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8 Dividend Stocks Vs. The Coronavirus

Mar. 08, 2020 4:02 PM ETEOG, EVR, LEG, MCY, MPC, SRC, UNM, UPS32 Comments


  • Howard Marks gives a very relevant insight about risk and investor complacency that seems to have played out over the last year or so.
  • Could the spreading coronavirus of 2020 be the equivalent of the collapsing housing market of 2007-2008?
  • I am trying to buy only in small amounts so as to preserve cash in the case that stocks continue to fall.
  • The eight picks this week include a net lease REIT, two energy companies, two insurance companies, an independent investment bank, a soon-to-be Dividend King, and an iconic logistics company.
  • Here's to health and wealth in the week ahead!


Every week, I try to find the five most opportunistic and timely dividend stocks to highlight as "buy" ideas and present them in these articles. This week, due to the continued stock selloff, I just couldn't narrow it down to only five picks. So I'm presenting eight high-quality, undervalued dividend stocks that offer stellar starting yields.

There are many dividend stock "listicles" (list articles) on the Internet, but relatively few of them focus solely on stocks that are good values today. In a time of very low yields in both stocks and bonds, value investing becomes a vital way to generate a decent, reliable income stream.

That is as true for younger investors like me who focus on dividend growth and compounding as it is for retirees and near-retirees in search of current yield. So let's examine this week's picks and explore why they could make strong long-term dividend investments.

But first, a little reminder about risk from the brilliant Howard Marks.

Fear, Greed, and Complacency

Sometimes, during particularly placid and minimally volatile periods in the markets, it can be easy to forget how much stock prices are influenced by investor psychology. We hear often about the vacillations between fear and greed, but I think there's a third investor emotion that sometimes dominates. This emotion is neither fear nor greed, but rather something in the middle.

That emotion is complacency. When the stock market remains overvalued for some time but isn't skyrocketing on irrational exuberance, it's likely that the emotion predominant among investors is complacency rather than greed. The Fed's constant asset purchases since early last Fall have fueled stock prices up to all-time highs, despite the lack of earnings growth in 2019.

Could this stock price run-up that ended in the last few weeks be

This article was written by

Austin Rogers profile picture

Austin Rogers is a REIT specialist with a professional background in commercial real estate. He writes about high-quality dividend growth stocks with the goal of generating the safest growing passive income stream possible. Since his ideal holding period is "lifelong," his focus is on portfolio income growth rather than total returns.

Austin is a contributing author for the investing group High Yield Landlord, one of the largest real estate investment communities on Seeking Alpha, with thousands of members. It offers exclusive research on the global REIT sector, multiple real money portfolios, an active chat room, and direct access to the analysts. Learn more.

Analyst’s Disclosure: I am/we are long SRC, EOG, MPC, MCY, UNM, EVR, UPS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (32)

crrh profile picture
10 Mar. 2020
Have been slowly adding to my MCY holdings here as the yield has become historically very high for this Divvy Aristocrat. I cannot foresee MCY profits being hurt by CV-19 and their locked in bonds will give them a strong return over the next 12-18 months at least. Q re MPC--why not buy MPLX instead--yield is outrageous in this panic to sell midstream and the dividend looks solid to me, even if they stop raising it, which it likely a good idea for now. I am also finding yields and cap gain potential in GD, LMT, and RTN very attractive--do not see why their bottom lines will suffer in this? What am I missing?
Roger Salus profile picture
Great read, CC.

Thanks for sharing your insight.
Cashflow Capitalist
I just started a position in UNM ($17.71). Thank You for your research. I lover reading your articles every week.
Austin Rogers profile picture
Thanks very much, @wease! Best of luck in your investing.
Spirit for the win.
Adream profile picture
Nice article. imo, UNM price is low because of the long term care liabilities though. not sure fundamental analysis is enough to assess a buy there.
BM Cashflow Detective profile picture
Hi @Cashflow Capitalist ,
I am also a fan of Howard Marks. Now we have another thing in common. His teachings have giving me a completely new understanding of how I will deal with cyclics in the future. This acquired understanding will make me a much better investor.

Complacency in optimism is the originally source for risk. Complacency in pessimism is the originally source for opportunities. In other words, stoism with prudent investment behavior in a pessimism environment is the originally source for long-term success.

In other words again, the current purchases from MPC (it doesn't get any cheaper), EVR (the better Goldman Sachs), and UNM (the risks with long-term care liabilities are already priced in) are the optimists' purchases from the pessimist. As an optimistic buyer at current share prices, I am very complacent.

A note to @Adream . UNM is good value based on its PB Ratio (0.3x) !!! Much more than this. That means. You have a discount on the book value of 0.7 and get the operative business and the dividend of 5.52% for an incredible 0 dollars on top!!! This is the valuation for a company that is almost bankrupt. What are you waiting for? Think about it. My definition of risk is definitely different.
Adream profile picture
@BM Cashflow Detective
My point exactly, I didn't say it's the case but as I see it market value it as it could go bankrupt. So I was interested to know the author's opinion about the bankruptcy risk (and more specifically the long term care liabilities).
As you said if long-term care liabilities are priced in, then depending on your take on that discount, It might be considered only "fairly" valued.
Nice article.

I agree with you generally on UPS, LEG and MPC — I have buy orders in on them at 10% or more below the Friday close. I think this oil price shock is going to create some great long term bargains. I may buy more EPD tomorrow (well, today now) too.

I agree with the other commenter on the insurance companies: I see substantial headwinds from this interest rate craziness, and don’t see it ending any time soon. If we really are in a low interest rate environment for the foreseeable future, insurers’ business models face structural problems.

Thanks for the EVR idea; I will study it.
Snagged some UPS when they were at 89. A good company.
When, not if, we get to negative rates, insurance companies will be screwed.
Shepferg2 profile picture
Hit follow after reading half of this article. Clear, concise and a great spot to start for these stocks!

I just bought UNM last week and completely agree about the incredible value. Agree that times will be a little tougher with the current rates, but can's see how the long term investment isn't a big winner. I was also thinking about UPS, but just got out of FEDEX. I think there is a lot of potential for disruption in this space from UBER and Amazon and the huge investment in their transportation infrastructure could just turn into an anchor. Your note about the dividend coverage just confirms my decision.

Good luck all! There are some decade bargains out there to be had. Stay healthy to enjoy the win!
Austin Rogers profile picture
Thanks, @Shepferg2! I own a grand total of 2 UPS shares, having purchased them Thursday and Friday of last week. I have reservations about the business as well, but they've got the scale to have the lowest costs in their industry, and ideally they'll be able to cut back on capex spending eventually and let the cash flow build up. Just looks too cheap not to dip my toe in the water.
unm has sucked for 10 years
With the oil price war making the news on Monday, I'm wondering how that will impact MPC, at least for the short term.
Austin Rogers profile picture
I think more downside for MPC's stock price is a pretty safe bet. As for how much it'll hurt the business, it remains to be seen.
thumperjr profile picture
gotta love LEG
Church's chicken is delicious. They tend to be in more rough parts of town so I am not sure how great the land beneath them is. Long chicken. Long SRC.
Austin Rogers profile picture
The nice thing about church's chicken locations is that they can relatively easily be repurposed into another fast food tenant if Church's Chicken vacates. Assuming SRC bought them at a decent price, I don't mind the less-than-stellar locations.
Very good article. Own and adding MCY, MPC, will look at UNM. Thank you.
Ramon_13 profile picture
I started a new position with LEG
zeruff profile picture
Hey there CC. Have you seen any global energy consumption projections? I've checked out the EIA link you provided as well as poked my nose around the internet, but didn't find anything definitive or comprehensive. I've also got positions in oil (mostly MLPs), with a fundamental premise being that global demand for fossil fuels is gonna rise supported by the US becoming an exporter. Could've sworn I read something somewhere backing up that claim, but now I can't seem to find it again (and apparently I didn't take notes on it, like a dummy).

Thanks for writing!
Austin Rogers profile picture
@zeruff Here are some short-term projections from the EIA as of February 11th: www.eia.gov/...

Although they revised down their projections for oil & gas demand after that. See here: www.eia.gov/...

And there's some great info in EIA's annual energy outlook from 2019 here: www.eia.gov/...
zeruff profile picture
@Cashflow Capitalist, unless i'm reading these documents wrong, it seems like the long-term projections are confined to the US and any global projections are only for the short-term. Appreciate the effort in looking those up though. Thanks.
Austin Rogers profile picture
@zeruff You're right. Sorry--the result of a quick search on EIA's website. There are probably projections for the global economy and emerging markets out there, though. I'll make a note to look for them.
Thanks for the write up. Long UPS thinkingvabiut starting a position in MPC
xKaotic profile picture
I’ve added to MCY, LEG and UPS on this decline so far with plenty of ammo on standby for even lower prices.
Austin Rogers profile picture
Sounds like you're in a similar position as I am! This is why it's great to hold some cash.
Invested some in CMA today. Waiting for more buy opps.
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