Phillips 66 (PSX) is a diversified petrochemical company that refines crude oil and natural gas into fuels and petrochemicals, operates gas stations in the U.S. and Europe, and owns stakes in two midstream MLPs that transport fuels. Phillips 66's earnings are very hard to forecast as they depend largely on unpredictable swings in commodity prices (crude oil, natural gas, gasoline, ethylene, etc), which are in turn based on ever-shifting trends in supply and demand. Moreover, the diversified nature of Phillips 66's operations means that fluctuations in commodity prices can have both favorable and unfavorable impacts on the business. For instance, refining can be more profitable when oil prices are low, whereas midstream firms benefit from high oil prices. Nevertheless, it's [...]

Main Street Capital (MAIN) was the only Safe-rated business development company, or BDC, prior to the coronavirus outbreak. Five other BDCs were rated Borderline Safe, and the remaining 30-plus companies have had Unsafe or Very Unsafe Dividend Safety Scores for several years. Since the beginning of March, the VanEck Vectors BDC Income ETF (BIZD), which tracks the overall performance of publicly traded BDCs, has collapsed 46% while the S&P 500 Index has shed 21%. Handing out loans with double-digit yields in a zero interest rate world is a dangerous game that's only magnified with the use of leverage. In 2018, Congress even increased the amount of leverage BDCs can use.Making matters worse, most borrowers who take money from BDCs are relatively small, highly levered companies that aren't able to access [...]

On March 6, we discussed why Chevron appeared to have one of the safest dividends in the energy sector. Days later, the price of oil plunged from around $45 per barrel to below $35 as Saudi Arabia engaged Russia in a price war for market share. At the time, we shared our thoughts that the price of oil could remain very weak for at least a few quarters, if not for more than a year. Since then, a bad situation has only gotten worse. With the coronavirus pandemic suddenly bringing many parts of the economy to a standstill and depressing short-term demand for fuel, last week oil suffered its worst loss since 1991, settling near $20 per barrel. This is an unprecedented environment for oil [...]

In a market filled with uncertainty, McDonald's CEO Chris Kempczinski provided income investors with a vote of assurance during his interview with CNBCtoday:  "The dividend for us is a paramount priority and so there's no changes planned for that." McDonald's is one of the few restaurant stocks positioned to continue its dividend during the coronavirus pandemic. Mr. Kempczinski said that only 50 of the company's 14,000 U.S. restaurants are closed, and that's only because they were located in larger buildings such as offices which are no longer open. McDonald's generates the majority of its business through drive-thru, delivery, and curbside pick-up, positioning it better than most to continue operating. Given people's essential need for food, management expects governments will ask them [...]

The coronavirus outbreak has prompted a growing number of retailers to temporarily close their stores to help slow the spread of the virus. Earlier this week V.F. Corp (VFC) announced plans to shutter its North American stores through April 6 in addition to previously announced closures throughout Europe and Asia. With revenue set to take a big hit for at least several weeks, retailers must decide how cautious to be with preserving capital.  Company-owned stores account for about 30% of V.F. Corp's revenue and provide the biggest hit to profitability when demand drops due to their high fixed costs. Online sales contribute another 10% and could be relatively more resilient during this period, but the remaining 60% of sales are generated from selling its [...]

The novel coronavirus outbreak has triggered temporary store closures and social distancing restrictions designed to slow the virus' spread.  The end result has been unprecedented disruption for most of Sysco's food distribution customers, including restaurants (62% of sales), hotels (9%), and schools and governments (9%). Based on the analysis shared below, we are downgrading Sysco's Dividend Safety Score to Borderline Safe and plan to sell the shares of Sysco that we hold in our Conservative Retirees portfolio on Monday, March 23. To show how rapidly the operating environment has changed, OpenTable, a widely-used online reservation platform, reported a 92% year-over-year drop in restaurant bookings in the U.S. for Thursday, March 19. As you can see, the trend has significantly accelerated over the last 10 [...]

The coronavirus outbreak has prompted a growing number of retailers to temporarily close their stores to help slow the spread of the virus. On March 19, TJX (TJX) announced actions it was taking in response to "the rapidly changing market uncertainty" caused by the global pandemic. The off-price retailer stated it was closing practically all of its stores for two weeks, as well as its online businesses, distribution centers, and offices. As expected from a well-respected operator like TJX, the firm plans to pay its impacted associates for two weeks during these closures. No one knows how quickly stores will ultimately reopen, but there's a very non-zero chance that closures last well beyond a couple of weeks as more dramatic social distancing actions are mandated across [...]

The coronavirus pandemic and oil-price war have weighed on the short-term outlook for Magellan Midstream Partners' (MMP) business. The firm generates about 55% of its operating profits from transporting and storing refined petroleum products such as gasoline and diesel fuel. This has long been a nice cash cow business because demand trends are stable and growth is low, providing consistent throughput while discouraging others from constructing rival pipelines. Due to the predictability of fuel consumption, Magellan's refined products operations have never really been a contract-driven business.  Last year only about 40% of shipments on Magellan's pipeline system were subject to agreements with shippers dictating payment, volume, or term commitments. These deals only had an average remaining life of three years, [...]

In the crosshairs of America's response to the spread of the novel coronavirus, Simon (SPG) announced yesterday that all of its mall locations would close until at least March 29 (about two weeks). Simon is now in an unprecedented situation with a wide range of outcomes and a high level of uncertainty. It's anyone's guess how long stores will remain closed, though two weeks is likely optimistic. President Trump wouldn't offer a timeline today when asked by the media how long until Americans would be able to return to normal life. But already, AMC Theaters — not a tenant of Simon's, to be sure — has pledged to close its movie theaters for 6-12 weeks. Moreover, when stores do reopen, it's unclear how quickly [...]

National Retail Properties (NNN) is one of America's oldest triple net lease REITs and has grown its dividend each of the last thirty years. Triple net lease contracts shift most operating expenses (insurance, maintenance, utilities, and property taxes) to the tenant.  NNN simply collects rent and typically enjoys highly stable cash flow. However, the coronavirus outbreak has prompted a growing number of retailers to temporarily close their stores to help slow the spread of the virus, calling into question whether NNN's tenants will be able to meet their rent obligations in the near future. Moreover, it's unclear when stores will be able to reopen. Two weeks is when many governments and businesses plan to reevaluate the situation, and it would be unsurprising [...]