The best way to learn about a company is directly from the executives that run the business on a day-to-day basis. The problem is, there are thousands of actively traded stocks in the U.S. alone and CEOs rarely make the time to speak directly with anyone outside of their largest investors.
That’s why I keep an eye out for Form 4’s, which is the SEC filing insiders are required to submit within two business days of trading shares in their own company.
Several years back, Lynch was quoted: “insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
With that in mind, here are three dividend stocks that company executives have staked their own money behind in recent weeks.
Healthcare Trust of America (HTA) is a real estate investment trust (REIT) that owns medical office buildings, with locations diversified across the U.S. Chief Financial Officer Robert Milligan bought $96,000 worth of stock earlier this month.
According to Peter Lynch, that’s a rather clear signal, especially since Milligan signs off on the company’s accounting. What’s even more impressive with Healthcare Trust, is the CFO was joined by six members of the board of directors who also bought shares on the open market. In addition, the company is looking to acquire stock at the corporate level, announcing a $100 million repurchase program in June.
How Low Can You Go?
The shares have struggled in 2018, falling 15%. Lower doesn’t always mean cheaper, but what makes Healthcare Trust appear such a good value is that shares are also trading at a 15% discount to net asset value (NAV) of $30 a share. NAV can tend to serve as a price floor, especially when it is stable, as it has been here.
Management is targeting 2% to 3% “same-store” net operating income growth in 2018, as the company is seeing positive pricing and occupancy trends, while keeping a tight lid on costs. Healthcare Trust currently yields 4.8% and has boosted its dividend twice in the past four years. In essence, you’re getting paid to wait, while betting alongside management that the stock will move back up toward NAV.
Mack-Cali Realty (CLI) is a REIT that owns office and apartment properties, with the lion’s share of its holdings in Jersey City, NJ.
Clear to Buy Now?
Earlier this month, CEO Michael DeMarco bought $1 million worth of stock on the open market. What stands out most about the stock is that it’s near the low end of a 52-week trading range of $16 to $28.
Management exceeded both sales and funds from operations (FFO) estimates in the first quarter of 2018. The upside was a welcome surprise after Mack-Cali cut full-year guidance back in February, just a few weeks after naming a new chief financial officer.
The stock has been a roller coaster, but the company’s 3.9% dividend yield is backed by a solid balance sheet and management boosted the payout at this time last year. The CEO’s purchase and a follow-up buy of $500,000 from a board member could signal that the worst is behind the company.
Tallgrass Energy (TEGP) is a limited partnership that engages in the transportation, processing and storage of oil and natural gas. Earlier this month, CEO David Dehaemers Jr. stepped up and bought more than $200,000 of company shares.
Tallgrass Energy is the general partner of Tallgrass Energy Partners (TEP), which owns the underlying midstream assets where all of its cash to cover the 7% dividend yield flows from. This can be as confusing as it sounds, but management is in the process of consolidating the two entities, which should reduce funding costs and boost future earnings and dividends.
Steady Growth Can Continue
Not only does Tallgrass Energy offer an attractive yield today, but the underlying distribution has increased 11 consecutive quarters, doubling since late 2016. Tallgrass Energy Partners has raised its own distribution 19 consecutive quarters and covered the payout 1.3x with cash flow in the first quarter, so there’s plenty of room for future growth once the companies combine.
— David Peltier
While we like to see insider buying with a turnaround story, we love when CEOs who always do the right thing are purchasing more shares for themselves.
And today, three of our favorite CEOs are increasing their personal stakes and buying as much stock as they can get their hands on!
I understand why. All three businesses are recession-proof, and should continue to cruise no matter what’s in Trump’s next Tweet. These companies have captive, growing audiences – and they’ll be able to continue raising the rent without a problem.
And best of all, these stocks pay current yields up to 9%. They are cornerstones of my “no withdrawal” portfolio, which lets retirees and near-retirees generate enough income from dividends that they never have to sell a share of stock.
I’m sure you’ve considered this strategy. Maybe you’re dismayed that it’s impossible to execute with rates near historic lows. After all, with paltry dividends, there’s not enough income to live off.
That’s why a different approach – a contrarian one – is needed today. We must locate yields that are 7% or 8% or higher, and also make sure they’re secure. And what better way to do this than to follow CEOs buying their own out-of-favor, high yielding shares!
We’d love to share the names and tickers of these three insider-loved recession-proof REITs with you. In fact, Chief Investment Strategist Brett Owens has prepared a detailed report with our full analysis. Click here for instant access – and all the details on our “no withdrawal” strategy.
Source: Contrarian Outlook