Here’s a Great Way to Bet on the Strong Consumer By Lucas Downey, Contributing Editor, TradeSmith Daily The consumer remains resilient. While pundits squabble over a higher-than-expected January CPI, respectfully I think they’re missing the opportunity. Sure, no one enjoys elevated prices. But instead of fretting over them… Why not focus your attention on where consumers are happily spending their greenbacks? One such area of the market enjoying a resilient consumer is the travel and leisure space, specifically cruise lines. If you’re not sold on the idea of jumping back into one of the most battered areas during COVID, today’s message should challenge that view. We’ll be unpacking three data-driven reasons why Royal Caribbean Cruises (RCL) is a really great way to bet on a strong consumer. Let’s hop to it! | Recommended Link | | | | We’re on the cusp of the biggest market disruptions in modern history, and its impact on American retirements is already in motion. The 1% are about to exploit a massive “transfer of wealth” at the cost of your own personal savings. Depending on how you prepare, this tipping point could either be a grave danger or an incredible opportunity. Here’s what you need to know. |  |
Three Data-driven Reasons to Ride the Royal Caribbean Uptrend Royal Caribbean was one of the casualties during the COVID-19 crisis. Travel halted. And the prevailing view was to stay inside and isolate. Those mandates hit leisure industries hard, including small-market restaurants, airlines, and cruises. Here’s a chart from 2018 showing just how low RCL shares crashed… and the beautiful uptrend that’s taken flight from 2023: 
At the bottom of the chart you’ll see dividends-paid signals highlighted with the letter D. What’s important here is that business got so bad, RCL had to scrap the dividend altogether back during COVID. But those fortunes have turned the corner, as the company not only reinstated a dividend of $0.40/share on July 25, 2024… Management felt so confident that they raised the payout on Dec. 11 to $0.55/share. It gets better. On Feb. 12, they hiked the payout again to $0.75/share! This is one of the strongest signs of a company’s forward outlook… And it leads to our first study. Reason #1 to really like Royal Caribbean is it pays a dividend. I’ve been on record many times discussing the power of dividends for your portfolio. When businesses “graduate” from growth stocks to income stocks… History favors the bulls. A powerful study from 1973 (Ned Davis Research) proves that companies that initiate and grow their dividends outperform non-payers by a wide margin. I recognize that RCL cut and reinitiated its payout, so this study isn’t exactly an apples-to-apples comparison. But let me say it again – when a company pays and grows a dividend, that’s a welcome signal. 
As you can see in the chart above, dividends matter. And a few notable dividend reinitiations have signaled big gains ahead. Reason #2 to really like RCL shares is the fact that other leisure companies that suspended and reinstated their dividend thrived afterward. Just last week I discussed how new dividend initiations are like graduations, which have been quite bullish for high-quality names. But what about companies that suspend and then reinstate their dividend? Well, based on a quick dive, I located a few notable dividend reinstatements in the related leisure and hospitality space. And they all did very well post the reinitiation. Texas Roadhouse (TXRH) suspended its dividend during COVID and reinstated a payout on April 28, 2021. Had you purchased the stock then, the return is 81% vs. 53% for the S&P 500. 
Hilton Worldwide Holdings (HLT) was another COVID casualty that suspended its dividend. On May 3, 2022, it reinstated a payout. Notice how since then, shares have crushed the S&P 500, with an 81% gain vs. 51% gain for the large-cap benchmark. 
OK… If you aren’t a believer yet, let’s do one more. Marriott International (MAR) also suspended its dividend during COVID and reinstated a payout on May 4, 2022. Since then, MAR shares have climbed 62% vs. 47% for the S&P 500. 
I’m here to tell you that when high-quality companies reinstate a dividend – get in there! Now all that’s left to do is qualify RCL as a good bet today. I’ve got you covered. Reason #3 to own RCL shares is due to Jason Bodner’s powerful Quantum Score (QS). QS is an incredible tool that you can use to instantly know if a stock is a buy or a pass. You can score any stock once you’re a member of Jason’s Quantum Edge Pro service that’s finding market-beating, under-the-radar stocks loved by institutions. Whenever you have a leading stock with a top-tier QS, it’s the go-signal for me. The QS instantly sizes up companies with a fundamental and technical factor ranking. Above 70 is the Green Zone. With a QS rating of 82.8, made up of outstanding fundamental and technical criteria, this seals the deal for me. Given RCL recently beat on the top and bottom line for Q4, I’m not surprised one bit by this top score. As a bonus, for Q1 the company signaled an EPS of $2.48, easily outpacing Wall Street’s $2.35 estimate. 
Look – don’t neglect prior high-quality names that stumbled during COVID. The consumer remains strong and is spending on travel and experiences. If you worry about elevated CPI prints, the opportunities will cruise by. TradeSmith helps you spot these opportunities through cutting-edge software. Keep it simple. Bet on the consumer and dividend reinstaters. Regards, Lucas Downey
Contributing Editor, TradeSmith Daily | 
