If you woke up this morning and thought to yourself:
“Well, at least that’s over with!”
You’re not alone. Historically speaking, financial markets in the US don’t seem to care which side wins on Election Night (or, in the drawn-out days and weeks that will follow). The important thing for the markets is that the election uncertainty is largely over.
As the political carnival fades into our rearview mirror, we’re left with some dividends that made out better than others. Let’s review these winners and losers now.
Winner: Financial Markets
Since March 2009, the long-term (multi-year) trend of the stock market has been up. September and October, two of the rockiest financial months on the calendar, created their usual bouts of nausea.
From a short-term perspective, we should expect more choppiness ahead. Bigger picture, however, we should expect a rising tide will continue to lift our dividend stocks.
One group of high yield ideas, in particular, consists of stocks and funds that are likely to rally into 2021 thanks to a particular loveable loser.
Loser: US Dollar
It’s been many months since the US economy received a multi-trillion dollar stimulus package. With the political order for the next two years now lining up, what better way for our elected officials to celebrate their wins than with stimulus, part two?
After all, they needn’t worry about who will foot the bill. Our money supply, as defined by the Federal Reserve’s own “M2” measure, is already up a breathtaking 24% year-over-year.
More money (dollars) means that each dollar remaining is worth less. It’s a case of supply and demand, and here we have supply already skyrocketing with another “dollar dump” likely on the way:
As M2 Skyrockets, Dollar Slumps
Winner: Jay Powell’s Printing Press
Who exactly is going to finance these new trillion-dollar debts? In theory, it is you and I, the taxpayers, who will be on the hook for the bonds that Uncle Sam issues.
But let’s be honest. Federal Reserve Chairman Jay Powell is simply going to print as much of the stimulus money as he can. Which brings us back to dividend stocks.
When the Fed prints money, equities are the place to be. They go up faster than bonds! And select dividend payers are likely to cruise higher.
For example, The Chemours Co (CC) is a chemical firm that dominates some interesting niches such as marine craft coatings and Teflon ingredients. It’s been a rough market for Chemours’ products in 2020, but the firm still managed to be cash flow positive in the most recent quarter.
The company has $1 billion in cold hard cash—ample liquidity—to “make it” to brighter days in 2021. Shares trade for just 65% of annual sales, much cheaper than shares of parent DuPont, which command 202% of revenues.
Since we added this company to our CIR portfolio just five months ago, it’s delivered total returns of 21% (even after the most recent pullback). This “fallen dividend angel” has more room to run, and shares still yield 5% today:
Chemours Plays “Catch Up” with its Payout
Loser: “Low Vol” Strategies
Investors who are seasick and reaching for their “low volatility” life rafts may be disappointed in the weeks and months ahead when they don’t find any stocks or funds that don’t move on a daily and weekly basis.
But rather than “run from the VIX,” we contrarian income investors should instead embrace the volatility. The ups and downs give us chances to secure more dividends per each dollar we invest. And that, after all, is the name of the cash flow game that we play.
A stock like Chemours pays us 5% while we ride the waves. If we catch it on a “bad day” it may pay even more. I’ll take this type of “5% payer with upside” all day long in this environment. (Remember, when the markets settle down, yields like these quickly evaporate because investors bid the attached share prices up.)
Winner: Dividend Swing Trades with 20% Potential
I’m sure you’ve seen my emails talking about the brief “reopening” for my Dividend Swing Trader service, so I’ll keep this short:
- This volatile environment is perfect for faster-moving dividend trades, like the ones we recommend in DST. And,
- The doors are shutting on this offer at midnight tonight.
If you think this service might be for you, then why not take us up on the 60-day risk-free test drive? Otherwise, you might be locked out on some big yields and even larger profits for the rest of 2020, into 2021 and possibly beyond.
Our offer for safe 20% returns from secure dividend stocks evaporates in a few hours. Click here to kick the door open for your last minute risk-free test drive.
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