did not go down appreciably during the Great Recession nor the 2015 oil price crash, and it won't here either. Thus firms whose main business is moving natural gas from here to there for a fixed fee are not going to be that heavily affected. This guest article (from Darren McCammon) reviews two such companies that currently offer attractive, well covered, double digit dividend yields (we currently own one of the two). According to Mr. McCammon “these are exactly the type of firms one should be buying greedily as everyone else runs in fear.”
Omega’s 10% Yield: Is Low Private Pay Now a Strength?
The high percentage of government-subsidized tenants (i.e. Medicare and Medicaid) of Omega Healthcare Investors (OHI) is often considered to be a bad thing (because the government creates painful pricing pressure that doesn’t exist among private pay tenants). However, in light of the coronavirus crisis, government support has become more attractive, and this shift is strengthened as Omega’s Skilled Nursing Facility (SNF) industry is in a much better place (in terms of supply and demand) than it was just a few years ago. In this report, we review Omega’s asset mix, market dynamics, dividend prospects, risks, and then conclude with our opinion on investing.
PIMCO Bond CEFs: Are You Betting Against The Fed?
Many popular PIMCO closed-end funds (CEFs) have sold off particularly hard as investors fear the potential impacts of a coronavirus-driven recession. Further, large CEF premiums versus net asset values (NAVs) have evaporated into unusually large discounts as selling pressure has been intense. Further still, the price declines have been exacerbated by a drying up of liquidity in the bond markets. And even though the US Fed has dramatically increased its quantitative liquidity easing in the treasury and agency Mortgage Backed Securities (MBS) repo markets, just this week it announced that it will “be moving for the first time into corporate bonds, purchasing the investment-grade securities.” To some investors, the Fed’s essentially unlimited buying power is terrifying, and to others it is highly reassuring. Will you be betting against the Fed?
Big Monthly Dividend REIT: High E-Commerce Exposure Reduces Coronavirus Risks
This single tenant focused industrial REIT offers healthy monthly dividend payments (8.0% yield) and the potential for significant price appreciation. We believe it will benefit from the current uncertainty amid the coronavirus outbreak given its high exposure to the e-commerce sector. The trend for online shopping is a secular one but has become more prominent currently as people are forced to stay at home. We do caution that the current situation will impact the business but given its diversified portfolio and high exposure to e-commerce we expect healthy price appreciation once the situation returns to normalcy. This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion about why it’s worth considering if you are a long-term income-focused investor.