The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
The stock market is hotter than Tiger Woods' golf game. (Although I don't think he's going to win another green jacket at Augusta this weekend.)
But even though the Dow and S&P 500 are hitting new records on an almost daily basis, an interesting shift has taken place lately. Boring stocks are pulling a Justin Timberlake and bringing sexy back. (Perhaps in a suit & tie?)
McDonald's (MCD) is looking golden. Shares are up 16% this year. They've topped the century mark and are near an all-time high.
The Dow Jones Utility Average (DJU), a collection of 15 power companies, has gained 6.5% during the past month and 15% so far this year. That's better than the broader Dow, S&P and the Nasdaq. (It's electric. Boogie woogie woogie!)
None of these companies scream growth. These aren't tech stocks, banks or retail.
Mickey D's profits are expected to rise just 8% this year while sales are forecast to increase by only 4%. Analysts are predicting just a 6% increase in earnings for Coke and a mere 2% rise in sales.
Many leading health care and utility companies are also likely to post slow and steady growth for their top and bottom lines (i.e. in the single digits) this year. Ditto for Ma Bell and Big Red.
These companies are not inherently exciting. But you know what is? Their dividends.
The dividend yield for McDonald's is 3%. So even with expectations for just a small earnings increase, the stock should give investors a nice lift when you factor in the income from the dividend.
Heck, with a 10-year Treasury still yielding less than 1.8% despite umpteen gajillion stories about how the bond bubble is about to burst, it makes sense for conservative investors to flock to solid blue chips over Treasuries.
Utilities have always been viewed as bond surrogates. With long-term interest rates near historic lows, their dividends stand out even more. Duke Energy (DUK), Southern Company (SO) and Consolidated Edison (ED) have dividends that yield more than 4%. So do AT&T and Verizon.
And the big drug companies are also magnets for income investors. Pfizer and J&J yield in excess of 3%.
Still, the fact that dividend stocks are doing so well is a bit alarming. It shows that even though the broader market is continuing to rise, investors may still be growing less confident with the direction of the U.S. economy. None of these companies are the types you want to own if GDP is about to go on a tear. They are all defensive by nature.
If investors were really flocking to riskier assets, you'd expect tech stocks to be doing well. That's not the case. The Nasdaq is the worst performer of the major indexes this year.
And many industrials, which should be thriving if the economy was actually on the mend, have been terrible performers this year. There are only two Dow stocks down in 2013: Alcoa (AA) and Caterpillar (CAT). Not exactly an endorsement for the global market, particularly China.
What's more, CNNMoney's Fear & Greed Index is telling an interesting story lately. Although the overall index has returned to Greed mode following a couple of days in Neutral territory, the Safe Haven Demand indicator is still in Fear mode. That's a sign that many investors still want income over growth.
I'm not saying that the market is about to crash. Trying to call a top is a foolish and dangerous thing to do. But there's no denying that the now four-year old bull market is running out of steam. And investors need to remember that any time an asset goes up a lot in a short period of time (houses, Internet stocks and Bitcoins, anyone?) you need to be careful.
Boring dividend stocks are doing well now. But a big yield won't prevent a stock from dropping if earnings start to deteriorate.
Just look at tech. Microsoft (MSFT), Intel (INTC) and Hewlett-Packard (HPQ) had started to move up recently on the notion that they too were now steady Eddie dividend stocks. Yesterday's shockingly bad numbers on PC sales in the first quarter put an end to that rally. Microsoft, Intel and HP are tumbling hard today.
Fundamentals still matter. They always have and always will.
Investing 101: If a stock is priced for perfection, bad news is going to cause a rush for the exits. That definitely was happening with fast food giant Yum! Brands (YUM) on Friday.
Even though the company reaffirmed its outlook for 2013, investors were spooked by an alarming 4% decline in same-store sales in China. Yum has focused heavily on China, particularly through its KFC franchise.
Shares fell nearly 10%. An overreaction? MOREPaul R. La Monica - Nov 30, 2012 12:32 PM ET
Even the dollar value menu couldn't coax consumers to McDonald's in July.
Same-store sales were flat in the United States and Europe, and sales were down 1.5% throughout Asia, the Middle East and Africa.
The house that Ronald McDonald built did try but "promotional activity" couldn't offset the sluggish global economy, the company said in a statement. One bright spot was the most important meal of the day: Breakfast.
McDonald's (MCD) said consumers MORECatherine Tymkiw - Aug 8, 2012 3:49 PM ET
Shares of Chipotle Mexican Grill plunged more than 20% Friday after the company reported weaker-than-expected sales growth, even as profits rose in the second quarter.
Chipotle (CMG) stock fell $92.28, or 23%, to $311.98 a share. Shares of McDonald's (MCD), Wendys (WEN) and Taco Bell-owner Yum brands (YUM) were down between 1% and 2%.
The sell-off came after Chipotle said late Thursday that same-store sales, a key measure of demand, grew only MOREBen Rooney - Jul 20, 2012 12:55 PM ET
When you think about the 4th of July, fireworks, backyard barbecues and Tchaikovsky's "1812 Overture" (music with cannons!) probably come to mind. And thanks largely to ESPN, the gluttonous International Hot Dog Eating Contest down in Brooklyn's Coney Island has also become a national Independence Day tradition.
The contest has been going on since 1916 at the Nathan's Famous hot dog stand at the corner of Surf and Stillwell Avenues -- MOREPaul R. La Monica - Jul 2, 2012 9:44 AM ET
Will the third trip to the public markets be the charm for Burger King's investors?
Burger King (BKW) started trading on the New York Stock Exchange Wednesday, and the home of the Whopper quickly popped nearly 7% from its opening price of $14.50.
In early April, the world's second largest hamburger fast food chain announced a new healthier menu replete with salads, wraps and smoothies. (The new bacon sundae is a glaring MOREMaureen Farrell - Jun 20, 2012 10:54 AM ET
Fast food. Slow economy. Europe and China are starting to hurt McDonald's (MCD). And the fears of a China pullback have really weighed on Yum (YUM), whose KFC brand is huge in China. Still, some traders are still bullish on Happy Meals and the Colonel's Crispy Strips.
HedgeyeHWP: $MCD - "Europe posted a 2.9% increase in comparable sales for May driven by the U.K., Russia and Fr, partially offset by Germany" MOREPaul R. La Monica - Jun 8, 2012 2:53 PM ET
Shares of McDonald's and KFC-owner Yum! Brands declined Friday amid growing fears about slowing economic growth in China.
McDonald's announced that its sales at stores open at least a year in the Asia, the Middle East and Africa region declined 1.7% in May, with particular weakness in Japan and China.
In fact, sales in China declined for the first time since November 2009, said Lynne Collier, analyst at Sterne Agee. Collier said that her conversations MOREHibah Yousuf - Jun 8, 2012 12:36 PM ET
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