5 Big Dividends (up to 9.7%) That LOVE Higher Interest Rates

The Contrary Investing Report

Investing and Trading News, with a Contrarian, Sarcastic Twist!

We hear it every single time the Federal Reserve raises rates, or even merely hints at it!

“Higher interest rates will crush dividend stocks – especially high yielders.”

Sounds scary – but it’s simply not true. And we’ll highlight five picks paying up to 9.2% that will prove just that.

Many high-yield dividend payers don’t care about the interest-rate boogeyman – and some actually outperform the market when the Fed lifts rates. Consider this research from index provider MSCI (MSCI) studying 88 years of market history up through July 2015 (emphasis mine):

“We found that, when rates were low to begin with, high-dividend stocks outperformed the market by an annualized 2.4 percentage points when rates started to go up.

On the other hand, when low rates fell under such conditions, the high-dividend stocks in our study actually lagged the market by an annualized 2.
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Many investors think they need to choose between current income and price upside. They don’t.

In a moment, I’ll highlight five stocks paying between 8% and 10% with 40% upside to boot.

Let’s face it – growth matters. It’s the best way to retire on a nest egg of just $500,000:

How to Stretch Your Investment on $500,000

The table above assumes a nest egg of half a million dollars that yields 8% a year, and absolutely no dividend reinvestment – here, you’re putting every cent of income into your pocket. Look how much that $500,000 expands over just a few years as you’re able to achieve more capital gains out of it. Even if you’re conservative and want to assume just 4% in annual growth out of your portfolio, that’s an extra $240,000 after 10 years – a much better position to be in than if you settled for a no-growth portfolio by selecting subpar high yielders …
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The past year has been good for the S&P 500: it’s up about 15.7%, including dividends.

So if you’re simply tracking the index through an exchange traded fund, congrats. That’s a decent gain.

But I’ve got one simple trick—and a far superior fund buy—that can help you do even better … and grab a big chunk of your gain in cash, too.

That trick? Covered calls.

Covered what?

Covered calls are a strategy in which investors buy stocks and sell call options against those stocks.

Think of call options as a kind of insurance; investors buy them if they are short the market and want to protect themselves from blowing up in case the market rallies. If you sell those options to investors, you’re essentially becoming an insurer, giving these gamblers the protection they crave to cover their risky bets. …
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Now that everyone’s a bit fearful, it’s time for us contrarians to get greedy for yield. Last week, we discussed three great dividend stocks to buy now and hold forever. These top-notch businesses are going to grow their earnings steadily in the years and decades ahead. And they’re selling at discount prices for the moment, thanks […]

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January’s financial dumpster fire torched nearly every portfolio on the planet. Easy to say, “buy the dip” but harder to do effectively. Most portfolios underperform the stock market at large because investors sell low, only to buy higher later! Except for DRIP investors, that is. They scale up their stock purchases during pullbacks, and scale […]

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There’s a new bond king in town – and he’s warning investors about a high yield darling that’s really a backdoor energy trap. Barron’s swapped out Bill Gross for Doubleline Capital founder Jeffrey Gundlach in its 2016 Roundtable. The publication says that Gross decided to resign his post. Whatever the case, it’s a good trade […]

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China’s financial grease fire has officially spread to American stocks. If your portfolio isn’t yet “China-proof” then you’d better protect yourself now. Sell your dividend-paying disasters and get your capital into issues that do pay yields but aren’t hooked on dragon dust. I get it – you probably didn’t think good ol’ U.S dividend-paying stocks would […]

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Most “first-level investors” spent the holiday season dumping any and all fixed income holdings like expired eggnog. The Fed rate hike got in their heads, and in their panic they tossed some perfectly good funds in the return bin. Many closed-end funds are now trading at double-digit discounts to their net asset values (NAVs). Doubleline […]

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Dividend darling Kinder Morgan (KMI) just reminded us why we need to know what’s funding that payout we love receiving every quarter. KMI investors who didn’t see the dividend cut coming were flying blissfully blind. Everyone else, meanwhile, saw the business problems from a mile away. They sold the stock down 58% in the six months prior to […]

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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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