Finance

• As the market gears up for potential volatility in the coming months due to the presidential election, low-beta names become more attractive.
• With fundamental tailwinds pushing their business models, a select few stocks stand out as ones to attract more capital.
• Wall Street analysts agree with double-digit upside; even bearish traders have been heading for the exits.

Now that the most important event of the year, the Federal Reserve () interest rate cuts, is over, investors wonder where their capital can be safely treated in the face of potential volatility in the coming months. To satisfy this need to keep a stable portfolio, a decent weight in low beta stocks, characterized by smaller average daily moves compared to the , is called for.

Some investors only focus on a stock’s beta without considering some of the fundamentals and sentiment that the market and Wall Street have toward them. Ideally, companies in the sector can combine the low volatility and stability that’s now needed. Still, there is also an additional factor to consider: a subscription-based model to make it easier for analysts to project cash flows and valuations in the middle of a rocky market.

This stock list includes T-Mobile US (NASDAQ:), as phone bills are subscriptions that only a few users are willing to fall behind on. Moving over to a nearly given profit maker, investors can look into Waste Management (NYSE:) as a business model that will continue growing as long as people live in the United States. Finally, another subscription business is found in American Water Works (NYSE:), a utility stock.

T-Mobile Stock Is a Smart Investment for Any Market Cycle

It probably doesn’t matter whether the economy is booming or busting; nearly all citizens will be able to make room in their budgets to pay for their monthly phone bills, making T-Mobile a stock to have during rocky and quiet markets.

The stability of its business model enables the stock to carry a low beta of 0.5 today, which means that T-Mobile stock moves 50% less than the S&P 500 index. More than that, because of the ability to assess the future cash flows for the year, management can pay out a dividend of $3.5 a share for an annual yield of 1.7% today.

Stable stocks don’t have to mean boring stocks; analysts at Benchmark decided to reiterate their “Buy” rating for T-Mobile stock as recently as late September 2024. This time, these analysts landed on a $250-a-share valuation for the company, directly calling for up to 20% upside from where the stock trades today.

Knowing that low beta stocks may become investors’ preference in the coming months, even bearish traders have decided to step back from T-Mobile stock, as seen in the company’s falling short interest of 14.8% in the past month alone.

Over the quarter, short interest has also declined from a high of $4.5 billion to only $3 billion today, showing investors more signs of bearish capitulation, leaving more room for bullish investors to come in and take their place.

Waste Management Stock Could Capitalizing on the New Business Cycle

Now that the Fed has cut interest rates, and other nations like China have followed suit with a similar 50 basis point cut, the rate of business activity might start to spike in the coming months, leading to more waste being generated from both the consumer and business sector.

This is where Waste Management stock comes into play, as it is at the center of global waste trade between nations that buy scraps made from the United States to recycle or utilize for their own purposes. Because the business model is centered on a fact of everyday life, investors can probably assume how it can reflect into a low-beta stock.

With a beta of only 0.75, Waste Management stock has started to attract investors who want to keep their risk under control in today’s market. This trend will cause investors to notice a few outlier analyst price targets coming from Wall Street.

Those at Truist Financial (NYSE:) now see Waste Management stock valued at $235 a share, which calls for a 12.6% upside from its current price. These factors have attracted institutional capital, as seen in the $5 billion that has entered Waste Management stock over the past 12 months.

Why Utility Stocks Like American Water Works Are the Go-To Safe Haven

After the market has digested the potential effects of recent interest rate cuts, another major event is coming up: the presidential election. Now, investors have two choices: either stay completely out of the market until the dust settles or devise a strategy that mitigates the potential risks.

Utility stocks might be the best choice on this list to mitigate volatility, which is why American Water Works stock is a good buy today. With a beta below 0.70, the price action and volatility aspects are now taken care of for sentiment measurement.

Those at the Royal Bank of Canada have landed on an “Outperform” rating for American Water Works stock and now see a price target of up to $164 a share to call for a net upside of as much as 13% from where the stock trades today.

Then there’s the rising institutional buy interest, such as the recent 6.9% boost in holdings coming from the Czech National Bank, bringing their net position to $5.8 million today and showing investors more willingness from big players to start positioning themselves into this stock before the broader adoption comes in.

Original Post

• The semiconductor sector faced sharp declines in July as investors rotated into defensive areas due to expectations of a Federal Reserve rate cut and the Japan carry trade unwind fiasco.
• The VanEck Semiconductor ETF (SMH) has since stabilized and now sits just 13.6% below its all-time high.
• Key stocks like NVIDIA, Taiwan Semiconductor Manufacturing, and Broadcom are showing bullish setups, signaling potential upside for the sector.

The semiconductor sector, long a leader in market performance, has faced headwinds in recent months. After an impressive run last year and through much of 2024, the industry took a sharp hit in July as expectations for a Federal Reserve rate cut grew, and the now infamous Japan carry trade unwind played out. This led to investors rotating into more defensive areas of the market.

The popular VanEck Semiconductor ETF (NASDAQ:), a benchmark for the sector, plunged from its all-time high of over $280, falling toward crucial support at $200 in just one month. This abrupt selloff ignited fears of deeper losses and prompted a shift into safer sectors like Utilities and Industrials.

Yet fast forward two months, and the picture looks brighter for semiconductors. The SMH ETF has stabilized above critical rising moving averages and pared losses, now sitting just 13.6% below its peak. The ETF has formed a bullish technical setup, posting two consecutive higher lows and consolidating around the $250 level—close to a potential breakout zone. This turnaround raises an important question: could rotation back into the semiconductor sector be starting?

To answer that, let’s look at the sector’s top holdings, which account for much of SMH’s weight and drive the sector’s performance. NVIDIA (NASDAQ:), Taiwan Semiconductor Manufacturing (NYSE:), and Broadcom (NASDAQ:) together comprise nearly 43% of the ETF’s total weighting.

Let’s examine these key players’ recent momentum and outlook to better assess whether the semiconductor sector is again positioned for upside.

NVIDIA Powers AI Revolution, Poised for Strong Growth

NVIDIA, the ETF’s largest holding, has been a standout performer and is currently consolidating after a strong rebound from its August lows. From a technical perspective, the stock is in a bullish pattern and hovers near a critical breakout level above $125.

Analysts remain overwhelmingly positive on NVIDIA, with a consensus price target suggesting a 16% upside from current levels. The stock is rated as a Moderate Buy by analysts, with 39 out of 43 analysts recommending it as a Buy. Notably, Rosenblatt analyst

Hans Mosesmann holds a Street-high price target of $200, representing a 71% upside. Mosesmann is particularly bullish on NVIDIA’s software, which he believes will significantly bolster the company’s sales mix and valuation over the next decade.

NVIDIA’s dominance in powering artificial intelligence (AI) models like ChatGPT is well-known. Still, upcoming products like the highly anticipated Blackwell AI chip are generating massive demand, according to CEO Jensen Huang.

TSM Set to Benefit From Rising Chip Demand and AI Growth

Taiwan Semiconductor Manufacturing, the second-largest holding in SMH, is in a similar position to NVIDIA, consolidating in an uptrend and close to a potential breakout.

The stock popped over 2% recently as momentum continues to shift upward, with analysts forecasting an 11.4% upside from current levels.

TSM, as the primary chip manufacturer for NVIDIA, stands to benefit from the overwhelming demand for NVIDIA’s Blackwell chip. Additionally, the recent fundraising by OpenAI to boost its computing capacity will likely translate into more business for TSM, as OpenAI is expected to purchase chips from NVIDIA, and TSM will handle production.

Broadcom Joins Peers in Uptrend, Poised for Further Gains

Broadcom, SMH’s third-largest holding, mirrors the bullish trends seen in NVDA and TSM. The stock is showing signs of consolidation within a new uptrend, and analysts are forecasting a 10% upside.

Broadcom remains well-positioned as a critical player in the semiconductor supply chain, with significant exposure to both cloud computing and AI growth themes.

Like its peers, Broadcom enjoys strong analyst support, with a firm Buy rating and continued optimism around its future prospects.

Is the Rotation Back On?

The semiconductor sector appears to be on the verge of a potential comeback, with the SMH ETF stabilizing and key players like NVIDIA, TSM, and Broadcom positioned for further upside. Bullish technical setups and strong analyst sentiment for these stocks suggest that the sector could be ready to regain its leadership position in the market.

Original Post

• Dine Brands faces headwinds but possesses turnaround potential.
• Analyst upgrades and a stock buyback contribute to a positive outlook.
• Dine Brands’ strategic initiatives focus on brand enhancement and customer experience.

Dine Brands Global (NYSE:) is the driving force behind beloved restaurant sector brands like Applebee’s, IHOP, and Fuzzy’s Taco Shop. Through a strategic franchise model, Dine Brands has successfully established a widespread presence across the globe, capturing the hearts (and stomachs) of a large and diverse customer base.

The company’s franchise-heavy approach offers unique advantages for scaling operations and building brand recognition, but Dine Brands hasn’t been immune to industry challenges.

However, despite these challenges, Dine Brands remains a company with a diverse portfolio of established brands and an extensive global reach. To address its challenges and unlock growth potential, the company has been actively implementing a strategic transformation focused on enhancing the customer experience, menu innovation, and digital engagement, but will this revitalized approach be enough to unlock Dine Brands’ potential and propel the company towards a path of growth and profitability?

A Mixed Picture With Upside

Dine Brands’ financial reports reflect the broader challenges currently being faced by the restaurant industry. While the company has a strong portfolio of established brands like Applebee’s and IHOP and an extensive global reach, it has grappled with declining same-store sales and difficulties meeting its financial guidance.

Dine Brands’ for the second quarter of 2024 showed a 1% decline in revenue compared to the same quarter last year, with earnings per share (EPS) of $1.71 exceeding analyst expectations but falling short of the previous year’s $1.82.

However, several factors suggest the potential for a turnaround. Notably, Dine Brands’ analyst community upgraded the stock, raising the price target to $47 from $34. The bullish outlook hinges on several key catalysts, including a potential $100 million+ accelerated share repurchase plan, the company’s free cash flow generation (forecasted at $99.2 million in 2024 and $107.5 million in 2025), and ongoing efforts to optimize the value proposition of Applebee’s and IHOP.

Despite these positive signals, Dine Brands faces several challenges. The restaurant industry is currently contending with inflationary pressures, rising costs, and the potential for an economic downturn, which could further impact the company’s revenue and earnings growth. Dine Brands’ competition remains strong, with established players vying for market share alongside the rapidly expanding fast-casual segment.

Specifically, Dine Brands needs to address the declining appeal of casual dining among younger demographics and find innovative ways to enhance the customer experience and drive traffic to its restaurants. Furthermore, Dine Brands carries a significant debt load with a debt-to-equity ratio (D/E) of around five as of the latest quarter. The high debt levels could limit its financial flexibility and hinder its ability to invest in growth initiatives. The company’s negative return on equity of -35.88% in the latest quarter also raises concerns about its efficiency in generating profits from shareholder investments.

Dine Brands Eyes Turnaround with Debt Management and Stock Buyback

Dine Brands’ potential for a significant turnaround, fueled by analyst’s optimistic projections and the planned stock buyback, is undeniable. However, a cautious approach is warranted when considering an investment in this company. The current low stock valuation, with shares down 30% year-to-date, could reflect the market’s apprehension about Dine Brands’ ability to successfully execute its turnaround strategy in the face of current headwinds. The ongoing decline in same-store sales, a critical measure of a restaurant company’s health, remains a concern and could persist if macroeconomic conditions worsen.

Dine Brands has been proactive in managing its considerable debt load. The company recently refinanced its debt to lower interest expenses and gain greater financial flexibility. Additionally, a significant portion of the company’s strong free cash flow is earmarked for an accelerated share repurchase program in the second half of 2025. This initiative aims to reduce the number of outstanding shares, lowering the debt-to-equity ratio and potentially boosting earnings per share.

In addition to the debt reduction, Dine Brands is laser-focused on enhancing its core brands, Applebee’s and IHOP. This includes initiatives to elevate the customer experience, introduce menu innovations like all-day breakfast and gourmet burgers to cater to evolving consumer preferences, and bolster digital engagement through loyalty programs to attract a younger demographic. Dine Brands also recognizes the vital role of its franchisees and is committed to supporting them, including financial assistance, operational guidance, and marketing resources. While the primary focus is improving domestic performance, Dine Brands continues exploring international expansion opportunities for long-term revenue growth and diversification.

Navigating Challenges: Dine Brands’ Long-Term Growth Story

Several indicators suggest a positive outlook for Dine Brands’ future. The analyst upgrade and increased price target reflect optimism about the company’s ability to overcome challenges and deliver improved financial results in the coming years. While acknowledging the current difficulties, management remains confident in the company’s long-term potential and believes the strategic initiatives outlined above will position Dine Brands for sustained growth and profitability.

However, investors should not overlook the inherent risks associated with this investment. The restaurant industry is highly sensitive to economic fluctuations, and a potential downturn could significantly impact Dine Brands. Consumers may reduce spending on dining out, leading to lower restaurant traffic and impacting revenue and profitability. The competitive landscape also remains intense, requiring Dine Brands to execute its strategies flawlessly to gain market share and maintain brand relevance in a crowded field. Additionally, the success of the turnaround strategy hinges on the company’s ability to implement its initiatives effectively, and unforeseen challenges may arise during this transformation

Dine Brands offers a compelling investment opportunity with significant upside potential, particularly given the analyst upgrades and the potential for a stock buyback. However, it is not a risk-free investment. Investors with higher risk tolerance and a long-term investment horizon may consider adding Dine Brands to their portfolio. However, it is crucial to carefully weigh the company’s strategic initiatives, the competitive landscape, and potential economic risks before making investment decisions.

Original Post

Let’s talk about companies that are serious about dividend hikes. I’m talking about recent payout raises of 25%, 67% and even 120%.

Know what happens to a stock that raises its dividend like this? Its shares skyrocket.

Consider Graco (NYSE:), a company that specializes in fluid-handling systems, serving everyone from homeowners and contractors to industrial and manufacturing businesses. Graco.com delivers one of the most beautifully boring boasts we’ll ever read, showing us the many mundane ways GGG has become a fixture in our lives:

“We pump peanut butter into your jar, and the oil in your car. We glue the soles of your shoes, the glass in your windows and pump the ink onto your bills. We spray the finish on your vehicle, coatings on your pills, the paint on your house and texture on your walls.”

This ubiquitous cash flow powers Graco’s “dividend magnet.” These peanut butter pump and shoe sole sales add up to sweet payouts that Graco raises year after year after year.

Over the past 20 years, Graco has raised its dividend by 720%. Its share price has followed this payout higher like a magnet. Including dividends, Graco has delivered a total return of 975% over this same time period:

The Dividend Magnet at Work in GGG

Graco’s current dividend of 1%+ helps the company fly under the radar. It puts income investors to sleep! They miss the fact that Graco longs who bought a decade ago are collecting a 5% yield on their cost.

Plus, they have enjoyed some plush price gains.

Where do we find the next Graco? We look at the growing dividends. Let’s be picky and sort through a pile of divvie hikers ranging from 23% all the way up to 120%.

(And oh by the way, these five companies should announce their next payout hike over the next three months. Consider yourself forewarned…)

Deere (DE)
Dividend Yield: 1.4%
2023 Increase(s): 22.5% (across multiple hikes)
Projected Q3 Dividend Announcement: Early December

Deere (NYSE:) is one of the most recognizable brands on the planet, especially for anyone who lives anywhere outside of a bustling city.

Deere is famous for its tractors, but it’s also a global juggernaut in a wide variety of other agricultural machinery, heavy equipment, forestry machines, engines and drivetrains. In fact, it’s so big that, much like some auto manufacturers, it has its own financial services segment that finances sales and leases much of this equipment, and provides wholesale financing to equipment dealers.

Deere is weathering a difficult 2024 in the midst of a longer-than-average replacement cycle in the agricultural industry. Revenues and earnings alike are expected to materially backtrack for the full year, and could slide some more (albeit at a slower pace) in 2025. That makes its next dividend announcement, expected in early December, all the more interesting.

Throughout the 2010s, investors suffered large periods of stagnant dividends. But Deere’s fortunes exploded for the first few years of this decade, and Deere responded by generously and even aggressively rewarding its shareholders, signing off on multiple dividend hikes each year. Last year’s December hike, to the current $1.47 per share dividend, represented a 22.5% year-over-year boost from the year-ago payout. (Spread across three raises in four quarters!)

That hasn’t been the case in 2024.

If Deere is downshifting to a schedule of annual hikes, early December would mark its next potential raise—and whether it raises (or the size of the raise if it does) could say a lot about the tractor giant’s confidence heading into 2025.

Is Deere’s Dividend About to Go Cold Again?

Equinix (EQIX)
Dividend Yield: 1.9%
2023 Increase(s): 24.9%
Projected Q3 Dividend Announcement: Late October/Early November

Equinix (NASDAQ:) is not just a real estate investment trust (REIT), but one of the world’s largest infrastructure providers, boasting 264 data centers in 33 countries on six continents—an infrastructure supporting more than 10,000 customers and over 472,000 interconnections.

It’s also something of an outlier in the REIT space given its sub-2% yield. (For context, the Nareit All Equity REIT average yield is roughly 3.7%.) However, it’s not for lack of trying; EQIX keeps raising its payout.

It’s Just That Its Pesky Stock Price Keeps Rising, Too!

Equinix is far from a stodgy property owner. This tech-forward firm, whose properties benefit from numerous emerging trends (including artificial intelligence) has managed to raise the top line for 86 consecutive quarters, and it boasts some of the most consistent adjusted funds from operations (AFFO) growth in the space.

Source: Equinix Q2 2024 Investor Presentation

As the chart shows, though, Equinix finally stepped up its game last year. After building up a track record of high-single-digit growth, EQIX came out swinging in 2023, authorizing a fat raise of nearly 25% to its current $4.26 per share.

The question now is whether that was a one-time move, or whether Equinix is entering a new phase of aggressive dividend growth. We could get an answer sometime in late October or early November, when EQIX is expected to make its next dividend announcement.

Host Hotels & Resorts (HST)
Dividend Yield: 6.0%*
2023 Increase(s): 66.6% (across multiple hikes)
Projected Q3 Dividend Announcement: Mid-December.

Host Hotels & Resorts (NASDAQ:) is another REIT, but this one specializes in hotel properties.

Host Hotels & Resorts’ portfolio currently is composed of 81 hotels representing 43,400 rooms. By revenue, Marriott (NASDAQ:) properties are the biggest slice of the pie at 62%, followed by Hyatt (NYSE:) at 20%. The rest is scattered among the Four Seasons, Hilton (NYSE:), Accor (EPA:) and others.

Host was one of many COVID dividend casualties—the company suspended its payout in 2020, then brought it back at a reduced level in 2022. Then it started aggressively raising the dividend every quarter or two.

In July 2023, I previewed the third quarter’s potential dividend hikes. At the time, I said:

“The REIT seems to be deliberately marching toward its old dividend total, with four increases in two years. To reach its pre-COVID dividend levels, it would need to tack on another 5 cents per share—another 33% from current levels.”

It did just that, improving its distribution from 15 cents to 18 cents, and then 20 cents (which was 66% higher than its year-ago payout), across the next two quarters.

Host’s Dividend Is Officially Back to Normal

Thing is, that’s where HST’s dividend has remained for nearly a full year. So, much like Deere, if Host is slowing down to a more orthodox annual raise schedule, we’d likely see that raise announced mid-month this December.

* By the way, those spikes in the chart above are Host’s special dividends. The company had a practice of dishing out extra one-time payments each year pre-dating COVID, and it has resumed the practice along with its regular dividend. And it can be mighty generous—all told, Host’s regular dividend translates to a 4.6% yield, and the special boosts that to 6%. Host also tends to announce that special distribution in December.

First Citizens BancShares (FCNCA)
Dividend Yield: 0.4%
2023 Increase(s): 119%
Projected Q3 Dividend Announcement: Late November

First Citizens BancShares (NASDAQ:) would seem like just another of the nation’s many regional banks. It predominantly operates as First Citizens Bank, which provides a variety of personal, small business, commercial and wealth products and services, ranging from free checking accounts to institutional asset management.

It’s possible you haven’t heard of First Citizens Bank.

But it’s very likely that you’ve heard of the bank First Citizens acquired in March 2023: Silicon Valley Bank.

SVB, which predominantly dealt with startups and tech firms, became the country’s third-largest bank failure after a classic bank run. In a matter of days, SVB was put under FDIC control. A few weeks after that, First Citizens purchased Silicon Valley Bank and assumed the majority (but not all) of its deposits and loans.

The collapse could be largely chalked up to a hyperconcentration in clients and, frankly, horrible timing. But SVB’s growth-minded business is a boon within the much more diversified First Citizens. The regional bank’s revenues tripled last year; net income jumped by more than 10x.

FCNCA then rewarded shareholders in late 2023 by announcing a 119% jump in the dividend, to $1.64 per share. (This, a year after a very generous 60% hike in 2022!) And it’s still splashing cash, announcing a $3.5 billion share buyback in July.

Silicon Valley Bank Ended Up Making Someone Richer: FCNCA Shareholders

That level of growth obviously will be much more difficult to come by unless First Citizens can somehow get its hands on another transformative acquisition target. The likeliest next dividend announcement date, which should come sometime in late November, could tell us exactly how optimistic FCNCA is about additional upside from here.

Korn Ferry (KFY)
Dividend Yield: 2.0%
2023 Increase(s): 120% (across multiple hikes)
Projected Q3 Dividend Announcement: Late November/Early December

Korn Ferry (NYSE:) is a global provider of consulting services. That includes things like org structure, culture, performance and development, executive search and talent acquisition services, as well as platforms that help companies build engagement surveys, develop sales strategies, and gather data that educates employee compensation programs.

This is a cyclical business, so KFY understandably hits the occasional growth snag, but broadly speaking, the arrow has been pointed pretty reliably northward for decades.

The dividend, on the other hand, has been nothing but chunky.

But What a Ride It Has Been!

Korn Ferry initiated a dividend program in 2015 with a 10-cent-per-share payout, then proceeded to keep that distribution level for another five years. Finally, in 2021, it got the ball rolling again—and that ball has really started to roll downhill. The dividend of 37 cents per share is now 270% higher than it was at the start of 2021. Its raise to 33 cents announced late last November represented a 120% jump from the prior year’s payout.

KFY is now raising every couple of quarters (including a 12% bump to the current 37 cents announced in June). If it keeps up with its current semiannual pace, look toward late November or early December for a possible hike.

It could be a telling hike, too. On the one hand, KFY is coming off a disappointing fiscal 2024 (Korn Ferry’s fiscal calendar ends in April) that saw both the top and bottom lines contract. But Wall Street largely expects a rebound this fiscal year and next. Another big hike could signal that the pros have the right idea, and that last year was just one of the occasional hurdles KFY has to clear.

A Simple, Safe Way to Lock In 15% Yearly Returns … For Life!

The dividend growers above aren’t exactly perfect, but they’re still excellent examples of the right strategy—a simple but potent two-step recipe for success that has proven itself to investors again, and again, and again:

• Step 1: Buy aggressive dividend growers that are actually expanding their businesses, too.
• Step 2: That’s it! There is no Step 2! Just keep targeting elite dividend growers!

If you invest your money with corporate managers who both effectively deploy capital for growth and know how to reward shareholders, you will clobber the market on a regular basis—and better still, as the years roll on, more and more of those returns will come from cold, hard cash.

Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, “7 Great Dividend Growth Stocks for a Secure Retirement.”