MOTLEY FOOL
ASK THE FOOL Reorganizing the S&P 500
Q: I heard that the S&P 500 recently reorganized itself. What does that mean? — A.B., Winona, Minn.
A: The Standard & Poor's 500 index of 500 big companies is adjusted regularly, with some companies being removed from the index while others are added to replace them. For example, Twitter was added to the index in June to replace Monsanto, as Monsanto was being acquired by Germany’s Bayer and would no longer be a standalone company or stock.
The index recently underwent a bigger transformation than usual, though, as it changed how it classifies and groups certain companies.
Gone is the Telecoms sector, replaced by a new Communications Services sector. The sector will contain not only companies that provide various communication platforms but also those offering media content. Some of its components will be Comcast, AT&T, Verizon, Walt Disney, Facebook, Twitter, Netflix and Google parent Alphabet.
The change was made to better classify companies with operations that span both communication channels and content. The reorganization won't really affect those invested in the overall S&P 500 index, but if you've invested in any funds specializing in various sectors, the holdings in them may well have changed.
FOOLISH TRIVIA Name that company
I trace my roots back to 1968, when I was formed as one of the first hospital management companies in the U.S. Over many years, I built and acquired lots of hospitals. In 1994, I merged with Columbia Healthcare, which had previously acquired Human’s hospital operations. I recently boasted 178 hospitals, plus 119 surgery centers, in 20 states and the United Kingdom. I've been taken public and private several times in my life, and I am currently publicly traded, with a recent market value north of $46 billion. I have 249,000 employees and more than 28 million patient encounters each year. Who am I? Last week's trivia answer: Kellogg Co.
THE TAKE Putting money in storage
If you're looking for solid stocks with dividend yields over 3 percent, real estate investment trusts, or REITs, are an excellent option. They're required to pay out 90 percent of their taxable income to shareholders, and many pay 100 percent. One REIT for investors to consider is Public Storage (NYSE: PSA), which has a dividend yield recently over 4 percent. Public Storage primarily acquires, develops and operates self-storage facilities, and it boasts more than 2,400 facilities in 38 states and 228 facilities in western Europe. It generates revenue through rental income from tenants, and it can boost that by raising prices in supply-constrained markets or via higher occupancy rates. On the downside, tenant leases tend to be short-term in nature.
Public Storage offers a lot of stability. Investors can enjoy its dominant market-share position. People will always need a place to store extra stuff; that demand isn't going away anytime soon. That makes Public Storage worth considering for long-term investors seeking income.