These 7.5% Yields Will Survive a 2008 Repeat

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“I’m 11 years older now. Brett, I just can’t have a repeat of 2008,” my new subscribers often share.

“Now tell me which of these dividends will survive a bear market like that. I want to buy only the safest yields,” they continue.

Fortunately I’m no stranger to dividends that thrive in bear markets. We fittingly launched the Contrarian Income Report months before the market’s tantrum in 2016. The S&P 500 promptly dropped 10% as a welcome present!

It was no problem for our strong dividends, however. In fact, subscribers who focused on their own holdings rather than the financial news likely have missed the broader carnage altogether.… Read more

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The yield curve is now “inverted.” This warning has preceded “seven of four” recent bear markets (more on this in a moment). Time to be safe and sell everything?

Before we stash cash in the mattress, let’s review the actual facts. Fundamental Capital’s Troy Bombardia, one of my favorite historical finance quants, has run the numbers on what happens to the S&P 500 when the 10-year “long” yield dives below the three-month rate:

  • In 1966, 1973, 2000 and 2006, an inverted yield curve indeed preceded a big stock market pullback (usually by a year or two).
  • Meanwhile in 1978, 1980 and 1989 it didn’t mean much.

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Let’s face it: this frothy market has made it much tougher to uncover the big, cheap dividends you need to fill out your retirement portfolio. So today we’re going to fight back with my top 2 “off-the-record” strategies for honing in on 7.4%+ dividends that still have a lot of upside ahead.

First, to get a sense of the vice the rebound has locked income investors in, check out this chart:

Stock Bounce Crushes Yields

That amounts to an 18% bounce since Christmas Eve, which has sliced 15% off the S&P 500’s dividend yield (because yields fall as prices rise). As I write, the average S&P 500 name dribbles out a 1.9% payout—less than inflation!… Read more

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If you’re worried that stocks are expensive again, well, they are. The current bull market is making a run at history. But it’s also costly to stay in cash (and lock in zero income). Fortunately, it’s possible to buy some downside protection with yield.

I understand the “I’m worried so I’m sitting in cash” concern. And I know many investors who continue to sit on their money and hope for a big pullback. But wouldn’t it be nicer to bank 32% total returns with 8%, 9% or even 10% or more of it coming as dividends?

Our Contrarian Income Report subscribers who smartly stayed with Omega Healthcare Investors (OHI) – a big paying REIT – have done much better than their scared cash hoarder friends, as well as the broader market in general.… Read more

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If you’re hunting for income, your job just got a lot tougher, and it’s all the Federal Reserve’s fault! Fed Chair Jerome Powell’s recent cave-in on rate hikes means the central bank is out of action for the rest of 2019—and its next move could even be a cut.

Sure, this has been great for stock prices, which surged 8% since the new year. But it’s crushed dividend yields, leaving you with far fewer buys to get the 6%+ yields you need to retire on dividends alone.

Look at how this past month’s price gain has compressed the average S&P 500 stock’s yield from a pathetic 2.1% to a very pathetic 1.9%!… Read more

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A crazy stock market is perfect for covered call writers. When volatility is high, so are option premiums, which means this popular income strategy should be a profitable one throughout 2019.

New to covered calls? Here’s how they work:

  1. You buy at least 100 shares of a stock or fund. You now own these outright. (Why 100? Because one covered call contract covers 100 shares of underlying stock.)
  2. You then sell (“write”) covered calls at a price around or above the stock’s current price for additional income. In doing so, you are agreeing to sell the stock at that price – the “strike” – in exchange for money today.

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Thanks to the December selloff, it’s relatively easy to find 9% yields. The stock market was a relentlessly receding tide in the fourth quarter, which is bad for “buy and hope” investors but quite helpful for income specialists like us.

Let’s look first at real estate investment trusts (REITs). Many now pay 9% – some good, some bad. The main index Vanguard Real Estate ETF (VNQ) has only paid this much (4.9%) twice before in the past ten years:

VNQ Is Rarely This Generous

By cherry picking the lot we can find 49 stocks paying 9% or more. But we should avoid names like Government Properties Income Trust (GOV), which frequently pops up on cute recession-proof dividend lists.… Read more

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I know it’s tempting, but right now is not the time to flee from stocks to cash. Markets are extremely oversold and due for some sort of relief rally (at least). Liquidate now and we’re no better than the average investor who underperforms by selling low after buying high.

Plus by collecting our dividends we’ll soon outpace the investors who smartly (or more likely, luckily) sold in September. Here’s why.

Studies show it’s very difficult (and really, impossible) to know when it’s time to “get back into stocks.” Hulbert Financial recently ran the numbers for Barron’s on the advisors it monitors.… Read more

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“Buy and hope” traders are, understandably, terrified today. Their portfolios are paying nearly nothing in dividends. Don’t you think fat 10% payouts would put them at ease a bit?

The unfortunate situation for our “B&H” friends is that they bought stocks without a plan to generate cash flow from them. They purchased their shares – probably after much of the decade-long run up – and now must hope that this old bull market is not aging in dog years!

A better idea? Demanding big dividends. After all, without cash flow, what is a stock really worth besides what someone will possibly pay us for it tomorrow?… Read more

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Don’t be tricked by these manic markets. Let’s use this opportunity to “lock in” some inexpensive 7.7% dividend treats.

You probably know the mistake that most basic investors make. They fixate on the wrong charts and the wrong tickers. For example most “buy and hope” types are bemoaning the stock market’s near-10% correction:

Rocky Times for Buy and Hope Investors

Meanwhile savvier shareholders are focusing on dividend disparities like this one from Omega Healthcare Investors (OHI). The healthcare REIT (real estate investment trust) yields 7.8% today, which is more than four times what the slumping S&P 500 pays!

Four Times the Dividend Yield

OHI investors might not even realize that the markets are down.… Read more

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About Author

Brett

Hi, I’m Brett Owens – and I’m a financial junkie. My “problem” started incollege, when I got a little dose of the stock market – man, was I hooked…in no time, I was reading the Wall Street Journal religously.

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