Annaly Capital is a mortgage REIT (the company basically borrows money against its book value to buy mortgage related assets, mainly agency RMBS), and it often captures the eye of income-focused investors because it offers a high yield. Mortgage REITs have been through a lot this year as liquidity challenges caused heightened volatility. However, not all mortgage REITs are created equally. In this article we review Annaly Capital, with a particular focus on the preferred shares. The preferreds offer compelling high yields, price appreciation potential and they are safer than the common. We consider Annaly’s current balance sheet and liquidity, credit spreads, share price action, valuation and the big risks. We conclude with our opinion on investing.
This 9.4% Yield Bond CEF Is Worth Considering
We currently own this 9.4% yield BlackRock Closed-End Fund (CEF) for its many attractive qualities. We last wrote about the compelling bond CEF opportunity in late March when the markets were falling apart due to covid fears (for example here and here), and as you can see in the following chart, shares have since rebounded strongly. However, we believe the price remains attractive, and in this article we review the compelling qualities and important risks (buying opportunities) to watch. Worth mentioning, despite volatility, it has never stopped paying (or even reduced) its big Monthly dividend payments to investors.
Microsoft: New Options Trade, Another High Income Bullish Put Spread
The tech sell off is continuing this week, and cloud stocks continue to be among the very hardest hit. Microsoft has been rapidly growing its cloud business on a massive scale, and the shares have sold off considerably harder than the rest of the market in recent weeks. And this morning’s small news (Microsoft is paying $7.5 billion cash for game developer, Bethesda Softworks) has created more jitter among investors—perfect for this trade because to prevent Microsoft shares from eventually going higher in the long-term has about a snowflake’s chance in Gahenna. In report, we revisit the high-income-generating opportunity that current exists in bullish vertical put spreads on Microsoft (not as scary as it sounds). Our previous implementation of this strategy expired (quite successfully) on Friday, and the opportunity is again very attractive.
This Healthcare Diagnosis Stock: +50% Upside in 6 to 12 months
This particular company is a rapidly growing leader in cancer prevention and diagnosis, with high margins and a large total addressable market. However, the shares have recently sold off based on short-term fear (COVID-19 has temporarily slowed screening, but will ultimately accelerate adoption) and shortsightedness related to profitability. As a result, the valuation is now quite attractive relative to the long-term opportunity. In this article, we review the business, the growth opportunities, recent performance and valuation, risks and conclude with our opinion on investing.
Why This Tiny Digital Advertiser's Shares Could Soar
The COVID-19 pandemic has created tremendous challenges and opportunities. And in the case of this tiny digital advertising firm, the opportunity has been magnified not only by the pandemic, but also by the firm’s own specific challenges and now recent merger. In fact, advertisers have significantly reduced digital ad spend in the short-term (which has magnified pressure on these shares), but as we head into 2021, digital ad spend is expected to resume rapidly, and it could slingshot these shares higher, especially considering the improved long-term business model and enormous market opportunity.
Tsakos Preferreds: Despite Risks, Attractive +10% Dividend Yield, Capital Appreciation Potential
If you are an income-focused investor, these preferred shares are worth considering. Despite the risks (such as a high debt load, a growing amount of preferred share dividend payments, significant fleet depreciation and the first decrease in oil demand since 2009), there are reasons to believe this investment opportunity is very attractive. For example, the company has historically navigated through many crisis situations, thanks in large part to its fixed-rate chartering policy. Further, the company has a diversified fleet and a consistently improving debt profile (albeit with growing preferreds). Further still, efforts to improve the common stock’s price (via a reverse stock split), the expected recovery in charter rates (from an anticipated oil demand rebound in 2021) and a possible tanker supply imbalance (created by the implementation of IMO regulations), all bode well. Overall, we like the deeply discounted price on the preferred shares, especially considering the big stable dividend payments to investors.
New Options Trade: Very High Upfront Income, Bullish Vertical Put Spread (The Cloud-Tech Sell-Off Continues)
Cloud and technology stocks are selling off hard again this morning, and a lot of investors are fearing there is a lot more selling to come. After all, it is cloud and tech stocks that have rallied so hard this year as their natural “social distancing” qualities have made them the beneficiaries of the dramatic pandemic rebound that has been going on for months.
However, the sell off has been indiscriminate (among cloud and tech), and some very attractive businesses are getting closer to trading at very attractive prices. In this report, we review an attractive cloud-tech juggernaut, and share an attractive options trade that utilizes a “bullish vertical put spread” (not as scary as it sounds). The trade lets you generate attractive upfront income, giving you the chance to pick up shares of this attractive business at an even lower price, while also limiting your downside risk (and limiting the amount of cash you need to set aside to secure the trade as compared to simply selling a naked put option). We believe this is a very attractive trade to place today, and potentially over the next few trading sessions.
Top 10 Big-Dividend REITs
Over the last six months, Real Estate (XLRE) has been one of the worst performing sectors of the market, but that could be about to change. With the amazing growth stock rally starting to wobble, select REITs are looking particularly attractive as the world begins to get a better grip on covid. Obviously, the pandemic challenges are great and in many cases they add to the struggles of a secular demise in some brick-and-mortar commercial real estate. Nonetheless, select REITs are particularly attractive, and this report ranks our top 10 big-dividend REITs (5% yields and above), counting down from #10 to #1.
Brookfield Property REIT: 11.5% Yield, Higher Risk
Brookfield Property REIT (BPYU) offers an 11.5% dividend yield that is hard to ignore. While clearly there are concerns given its exposure to malls and retail, we believe the backing of parent, Brookfield Asset Management (BAM), will help it weather the storm. BAM’s decision to fund BPYU’s tender offer is a vote of confidence in the business, and it also signals to investors that the current valuation may be a bargain. If you have a higher tolerance for volatility and risk in your portfolio, you may want to consider adding shares. This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion about investing.
Federal Realty Trust: Dividend Capture Covered Call Income
With the market on pace to wrap up its best August in 30 years, now presents an interesting opportunity to generate attractive upfront income with a dividend capture covered call option strategy on Federal Realty Investment Trust (FRT). This trade may sound daunting because FRT is in the highly challenged “retail REIT” industry, and because this option trading strategy is less common. However, we believe the trade is an attractive one to place today, and potentially over the next few days, as long as the underlying stock price doesn’t move too dramatically and you can get comfortable with the moving parts of this simple yet attractive opportunity. On an annualized basis, the trade will net us up to 17% extra income over the next 47 days.
Microsoft: Growth, Cash Flow and Perhaps TikTok
Microsoft (MSFT) has experienced an impressive turnaround over the last few years. The company’s top-line growth has been fueled by its cloud computing solutions. Demand for cloud computing has been on the rise and has seen acceleration post COVID-19 due to a global push for business digitalization. More recently, Microsoft has been in the news after announcing that it (along with Walmart (WMT)) is in talks with ByteDance to acquire social media app TikTok’s business in certain countries including the US. In this report, we analyze Microsoft’s business model, its market opportunities including the potential TikTok transaction, competitive positioning, valuations, risks, and finally conclude with whether an investment in the company’s stock offers an attractive balance between risks and rewards.
New Options Trade: Very High Upfront Income, Bullish Vertical Put Spread
A lot has changed since the onset of the pandemic, obviously. And healthcare is one sector that has felt the impacts. This article not only reviews an innovative healthcare leader, but we also share an attractive option trade that utilizes a lessor known (but not complicated) strategy, sometimes referred to as a bullish vertical put spread (not as scary as it sounds). The trade lets you generate attractive upfront income, while limiting your downside risk, limiting the amount of cash you need to set aside to secure the trade, and it also gives you the chance of owning a very attractive stock at a lower price. Given the stock’s recent price move, we believe this is an attractive trade to place today, and potentially over the next few trading sessions.
Simon Property Group: 8% Yield, Discounted Price, Real Risks
Retail REITs have been among the hardest hit stocks during COVID19 lockdowns, and blue-chip Simon Property Group (SPG) has not been spared. Its dividend has been reduced significantly and its share price has fallen dramatically. Furthermore, its former Taubman Centers (TCO) deal, recent retailer buying spree and rumors of a deal with Amazon (AMZN), complicate matters further. In this article, we review the health of the business, valuation, risks, dividend safety, and conclude with our opinion about whether SPG is worth considering if you are a long-term income-focused investor.
Portfolio and Tracker Tool Updates
We do not trade often at Blue Harbinger, but we have just made significant updates to both our Income Equity and Disciplined Growth portfolios. This report provides an overview of the changes, as well as details on why we made the changes. We also highlight some updates to the website, such as the new home page and the new portfolio tracker tool (both are designed to be more useful to readers).
Verizon: 4.2% Dividend Yield, Oasis or Mirage?
Compared to high-flying tech stocks, dividend stocks have fared poorly since the onset of the pandemic, and some investors are left wondering if this trend is permanent. Verizon (VZ) is one such stock that investors have grown to trust (14 consecutive years of dividend increases), but just how safe is its business model? In particular, will its recurring subscription revenue stream (mainly from its wireless business) keep cash flowing? This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion on whether Verizon is worth considering if you are a long-term income-focused investor.
Income via Growth Stock: Time to Sell Put Options?
This powerful consumer internet company operates a leading digital entertainment business as well as an e-commerce platform and a digital financial services operation in Southeast Asia. The company operates in some of the fastest growing economies in the world. And it is benefiting from the tailwinds of global “Stay-at-home” orders. Not surprisingly, the stock has rallied over 200% since the start of the year. In this report, we analyze the business model, competitive strengths, financial position and finally conclude with our opinion on the stock’s risk-reward (as well as an interesting options trade idea that generates attractive upfront premium income).
Federal Realty: A Dividend Aristocrat Among REITs
Despite having just increased its dividend for the 53rd consecutive year, retail REIT Federal Realty Investment Trust (FRT) has been hit hard by the current pandemic. Conditions have started to improve (e.g. more tenants are re-opening and cash collections are increasing), but in order to succeed FRT will need to make smart capital allocation decisions and manage its liquidity carefully (its dividend payout ratio is near the high end of its historical range). This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion on whether FRT is worth considering if you are a long-term income-focused investor.
Income Via Growth: A Post-Pandemic Cybersecurity Winner
From time to time, we like to share highly attractive “income-via-growth” opportunities, and this is one of those times. This article is about a stock that pays zero dividend, but can provide a lot of spending cash to investors through long-term price appreciation. We believe it’s a good idea to sprinkle a few of these types of stocks into your portfolio, but if you are looking strictly for high dividend stocks, this article is not for you.
New Options Trade (Triton): High Upfront Income on Short-Term Volatility
Intermodal shipping container company, Triton International (TRTN), announced expectation beating earnings last week, and the shares climbed significantly as a result. However, the shares gave back a large portion of those gain yesterday in a volatile trading session. In this article we share a Triton options trade that allows you to generate big upfront income and also gives you a chance to own an attractive big-dividend business at an even lower price. We believe the trade is an attractive one to place today, and potentially over the next few days, as long as the underlying stock price doesn’t move dramatically before then.
AT&T's +7% Dividend Yield: It's a Pandemic!
AT&T’s (T) share price has declined dramatically this year (due to the global Covid-19 pandemic), similar to declines when the Tech Bubble burst (early 2000’s) and during the Financial Crisis (2008-2009). However, AT&T’s dividend has continued to steadily rise for over 36 consecutive years (it’s a dividend aristocrat), and the current yield (over 7%) is the highest it’s been during the past two decades. This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion about investing in AT&T.