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
Quarterly Results for BlackRock and Wells Fargo -- The Week in Dividends 2020-01-17
From the DividendInvestor news file this week:

Procter & Gamble PG and Southern Co SO both declared quarterly dividends that were unchanged from their previous payouts.

Please see new analyst notes below from Morningstar Research Services for BlackRock BLK, Comcast CMCSA, and Wells Fargo WFC.

Best wishes,

David Harrell
Editor, Morningstar DividendInvestor

News and Research for Dividend Select Portfolio Holdings

Positive Flows and Market Gains Lift BlackRock's AUM to Record $7.430 Trillion in Fourth Quarter
by Greggory Warren, CFA | Morningstar Research Services LLC | 01-15-20

While there was little in wide-moat BlackRock's fourth-quarter earnings to alter our long-term view of the firm, we expect to increase our fair value estimate to $550 per share to account for our expectations for better AUM levels and fees than we had been forecasting for the near to medium term. BlackRock closed out the December quarter with a record $7.430 trillion in managed assets, up 6.7% (24.3%) sequentially (year over year), with both organic growth and market gains contributing to AUM growth during the period. Net long-term inflows of $99.0 ($335.7) billion during the quarter (full year) were fueled by $20.6 ($109.9) billion of active fund flows, $3.2 ($42.3) billion of inflows from the firm's institutional index business and $75.2 ($183.5) billion in inflows from iShares. BlackRock's annual organic growth rate of 6.1% during 2019 was better than both management's ongoing annual organic growth rate target of 5% and our long-term forecast calling for 3%-5% annual organic AUM growth. Average long-term AUM growth of 4.3% (16.1%) sequentially (annually) during the fourth quarter translated into an 11.2% (1.9%) increase in base fee revenue growth, as the company lapped a really difficult fourth quarter of 2018 (which also suppressed top-line growth the first couple of quarters of 2019). Total revenue was up 15.8% when compared with the prior-year's quarter and increased 2.4% on a full-year basis (better than our forecast calling for flattish revenue growth during 2019--much of which can be tied to stronger performance fee and technology and risk management revenue). As for profitability, BlackRock posted a 20-basis-point (70-basis-point) decline in full-year operating margins (when looked at on an adjusted basis) to 38.2% during 2019. Even so, we continue to project a slight expansion in the firm’s operating margins during 2020-24, driven not only by the increased scale of BlackRock's operations but the efficiencies created by ongoing technology investments.

Comcast Underwhelms With Peacock Projections, but Optionality Remains Key
by Michael Hodel, CFA | Morningstar Research Services LLC | 01-17-20

Comcast fleshed out NBC Universal's planned Peacock streaming service at an analyst event, outlining offerings and financial expectations. We continue to view Peacock primarily as a defensive product, designed to protect NBCU's television distribution and advertising revenue streams as consumer habits evolve. Like AT&T's HBO Max, Peacock is designed to provide a platform to develop new types of relationships with consumers and provide an avenue to maintain audience sizes should the decline in the traditional pay-TV ecosystem accelerate. In exchange for this optionality, NBCU says it will make more content available to consumers, an investment it believes will cost a relatively modest $2 billion over the next two years. While management expects Peacock to break even by 2024, we expect margins in the television business to decline permanently over the next few years as more firms chase top-tier content. We believe Comcast warrants a wide moat based on the strength of its core cable business and we view shares as roughly fairly valued.

Unlike HBO Max, Peacock will lead with a free ad-supported tier with limited content designed to minimize barriers to adoption and help build a following for new shows. Peacock Premium, which will include the full slate of programming, will cost $5 per month, or $10 without ads. Surprisingly, NBCU only expects to hit 30 million-35 million active accounts by the end of 2024, despite making the ad-supported premium service available for free to 24 million Comcast and Cox cable customers at launch, with plans to add more distribution partners. AT&T, in contrast, expects to approach 50 million HBO Max customers by 2024, building on a larger base of 34 million subscribers but at a far more expensive $15 price. At this point, we believe these firms are lobbing out forecasts to manage expectations, knowing that their offerings will evolve with consumer demand and competition.

Interestingly, NBCU says it will make the ad-supported version of Peacock Premium available for free to Comcast's Internet-only customers using its Flex streaming box. NBCU indicated it may also make the service available to other cable companies to offer to their broadband-only customers. This move is at odds with notion that Comcast would use Peacock to support the traditional television bundle and seems strange to us. Comcast doesn't need help competitively in the Internet-access business, given the strength of its network relative to its phone rivals in most locations. While we understand the desire to build a wide audience for Peacock, NBCU still needs to maintain the relative attractiveness of the core traditional television offering while adequately monetizing those customers who want its entertainment content but don't value marquee news and sports enough to take the big cable bundle.

NBCU expects Peacock will generate $2.5 billion in 2024, a very modest amount relative to the roughly $18 billion it brought in during 2019 from cable and broadcast advertising and affiliate and retransmission fees. As with the customer forecast, we suspect the 2024 projection has a large margin for error and is subject to change. Still, the dramatic difference in size between the two businesses illustrates the fine line that NBCU and its television bundle peers are walking. The challenges facing the traditional cable bundle are complex and encompass factors outside of the firms' control, including the paths that major sports leagues take with their rights offerings. Creating and preserving optionality is critical for NBCU even if the cost is high.

Wells Reports a Tough Fourth Quarter: More Legal Charges, and Future Expense Outlook Is Cloudy
by Eric Compton, CFA | Morningstar Research Services LLC | 01-14-20

Wide-moat Wells Fargo reported poor fourth-quarter results, largely attributable to a $1.5 billion legal charge in the quarter as well as elevated expenses in other parts of the bank. While we hadn't made any predictions about the amounts of future operating losses, we did expect that several outsize legal charges were on their way, which is exactly what happened in both the third and fourth quarters. Given that the bank has not announced a final wave of settlements, we think it is important for investors to brace for more potential charges.

Wells also missed its overall expense guidance, which excludes excess operating losses. Adjusted noninterest expense came in at $53.7 billion compared with a goal of $53 billion. Overall, we think it is important to focus on what information was actually new versus the information that was simply negative, but predictable. Booking more legal charges was somewhat predictable, although the exact amount was a new piece of information. Missing expense guidance was also a new piece of disappointing information, although it seems that the reasons for the miss are arguably transient (outside professional services, impairments and write-downs, and severance charges). We'll be eagerly awaiting a new outlook from management as it completes internal reviews, but in the meantime, besides bumping up our operating loss outlook for the medium term, we don't see much that has fundamentally changed.

We think it is clear that Wells is still a work in progress, and that progress will takes years, not months. After making several adjustments to our projections, largely related to slightly higher expenses in the future, we are lowering our fair value estimate to $56 per share from $57.

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.

©2020 Morningstar, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. The information contained in this document is the proprietary material of Morningstar, Inc. Reproduction, transcription, or other use, by any means, in whole or in part, without the prior written consent of Morningstar, Inc., is prohibited. All data presented is based on the most recent information available to Morningstar, Inc. as of the release date and may or may not be an accurate reflection of current data.  There is no assurance that the data will remain the same.

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.

Investments in securities are subject to investment risk, including possible loss of principal. Prices of securities may fluctuate from time to time and may even become valueless. Securities in this report are not FDIC-insured, may lose value, and are not guaranteed by a bank or other financial institution. Before making any investment decision, investors should read and consider all the relevant investment product information. Investors should seriously consider if the investment is suitable for them by referencing their own financial position, investment objectives, and risk profile before making any investment decision. There can be no assurance that any financial strategy will be successful.

Common stocks are typically subject to greater fluctuations in market value than other asset classes as a result of factors such as a company's business performance, investor perceptions, stock market trends and general economic conditions.

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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