Why Exelon Corporation, NextEra Energy, Inc., and Tyson Foods Inc. Are Today’s 3 Worst Stocks

What's wrong with dividends? Nothing, actually -- they're godsends for the long-term investor. However, dividend sustainability becomes a concern as interest rates rise.

Jul 3, 2014 at 7:00PM

The stock market closed three hours early today ahead of the Fourth of July holiday tomorrow. That didn't stop investors from sending both the Dow and the S&P 500 Index (SNPINDEX:^GSPC) to all-time highs in a hurry on the heels of a stunningly resurgent jobs market. The U.S. Labor Department's monthly nonfarm payrolls showed that the economy created a seasonally adjusted 288,000 jobs in June, a figure so comically far above the 211,000 consensus expectation, it made the economists responsible for the lowball forecast look downright silly. Looking even sillier were shares of Exelon Corporation (NYSE:EXC), NextEra Energy, (NYSE:NEE), and Tyson Foods (NYSE:TSN), which each somehow managed to fare miserably as stock markets hit all-time highs, and Americans literally prepare to jubilantly launch fireworks, grill out, and enjoy life.

Unfortunately for today's three laggards, they hail from a sector that actually tends to suffer when investors are slapping each other on their backs, and stock markets are roaring to record highs. That sad-sounding sector, of course, is the utilities sector. Do you know what percentage of S&P 500 stocks advanced today? Well, 80%. Eighty percent. Care to guess how many of the S&P's 10 worst performers were utilities stocks today? All 10. Every last one of the worst performers was a utility stock. Exelon shares ended as one of Thursday's more pronounced decliners, dropping 1.8%. So why was Wall Street so down on Exelon today? Sure, it's dealing with some fallout from Midwest storms earlier this week, and Hurricane Arthur won't do it any favors; but it's one of the largest utilities in the country, rewarding investors with a 3.4% annual dividend yield to boot!

But if chunky dividends and large market caps were the only things investors wanted, shares of $42 billion electric utility company NextEra Energy wouldn't have lost 1.5% on Thursday. The concern with NextEra Energy, Exelon, and utilities stocks, in general, in a clearly improving economy, revolves around the fear of higher interest rates. The momentous job growth in June put the unemployment rate at 6.1% -- its lowest level in nearly six years -- and capped off a five-month job-creating binge that was last matched in 2006. You can bet this unexpected strength has the Federal Reserve thinking about when it should raise interest rates again -- an act that would impair the ability of utilities like NextEra and Exelon to keep paying fat dividends.


It takes a stronger person than I to say no to some food like this. Source: Tyson Foods

While it's true that the day's worst stocks were all utilities, Tyson Foods deserves special mention for underperforming with the worst of 'em, as the mere meat-packing giant that it is. Tyson Foods, which produces all sorts of poultry, beef, and pork products, shed 1.2% on Thursday. You've likely seen the brand plastered all over your local grocery store for years, but Tyson has grander ambitions: It wants to take a bite out of Jimmy Dean. As of yesterday, the company did just that, snapping up Hillshire Brands -- which also makes Ball Park hot dogs -- for $7.7 billion. While a plan to acquire an iconic hot dog brand in the days before the Fourth of July isn't beyond the dexterous financiers of Wall Street, Tyson's Hillshire deal won't officially close until late September.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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