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Stay Away From Apple Component Players – Cramer’s Lightning Round (5/16/18)

Stocks discussed on the Lightning Round segment of Jim Cramer’s Mad Money Program, Wednesday, May 16.

Bullish Calls

Johnson & Johnson (NYSE:JNJ): Cramer has been a fan and still likes the stock.

Pure Storage (NYSE:PSTG): They are a smart management company.

Foot Locker (NYSE:FL): Cramer thinks it’s okay. He prefers Nike (NYSE:NKE) even though it’s at the 52-week high.

Insperity (NYSE:NSP): This “business optimization company”, as Cramer calls it, doesn’t quit and he has been recommending it for a long time.

Bearish Calls

Gulfport Energy (NASDAQ:GPOR): Don’t go down the food chain. Buy Schlumberger (NYSE:SLB) as it’s a high quality company.

Preferred Apartment Communities (NYSEMKT:APTS): Cramer is not a fan of multi-family REITs. The 7% yield seems like a red flag.

Cirrus Logic (NASDAQ:CRUS): “We’re not really recommending the components players that go into Apple (NASDAQ:AAPL) right now. It’s just too hard.”

Frontline (NYSE:FRO): The crude carriers have done poorly.

>>Read Wednesday’s Mad Money summary here

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For Tesla, Less Is More

Page 14 of Tesla’s (NASDAQ:TSLA) 2017 10-K states:

Segment Information

We operate as two reportable segments: automotive and energy generation and storage.

The automotive segment includes the design, development, manufacturing, and sales of electric vehicles. The energy generation and storage segment includes the design, manufacture, installation, and sale or lease of stationary energy storage products and solar energy systems, and sale of electricity generated by our solar energy systems to customers.

As stated, Tesla has two reportable business segments, the automotive segment and the energy generation and storage segment.

What does “Full Disclosure” mean to the SEC and to the Financial Accounting Standards Board (FASB, which governs the accounting standards that public companies must comply with)? It is a basic Generally Accepted Accounting Principle (GAAP). As stated on page 1,314 of “Intermediate Accounting by Kieso, Weygandt, and Warfield, 2010:

The full disclosure principle calls for financial reporting of any financial facts significant enough to influence the judgment of an informed reader.”

The same page also states:

For example, recently the SEC required companies to provide expanded disclosures about their contractual obligations. In light of the off-balance sheet accounting frauds at companies like Enron, the benefits of these expanded disclosures seem fairly obvious to the investing public.”

I’ve stated it a number of times and I’ve seen other posters on SA state the same thing, and that is that Tesla does not seem transparent enough with its financial reporting. That thought came into focus when I thought about the company’s reportable business segments. I knew there was a specific standard or two that governed segment reporting. So, I decided to research the matter and see what information was required to be reported and then compare that with what Tesla reported, as well as what other companies, with more than one reportable segment reported.

The accounting standard governing business segment reporting is Statement of Financial Accounting Standards (SFAS) 131: Disclosures About Segments of an Enterprise and Related Information. SFAS 131 replaced SFAS 14: Financial Reporting for Segments of a Business Enterprise in 1997. The reason for the updated standard on business segment reporting was because financial analysts found SFAS 14 inadequate. (See paragraphs 42 and after of the Standard). They wanted financial statement data to be disaggregated to a greater degree than required by SFAS 14.

With FASB changing over to the accounting standards codification (ASC), this standard is now ASC 280: Segment Reporting, but it’s the same content as SFAS 131. Because the content is identical, I will refer to text from SFAS 131, instead of ASC 280. The codification is harder to access because you have to register at FASB’s website, so I can’t link to the text with it, whereas SFAS 131’s text is readily accessible.

SFAS 131 requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that’s evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments.

The reason that SFAS 131 was created was to:

Better understand the enterprise’s performance through expanded disclosures. Better assess its prospects for future net cash flows. Make more informed judgments about the enterprise as a whole.

It appears that Tesla meets the technical requirements of SFAS 131: Disclosures About Segments of an Enterprise and Related Information, but has failed to comply with the spirit of the standard. That’s my opinion after researching this subject.

SFAS 131 requires that a public business enterprise report a measure of profit or loss, certain specific revenue and expense items, and assets by segment. It also requires reconciliations of total segment revenues, total segment profit or loss, total segment assets, and other amounts disclosed for segments to corresponding amounts in the enterprise’s general-purpose financial statements. Information about the revenues derived from the enterprise’s products or services, about the countries in which the enterprise earns revenues and hold assets, and about major customers also is required to be reported, regardless of whether that information is used in making operating decisions.

An operating segment of an enterprise is defined by SFAS 131, paragraph 10 as:

10 …a component of an enterprise:

a. That engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same enterprise).

b. Whose operating results are regularly reviewed by the enterprise’s CODM to make decisions about resources to be allocated to the segment and assess its performance, and

c. For which discrete financial information is available.”

Then paragraph 12 states:

12. The term chief operating decision maker identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the segments of an enterprise.”

This means that the CODM, as defined in the previous paragraph, may be a group of persons and not just one person.

The following defines what a “reportable business segment” is which requires disaggregated segment reporting:

Quantitative Thresholds

18. An enterprise shall report separately information about an operating segment that meets any of the following quantitative thresholds:

a. Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 percent or more of the combined revenue, internal and external, of all reported operating segments.

b. The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of (1) the combined reported profit of all operating segments that did not report a loss or (2) the combined reported loss of all operating segments that did report a loss.

c. Its assets are 10 percent or more of the combined assets of all operating segments.

So, now we know what business segments are and which business segments must be reported separately from consolidated amounts.

I’m including here the SEC’s explanation of why it changed its guidance to conform to SFAS 131.

Let’s now examine, from SFAS 131, what is required to be disclosed by reported operating segments:

Disclosures

25. An enterprise shall disclose the following:

a. General information as described in paragraph 26

b. Information about reported segment profit or loss, including certain revenues and expenses included in reported segment profit or loss, segment assets, and the basis of measurement, as described in paragraphs 27-31

c. Reconciliations of the totals of segment revenues, reported profit or loss, assets, and other significant items to corresponding enterprise amounts as described in paragraph 32

d. Interim period information as described in paragraph 33.

26. An enterprise shall disclose the following general information:

a. Factors used to identify the enterprise’s reportable segments, including the basis of organization (for example, whether management has chosen to organize the enterprise around differences in products and services, geographic areas, regulatory environments, or a combination of factors and whether operating segments have been aggregated).

b. Types of products and services from which each reportable segment derives its revenues.”

Information about Profit or Loss and Assets

27. An enterprise shall report a measure of profit or loss and total assets for each reportable segment. An enterprise also shall disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker:

a. Revenues from external customers

b. Revenues from transactions with other operating segments of the same enterprise

c. Interest revenue

d. Interest expense

e. Depreciation, depletion, and amortization expense

f. Unusual items as described in paragraph 26 of APB Opinion No. 30, Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions

g. Equity in the net income of investees accounted for my the equity method

h. Income tax expense or benefit

i. Extraordinary items

j. Significant noncash items other than depreciation, depletion, and amortization expense.

28. An enterprise shall disclose the following about each reportable segment if the specified amounts are included in the determination of segment assets reviewed by the chief operating decision maker:

a. The amount of investment in equity method investees.

b. Total expenditures for additions to live-lived assets other than financial instruments, long-term customer relationships of a financial institution, mortgage and other servicing rights, deferred policy acquisition costs, and deferred tax assets.

Now we come to a very important part of the standard. It’s this paragraph that seems to be a loophole for Tesla to circumvent what was intended by SFAS 131.

Measurement

29. The amount of each segment item reported shall be the measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segment and assessing its performance. Adjustments and eliminations made in preparing an enterprise’s general-purpose financial statements and allocations of revenues, expenses, and gains or losses shall be included in determining reported segment profit or loss only if they are included in the measure of the segment’s profit or loss that’s used by the chief operating decision maker. Similarly, only those assets that are included in the measure of the segment’s assets that’s used by the chief operating decision maker shall be reported for that segment. If amounts are allocated to reported segment profit or loss or assets, those amounts shall be allocated on a reasonable basis.”

Are you still with me? It is a lot to digest. There is more, but I want to stop here and begin the analysis of Tesla’s disclosures. Tesla reports its business segment information under Note 23 of the 2017 10-K, pages 117 and 118:

Note 23 Segment Reporting and Information about Geographic Areas

We have two operating and reportable segments: (i) automotive and (ii) energy generation and storage. The automotive segment includes the design, development, manufacturing and sales of electric vehicles. Additionally, the automotive segment is also comprised of services and other, which includes after-sales vehicle services, used vehicle sales, powertrain sales and services by Grohmann. The energy generation and storage segment includes the design, manufacture, installation and sales of solar energy generation and energy storage products. Our CODM does not evaluate operating segments using asset or liability information. The following table presents revenues and gross margins by reportable segment (in thousands):”

Note on page 117 that Tesla’s “measure of profit or loss” which they use “for purposes of making decisions about allocating resources to the segment and assessing its performance” is Gross Profit.

At this point I have to ask: Really? You mean to say that Mr. Musk and Mr. Ahuja, or whoever the CODM is, meet with the people responsible for the two business segments to review operating performance and the only measure of profit or loss that they review is Gross Profit? Are you serious?

I mean, you have business segment operating expenses like:

Payroll for design, development, manufacturing, and sales. SG&A for both operating segments, like utilities, telephones both stationary and mobile, internet usage charges, and general office supplies for administrative employees and sales employees. Depreciation for general purpose office equipment like computers, printers, telephones, desks, chairs. Depreciation on the buildings that house administrative and sales employees. Amortization on computer software used to manage both segments. Marketing costs Other things I have not mentioned or thought of.

All of these costs can be easily identified with either the Automotive segment or the Energy Generation and Storage segment. I am certain that Tesla’s CODM reviews these business segment costs and reviews operating income or loss by business segment in order to assess operating performance for each segment. But, SFAS 131 doesn’t define what the term “a measure of profit or loss” is. Therefore, the Standard provides Tesla with a loophole whereby they are not required to disclose operating income or loss by business segment. As a consequence, in Tesla’s case the new Standard provides a loophole whereby less disaggregated financial information may be disclosed than the old one. That’s exactly the opposite of what was intended with the issuance of the new Standard.

To support my claim that Tesla’s CODM looks at details of operating performance on a segment level basis that go well beyond the Gross Profit level, Take a look at this article from October 25, 2017.

” Tesla said at the time of the acquisition it would cut costs by $150 million in the first full year after closing the deal, which will occur November 21, 2017. SolarCity cofounders Peter and Lyndon Rive have both left the company since it was acquired by Tesla. The Rives are cousins of Tesla CEO Elon Musk. “

The word “synergies,” however, means cost cutting, and at least some of the cost cutting will come in the form of layoffs.

Like all companies, Tesla conducts an annual performance review during which a manager and employee discuss the results that were achieved, as well as how those results were achieved, during the performance period. This includes both constructive feedback and recognition of top performers with additional compensation and equity awards, as well as promotions in many cases. As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures. Tesla is continuing to grow and hire new employees around the world.”

SFAS 131 provides an example of Segment Information to be reported, in paragraph 122:

Diversified Company evaluates performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses and foreign exchange gains and losses.”

Did you get that? The example in SFAS 131, itself, uses what to evaluate performance? Operating Income or Loss.

The example company also has a finance segment that meets the reportable segment criteria. Tesla has a finance division in its Auto Segment. That division doesn’t meet the reportable segment criteria? Interesting. Very interesting.

IMO, Tesla does, in fact, assess business segment performance at the operating income or loss level. My own accounting work experience tells me that. Common sense tells you that. I was born at night, but not last night. So, even though Tesla meets the technical requirements of SFAS 131, by reporting “a measure of profit or loss,” the company fails to comply with the very intent of the standard, in my opinion.

There’s another matter, also, the reporting of segment assets. Tesla doesn’t report their assets by segment, but only by a consolidated total. Again, it appears that Tesla meets the technical requirements of SFAS 131, but fails to comply with its spirit. Within Note 23 of the 2017 10-K, on page 117, Tesla states: Our CODM does not evaluate operating segments using asset or liability information.

Paragraph 29 of the standard states: “The amount of each segment item reported shall be the measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segment and assessing its performance. “

So, with Tesla’s statement, they comply with the technical requirements of the standard since, according to the company, the CODM doesn’t evaluate operating segments using asset or liability information.

But, is it really true that Tesla doesn’t evaluate segment operating performance or the allocation of resources (assets) using asset information? Has Tesla consolidated SolarCity and reduced the amount of assets under its management, as a result? Yes, they have. Does Tesla continue to monitor and manage the amount of its assets, company wide? Obviously, they do. And what about “capex?” So if this isn’t reviewing resource allocation (assets) and making decisions about resource allocation (assets), then I’m from Mars. I think any public company manages the allocation of resources using asset information, as can readily be seen by the asset information provided by other enterprises with more than one segment. Ford (NYSE:F), GM (NYSE:GM), John Deere (NYSE:DE), GE (NYSE:GE), Johnson & Johnson (NYSE:JNJ), Caterpillar (NYSE:CAT), and every other company that I’ve researched, that has more than one business segment, provides operating income, asset information, depreciation, and other information by segment. But not Tesla. I find it hard to believe that Tesla doesn’t review and evaluate operating performance or resource allocation with asset information.

Let’s go on, now, and review a few other paragraphs of the standard.

32. An enterprise shall provide reconciliations of all of the following:

a. The total of the reportable segment’s revenues to the enterprise’s consolidated revenues.

b. The total of the reportable segments’ measures of profit or loss to the enterprise’s consolidated income before income taxes, extraordinary items, discontinued operations, and the cumulative effect of changes in accounting principles.

c. The total of the reportable segments’ assets to the enterprise’s consolidated assets.

d. The total of the reportable segments’ amounts for every other significant item of information disclosed to the corresponding consolidated amount.

All significant reconciling items shall be separately identified and described. For example, the amount of each significant adjustment to reconcile accounting methods used in determining segment profit or loss to the enterprise’s consolidated amounts shall be separately identified and described.

Tesla includes a reconciliation of its reportable segment revenues to consolidated revenues. But I don’t see a reconciliation of the reportable segments’ profit or loss to the consolidated income or loss before income taxes, extraordinary items, etc. And a reconciliation of the reportable segments’ assets to consolidated assets is missing.

Then there’s paragraph 38 about reporting revenues from external customers by geographic region, and long-lived assets by geographic region. Tesla complies with this.

Then there’s paragraph 39:

Information about Major Customers

39. An enterprise shall provide information about the extent of its reliance on its major customers. If revenues from transactions with a single external customer amount to 10 percent or more of an enterprise’s revenues, the enterprise shall disclose that fact, the total amount of revenues from each such customer, and the identity of the segment or segments reporting the revenues. The enterprise need not disclose the identity of a major customer or the amount of revenues that each segment reports from that customer.

Tesla doesn’t provide any information in this regard, so, apparently it doesn’t derive at least 10 percent of its revenues from just one customer.

So, that’s the standard and you can review it at FASB’s website here.

Let’s further evaluate the adequacy of Tesla’s disclosures about its business segments by revealing what was intended when SFAS 131 replaced SFAS 14.

First, let’s review the statements of the sole FASB Board Member (there are seven board members) who dissented from the issuance of SFAS 131:

This Statement was adopted by the affirmative votes of six members of the Financial Accounting Standards Board. Mr. Leisenring dissented.

Mr. Leisenring dissents from the issuance of this Statement because it does not define segment profit or loss and does not require that whatever measure of profit or loss is reported be consistent with the attribution of assets to reportable segments.

By not defining segment profit or loss, this Statement allows any measure of performance to be displayed as segment profit or loss as long as that measure is reviewed by the chief operating decision maker. Items of revenue and expense directly attributable to a given segment need not be included in the reported operating results of that segment, and no allocation of items not directly attributable to a given segment is required. As a consequence, an item that results directly from one segment’s activities can be excluded from that segment’s profit or loss. Mr. Leisenring believes that, minimally, this Statement should require that amounts directly incurred by or directly attributable to a segment be included in that segment’s profit or loss and that assets identified with a particular segment be consistent with the measurement of that segment’s profit of loss.

Mr. Leisenring supports trying to assist users as described in paragraph 3 of this Statement but believes it is very unlikely that will be accomplished, even with the required disclosures and reconciliations to the entity’s annual financial statements, because of the failure to define profit or loss and to impose any attribution or allocation requirements for the measure of profit or loss.

Mr Leisenring supports the management approach for defining reportable segments and supports disclosure of selected segment information in condensed financial statements of interim periods issued to shareholders. Mr. Leisenring believes, however, that the definitions of revenues, operating profit or loss, and identifiable assets in paragraph 10 of Statement 14 should be retained in this Statement and applied to segments identified by the management approach.

I concur with Mr. Leisenring. Without defining profit or loss, companies like Tesla can skirt the spirit and intent of the new standard, as we see being done in Tesla’s 10-K, in my opinion.

So, I have a question. Is there any “material” information which Note 23 of Tesla’s financials discloses that isn’t contained within its Consolidated Income Statement? Very little, in my opinion. The intent of SFAS 131 was that MORE disaggregated financial data would be disclosed than was disclosed under SFAS 14. That isn’t the case with Tesla.

Here is the intent of the new Standard, in paragraphs 42 through 45:

Background Information

42. FASB Statement No. 14, Financial Reporting for Segments of a Business Enterprise, was issued in 1976. That Statement required that business enterprises report segment information on two bases: By industry and by geographic area. It also required disclosure of information about export sales and major customers.

43. The Board concluded at the time it issued Statement 14 that information about components of an enterprise, the products and services that it offers, its foreign operations, and its major customers is useful for understanding and making decisions about the enterprise as a whole……

44. In its 1993 position paper, Financial Reporting in the 1990s and Beyond, the Association for Investment Management and Research (AIMR) said:

(Segment data) is vital, essential, fundamental, indispensable, and integral to the investment analysis process. Analysts need to know and understand how the various components of a multifaceted enterprise behave economically. One weak member of the group is analogous to a section of blight on a piece of fruit – it has the potential to spread rot over the entirety. Even in the absence of weakness, different segments will generate dissimilar streams of cash flows to which are attached disparate risks and which bring about unique values. Thus, without disaggregation, there is no sensible way to predict the overall amounts, timing, or risks of a complete enterprise’s future cash flows. There is little dispute over the analytic usefulness of disaggregated financial data. (Pages 59 and 60).

45. Over the years, financial analysts consistently requested that financial statement data be disaggregated to a much greater degree than it is in current practice. Many analysts said that they found Statement 14 helpful but inadequate. In its 1993 position paper, the AIMR emphasized that:

There is no disagreement among AIMR members that segment information is totally vital to their work. There also is general agreement among them that the current segment reporting standard, Financial Accounting Standard No. 14, is inadequate.

Then, paragraph 93 of SFAS 131 states:

Although this Statement requires disclosure of more information about an individual operating segment than Statement 14 required for an industry segment, ….”

Clearly, what was intended with the new Standard was more disaggregated data, not less. But, with Tesla, less is more. I give Tesla a grade of F for this section of their 10-K. Their Business Segments are something of a “black box” due to the lack of disclosure about them.

In Contrast, I present John Deere’s Disclosure Note on Reported Segments. It’s three pages long:



I’ll wrap up the article with this. Where’s the beef? When businesses become materially diversified, investors and investment analysts want more information about the details behind the consolidated financial statements. In particular, they want Income Statement, Balance Sheet, and Cash Flow information on the individual segments that compose the total income or loss figures.

Much information is hidden in the consolidated numbers. If an investor or an analyst has only the consolidated figures, he or she cannot tell the extent to which differing product lines contribute to the company’s profitability (or lack of), risk and growth potential. Earnings of the individual segments enable investors and the analyst to evaluate the differences between segments in growth rate, risk, and profitability, and to forecast consolidated profits. SFAS 14 was written to better serve the investor and analysts by requiring segmented information be made available, including operating income or loss and the assets contributing to that income or loss. SFAS 131 replaced SFAS 14 so that even more and better segmented data would be made available. Tesla defeats the purpose for which SFAS 131 was issued, since it provides less information about operating income and assets (no data) than it would have been required to report under SFAS 14.

In short, take away Note 23 of Tesla’s 10-K and little material information has been omitted, meaning Note 23 tells us little more about the business segments than if the Note were not present.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.

Additional disclosure: I may buy puts on Tesla when and if the price reaches $350
It is highly risky to short this stock. Please understand the risks fully before doing so.

8 Biggest Dow Losers So Far in 2018

Over the course of the past week’s five trading sessions, the Dow Jones industrial average dropped more than 1,400 points, the biggest weekly percentage loss in more than two years. Eight Dow component stocks are down at least 10% for the year to date and only six have been able to show a gain so far in 2018.

No one will be shocked to read that General Electric Co. (NYSE: GE) is the worst-performing Dow stock of 2018, down 25.1% as of Friday. The stock posted a new 52-week low Friday at $13.02. As the share price declines, investors worry more about the viability of GE’s dividend payments. At yesterday’s close the dividend yield is 3.41%. For the prior 12 months, GE shares have lost nearly 56% of their value.

Procter & Gamble Co. (NYSE: PG) has seen its share price drop by 17.38% to date in 2018. Shares lost nearly 4% last week and set a new 52-week low of $75.81 on Friday. The stock has long been a favorite defensive holding, and of the eight stocks on this list, its weekly loss was the second smallest. The stock’s dividend yield is 3.52%, and shares are down 16.4% for the past 12 months.

Walmart Inc. (NYSE: WMT) dropped 4.21% last week and shares are down 13.5% for the year to date. The company has been waging anear-life and death battle with Amazon that is both costly and only a moderate success. Walmart’s dividend yield at Friday’s close was 2.39%, and shares still trade up by over 22% over the past 12 months.

Exxon Mobil Corp. (NYSE: XOM) closed Friday down 12.85% for the year to date and down just under 3% for the week. That was the smallest weekly loss of any of the stocks on this list. Exxon was buoyed by last week’s5.6% boost to crude oil prices. The stock’s dividend yield was 4.14% at Friday’s close, and shares are down about 11% over the past 12 months.

Verizon Communications Inc. (NYSE: VZ) has lost about 12.5% of its value since the beginning of the year. Last week’s dip of 4.67% didn’t help, but Verizon did manage to avoid setting a new annual low during the week. The company’s 5% dividend yield helps keep investors in the fold, and some encouraging words about Verizon’s 5G technology also helped moderate losses last week. The stock is still underperforming for the past 12 months, however, down 6.75%.

DowDuPont Inc. (NYSE: DWDP) has posted a year-to-date drop of about 11.5% after losing 7.2% of its value last week. Like Verizon, the industrial firm managed to avoid posting a new low last week, and the stock price is flat over the past 12 months. DowDuPont’s dividend yield was 2.32% at Friday’s close.

Johnson & Johnson (NYSE: JNJ) dropped 6.42% last week to bring its year-to-date loss to 10.5%. Like P&G, this is another defensive stock that investors hold onto for its long history of dividend performance. At Friday’s closing price, the dividend yield for J&J is 2.64%, hardly a dazzler, but an amount that is a virtual lock to be paid. For the past 12 months, its shares have lost just 0.6%.

McDonald’s Corp. (NYSE: MCD) makes this list because its stock is down 9.96% for the year, close enough to 10% for us. Shares lost 4.55% last week, but has still has added just over 20% to its share price during the past 12 months. Not quite as sure a defensive play as P&G or J&J, McDonald’s pays a dividend yield of 2.55% and remains a favorite among some analysts.

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These Are the Only Dow Stocks Up for the Year

The 5 Best Stocks for Retirees to Buy Before 2018

Adding extra income to your nest egg can be the difference between a comfortable retirement and living the retirement of your dreams. That’s why we’ve put together a list of the five beststocks for retireesto buy today…

Now, owning stocks involves a certain level of risk. That’s especially true for retirees who don’t have decades to recover losses. But if you’re a retiree with some extra money set aside, owning stable, high-dividend-paying stocks can provide extra, valuable income in your golden years.

Money MorningChief Investment Strategist Keith Fitz-Gerald says owning dividend stocks like these can be likeearning a “second salary.”

“Dividends can work like magic when it comes to reaching your financial goals and a safe retirement,” says Fitz-Gerald.

In fact, one of theretirement stockswe’ll show you below yields more than 17% on its dividend. That means a $10,000 investment would accrue $1,700 a year from dividends alone.

And that outpaces other options for retirement income, like annuities or mutual funds…

top stocksmoneymorning.com/wp-content/blogs.dir/1/files/2017/12/top-stocks-300×220.jpg 300w, moneymorning.com/wp-content/blogs.dir/1/files/2017/12/top-stocks-178×130.jpg 178w, moneymorning.com/wp-content/blogs.dir/1/files/2017/12/top-stocks-75×55.jpg 75w” sizes=”(max-width: 480px) 100vw, 480px” title=”top stocks” />

An annuity can guarantee a steady rate of return – around 3% for a fixed annuity – but once purchased, you can’t withdraw your money without paying extra. With a stock, you can sell shares when you need to free up the money. Plus, you’ll profit if the share price rises.

Additionally, fees from annuities and mutual funds chip away at your money, countering the added income.

Managed fund fees can run over 2%. Annuities also come with complex fees. Fidelity lists 11 different fee possibilities depending on which annuity you purchase.

Retirement Rocket Fuel:Forget about needing a million bucks or more to retire. With this strategy, you could retire with just $12,000 and make up to $162,000 a year…every year.Click here to learn how…

Again, nothing beats a complete retirement plan when it comes to reaching your retirement goals. That’s whyFitz-Gerald has put together an action plan to help you get there, too.

Stocks for retirees moneymorning.com/wp-content/blogs.dir/1/files/2017/12/dividend-jar-75×50.jpg 75w” sizes=”(max-width: 300px) 100vw, 300px” title=”Stocks for retirees ” />But if you’re looking to add a little extra income to your retirement with stable,high-dividend stocks, we’ve got you covered.

Not only do these stocks pay high dividends – some yield above 15% – but these are well-run, profitable companies. That’s essential for income investors, because the company needs to keep generating profits to keep paying a dividend.

Fitz-Gerald says, “a company’s ability to keep paying and increasing its dividend is just as important in the long term” as high yields are.

That’s why we’ve found five stocks with high dividends and excellent business models to keep the payouts coming…

The Best Stocks for Retirees, No. 5: Ticc Capital Corp.

Ticc CapitalCorp. (Nasdaq:TICC)is a corporation chartered under a unique tax structure that allows it to send more of its profits back to investors. Business Development Corps. (BDCs) were designed to allow average investors – not the hedge fund giants on Wall Street – to fund private startups.

And that’s the structure utilized by Ticc Capital Corp. Because Ticc is a BDC, it’s required to distribute at least 90% of its income back to its investors.

That’s how Ticc pays its investors a quarterly dividend of $0.20 a share. With a share price of $6.55, the dividend yields 12.23% on your investment. That can add up to some serious income.

The average working person between ages 56 and 61 has $163,577 in savings. According to Fitz-Gerald, “TICC’s 12.23% yield would mean a $20,000 income stream a year – which amounts to $1,667/month of taxable income.”

While we don’t recommend putting your savings into one stock, the example shows just how powerful of an income generator Ticc can be for your extra money.

And Ticc is a well-run company. It has an operating cash flow of $315.16 million and a profit margin of nearly 10%. That ensures Ticc will be able to keep paying its huge dividend and can even raise it over the coming years.

The Best Stocks for Retirees, No. 4: New Residential Investment Corp.

New Residential Investment Corp.(NYSE:NRZ) is the most unique pick on our list, since it’s a real estate investment trust (REIT). NRZ manages a portfolio of real estate holdings and mortgages, which gives its investors exposure to the real estate market.

While REITs can be used to diversify a typical stock portfolio, they also bring their investors serious income.

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NRZ has over $70 billion in assets under management, and those assets bring NRZ a quarterly income of $356.79 million. And nearly all of that income gets passed on to NRZ’s investors since it’s a REIT.

“New Residential is required by the SEC to return 90% of taxable income to shareholders annually,” says Fitz-Gerald. “That means money in your pocket, if you’re one of ’em.”

NRZ pays a dividend of $0.50 a share, and with a share price of $16.95, its dividend yields 11.8% on your investment.

The Best Stocks for Retirees, No. 3: Lockheed Martin Corp.

Lockheed MartinCorp. (NYSE:LMT) is one of the best defense contractors in the world, and it’s hugely profitable.

With a profit margin of 10.37% and total revenue of $47.2 billion annually, the company is raking in a profit of nearly $5 billion a year. And in 2017, the company announced it was increasing its yearly profit projections by 5%.

You see, LMT is an exceptionally well-managed company with billions in government contracts across the world. But it’s also plugged in to the Unstoppable Trend of war, terrorism & ugliness.

The key to making huge profits is to find “must-have” companies that fall into what Fitz-Gerald calls the six “Unstoppable Trends”: medicine, technology, demographics, scarcity & allocation, energy, and war, terrorism and ugliness (also known as “defense”). The Unstoppable Trends are backed by trillions of dollars that Washington cannot derail, the Fed cannot meddle with, and Wall Street cannot hijack.

That means LMT is always going to be in demand, no matter what else is going on in the broader market. That lets LMT pay its investors a massive $2.00 dividend per share. That’s right, the company will pay you $2 a quarter just for owning its stock.

And it’s likely you’ll be growing your money by doing that, too. LMT is up 32% over the last year, jumping from $237.39 a share to $312.67 a share today. Analysts are projecting it could hit $340 a share.

That’s a nice profit opportunity for ahigh-dividend income stock.

And we’ve saved the best for last. Our last two income stocks for retirement are our top picks, including one paying a dividend that yields over 17%…

The Best Stocks for Retirees, No. 2: Arlington Asset Investment Corp.

Arlington Asset Investment Corp.(NYSE:AI) is another BDC, but this one focuses on owning government debt.

That may sound like a dull business model, but rest assured, it’s a lucrative one. AI has nearly $5 billion in its portfolio and is massively profitable.

With a profit margin of 38.8%, AI is able to funnel more than three times the profit of any stock on this list back to its investors.

That’s how it manages a dividend yield of a whopping 17.17%, the biggest dividend on our list. And the best part is AI is likely to continue growing its dividend.

Fitz-Gerald especially likes AI because of its long-term stability, which is essential for it to keep paying such a spectacular dividend.

“This stability is exactly what you’d expect from a business gathering income through U.S. government-backed mortgages,” Fitz-Gerald said. “It may not be the most exciting field, but it sure pays the bills, as you’ll see from this company’s quarterly dividend income stream.”

In fact, AI has upped its dividend 92% since 2010.

The Best Stocks for Retirees, No. 1: ABB Ltd.

ABB Ltd.(NYSE ADR:ABB) is a Swiss company specializing in electrification, but that’s just the tip of the iceberg with this company.

Fitz-Gerald says the company is actually billing itself as a “technology leader,” and that’s important for its future.

“Not many investors realize this, but more than 55% of ABB’s sales are already from software and digitally enabled devices,” according to Fitz-Gerald.

That means ABB’s future is looking bright, but its income potential is what attracts us to it here.

ABB pays a dividend of $0.76 a share. With a share price of just $25.18, investors get access to that payout for a fraction of the cost of a stock like Johnson & Johnson (NYSE:JNJ), which pays a dividend of $0.84 per $132.77 a share.

You see, Fitz-Gerald is a believer in the maxim that “price is what you pay, but value is what you get,” and ABB delivers value.

Plus it fits all three of Fitz-Gerald’s criteria for finding value in stocks, which is essential to maintaining income.

“My goal is to find a high-quality business with a proven track record, savvy management, and plenty of profit potential,” says Fitz-Gerald. And ABB stacks up with all of them.

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9 Best Dividend Stocks to Buy for Every Investor

As we close out 2017, it’s good to remind ourselves of what worked, and what didn’t. This past year, though, makes this introspective exercise rather tricky. Although Wall Street early on forecasted a rough 2017, the end result was quite the opposite. Benchmark indices hit all-time records, while most sectors witnessed tremendous optimism. Who needs dividend stocks at a time like this?

This also means that inferior investment strategies were masked by secular bullishness. The new year may not be as forgiving, which is why I’m recommending investors to get selective. Fortunately, with dividend stocks, you don’t have to feel pressured into always picking winners.

At its core, choosing the right dividend stocks to buy is about options. Although picking high-flying growth companies is the sexiest endeavor, it isn’t always the smartest. With passive-income yielding firms, you get the potential for making capital gains, and also residual payouts to bolster your position. During a down period, dividends can also help you ride out the storm.

But don’t mistake these yields as “boring” strategies. Like any investment class, you can dial up the risk for the chance of greater rewards. This is why picking the most appropriate dividends stocks to buy is so important: no one knows your investment style better than you!

The following ideas are broken down into three sections: stable, mid-level and high-yield (speculative). Each section has something to offer, depending on how much risk you’re willing to take.

Best Dividend Stocks to Buy: Johnson & Johnson (JNJ) investorplace.com/wp-content/uploads/2017/10/jnjmsn1-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/10/jnjmsn1-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/10/jnjmsn1-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/10/jnjmsn1-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/10/jnjmsn1-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/10/jnjmsn1-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/10/jnjmsn1-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/10/jnjmsn1-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/10/jnjmsn1-78×43.jpg 78w,https://investorplace.com/wp-content/uploads/2017/10/jnjmsn1-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

If you love stable dividend stocks, you love Johnson & Johnson (NYSE:JNJ). It is the powerhouse brands of powerhouse brands. Better yet, JNJ is levered toward the ultimate in secular industries: healthcare. Separated among consumer-level products, pharmaceuticals, and medical devices, JNJ is one of the most respected companies in the world.

Currently, Johnson & Johnson’s dividend yield is 2.4%. Given the strength of its global business, that dividend is rock solid. But what people may not immediately appreciate is that JNJ can also surprise people in the capital markets. For instance, year-to-date, shares are up over 21%. To put that into perspective, the benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is just under 18%.

Critically for the conservative investor, JNJ rarely loses. Between 1970 to the end of 2016, annual returns average almost 15%. Moreover, JNJ only hit red ink 13 times, meaning that 72% of the time, you can expect shares to win.

In our business, that’s as close to a sure thing as you’re gonna get!

Best Dividend Stocks to Buy: Wells Fargo & Co (WFC) Wells Fargo & Company (WFC)investorplace.com/wp-content/uploads/2017/01/wfcmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/01/wfcmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/01/wfcmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/01/wfcmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/01/wfcmsn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/01/wfcmsn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/01/wfcmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/01/wfcmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/01/wfcmsn-78×43.jpg 78w,https://investorplace.com/wp-content/uploads/2017/01/wfcmsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

I’ll admit that I wasn’t thrilled about putting Wells Fargo & Co (NYSE:WFC) into my dividend stocks to buy list. You’ll recall that WFC was embroiled in a major controversy that shocked the entire financial and business community. Essentially, the banking giant admitted to creating more than two million fake accounts to meet ambitious sales targets.

It made me sick and I’m not the only one. But eventually, people get over this stuff, perhaps resigned to the fact that the major conglomerates always win. I’ve even made the argument that Equifax Inc (NYSE:EFX) — yes, that Equifax — will be forgiven. As cynical as it may sound, what good will being angry do for any of us?

It stinks that the ultra-rich get away with bloody murder. From a financial perspective, though, WFC is an opportunity. Despite giving long-term holders seasickness, WFC stayed the course. If the current positive momentum remains, shares will end the year in the black. Wells Fargo isn’t going anywhere.

Most importantly, WFC spits out the biggest dividend yield among the “big four” at nearly 2.7%. That may be the price of forgiveness!

Best Dividend Stocks to Buy: Exxon Mobil Corporation (XOM) xom stock exxon stockinvestorplace.com/wp-content/uploads/2017/02/xommsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/02/xommsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/02/xommsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/02/xommsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/02/xommsn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/02/xommsn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/02/xommsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/02/xommsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/02/xommsn-78×43.jpg 78w,https://investorplace.com/wp-content/uploads/2017/02/xommsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

Again, on the surface level, Exxon Mobil Corporation (NYSE:XOM) is a strange name to put on a best dividend stocks list. Energy is hardly the most consistent sector. More to the point, XOM has been on the wrong end of a market shake-up. Since the oil collapse of 2014, XOM has at best been treading water against prior highs.

But the flipside to this bearish argument is that in practical ways, energy is the most consistent sector possible. When people hit the switch, they expect the lights to turn on. Similarly, when they go to the gasoline station, they expect to fill their tanks. Without XOM and its ilk, none of these things would occur. A societal breakdown could commence.

In all seriousness, investors should be encouraged by Exxon Mobil’s response to the oil market downturn. They and the remaining survivors have revamped their operations and rid themselves of unproductive assets. Today, XOM and the oil community are leaner, meaner, and better prepared for whatever lies ahead.

In other words, XOM has proven its resilience. As a conservative investor, you can buy that 3.7% yield with confidence.

Best Dividend Stocks to Buy: Duke Energy Corp (DUK) Duke Energy Corp (NYSE:DUK)investorplace.com/wp-content/uploads/2017/05/dukmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/05/dukmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/05/dukmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/05/dukmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/05/dukmsn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/05/dukmsn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/05/dukmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/05/dukmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/05/dukmsn-78×43.jpg 78w,https://investorplace.com/wp-content/uploads/2017/05/dukmsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

If you’re a real numbers guy, you’ll want to pay attention to Duke Energy Corp (NYSE:DUK). Based on a quantitative model that our own Louis Navellier developed, DUK is one of the best dividend stocks to buy right now. Mixing in commonly-used metrics (ie. earnings momentum) as well propriety methods, DUK appears primed for a stellar new year.

I, on the other hand, prefer to keep it simple if there’s no real need to complicate things. Here’s what I’m looking at: since the tech bubble and the 2008 financial crisis, DUK has steadily rewarded investors with few hiccups. This year, DUK is set to return more than 13% should its technical momentum hold.

All indications suggest that Duke Energy can keep the good times flowing into next year. As it stands, the company is the seventh-largest electric utility company in the U.S. Furthermore, management has retired many of its coal power plants, instead focusing on natural gas and cleaner energy sources.

Currently, DUK stock yields slightly more than 4%. Although slightly riskier than your conservative dividend play, Duke Energy has the right balance between stability and income.

Best Dividend Stocks to Buy: AT&T Inc. (T) AT&T T stockinvestorplace.com/wp-content/uploads/2016/04/tmsn2-300×165.jpg 300w, investorplace.com/wp-content/uploads/2016/04/tmsn2-73×40.jpg 73w, investorplace.com/wp-content/uploads/2016/04/tmsn2-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/04/tmsn2-250×137.jpg 250w, investorplace.com/wp-content/uploads/2016/04/tmsn2-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/04/tmsn2-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/04/tmsn2-160×88.jpg 160w, investorplace.com/wp-content/uploads/2016/04/tmsn2-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/04/tmsn2-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/04/tmsn2-91×50.jpg 91w,https://investorplace.com/wp-content/uploads/2016/04/tmsn2-78×43.jpg 78w, investorplace.com/wp-content/uploads/2016/04/tmsn2-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Mike Mozart via Flickr

I have to say that AT&T Inc. (NYSE:T) disappointed me this year in the capital markets. Typically, AT&T is like clockwork — more often than not, you know what you’re getting. This year was the anomaly. On a YTD basis, T stock dropped like a rock, currently down 14%.

Although you have to have a short memory in the investment markets, I took the AT&T’s implosion personally. Investment-performance aggregator TipRanks honored me with “top blogger” status, and used my bullishness toward T stock in their feature article. Unfortunately, Wall Street had other plans and took my blue-chip baby down.

No matter. Keep in mind that between 1984 through 2016, AT&T’s annual returns average more than 13%. More importantly, during this time, T stock has only lost eight times out of 33. When this year is over, the statistic will likely be nine times out of 34. Even in that case, AT&T is a winner 73.5% of the time.

Like the aforementioned JNJ, at this rate, T stock is practically a sure thing. The only difference is the reward. AT&T offers a whopping 5.36% dividend yield!

Best Dividend Stocks to Buy: Welltower Inc (HCN) investorplace.com/wp-content/uploads/2016/08/hcnmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2016/08/hcnmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/08/hcnmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/08/hcnmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/08/hcnmsn-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/08/hcnmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/08/hcnmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2016/08/hcnmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2016/08/hcnmsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: sima dimitric via Flickr

I cannot wait for the current batch of young millennials to turn 40. Each generation has its fair share of youthful idiocy; however, I think millennials, particularly those in their mid-twenties, take the cake. The way that so many of them conduct themselves, you’d think that they honestly believe they will never age.

The news flash that everyone else knows instinctively is that time stops for no one. With that harsh reality in mind, I bring to you Welltower Inc (NYSE:HCN). HCN is a real estate investment trust specializing in senior care and facilities. Even if you’re one of the young Millennials that sees no use for Welltower, you still might put your parents into one of their centers.

Joking aside, I can think of no other business where revenues are virtually guaranteed, save for a funeral home. Although Welltower’s market performance has been a little choppy, in the long haul, HCN has been a steady investment. In the trailing ten years, shares have gained nearly 48%.

Of course, we can’t forget the dividend yields, which for HCN stands at 5.26%.

Best Dividend Stocks to Buy: Blackstone Group LP (BX) Blackstone (BX)investorplace.com/wp-content/uploads/2017/05/bxmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/05/bxmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/05/bxmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/05/bxmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/05/bxmsn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/05/bxmsn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/05/bxmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/05/bxmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/05/bxmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2017/05/bxmsn-170×93.jpg170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

Moving on to the speculative side of dividend stocks, we have Blackstone Group LP (NYSE:BX). If you were to simply assess BX based on this year’s performance alone, Blackstone wouldn’t seem at all risky. On a YTD basis, BX gained nearly 19%, making it one of the top performers on this list.

Typically, strong capital returns and high yields don’t go together. With a dividend yield of 7.2%, Blackstone’s passive income is right around the same as an average mutual fund. So what gives?

Let’s just say that BX will probably never make the list of best “feel good” stocks. The financial firm has been involved in a number of controversies, ranging from scandalous real-estate practices to shadow banking. For conservative-leaning voters, Blackstone has troubling ties to key Democrats.

Additionally, BX is a “make money at any cost” type of organization. Their profiteering activities in SeaWorld Entertainment Inc (NYSE:SEAS) amid its “Blackfish” controversy is a perfect example.

But hey, who said Wall Street was a friendly place?

Best Dividend Stocks to Buy: Kimco Realty Corp (KIM) investorplace.com/wp-content/uploads/2017/02/kimmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/02/kimmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/02/kimmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/02/kimmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/02/kimmsn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/02/kimmsn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/02/kimmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/02/kimmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/02/kimmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2017/02/kimmsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

I will tell you straight up that anything involving brick-and-mortar retail is a risky game. Earlier this year, I cautioned my readers about investing in retail REITs. With overall declining foot-traffic, the physical retail space doesn’t have the appeal it once did. Of course, the most important factor is e-commerce. Why sit in traffic and wait in lines when you can shop conveniently at Amazon.com, Inc. (NASDAQ:AMZN)?

The flipside to this argument is that some retail sectors that Amazon has trouble impacting exist. For instance, most people find it more convenient to size their clothing at a physical apparel shop than guessing online. In addition, some store brands offer better pricing or a better experience than Amazon. Think Wal-Mart Stores Inc (NYSE:WMT), Costco Wholesale Corporation (NASDAQ:COST) and Best Buy Co Inc (NYSE:BBY).

A retail REIT that focuses on strong brands just might have a chance, hence Kimco Realty Corp (NYSE:KIM). KIM features multiple properties running highly-demanded store brands. Moreover, a good chunk of their properties are located in lucrative markets.

Will it be enough to overcome the risk to the entire sector? I’m not so sure, which helps explain Kimco’s 6% dividend yield. Nevertheless, if you’re a believer, KIM gives you a solid opportunity.

Best Dividend Stocks to Buy: Sotherly Hotels Inc (SOHO) investorplace.com/wp-content/uploads/2016/09/officereitmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2016/09/officereitmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/09/officereitmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/09/officereitmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/09/officereitmsn-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/09/officereitmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/09/officereitmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2016/09/officereitmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2016/09/officereitmsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Anders Jildén via Unsplash

Thanks to the abundance of consumer-level technologies, traditional industries face obsolescence. A decade ago, if you needed to go to the airport, you essentially had to call a cab. Now, with ride-sharing apps like Uber or Lyft, you can request a similar service conveniently through your smartphone.

A similar upheaval may occur in the hotel industry, thanks to apps like Airbnb. To survive in this rough-and-tumble sector, you need a fresh approach. Sotherly Hotels Inc (NASDAQ:SOHO) just might have the magic formula. Centered largely in the southern region of the U.S., SOHO provides an authentic, unique experience for its guests.

Apparently, most Millennials want brands to be more authentic, and that fits SOHO to a T. Visit any of their locations, and you feel like a welcomed member of a community, not some room number. Plus, former NFL star Herschel Walker sits on the board of directors: that’s just downright awesome!

But will any of this matter for investors? Again, it’s a tough call given so many changes in the hospitality and services sector. Still, with a 6.5% dividend yield, SOHO is worth a second look.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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