About the Editor

David Harrell is the editor of Morningstar DividendInvestor, a monthly newsletter that focuses on dividend income investment strategy. For illustration purposes, issues highlight activities pertaining to a Morningstar, Inc. portfolio invested in accordance with a current income and income growth from stocks strategy.

David served in several senior research and product development roles and was part of the editorial team that created and launched Morningstar.com. He was the co-inventor of Morningstar's first investment advice software. David joined Morningstar in 1994. He holds a bachelor's degree in biology from Skidmore College and a master's degree in biology from the University of Illinois at Springfield.

Our Portfolio Manager

George Metrou is an equity portfolio manager for Mornigstar Investment Management. Metrou joined the team as a portfolio manager in August 2018. Before joining Morningstar Investment Management, he was an equity portfolio manager with Perritt Capital, and as a portoflio manager with Perritt Capital Management. Prior to that he served as Director of Research and as an equity analyst at Perritt Capital, and as a portfolio manager with Windgate Wealth Management. He holds a Bachelor's degree in finance form DePaul University, and he also holds the Chartered Financial Analyst® designation.

 
Investment Strategy

Dividends are for everyone regardless of age. The outcome of owning dividend-yielding stocks is the key variable-higher-yielding stocks with safe payouts being less risky while affording investors who don't need current income the ability to reinvest/reallocate the capital.

The goal of the Dividend Select Portfolios is to earn annual returns of 8% - 10% over any three-to-five year rolling time horizon. We further seek to minimize risk, as defined by the probability of a permanent loss of capital. For our portfolio as a whole, this goal is composed of:

3% - 5% current yield
4% - 6% annual income growth

 
About Josh Editor's Photo
David Harrell
Editor, Morningstar DividendInvestor
David Harrell is the editor of Morningstar DividendInvestor, a monthly newsletter that focuses on dividend income investment strategy. For illustration purposes, issues highlight activities pertaining to a Morningstar, Inc. portfolio invested in accordance with a current income and income growth from stocks strategy.
Featured Posts
Enbridge's Moat Narrows -- The Week in Dividends 2021-06-11
From the DividendInvestor news file this week:

Philip Morris International PM declared a quarterly dividend that was unchanged from its previous payout.

Please see new analyst notes and updates below from Morningstar Research Services for Enbridge ENB, Plains GP Holdings PAGP, and United Parcel Service UPS.

Best wishes,

David Harrell
Editor, Morningstar DividendInvestor



News and Research for Dividend Select Portfolio Holdings

Enbridge's Moat Is Downgraded to Narrow From Wide Due to Long-Term Carbon Emissions Concerns
by Stephen Ellis | Morningstar Research Services LLC | 06-08-21

We are downgrading Enbridge's moat to narrow from wide, primarily due to concerns regarding the durability of midstream returns earned from serving Canadian oil and gas oil sands efforts. Our narrow moat is based on an efficient scale moat source. While we remain very confident in demand for Canadian oil (approximately 1.8% growth CAGR through 2030) and gas (9% CAGR over the same time frame) in the near to medium term, we are far more uncertain around long-term demand in the latter stages of our forecast due to the high carbon emissions intensity associated with the full cycle of oil sands production, which is a primary source for Enbridge's assets. Oil sands carbon intensity is among the highest among all the basins we cover, and it is disproportionately exposed to threats if countries and governments continue to seek ways to reduce greenhouse gas emissions. We expect material stakeholder challenges from legal, regulatory (Enbridge already pays carbon taxes for instance), and community perspectives for any new major Enbridge project, and likely new oil sands projects from producers, challenging the investment case for new pipes and boosting costs for existing assets. Beyond stakeholder issues, we believe refineries that run a heavy crude slate that requires Canadian heavy are increasingly looking to renewable diesel (produced from food waste), raising significant questions around the sustainability of long-term demand. Finally, while the nascent hydrogen and other renewable opportunities offer ways for Enbridge to manage the energy transition, we believe at best, they could become narrow-moat businesses, further reducing our confidence in an overall wide moat rating.

Our fair value estimate for Enbridge is $44 (CAD $53) per share. Our fair value estimate has declined from our prior $46 (CAD 59) estimate due to the shorter period of excess returns with the moat downgrade to narrow from wide.

Plains Sells Off Natural Gas Assets for $850 Million; Exceeds $750 Million 2021 Target
by Stephen Ellis | Morningstar Research Services LLC | 06-08-21

Plains announced it has sold its Pine Prairie and Southern Pines natural gas storage assets to Hartree Partners for $850 million. Hartree is a merchant commodities firm created in 1997 and owned by senior management and Oaktree Capital Management. We had expected $750 million in asset sales for Plains in 2021, so the change is not material enough to shift our earnings estimates, fair value estimate, or moat ratings for the Plains entities.

The transaction strikes us as positive for Plains, which can reduce debt and focus more on its oil-related assets. Still, there are some unusual components. Earnings contributions from the assets were not disclosed for a somewhat large sale, but Plains claims the valuation is attractive. The assets are also located on the Gulf Coast and mentioned as high-performing assets, yet Plains expects to recognize a noncash loss of $480 million in the second quarter. The disconnect between the critical nature of the assets and the loss on sale is likely related to their location in southern Louisiana and eastern Mississippi. We believe the assets perform at a high level but likely face threats from liquefied natural gas exports and better-located storage terminals that have resulted in a weaker outlook than previously expected. The fact that the assets are not located near the more productive and cost-effective Appalachian and Permian basins could also be a contributing factor.

UPS Sets 2023 Financial Targets at Virtual Investor Day; Domestic Margin Outlook Favorable
by Matthew Young, CFA | Morningstar Research Services LLC | 06-09-21

UPS held a virtual investor day in which management highlighted key strategic initiatives and established much-anticipated 2023 financial targets. In terms of strategy, as part of CEO Carol Tome's Better, Not Bigger framework, management intends to continue capitalizing on healthy underlying global package-delivery market growth (especially e-commerce tailwinds) while boosting UPS' value (versus volume) share. Value share suggests more of a revenue focus, implying to us that the firm will keep prioritizing revenue quality and yield gains as volume expands. SMB accounts remain a key growth engine for the domestic package segment, along with recovering B2B activity and underpenetrated international package markets. UPS also expects previous and ongoing investments (including automation and other digital efforts) to drive incremental network productivity gains and capacity optimization.

Importantly, management is targeting total revenue of $98 billion-$102 billion in 2023, a 5.7% CAGR from 2020 at the midpoint -- slightly above our forecast. It also expects total adjusted operating margin of 12.7%-13.7%, up 240-340 basis points from 2020, with half of those gains coming this year. This reflects a 10.5%-12% domestic package margin versus 7.7% in 2020 and 21.5% for international (22.2% in 2020). Domestic margins will benefit in part from successful pricing efforts this past year (with help from constrained capacity) and reaching the high end of the range will depend on the ultimate mix of higher-margin SMB business, which has strong momentum. UPS' margin guidance came in ahead of our expectations. For the domestic package division especially, we've been conservative given uncertainty surrounding where margins could shake out amid a spiking mix of B2C business, which has less route density than B2B. Overall, we expect to boost our $144 DCF-derived fair value estimate by more than 10% due to raising our medium-term and midcycle profitability assumptions.

Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. Analyst ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst ratings are based on Morningstar’s analysts’ current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst ratings are not guarantees nor should they be viewed as an assessment of a stock's creditworthiness. Ratings, analysis, and other analyst thoughts are provided for informational purposes only; references to securities should not be considered an offer or solicitation to buy or sell the securities.

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The commentary, analysis, references to, and performance information contained within Morningstar® DividendInvestorâ„ , except where explicitly noted, reflects that of portfolios owned by Morningstar, Inc. that are invested in accordance with the Dividend Select strategy managed by Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc. References to "Morningstar" refer to Morningstar, Inc.

Opinions expressed are as of the current date and are subject to change without notice. Morningstar, Inc. and Morningstar Investment Management LLC shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. This commentary is for informational purposes only and has not been tailored to suit any individual.

The information, data, analyses, and opinions presented herein do not constitute investment advice, are provided as of the date written, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. Please note that references to specific securities or other investment options within this piece should not be considered an offer (as defined by the Securities and Exchange Act) to purchase or sell that specific investment.

This commentary contains certain forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason.

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All Morningstar Stock Analyst Notes were published by Morningstar, Inc. The Week in Dividends contains all Analyst Notes that relate to holdings in Morningstar, Inc.'s Dividend Select Portfolio. Morningstar’s analysts are employed by Morningstar, Inc. or its subsidiaries. In the United States, that subsidiary is Morningstar Research Services LLC, which is registered with and governed by the U.S. Securities and Exchange Commission.
 
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