{"id":84915,"date":"2023-11-15T13:47:53","date_gmt":"2023-11-15T18:47:53","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/2-santa-claus-dividends-to-buy-before-2024\/"},"modified":"2023-11-15T13:47:55","modified_gmt":"2023-11-15T18:47:55","slug":"2-santa-claus-dividends-to-buy-before-2024","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=84915","title":{"rendered":"2 \u201cSanta Claus\u201d Dividends To Buy Before 2024"},"content":{"rendered":"
\n

Look, we\u2019ve all loved watching our dividend payers rocket to the moon<\/em> these past few weeks. Best part is, most of the market has been onboard!<\/p>\n

Here we can see the jump in the S&P 500 as a whole (in purple) versus its return on an equal-weight basis <\/em>(in orange). Sure, there\u2019s a bit of a gap, but safe to say this has been an across-the-board surge.<\/p>\n

We can (in a backhanded way!) thank Jay Powell\u2014just as he hinted that high Treasury yields were doing the Fed\u2019s work for it, the bond market (figuratively) flipped him off \u2026 and Treasury yields plunged from 5% to around 4.6% now.<\/p>\n

Here\u2019s my prediction: yields will keep<\/em> falling\u2014and (some) stocks will keep<\/em> rising.<\/p>\n

Wait until December. The Santa Claus rally will be in effect and the Fed will turn dovish, with the economy tracking toward that soft landing. Inflation will keep fading.<\/p>\n

<\/fbs-ad><\/p>\n

But here\u2019s the twist: we won\u2019t be able to simply buy anything and enjoy the next leg up. There\u2019s still a lot of fear out there. Quality will come first, second and third <\/em>on most folks\u2019 lists as they finally buy back in.<\/p>\n

So now is the time for us to dump weak holdings \u201con the rip\u201d and shift into the remaining bargain-priced dividend stars out there.<\/p>\n

Which brings me to the four tickers below. The first two are flawed dividends that need to be sold yesterday. The next two are bargain buys<\/em> worthy of shifting your cash into.<\/p>\n

\u201cOn the Rip\u201d Sell No. 1: Kohl\u2019s (KSS)<\/h2>\n

If you hold department-store retailer Kohl\u2019s, you have my sympathy. It\u2019s the poster child for cardiac share-price action!<\/p>\n

If you\u2019re hoping for yet another rise from the grave, dear reader, do yourself a favor and step out. Because it\u2019s not getting any better from here. Truth is, Kohl\u2019s 8.9% yield is a warning light: Revenue is down, earnings are down and it has a negative<\/em> payout ratio\u2014so it\u2019s shoveling out a dividend while losing money!<\/p>\n

Meantime, Kohl\u2019s is an ecommerce also-ran, a speck in the rear-view of Amazon.com (AMZN)<\/strong> and Walmart
\n
\n WMT
\n <\/fbs-ticker> (WMT). <\/strong>And consumers are cutting back on goods purchases amid high interest rates and recession worries. Just look at shipping company Maersk, which is slashing 10,000 jobs as containers pile up at ports. All of this makes this latest bounce in Kohl\u2019s shares\u2014up double-digits since October 12\u2014a good window to sell.<\/p>\n

\u201cOn the Rip\u201d Sell No. 2: Macerich
\n
\n MAC
\n <\/fbs-ticker> (MAC)<\/strong><\/h2>\n

Pity the mall landlords. They battled through pandemic restrictions and continue to deal with overpowering ecommerce competition. Now inflation, high rates and recession worries are hitting goods sales (see Kohl\u2019s above).<\/p>\n

No wonder Macerich, a real estate investment trust (REIT) with 47 million square feet of US retail space, has been on the mat since March 2020!<\/p>\n

Along with most retailers, the REIT slashed its dividend in March 2020, from $0.75 quarterly to $0.10. To management\u2019s credit, they\u2019ve since raised it to $0.17. But the road back to pre-pandemic levels remains long.<\/p>\n

Meantime, the stock yields 6.8%, but that\u2019s solely because of the slide in the share price. Macerich also has considerable debt maturing in the coming years, to the tune of $1.1 billion in 2024 and \u201925, and nearly $1.4 billion in \u201926. And it\u2019s shelling out a high 4.88% weighted average interest rate on its borrowings.<\/p>\n

Now let\u2019s talk occupancy, the lifeblood of any REIT. Macerich ended the latest quarter 93.4% booked. That\u2019s not bad, but we want sectors closer to 100%\u2014warehouse REIT Prologis
\n
\n PLD
\n <\/fbs-ticker> (PLD),<\/strong> for example (more on it next), ended its latest quarter 97.1% occupied. That\u2019s as close as you can get to full, and the scarcity of industrial space in the US is no secret.<\/p>\n

The bottom line? I just don\u2019t see much hope for a mall-REIT bounce-back in the current environment. So if you own this\u2014or any\u2014mall REIT, now is the time to move on.<\/p>\n

Bargain Buy #1: Prologis (PLD)<\/h2>\n

If you\u2019ve been reading my articles for a while, you know I love<\/em> warehouse REITs\u2014yes, even with high interest rates and a pullback in goods sales.<\/p>\n

That\u2019s because we still<\/em> have a worker shortage, so any recession will likely be shallow. And paychecks are still growing at 5% a year. Even if that rate falls off some, it would still support spending in the long run.<\/p>\n

It\u2019s tough to go wrong with the aforementioned Prologis: it\u2019s the biggest industrial REIT, with 1.2 billion square feet of space across the US.<\/p>\n

PLD\u2019s yield pales in comparison to those of Kohl\u2019s and Macerich, at 3.3%, but that\u2019s a good<\/em> thing, as it\u2019s more sustainable. Plus we\u2019re getting breakneck payout growth, which is charging up the share price!<\/p>\n

As you can see, the price always<\/em> runs ahead of the payout, and every time it falls behind is a buying opportunity. We\u2019re in just such a spot now.<\/p>\n

Prologis is also seeing operational success beyond its 97% occupancy rate: thanks to sharply higher rates on new and renewing leases, rental revenue soared 54% in its latest quarter. And it\u2019s borrowed cheaply, too, with a weighted average interest rate of just 2.9% on its debt.<\/p>\n

The stock plunged in the late-summer swoon, but it\u2019s jumped 6% since October 27, as rates fell. That\u2019s an opportunity to get in\u2014before PLD\u2019s stock reels in its payout.<\/p>\n

Bargain Buy #2: Visa
\n
\n V
\n <\/fbs-ticker> (V)<\/strong><\/h2>\n

Cash is so<\/em> 2019. And the (physical) greenback\u2019s demise has been a boon to Visa, a holding of my Hidden Yields<\/em> dividend-growth advisory. The decline of paper money has sent more transactions flowing down Visa\u2019s payment network. And \u201cBig V,\u201d which processes around 60% of US credit-card transactions, takes a slice of each one.<\/p>\n

And man, do those slices add up: Visa piled up $33 billion of revenue in its 2023 fiscal year, up 43% from 2019. And with US consumers still<\/em> holding their own (and, as we just discussed with Prologis, a worker shortage likely to keep it that way in the long run), we can expect that to continue.<\/p>\n

Meantime, Visa and main competitor Mastercard
\n
\n MA
\n <\/fbs-ticker> (MA)<\/strong> aren\u2019t<\/em> banks\u2014they just process payments. We can thank that particular difference for Visa\u2019s \u201cironclad\u201d balance sheet, with $20 billion in long-term debt essentially cancelled out by its $20 billion in cash and short-term investments. That\u2019s as spotless as it gets!<\/p>\n

No wonder Big V is a cash cow, with free cash flow per share up 235% in a decade.<\/p>\n

That\u2019s driven the payout up an amazing 420% (ignore the 0.9% current yield on this stock\u2014dividend growth is where the party\u2019s at). And as with Prologis, Visa\u2019s stock has consistently run ahead of its payout\u2014until now:<\/p>\n

To be sure, this one is never \u201ccheap\u201d on a P\/E basis, trading at 29-times its last 12 months of earnings. But that, too, is a matter of perspective: as you can see below, V\u2019s valuation is on the lower end of its five-year track:<\/p>\n

Opportunities to buy this stock, with this setup, don\u2019t come along often. Let\u2019s buy and ride V into a Santa Claus rally\u2014and beyond.<\/p>\n

Brett Owens is chief investment strategist for <\/em>Contrarian Outlook<\/em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Look, we\u2019ve all loved watching our dividend payers rocket to the moon these past few weeks. Best part is, most of the market has been onboard! Here we can see the jump in the S&P 500 as a whole (in purple) versus its return on an equal-weight basis (in orange). Sure, there\u2019s a bit of […]<\/p>\n","protected":false},"author":1,"featured_media":84916,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-84915","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"\n2 \u201cSanta Claus\u201d Dividends To Buy Before 2024 | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Look, we\u2019ve all loved watching our dividend payers rocket to the moon these past few weeks. Best part is, most of the market has been onboard! 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