Kelley Wright ranks among advisory industry's most respected experts on blue chip, dividend stocks. At the start of the year, the editor of IQ Trends presented his annual Lucky 13 portfolio of dividend value ideas. In a mid-year update, he offers some thoughts for the balance of the year.
So far it has been a “meh” year. We did see a bit of volatility in the first half with the market peaking in January, a good, old-fashioned correction of at least 10%, and some scratching and clawing to get back to par.
My thought is it will take the market most of the summer to figure it out, but figure it out it will. Personally, I think all this hand-wringing about tariffs and trade wars is missing the forest because of the trees.
What the real underlying issue is, will rising interest rates and the Fed removing liquidity from the system hurt the economy long-term? The trade and tariff thing are short-term and will soon be resolved and forgotten.
Liquidity and the access to capital are the straws that stir the drink, however, and have a real impact on earnings and subsequently dividends, which we all know are what drives stock prices. It remains to be seen what the second half of the year will bring, but my thought remains the market will end the year in the black.
I don’t think it will be a barnburner by any stretch of the imagination, but something okay, perhaps in the 6% to 8% range.
So far, Weyco Group (WEYS) is the clear first-half winner. That TJX Companies (TJX) is having an excellent year is not really news, they are after all the best at what they do.
Then we have those that confound me, like Franklin Resources (BEN), which is practically printing money as their economic internals are off the charts. Lastly is the headscratcher of all time, Philip Morris International (PM).
This is pretty simple: A lot of people like the effects of nicotine. Tobacco is the cheapest and most widely available nicotine delivery system. There is no worldwide health craze emerging where tobacco will go the way of the dodo bird. Any analyst that tells you otherwise has been smoking something besides tobacco.
Accordingly, PM and BEN are clearly double down stocks, and IBM (IBM) is a gift waiting to be discovered. If I were constructing the Lucky 13 today I would definitely add 3M company (MMM), AbbVie Inc. (ABBV), and Cummins Inc. (CMI).
If I could get Air Products & Chemicals (APD) at $147 or lower, Johnson & Johnson (JNJ) at $113 or lower, and American Express (AXP) at $86 or lower I would be all over it.
