Yield is fickle.
If you can get a decent yield, a decent yield meaning 3% or better, and that yield is from a non-retail real estate investment trust (REIT), or a trusted utility, it's been a major lift or at least safety net for a stock. The gains, for example, in the real estate investment trusts related to data centers or e-commerce have been incredibly strong. The more controversial names, like Ventas (VTR) , which is a senior living REIT that's periodically raided by stupid shortsellers, is up 25% and yields 4%.
When it comes to utilities, anything that's a name brand, even if it has operating difficulties like a Southern Company (SO) , has been nothing short of amazing, up 40% with a dividend that currently yields 4%.
Even the much maligned Consolidated Edison (ED) , at least in terms of negative analyst ratings, has rallied 22% with a dividend that now gives you just a 3% yield.
But once you get outside the utilities and the REITs, it is a whole different story. I have, for weeks, been working on Macy's (M) , an iconic retailer that should earn almost $3.00 and sells for just 5x earnings, giving it an astounding yield of 10%. Macy's has $5.2 billion in current liabilities and all I can say is that a 10% yield is a sign that the company can't make good on this liabilities. I find that fanciful given the more than $2.4 billion in earnings before interest, taxes and depreciation, as well as $781 million in free cash flow. But the yield has offered you no protection to speak of.
How about BP (BP) ? This company's stock yields 6.6% and it has the firepower to easily lift that dividend and I suspect it will. But if you told me that it could ever yield this much in a declining interest rate environment, I would have said you are crazy. That said, it is a fossil fuel stock and they are beginning to be divested by many ESG-oriented managers and younger money-runners seem to want nothing to do with them.
I thought Dow Chemical (DOW) with is strong cash flow would hold at 5%, again because of the promise of a much better than expected yield versus Treasuries. But Dow is also a fossil fuel company that makes plastics, which have become the new coal. You make plastics you aren't sustainable except in a landfill. I know CEO Jim Fitterling is trying to change the company's stripes by doing everything humanly possible to help rid the planet of plastic pollutions, but the sincerity of his efforts seem meaningless in the face of the company's core DNA, which is how it yields 6%.
Then there's Carnival (CCL) . Last night I was asked about Carnival, which had a wildly panned conference call because the company's adding capacity at the same time cruising, at least in Europe, is being cut back because of harder economic times. The company's always had a generous dividend because of its huge cash flow. Now, though it's too generous a dividend and it yields almost 5%. That's so high that it's longevity was actually questioned on the call given much-higher capacity additions than I know I expected not even six months ago.
Finally there are the master limited partnerships related to oil. These are just plain disasters. You've got outfits like Energy Transfer (ET) that sports a 9.6% dividend. I thought a 6% yield would hold the stock higher. MPLX (MPLX) is a fine MLP with a 9.4% yield. These yields offer no protection whatsoever, though, as the stocks blasted right through 6, 7, 8, and 9 like a knife through butter. On fossil fuels, no growth=sell, sell, sell -- regardless of the yield.
So understand that while all yields look alike, some are more equal than others with the some being the REITs and the utilities and the others being retailers, chemicals and fossil fuels of any way, shape or form.
