Real Money's editors tasked me with producing a column listing five attractive dividend plays in this market. First, I should go back to a similar column I wrote for RM on July 21 that outlined my dividend picks for the second half. From a macro perspective, it is probably a bit of an understatement to note that prevailing market trends (especially Friday) are favoring growth stocks over income stocks. Amazon (AMZN) , Facebook (FB) , Netflix (NFLX) and Alphabet (GOOGL) do not pay dividends, but FANG is the thing. (Facebook and Alphabet are part of TheStreet's Action Alerts PLUS portfolio.)
That said, total returns are important, so let's review my July picks and then I'll highlight five more attractive high-yielders at the end of the column. Figures presented represent total return since July 21; when analyzing dividend stocks, this should always be the metric used.
Target (TGT) : (+11.4%) In hindsight, getting Target in the low $50s feels like an absolute win. I mentioned "periodic 'Amazon is going to kill this one' hysteria" in my July RM piece, and TGT was down Friday. If this turns into real selling pressure and TGT falls back into the $50s, you should buy more of it.
Occidental Petroleum (OXY) : (+9.0%) I absolutely loved Friday's move through $60 on Brent crude and I believe oil prices will rise further as the fourth quarter progresses. OXY's done well since July and I no see reason to sell shares in light of the bullish industry environment.
Annaly Capital (NLY) : (+1.4%) I am still bullish on mortgage REITs as the Fed begins to unwind its massive holding in mortgage-backed securities. Ultimately, though, NLY's relative performance is going to depend on the bond market. If you think we are heading for a 3% yield on the 10-year, you should not own NLY; otherwise it is a solid hold with a 10.3% yield.
Helmerich & Payne (HP) : (-7.5%) Sentiment on the oil services sector has turned decidedly negative as the U.S. oil rig count has pulled back. Since I'm bullish on oil, I would hold HP even as I believe the rig count will decline slightly through year-end. In the long run, that's good for U.S. shale producers and good for HP, which sports a current yield of 5.4%
Frontier Communications (FTR) : (-15.5%.) Everybody hates Frontier, and I am not enjoying the bloody hands I have earned from trying to catch this falling knife. CEO Daniel McCarthy mentioned the magic words "inflection point" on the second-quarter earnings call and Tuesday's third-quarter call had better confirm that theme. I'm looking for a manageable level of subscriber churn (less than 2%) and confirmation that annual EBITDA will exceed $3.6 billion in 2017.
TheStreet chats with Target's CEO
So switching from rear-view to prognostication, here are five names for the rest of 2017 (with current yields in parentheses):
Exxon Mobil (XOM) : (3.7%) I was impressed with XOM's ability to beat expectations with third-quarter results this morning, and with industry pricing improving, those expectations are likely to increase for the fourth quarter.
Teva Pharmaceutical (TEVA) : (8.4%) A controversial name and, admittedly, I am not a pharma industry expert. That eight handle on the yield makes me want to do more work on the sustainability of the dividend, though, with the knowledge that growing competition for Copaxone is going to hamper TEVA's profitability.
CenturyLink (CTL) : (12.0%) Another ILEC (incumbent local exchange carrier), and one that is hated almost as much as Frontier. The big "if" here is the approval of CTL's merger with Level 3 (LVLT) . This transaction is being held up by the state of California despite already having received approval from the Department of Justice and Federal Trade Commission. CTL management guided toward approval in "mid- to late October" and we are running out of days for that prediction. Merger approval would drive a sharp pop in CTL shares, in my opinion, and make Friday's 12% yield seem like a distant memory.
Walmart (WMT) : (2.3%) It's a strange world in which a 2.3% dividend yield seems attractive, but that's where we are. If past form holds, WMT will announce a $0.01-per-share increase in the quarterly dividend in February, and the money it is not returning to shareholders is being wisely invested in competition with Amazon for the digital consumer.
Navios Maritime Midstream Partners (NAP) : (18.6%) I've written about Navios Group companies many times for RM, and NAP is especially relevant now given the seasonal uptrend in day rates for Very Large Crude Carriers and the Nov. 10 record date for its next quarterly cash distribution.