Here's a transcript of the MoneyShow interview with Timothy Lutts, Chief Analyst, Cabot Stock of the MonthFour Favorites for Long-Term Growth
Published: 06/03/2015 10:00 am EST ￼
Timothy Lutts is editor and chief analyst for Cabot Stock of the Month; here, he looks at four favorite stocks: a renewable energy yieldco, an electric car maker, a recent IPO in the gourmet burger sector, and a technology firm involved in high-definition video.
Steven Halpern: Our guest today is Timothy Lutts, editor and chief analyst for Cabot Stock of the Month and head of the Cabot Publishing Group, which—for some 45 years—has published many of the industry’s most respected and widely followed newsletters. How are you doing today, Tim?Timothy Lutts: Great, Steve, glad to talk to you.
Steven Halpern: At Cabot, you oversee a dozen advisory services ranging from small-caps and options, global investing, as well as growth- and value-oriented services, and the newest one focuses on dividends.
Could you walk us through the decision to introduce a dividend service and how important dividends are in the market cycle now?
Timothy Lutts: Sure. This publication—called Cabot Dividend Investor—aims to give investors—and steer investors toward—sources of regular income that they’re missing because interest rates are so low.
Interest rates, I think, are staying low and I think investors, especially as baby boomers head into retirement, I think they’re going to gravitate toward these various sources of dividends.
In particular, you know, blue chip stocks, of course, but there’s a great trend toward increasing dividends.
Since 1900, in fact, the average dividend payment on stocks has been about 5.4%, but today it’s down around 2%, so just to get back to average, and get us back to 5.4%, which is something to look forward to.
The other thing happening with dividends is some people are coming out with new vehicles, you know that in recent…okay, so, we’ve had REITs and then we’ve had NRPs, but the newest wrinkle is things called yieldcos. Yieldcos, there are only a few of them out there so far, they’re pretty young.
Steven Halpern: Speaking of yieldcos, you recently highlighted one in particular called TerraForm Power (TERP). Could you just briefly explain what a yieldco is and walk us through what you like in particular about TerraForm?
Timothy Lutts: TerraForm, like most of the yieldcos, is focused on the energy industry, specifically renewal energy, solar and wind in particular, and what they do is, the parent company (or companies) drop down their secure assets, which have long-term contracts, and therefore, a steady cash flow looking decades ahead.
And then, investors are encouraged to invest in these for the steady dividends, which—in the case of TerraForm—is a 3.2% yield.
Some are higher, so investors get the dividend. The parent companies get a new influx of cash for investment in new development and I think there’s going to more of them coming out in the years ahead. TerraForm is one.
Steven Halpern: Among growth stocks, you’ve been a long-term fan of Tesla (TSLA). In fact, you’ve been bullish on the shares at many times when the market was most skeptical. What kept you confident in the outlook for Tesla and what’s your outlook now?
Tickers Mentioned: Tickers: TERP, TSLA, SHAK, AMBA
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