Feature Article

This is a stock market that plays favorites. And clearly AT&T Inc (NYSE: T) hasn’t been one this year, with investors alternately grousing about high levels of debt, pandemic-affected results at WarnerMedia and dividend safety.

We still have a few weeks left in 2020. But whatever happens, this will go down as one of the most eventful years in stock market history. There’s certainly plenty to recap already. The rapid swing from historic profit-taking opportunity in mid-February to equally compelling Dream Buy barely a month later is certainly without precedent in my career.

Avoiding companies at elevated risk to dividend cuts is a time-honored tenet of income investing. That’s because reductions typically add insult to injury by triggering selloffs in offending stocks.

If you’re underwhelmed so far by the next generation of wireless communications—dubbed 5G—you’re far from alone. By any measure, this has been a year of exploding demand for fast and reliable connectivity with work, schooling and entertainment shifting to residences. Not one US communications company, however, has meaningfully broken down 5G adoption for investors, a fact reinforced by generally flat Q3 wireless revenue growth.

Back in January, I added unregulated electricity generator and retailer Vistra Energy (NYSE: VST) to the Aggressive Holdings for three reasons.

First, the company is a cash machine, consistently shaving costs from its business and debt from its balance sheet while gaining market share with acquisitions and “greening” its generation fleet. Second, its shares traded at a major valuation gap I thought would close as the US economy strengthened. And third, there was a growing possibility of a takeover, potentially by private capital.

Conservative Holding Avangrid Inc (NYSE: AGR) hasn’t raised its dividend since July 2018. Not surprisingly, its returns have since lagged the Dow Jones Utility Average by more than 25 percentage points.

Two major developments in the past month promise a favorable reversal of fortune, even as shares have dropped roughly 10 percent to an attractive entry point.

Economics not politics drive investment returns. Don’t get me wrong. Our Portfolio stocks came out very well in the recent election as businesses, future regulatory relations being the key concern.

The renewable energy focus of our electricity stocks is tailor-made for a new White House that will if anything try to speed up America’s ongoing energy transition. And the offshore wind stocks highlighted in the feature article are likely to be the next sector picks to pop, following example of contract generators like Brookfield Renewable Energy Partners (TSX: BEP-U, NYSE: BEP).

Energy Transfer LP (NYSE: ET) and Infraestructura Energetica (Mexico: IENOVA, OTC: IENVF) are the 25^th and 26^th dividend cutters from our Utility Report Card coverage universe in calendar 2020.

The silver lining is management’s decisions were clearly made for preference, rather than of necessity. That’s encouraging for both companies as well as others we track, with the result our Endangered Dividends List is the shortest it’s been all year.

PPL Corp’s (NYSE: PPL) potential sale of UK operations remains a threat to its dividend several weeks into the strategic review. Nonetheless, we’re adding the stock to the Aggressive Holdings now for three reasons.

“Keep it simple” is a best practices business maxim that’s far easier to preach than practice. But when a company consistently sticks to it, superior results follow—as they have for nearly 20 years at Michigan electric and gas utility CMS Energy (NYSE: CMS).