HDO Trade Alerts - Market Analysis for Jun 3rd, 2021

Good morning HDO! Many of our picks have been rallying hard and we have been seeing a lot of green! So this morning, we have a few adjustments to make in light of the current prices.

Action #1: Moving MAC to 'Hold to Sell'

We are moving Macerich (MAC) to "Hold to Sell". This is a category for picks where we believe the share price is likely to increase, but the dividend yield of 3.3% is not high enough to fit our main portfolio goals. These picks are best held with the intent to realize capital gains. We remain very bullish on the price expecting that it has the potential to nearly double and we anticipate that the dividend will approximately double in 2022.

MAC has been paying out the minimum requirement to maintain REIT status at $0.15/quarter and management made clear at the Q4 earnings call that they intend to pay out the minimum until they are experiencing stable year/year growth. Meaningful growth is expected to resume in the second half of the year 2021.

Based on management guidance, by Q4 of this year, MAC's FFO should be able to sustain a dividend of $1.30/year at a normal payout ratio, more than double the current dividend. We expect that a raise is most likely going to occur in Q1 2022, but MAC might raise in Q3 2021 if they see the growth they are expecting. 

Even with the dividend doubling, at current prices, MAC would be yielding 6.6%. Therefore, we are moving MAC to "Hold to Sell" as an indication that we do not intend to chase the price and we are not buying. However, with substantial upside potential, we are happy to hold to sell at a later date. For those who don't mind holding a lower-yielding stock, we believe MAC will be a big winner from here. 

Action #2: SELL PRU

Prudential (PRU) is up 18.3% since we bought it just 3-months ago. We believe PRU is currently close to being fairly valued and the yield has shrunk to 4.3% for the best reason possible- the price went up. For those who wish to keep holding, we see maybe another 8-10% upside potential plus the dividend. PRU is a very good stock with a modest yield to hold for the long term. For the model portfolio, we are going to take our gains and redeploy them into higher-yielding opportunities. 

Action #3: Sell Corecivic Bonds

SELL: Corrections Corp of Amer 2023 Notes 4.625% CUSIP #22025YAP5 Yielding 4.3%

When we bought these bonds, they were priced in the low $70s in January 2019 and were yielding 6.5%. Today, they are trading just under $100 par and are yielding 4.6%. With no more upside remaining between now and when they mature in 2023, we are happy to take our 40% profit and redeploy elsewhere.  

Action #4 Sell Federal Realty Trust

Federal Realty Trust (FRT) Yielding 3.6%

This is another success story that we are realizing gains on. We previously moved FRT to "Hold to Sell" in March and the price has continued to climb. We bought FRT in October last year at $76. Today, it is trading at $119 for a gain of 59% in 8-months. When we bought FRT, the yield was 5.6%, today the yield is just 3.6%. Therefore, we are realizing our gains. For those who bought in a taxable account, FRT is high quality and you can hold until your position is a year old and is taxable as long-term capital gains.

Action #5 Sell Washington Prime Group Common

Washington Prime Group (WPG

We moved WPG common into "Hold to Sell" when the price dropped to $2 and below. We expected a spike to provide a better exit opportunity, and that is occurring today. We are selling WPG common out of the model portfolio. We do not expect this price to last as WPG will almost certainly be filing bankruptcy in the near future and the outcome for the common is extremely uncertain. 

Very aggressive investors who want to gamble on bankruptcy should consider selling covered calls. We do not wish to hold the common through bankruptcy, so we are going to sell on this spike. 

Action Summary

  1. Macerich (MAC): Moved to "Hold to Sell" 
  2. SELL Prudential (PRU): At Market.
  3. SELL Corrections Corp of Amer 2023 Notes 4.625% CUSIP #22025YAP5: Ask above $99.50
  4. SELL Washington Prime Group (WPG): At Market  
  5. Redeploy proceeds in current picks below buy under, or hold cash for future opportunities.

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Good investing from your HDO Research Team,

Rida Morwa, Philip Mause, Treading Softly, Beyond Saving, PendragonY, & Preferred Stock Trader

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Rida Morwa is part of the High Dividend Investing (HDI) team at EWT, currently offering a 15-day free trial.