Here’s the funny thing about the inverted-yield-curve talk we’re getting hit with lately: most people are looking at the wrong numbers!
I’m going to show you how we savvy dividend investors can jump on this mistake to bag total returns of 69% and up—fast. First, here’s what I mean when I say investors are looking at the wrong numbers.
These days, all we hear about is the yield-curve inversion we’ve seen a couple times over the last few weeks, where the yield on the 10-year Treasury note fell below that of the 2-year.
It’s certainly worth paying attention to, because the inversion of the 10- and 2-year Treasury yields does predict recessions—though the timeline tends to be around 18 months and maybe even longer than that.
That’s far too long for you to sit on a mattress loaded with cash and miss out on gains (and dividends!).
These “Inverted” Yields Delivered a 310% Return
This is where the “other” inversion I want to show you today comes in. I’m talking about the “inversion” between the yield on the 10-year Treasury note and the yield on the average S&P 500 stock.
And that ignored indicator is telling us one thing: buy! Especially if you’re after stocks with fast-growing dividends. Check out this chart:
Cash in on the “Other” Yield Inversion
We’re looking at the yield on the 10-year (blue line) and the yield on the average S&P 500 stock (orange line) since the financial crisis. And you can see that, from time to time, the blue line wanders below the orange line.
If you’d bought in any of those periods (during the 2008 financial crisis, in 2012, 2013 and 2016), you’d be sitting on big gains today.
Say you bought the benchmark SPDR S&P 500 ETF (SPY) stocks at our first “inversion,” in November 2008. You’d now be up 310% (including dividends). Heck, even if you held off till the start of our last “inversion,” in January 2016, you’d have bagged a nice 67% total return in about three-and-a-half years.
As you can see at the end of that chart, the “inversion” has swung our way again, with the 10-year’s yield at a three-year low—positioning stocks for another leg up.
How We’ll Play This Unusual Indicator for Big Gains (and Dividends)
The logic behind this indicator is simple: as the yield on the 10-year falls, investors go hunting for higher income, which leads them to dividend stocks. Then, as they buy, they drive stock prices up and dividend yields down.
And remember, this happens even with the pathetic 2% (or less) dividend the typical big-cap name dribbles out! You’ll do better if you grab a stock whose payout is growing at an accelerating pace.
That’s because these payout hikes are a shiny lure to investors looking for income. As they dive in, they drive these stocks’ prices up, tick for tick, with the dividend.
How Our “Inverted” Yields Ignited a Fast 69% Gain
To give you a sense of the gains available, consider the last time our yields “flipped,” back in mid-January 2016. I pounced, recommending CoreSite Realty (COR), a real estate investment trust (REIT) that owns data centers, in the March issue of my Hidden Yields service, which I’d launched a few months earlier.
It was the perfect bait: even though CoreSite only yielded 2.6% when I recommended it, its dividend had exploded 308% in the a little over five years since the REIT’s IPO.
In other words, due to that payout growth, folks who bought COR when it started trading in September 2010 were already yielding 12.9% on their money!
A Runaway Dividend
Our “inverted” yield buy paid off: when we exited our position just under three years later, CoreSite’s dividend had soared another 108%, and we’d bagged 68.9% in gains and dividends, crushing the market in the process.
Income-Seekers Snap Up COR
And we weren’t done yet.
This “Inverted Yield Curve” Buy Tripled the Market’s Return
By July 2016, the gap between the yield on the 10-year fell further below the typical S&P 500 yield than it had in years. That summer, the average S&P 500 stock looked like a dividend-investor’s dream compared to the 10-year, with a 2.1% yield, compared to the long bond’s 1.4%.
(Even though 2.1% only gets you $21K in dividends a year on a million bucks—less than your local Starbucks barista makes … but I digress.)
The takeaway: income-seekers were getting desperate.
That was the perfect setup for Packaging Corporation of America (PKG), the lowest-cost producer of containerboard, which is used for packaging everything from food to your latest Amazon.com (AMZN) order (making it a perfect “pick and shovel” play on e-commerce).
PKG yielded more than CoreSite when I rolled it out as my Hidden Yields pick in July 2016, at 3.1%. Better still, management had boosted free cash flow by 171% in the preceding five years—a gain they dutifully handed over in dividends, with the payout surging 175% in that time.
Our play on the ultra-wide spread between the 10-year yield and the average stock dividend paid off: when we sold PKG just 14 months later, we’d bagged a 65% total return—tripling the market’s gain.
PKG Laps the Market—Twice!
That brings us to today.
With the yield on the 10-year plunging below the S&P 500, the best move you can make is buy dividend growth. Because if there’s one thing we can count on, it’s this: as long as so-called “safe” investments pay less than inflation, fast-growing payouts will be in high demand.
Zero in on those stocks with accelerating payouts backed by soaring cash flows and you’ll be well on your way to doubling your nest egg (and your income stream) fast.
7 “Yield Curve” Buys to Double Your Nest Egg and Triple Your Income
You know me, I’ve got 7 perfect buys for our new “inverted yield curve”: 7 “hidden” stocks I’ve handpicked to pay you a reliable 15% a year in gains and dividends.
That’s enough to DOUBLE your money every 5 years!
Imagine turning a retirement “pot” of $250,000 into $500,000, or $500,000 into $1 million. And on it goes.
Plus, these 7 dividend wonders are growing payouts at an accelerating pace. That sets you up to earn 10%, 13%, even 15% yields on your initial buy in just a few years—just like the lucky folks who bought the CoreSite IPO did!
And even if the market does take a tumble, these stocks’ soaring dividends give you downside insulation as more yield seekers spot their surging income streams and buy in, eager to hedge their own downside with dividend cash.
Don’t miss your chance to buy these 7 “hidden” dividend plays while you can still do so at a bargain. Click here and I’ll give you everything I have on each one: names, tickers, buy-under prices and the double-digit dividend (and share-price) growth you can expect from each one.
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