Tag Archives: BWINA

Hot Safest Stocks To Watch For 2019

Some companies take a Field of Dreams approach, hoping that if they build, customers will respond. That’s not the case with most energy infrastructure companies. They refuse to put shovels into the ground unless they’ve already received significant customer support in the form of long-term, take-or-pay contracts that guarantee a steady stream of cash flow as soon as an asset enters service.

While those customer commitments were hard to come by over the past few years due to the turbulence in the oil market, energy companies are beginning to grow more optimistic about the future. Because of that, Phillips 66 Partners (NYSE:PSXP) and several other partners were able to secure the necessary commitments to move forward with the Gray Oak Pipeline, which will transport oil out of the fast-growing Permian Basin. That project will enable these companies to generate more income, likely allowing them to boost their already above-average payouts.

Hot Safest Stocks To Watch For 2019: The AES Corporation(AES)

Like most utilities, AES Corp shares have been under pressure for some months in a rising interest rate environment. However, AES has bounced back sharply after hitting 52-week lows in February — the stock is up nearly 14% from the low point, as of this writing, and is yielding a solid 4.6%. If you believe clean and green is the future of energy, this dividend stock deserves your attention right away.

To be fair, AES doesn’t really have a dividend history, as it started paying a dividend only in 2013. However, AES’ annual dividend has tripled in absolute terms since, having grown at a jaw-dropping compound rate of nearly 32% between 2013 and 2017.

Clearly, AES loves rewarding its shareholders with dividends, and there’s more in store: AES is committed to growing its adjusted earnings per share and free cash flow by 8%-10% through 2020.

What excites me more is that AES is in a transformational phase, restructuring its portfolio and cleaning up its balance sheet to unlock greater value from its assets, which are now worth nearly $33 billion. For example, AES raised $1.05 billion in proceeds from the sale of non-core assets, primarily coal-fired plants, in March. The company used the entire proceeds to pare down debt, thereby winning a ratings upgrade to BB+ from credit rating agency S&P Global Ratings.

AES’ aggressive efforts to expand its renewable energy portfolio even as it strengthens its financials make it one of my top utility dividend picks for now.

Hot Safest Stocks To Watch For 2019: Shopify Inc.(SHOP)

Shopify — a platform for merchants to create an e-commerce operation — benefits from both high switching costs and the network effect. As with Axon, those who use Shopify’s platform would be loath to switch away from it. Once a vendor has all of its data hosted on a single site, it’s an enormous headache to migrate all of that data. Equally important, Shopify allows third-party app developers to build services on its platform. Because Shopify has over 500,000 merchants, app developers flock to the site, which makes the platform even more valuable for potential merchants.

Hot Safest Stocks To Watch For 2019: Prudential Financial Inc.(PRU)

Prudential Financial (NYSE:PRU) takes such pride in its rock-solid financial condition that it uses an actual rock — the Rock of Gibraltar — as its corporate symbol. Prudential Financial backs up that claim with a balance sheet that has more cash, cash equivalents, and short-term investments than total debt on it. It also claims a debt-to-equity ratio around 0.6 and a current ratio around 1.0 , which are further signs of a solid financial condition.

The rock of Gibraltar

Despite that incredible stability, Prudential Financial trades at a bargain-basement price. Its shares trade at less than 0.9 times its book value and at a single-digit price-to-earnings ratio whether you consider its trailing earnings or its forward-looking anticipated earnings. With earnings expected to grow by over 10% annualized over the next five years, that’s an incredible bargain for a very solid company. 

 

On top of that value and growth potential, Prudential Financial pays a solid dividend with a 3.4% yield that only represents around 17% of its earnings. Of course, the insurance industry often goes through periods of earnings contractions since the risks they insure aren’t always predictable. Still, with such a reasonable payout ratio and solid balance sheet, investors have a strong chance at both dividend income and growth over time.

Hot Safest Stocks To Watch For 2019: Baldwin & Lyons, Inc.(BWINA)

Baldwin & Lyons Inc (NASDAQ:BWINA,NASDAQ:BWINB) is an under-the-radar insurer focused mostly on the commercial transportation space. FedEx Corporation (NYSE:FDX) is the company’s key customer, part of B&L’s focus on the trucking industry.

BWINB has been a consistent dividend payer over time, even if dividend growth has been relatively muted. But a 4.8% yield is attractive in any market. BWINB also trades at a nice discount to book value: price-book is 0.85x at the moment, near its lowest levels this decade.

Long-term, there is potential disruption from self-driving trucks — though such a risk appears at least a decade off (and those vehicles will not be foolproof). The reliance on FDX raises a risk as well.

But B&L has been an industry specialist since 1930 — and has been through all sorts of changes in its industry. With a cheap price, a rock-solid balance sheet, and a strong dividend, investors can own that expertise at an attractive valuation.