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- The Dividend Investor's Edge Newsletter - April 25th 2022
The Dividend Investor’s Edge is a weekly newsletter designed to give you, the investor, a full picture of where the stock market is, and to equip you with important information I came across during the week, and what to look for in the week ahead, all constructed in an easy to understand format.
This newsletter is designed for investors of all levels.
Each Week I will discuss:
• An update on the Stock Markets major averages
• Stock Market: On The Horizon
• Notable Upgrades/Downgrades
• Dividend News
📈 Quick Look At The Markets 📉
As a reminder or for those of you new readers, in the “Quick Look At The Markets” section I plan to give you a recap on the prior week for the S&P 500 as a whole as well as the top performing and worst performing sectors. In addition, I will touch on volatility and fear in the market currently, which are important factors to consider when investing.
Oh boy, that was a wild week on Wall Street. The Dow Jones Industrial closed down nearly 1,000 on Friday, marking the worst day since October of 2020. I had some QQQ puts in play to help offset some of the bloodbath, but it was still a brutal day. On the bright side, when you get a market-wide sell-off like that, some high-quality stocks that may have already been cheap, get even cheaper. Days like we just saw on Friday, very few stocks are shielded from that type of selling.
We end the week on a very negative note and kick off the biggest week of earnings with numerous big time stocks reporting Q1 2022 earnings this week. It is a LOADED week of earnings, which means it will be a VERY busy week for me shifting through all those earnings reports.
The negativity in the markets continues to be related to the Fed and how they will act here with rate increases. Will it be 50bps in the next meeting? Will it be 6+ hikes in 2022? Many questions that investors are looking to have answered and try to plan for within their portfolios.
Inflation remains high and the Fed remains committed to combating that. One great place to look in order to hedge against high inflation is REITs. REITs have performed well in times of high inflation. REITs have built in escalators in their lease agreements, which automatically increase a tenants rent every year. Some REITs have those rent hikes tied to inflation, which in times like this would provide strong tailwinds. One REIT I really like that has this is W.P. Carey (WPC).
To say volatility was back would be an understatement. After a few weeks of easing volatility, fear has crept back into the markets in a big way.
How about the move we saw from Netflix (NFLX) this past week. Now I know they are not a dividend stock, but wow, that was a major downturn. NFLX shares fell 36% on the week.
Looking at the heat map below, it is an ugly one to look at as it is red across the board for the most part. Year-to-date the S&P 500 is down 10.9%, after falling 3.0% last week.
Here is look at the S&P 500 heat map from last week:
Top Sectors For The Week
Real Estate +1.24%
Consumer Staples 0.39%
Worst Sectors For The Week
Communication Services -7.74%
Energy -4.56%
Materials -3.72%
Fear Factor
Volatility levels are back in a strong way, as fear is yet again riding high in the stock market.
Fear and uncertainty is often expressed in the stock market through volatility. One way for investors to understand where the market as a whole is in terms of volatility is by monitoring the CBOE Volatility Index (VIX). The VIX represents the market’s expectations for near-term price changes within the S&P 500 index. The index is derived from index options with near-term expiration dates, projecting a 30-day forward projection.
The VIX ended the week with a reading of 28.21 with the 50-day moving average finishing at 25.71. A reading under 20 is when I consider things to be closer to normal, which is where things stand currently.
Here is a look at the VIX chart with the 50-day moving average:
Another resource you can look at is the Greed and Fear Index that measures market sentiment based on the following seven factors: put/call ratios, junk bond demand, stock price breadth, market volatility, stock price strength, safe-haven demand, and market momentum.
When it comes the the Greed and Fear Index, things have turned negative yet again and have gone from a neutral rating to a FEAR rating. Currently, the index has a reading of 40, which is much lower than where things were last week when the rating was 45.
📰 Stock Market: On The Horizon 📰
In this section labeled “Stock Market: On The Horizon” I will discuss a variety of different topics that have gone on in the market and are on the horizon.
I have already highlighted a few things in the sections above that investors will have their eyes on. There is not much more to say other than BUCKLE UP for the week ahead. Some HUGE reports from market moving companies are set to drop during the week. Apple (AAPL), Alphabet (GOOGL), Meta Platforms (FB), Amazon (AMZN), and Microsoft (MSFT) among others are all reporting during the week. Being that these companies have such huge market caps, if any of them sell-off, it could put the S&P 500 into a tailspin of sorts.
I have not discussed it here before, but now would be a great week to remind you about the sell-off rule. There is an old rule of sorts saying that after a sizable sell-off in a particular stock, investors should wait three days before looking to enter a position. Reason being is the fact that a poor earnings result or conference call discussing guidance that falls short, could lead to a sell-off in a stock. We see it all the time, but these sell-offs could trigger investors on margin or in options to cover a position, which could further intensify the selling in the days after. This is why waiting 3 days is a general rule of thumb to allow things to settle a bit.
If you are not yet subscribed to my YouTube Channel, head over and click that subscribe button so you are notified any time I drop a new video. As you already know, I love Dividend Stocks and on my channel I update viewers on my Portfolio and also drop weekly videos on particular Dividend Stocks that I am looking at.
My latest video covered 3 Cheap Dividend Stocks To Buy. Check it out!
You can also check out my latest Dividend Portfolio update from a few weeks back to see the positions I currently own in my Dividend portfolio. Here is that video:
I will be releasing a new video on Wednesday, so make sure you are subscribed so you do not miss it.
This week is going to be volatile, but remember, scared money doesn’t make money. You want to be able to take advantage of opportunities you see in the market. Do not be so concerned with buying the exact bottom, it is rarely done. Instead, find good opportunities and layer into the positions.
Here is a look at the companies reporting earnings this week.
I briefly touched on REITs above, and that is one sector I will be looking at this week. Medical Properties Trust (MPW), is one of the largest owners of hospitals around the globe, and they are down 20% YTD. Some negative analysts reports have driven the company lower combined with some poor results from healthcare related competitors. This is a great opportunity to grab a high-quality REIT in my opinion.
Let me know in the comments section down below what stocks you are looking at buying.
⏫ Stock Upgrades/Downgrades ⏬
In this section moving forward, I will add any notable analyst Upgrades or Downgrades I came across during the previous week.
UnitedHealth Group got multiple PT hikes after strong earnings last week
Microsoft (MSFT) PT lowered to $355 by Citi (interesting move to make this call the week before earnings)
Diamondback Energy (FANG) PT increased to $204
Johnson & Johnson (JNJ) PT increase to $205 at Credit Suisse and to $210 at Citi
Lockheed Martin (LMT) PT increase to $539 at Susquehanna
Starbucks (SBUX) PT lowered to $105 at MKM Partners
Dominos Pizza (DPZ) PT cut to $440 at MKM Partners
💰 Dividend News
In this section I will detail what I am watching and any Dividend related news.
Schlumberger (SLB) increases the dividend by 40%
NextEra Energy Partners (NEP) increases the dividend by 3.5%
Kinder Morgan (KMI) increases the dividend by 2.8%
Southern Company (SO) increases the dividend by 3%
The Travelers Companies (TRV) increases the dividend by 5.7%
Johnson & Johnson (JNJ) increases the dividend by 6.6%
Other Resources
Here are a few of my latest YouTube videos to watch:
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Have a Great Week!
Mark
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