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Buy These 8% Yielding Blue-Chip Bargains Before Everyone Else Does

May 04, 2022 7:45 AM ETMPLX, MMP, BASFY, LGGNY, EPD, BTI30 Comments

Summary

  • The bear market is likely approaching its terminal phase, which involves almost everything selling off hard and fast and then bottoming.
  • Whether this happens in the next week, or a month or two, doesn't ultimately matter to smart long-term investors.
  • EPD, MMP, MPLX, BTI, LGGNY, and BASFY represent six of the safest ultra-high-yielding blue-chip bargains on Wall Street.
  • They are 28% undervalued, yielding a very safe 8.0%, and analysts expect 4.7% long-term growth, and 12.7% long-term returns, similar to the 13.1% they delivered over the last 20 years.
  • Combined with the right low-cost ETFs, you can create a diversified and prudently risk-managed 5.1% yielding Zen Ultra SWAN retirement portfolio that analysts expect to nearly triple a 60/40s returns over the coming 30 years while reducing volatility by 50%.
  • Looking for a helping hand in the market? Members of The Dividend Kings get exclusive ideas and guidance to navigate any climate. Learn More »

bank vault with stack of 100 dollar bills

tifonimages/iStock via Getty Images

If it feels like 2022 has seen an especially bad start to the year, that's because it has.

According to Bloomberg, it's the worst start to the year since 1939.

This article explains why the

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This article was written by

Dividend Sensei profile picture
106.91K Followers

Adam Galas is a co-founder of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 5,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.


The WMR brands include: (1) The Intelligent REIT Investor (newsletter), (2) The Intelligent Dividend Investor (newsletter), (3) iREIT on Alpha (Seeking Alpha), and (4) The Dividend Kings (Seeking Alpha).


I'm a proud Army veteran and have seven years of experience as an analyst/investment writer for Dividend Kings, iREIT, The Intelligent Dividend Investor, The Motley Fool, Simply Safe Dividends, Seeking Alpha, and the Adam Mesh Trading Group. I'm proud to be one of the founders of The Dividend Kings, joining forces with Brad Thomas, Chuck Carnevale, and other leading income writers to offer the best premium service on Seeking Alpha's Market Place.


My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives.


With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and safe and dependable income streams in all economic and market conditions.


Analyst’s Disclosure: I/we have a beneficial long position in the shares of EPD, MMP, BTI, LGGNY, BASFY either through stock ownership, options, or other derivatives. 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.

Dividend Kings owns EPD, MMP, BTI, LGGNY, and BASFY in our portfolios.

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 (30)

Dividend Sensei profile picture
I’d like to sincerely thank my over 90,000 followers for an incredible five years at Seeking Alpha.

It’s been a privilege and honor to help teach so many people how to take charge of your financial destiny and achieve your long-term financial goals.

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Senior Analyst, Dividend Kings
Quest4Yield profile picture
@Dividend Sensei I enjoy reading your analyses. Congratulations on your 5 year milestone!
K
@Dividend Sensei Do any of these companies listed pay monthly?
h
Why does SA show LGGNY’s yield at 10.78% ?
Dividend Sensei profile picture
@hepzibahdiane

I'm seeing SA show 5.5%.

www.gurufocus.com/...

$1.17 annual dividend so 5.5% after today's big drop.

On no news. I just checked again with the expert consensus and there is no change to ALIZY's thesis.
h
@Dividend Sensei I was asking about LGGNY.
BM Cashflow Detective profile picture
8% yield Quality bargains are always advantageous and tempting.

I'm long $BTI $LGGNY $BASFY

False and exaggerated fears always have the benefit of falling prices.

Subsequently rising prices in connection with high passive income are then the best reward one could only wish for.
S
This feels like the ideal anti esg portfolio, I'm only missing some weapons.
Dividend Sensei profile picture
@Scenic Rose

Actually, all except for MPLX (not rated) are rated above-average to very good on ESG risk management.

The way institutions use ESG is to assess the company's comprehensive risk management profile and how they deal with those risks over time.

It has absolutely nothing to do with politics or political correction or what companies are or are not "evil".

For example, TSLA scores 52nd industry percentile on long-term risk management (what ESG actually is).

Aristocrats average: 67th percentile
Ultra SWANs: 71st
BTI: 72nd
ENB: 73rd
CMI: 82nd
LMT: 85th

According to rating agencies, TSLA is a worse ESG stock than BTI, ENB, CMI, and LMT.

Our Strong ESG list (70th industry percentile or better consensus from all 6 agencies) averages 85th percentile.

It includes a lot of companies that many people would consider "evil" but personal opinion has no place in business.

Big institutions quantify risk and judge companies based on how they manage it.

ESG is used as a religion by some but is actually a measure of risk management.

Like credit ratings though of course, they are looking at hundreds or even 1000+ factors, so the ratings can vary wildly.

Thus why we use the consensus from six major agencies.
B
Unfortunately for my Roth, they all issue 10-k's
Jackagain profile picture
SAR is better than most if not all of them.
Dividend Sensei profile picture
@Jackagain

Cut in 2009
Cut in 2011
Cut in 2012
Cut in 2014
Cut in 2015
Cut in 2020

Not a reliable dividend stock.
r
@Dividend Sensei it would appear that they are actually very reliable, and another cut is right around the corner.
Third Prize Is You're Fired profile picture
For some additional diversification, consider $OMF which gives you financial sector exposure. Yield was 8%+, but only recently retreated slightly below. Mgmt just boosted quarterly dividend in a big way (+35%, in lieu of previous special dividends), signaled they intend to annually raise the div, and are buying back a large portion of the company's market cap (I think around 15% if I remember correctly). Plus, they just reported good earning numbers late last month too.

One final point worth mentioning re: $OMF: if you reach for yield in the financial sector, you're likely to find it in BDCs. There are certainly some 8% yielders out there worth a look. However, the dividends paid to you from BDCs are Ordinary Dividends and are taxed at your ordinary federal income rate (guessing that ranges from 22% to 32% for most folks here). But $OMF pays you Qualified Dividends, which depending on your income level can be federally taxed as low as 15%. Remember...Tax Evasion is a crime, but Tax Avoidance is not.

Long 175 shares $OMF and accumulating below $47.50 (8% YOC)
Dividend Sensei profile picture
@third Prize Is You're Fired

It's on the list for full analysis and potential inclusion into the Master List.
Third Prize Is You're Fired profile picture
@Dividend Sensei Terrific. Keep up the good work!
mmytacist profile picture
@third Prize Is You're Fired just watched Glengarry Glen Ross with the daughter who manages a sales team 😂
G
What are some of the ETF's you would add to your portfolio picks
HornHonker profile picture
@GL 57 ARKK!!! (Just kidding). In these times of ever greater times of energy reliance, the once commodity that will always be needed is copper. Hence, I am long COPX. There are other copper ETFs out there as well.
BM Cashflow Detective profile picture
@GL 57

For example these ETFs which I have added as a selective supplement to my individual stock purchases.

iShares Asia Pacific Dividend ETF with a current dividend yield of 5.26%.

iShares Emerging Markets Dividend ETF with a current dividend yield of 8.27%.

iShares UK Dividend ETF with a current dividend yield of 5.43%.

iShares MSCI Europe Quality Dividend ETF with a current dividend yield of 4.34%.

iShares STOXX Global Select Dividend 100 ETF with a current dividend yield of 3.75%.

The money is on the streets all over the world, it just has to be collected.
Dividend Sensei profile picture
@BM Cashflow Detective

I'm a big fan of ETFs to augment your portfolio where you don't have expertise.

Just remember that even NOBL has a semi-variable dividend because of bi-annual rebalancing.
HornHonker profile picture
Nice analysis. I saw you put in the small bullet point about “if we don’t get a recession”. If the Fed actually tightens as much as claim they will, then there is no way the interest on $30T of debt can ever be paid. They will throw in the towel when the markets crash, but by then we will likely have a recession anyway. So how will all these picks hold up in a stagflationary environment?

I am long EPD and BTI.
m
@HornHonker in my humble opinion. Tobacco can and will profit in the future. The others we will see. All the prices will come down in the future at some point, but tobacco will still profit. I am long the Tobacco majors.
adityakhurana2 profile picture
@mrNCSU I agree with you, also, I am expecting Tobacco to get into Pot in a an even bigger way too. It makes sense for them too from a long term strategic perspective.
adityakhurana2 profile picture
@HornHonker these companies provide energy products (NGLs, NG, Crude, and EPD is foraying into Hydrogen too) and Tobacco (E-Cigs). I expect tobacco majors to get in on the Pot bandwagon in a bigger way, so my expectation is for years of growing dividends! These are essential (for smokers) everyday products.
k
Just bought some BASFY yesterday! Thanks for the article
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