MasterCard Notches a Win in Russia, While Waste Management Lines Shareholders' Pockets

Last May, I announced my intention to create a portfolio that embodied life's basic needs. To that end, over a period of 10 weeks, I detailed 10 diverse companies that I think will outperform the broad-based S&P 500 over a three-year period because of their ability to outperform in both bull markets and bear markets, as well as their incredible pricing power in nearly any economic environment.

If you'd like a closer look at my reasoning behind each selection, just click on any, or all, of the following portfolio components:

Let's look at how our portfolio of basic-needs stocks has fared since we began this experiment.

Company

Cost Basis

Shares

Total Value

Return

Waste Management

$42.60

23.24

$1,037.20

4.8%

Intel

$23.22

42.64

$1,287.73

30.1%

NextEra Energy

$87.94

11.26

$1,125.89

13.7%

MasterCard

$64.557

15.30

$1,129.29

14.3%

Chevron 

$124.95

7.93

$1,049.46

5.9%

Select Medical 

$8.96

110.49

$1,733.59

75.1%

Ford

$17.50

56.57

$943.02

(4.7%)

American Water Works 

$43.13

22.96

$1,105.75

11.7%

Procter & Gamble 

$81.29

12.18

$973.55

(1.7%)

AvalonBay Communities 

$133.95

7.39

$1,044.21

5.5%

Cash

   

$0.88

 

Dividends receivable

   

$277.03

 

Total commission

   

($100.00)

 

Original investment

   

$10,000.00

 

Total portfolio value

   

$11,707.60

17.1%

S&P 500 performance

     

14.8%

Performance relative to S&P 500

     

2.3%

Source: Yahoo! Finance, author's calculations.

Although the low-beta Basic Needs portfolio was never intended to outrun the S&P 500 to the upside, it seems to be doing so on a regular basis. Overall, both the portfolio and the S&P 500 ended at their respective highs since this experiment began nearly 11 months ago, however this group of basic-needs stocks has pulled away to its largest lead yet. We still have more than two years left to go, but as of now I'd say the healthy dividend income and sector diversity to which this portfolio was designed is paying off nicely.

As always, let's start our week off with the latest dividend news.

Show me the money!
Shareholders of refuse and recycling giant Waste Management (NYSE: WM  ) ended the week on a good note when the company paid out $0.375 per share to those on record as of June 6. Waste Management boosted its payout by a penny per quarter earlier this year in light of its strengthening pricing power in refuse collection and better overall yields. But weaker-than-anticipated metal prices are hindering any traction in its recycling business. Still, when it comes to refuse collection there are few choices for customers, meaning Waste Management has relatively little to worry about with regard to its cash flow and can instead focus on controlling costs in its recycling business while boosting investments in harnessing alternative energies such as methane gas from its landfills, which can be used to power homes.

Ford's mixed May
This past Tuesday automaker Ford (NYSE: F  ) reported that European sales actually fell 1% in May from the previous year largely due to an unusual bump in consumer segment sales last year. But commercial vehicle sales ticked higher and are now at their highest level in 16 years.



Source: Ford.

Furthermore, Ford was able to tack on an additional 10 basis points of market share in Europe to 7.9%. Ford's ability to rapidly grow commercial sales in Europe, boost consumer sales in China, and deliver steady improvement in the rebounding U.S. market has been its key to success over the past couple of years. So long as Ford continues to hit the right price points with its vehicles and remains innovative, then there's no reason its share couldn't head even higher.

Payment processors' big win
Payment processing facilitator giants MasterCard (NYSE: MA  ) and Visa appeared to have won a notable victory in Russia this week with Russia's lower house of parliament, the State Duma, beginning talks that would lower the amount of collateral each company would have to post in order to do business within the country. These collateral payments have been a sticking point for both companies and are a direct result of sanctions imposed on American companies by Vladimir Putin following similar U.S. sanctions against Russia that condemned its annexation of Crimea. In sum, with a smaller collateral payment due it's likely Visa and MasterCard won't pull out of Russia, which will give both a good chance to prosper from its rapidly growing economy.

Source: Intel

Intel's "cloudy" outlook
I'm not certain what they're putting in the water over at Intel (NASDAQ: INTC  ) over the last couple of months, but they should keep doing it because shareholders are enjoying a decade-high share price. Intel impressed this week by introducing its first customized cloud chip. This chip, part of its Xeon series, would allow big data businesses to manage large computer workloads with ease, boosting processing capabilities as needed, as long as their servers were running off Xeon processors. This looks like one of Intel's many ploys to be the hardware company of choice for enterprises moving into the cloud. Intel's goal is to derive around 30% of its revenue from the cloud by 2020, and the introduction of customizable Xeon chips is certainly one step toward achieving that goal. Following its earnings guidance boost in the prior week I'd presume existing shareholders are quite pleased.

Source: Patrick Finnegan, Flickr.

Branching out
Lastly, alternative-energy-focused electric utility NextEra Energy (NYSE: NEE  ) announced details on Thursday regarding its proposed spinoff and creation of master limited partnership NextEra Energy Partners. According to its release, NextEra Energy Partners will be offering 16.25 million shares at an offer price of $19 to $21 per unit, with underwriters having the ability to purchase up to 2.44 million additional shares. NextEra Energy Partners should price its offering on Thursday and begin trading next Friday on the New York Stock Exchange under the ticker symbol "NEP." NEP plans to use some of its proceeds from the offering to purchase common units of NextEra Energy Operating Partners, as well as for general corporate purposes. Spinoffs are proving to be wildly successful for investors as it helps to unlock value by making a company appear more transparent. I suspect this spinoff will have a similar effect on NextEra's share price.

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