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
A Raise for Amgen -- The Week in Dividends 2021-12-03
From the DividendInvestor news file this week:

Amgen AMGN raised its quarterly dividend by 10%, increasing its quarterly payout to $1.94 from $1.76 for the dividend that will be paid on March 8, 2022. Based on the new annual dividend rate of $7.76, the stock yields 3.8% as of today's closing price. Omnicom OMC and Verizon VZ both declared quarterly dividends this week that were unchanged from their previous payouts.

Please see new analyst notes and updates below from Morningstar Research Services for Enbridge ENB, ExxonMobil XOM, and Pfizer PFE.

Also this week -- as detailed in Wednesday's trade alert, George Metrou trimmed the portfolios' stakes in Pfizer.

Best wishes,

David Harrell
Editor, Morningstar DividendInvestor



News and Research for Dividend Select Portfolio Holdings

Canadian Energy Regulator Rejects Enbridge's Mainline System Long-Term Contracting Arrangement
by Stephen Ellis | Morningstar Research Services LLC | 11-29-21

The Canadian Energy Regulator (CER) has rejected Enbridge's proposed shift to long-term contracts from a monthly nominating system for the Mainline system. While we had expected the CER to accept Enbridge's proposal, ultimately, we do not believe the shift has a material impact on Enbridge's fair value estimate, as historically the pipeline utilization has been over 90% and in apportionment at times. Thus, we wouldn't expect any material differences in the rates achieved over time under any new contracting approach with the strong demand. However, maintaining the monthly nomination system introduces a level of uncertainty that wouldn't exist with long-term contracts because the barrels could potentially shift between competitors' pipes as new capacity comes online. The Canadian pipeline export capacity has historically been extremely undersupplied, and we don't expect that to change going forward, which means Enbridge's pipes will remain full or nearly full, in our view. With the minimal financial impact, we do think the increased uncertainty over future returns supports our narrow moat to some extent. Still, the bulk of this impact for this decision is that it reflects a black eye for Enbridge's management team in terms of managing its regulatory and stakeholder relationships over the multiyear timeframe that the application was under consideration by the CER and in preparation to submit the proposal. In response, Enbridge plans to re-engage with stakeholders and customers to pursue a new incentive contract structure or a cost of service contracting structure. Enbridge will submit a cost-of-service application to the CER while these discussions take place and expects a decision in 2023.

Exxon's Latest Plan Maintains Capital Discipline; Earnings Growth, Cash Return Potential Unrivaled
by Allen Good, CFA | Morningstar Research Services LLC | 12-02-21

ExxonMobil helped allay fears about capital discipline by extending its prior annual capital spending guidance of $20 billion-$25 billion another two years to 2027. The company refrained from giving precise 2022 spending guidance, but it will fall within that range, marking an increase from the anticipated $16 billion in 2021, given an increase in upstream development and resumption of downstream and chemical projects that were put on hold in 2020. However, higher 2022 capital spending was largely expected, leaving the extension to 2027 the important takeaway.

Despite the lower spending relative to plans prior to 2020, Exxon still expects to double earnings from 2019 levels by 2025 and double cash flow by 2027 on a combination of structural operating cost reductions, portfolio improvement, and growth across its upstream, downstream, and chemical segments. It also reintroduced a return target, anticipating return on capital employed to improve to 14% in 2025 and 17% in 2027. Production volumes will remain flat through 2025 before increasing to 2027 on new project startups.

Exxon estimates that under the current plan, including the cost savings and portfolio high-grading, at $60/barrel oil (our midcycle assumption) it will generate about $100 billion in surplus cash, after funding investment and paying the dividend, during the next five years. As such, we expect its current repurchase program of $10 billion over the next 12-24 months to be just the beginning. Dividend growth will also occur but will likely be modest in the near term, given Exxon's relatively high yield (6%) and payout ratios.

This combination of potential earnings growth and cash return is unrivaled elsewhere in the sector. Given this and a nearly 25% discount to our fair value estimate, we continue to see Exxon as the best option among the integrated oils.

Omicron Variant Could Require Its Own Vaccine, but We're Cautious on mRNA FVEs, Given Limited Data
by Karen Andersen, CFA | Morningstar Research Services LLC | 11-29-21

We're not making any changes to our fair value estimates for the leading global COVID-19 vaccine makers -- Pfizer, BioNTech, and Moderna -- following reports of the new omicron variant, as we see significant uncertainty around the profile of this new variant and whether it will require any additional shots beyond what is already included in our model. We already broadly include third-dose booster shots of these mRNA vaccines in our valuations, followed by annual shots for more vulnerable populations (infants and adults older than 65). While Pfizer's broad biopharma portfolio continues to support a wide moat, we think Moderna and BioNTech are still in the process of building sustainable competitive advantages, given the uncertainty around the future spread of COVID, the applicability of mRNA technology to other vaccines and treatments, and defense against similar or improved competing technologies.

Pfizer/BioNTech and Moderna have disclosed some information on strategies and timelines until a new vaccine could be developed, and we estimate that a new vaccine could be available targeting the omicron variant in six months, if necessary. On Nov. 26, the World Health Organization designated the latest COVID-19 variant, B.1.1.529 (now omicron), a variant of concern due to a large number of mutations and preliminary data pointing to potential transmission and immune escape advantages over other variants. BioNTech has said that we should know more about the efficacy of the currently available vaccines against omicron in a couple of weeks, following completion of some lab tests of the ability of antibodies from the vaccine to neutralize the new variant. Established manufacturing capacity -- which is poised to reach 4 billion doses annually at Pfizer/BioNTech and perhaps 3 billion annually at Moderna (depending on dosage) -- could be easily switched to a new variant vaccine, as raw materials and manufacturing processes remain the same.

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.

©2021 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.

Disclosure: 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.

 
Customer Support
Product Support
Inquiries regarding your subscription such as address changes, missing/damaged issues, etc.
Phone: 1-800-957-6021 | Mon-Fri 8:30AM-5:00PM
Inquiries regarding technical issues such as logging in or downloading
Phone: 1-312-424-4288 | Mon-Fri 8AM-6PM
E-mail: newslettersupport@morningstar.com
Product Sales
Inquiries regarding your subscription renewal, billing or to learn about other Morningstar investment publications and resources
Phone: 1-866-608-9570 | Monday-Friday 8AM-5PM CST
E-mail: newslettersupport@morningstar.com
Contact Your Editor
 
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