This 9.2% Dividend is Practically Crash-Proof (and It Likes Inflation)

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This 9.2% Dividend is Practically Crash-Proof (and It Likes Inflation)

The stock market keeps falling and falling because, for the first time in 14 years, there is nobody there to catch it.

The “Fed put” has expired.

The genesis of the Federal Reserve’s implicit put—the notion that the Fed will fix any decline—was the 2008 Financial Crisis. The financial system was on the ropes and the stock market itself became “too big to fail” as far as the Fed was concerned. Then-Chairman Ben Bernanke printed a bunch of money, boosted the market and was heralded a financial hero.

Since then, the Fed has been reluctant to let the stock market drop.… Read more

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Flip the 4% Rule “the Bird” and Retire on Dividends Instead

For decades, plain vanilla financial advisors have pitched a “4% withdrawal rate” as a retirement solution. Most were lazily stealing this advice from the smart, thrifty fellow who created the rule.

The 4% idea is that someone with, say, a million-dollar nest egg could safely withdraw $40,000 per year and probably not run out of money before they die. Or, at least, have it last for 33 years.

(And oh, by the way, they’d better hope that the financial poem keeps rhyming with a previous 50-year period. But I digress…)

Not the most inspiring idea, I know. So why are we even talking about this today?… Read more

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Please “Stop It” With the Strict Stop Losses

“This wine is crap.”

My wife (girlfriend at the time) glared back. I couldn’t let it go.

“Seriously…we paid $50 for this? I’d rather drink a bottle of Niagara.”

My comment—and ode to the New York wine that tastes like Welch’s grape juice—didn’t help the glare.

I was 22 years old, making $50K per year. It wasn’t a bad starting salary back in the day, but I didn’t have many extra $50s to spend on a Napa Valley wine tasting.

Plus, this guy had been drinking cheap Canadian beer since he was 16! The thought that I could procure 100 Labatt Blues for the price of our tasting raised my temperature further.… Read more

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This 9.2% Dividend is Ready for Rising Rates and Fed Hikes

Well, that escalated quickly.

We contrarians have been ready for rising interest rates—and long-term rates have indeed begun the year with a moonshot.

The Federal Reserve has been a big buyer of US bonds since the spring of 2020. If it weren’t for this “whale” buying $80 billion in bonds per month, long rates would likely be higher already.

How much higher is anyone’s guess. But now that the Fed is “tapering” its monthly purchases from $80 billion all the way to zero, everyone is rushing to place bets. And income investors are speculating that a fair rate for the 10-year is higher than here.… Read more

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How to Retire on $77,000 in Yearly Dividend Income

A recent research paper from Morningstar concludes that retirees should only withdraw 3.3% of their money annually. In other words, a million-dollar portfolio should only be relied on for $33,000 in annual income.

That is a sad ending for a seven-figure nest egg!

Scary, too. This $33,000 salary isn’t delivered in cash flow. No, this is a “withdrawal rate”—which means the retiree is tapping principal. Which means the retiree is buying stocks and hoping they’ll go up.

But “hope” is not a strategy. The volatile weeks we’ve seen recently have no doubt forced some terrified retirement investors into selling low.

This is “reverse dollar cost” averaging, unfortunately.… Read more

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These “Paper Mills” Print an Average Yield of 8.9%

“Regular” REITs typically buy physical properties, find someone to manage them, and lease them out. They collect rent checks and avoid paying taxes on most of these profits if they pay most of their earnings out as dividends (per the terms of their tax loophole, which frees them from paying taxes if they distribute 90% of their profits as payouts). This is the reason REIT stocks typically boast big yields.

Mortgage REITs (mREITs), on the other hand, don’t own buildings. They own paper. Specifically, they buy mortgage loans and collect the interest. How do they make money? By borrowing short (assuming short-term rates are lower) and lending long (if long-term rates are, as they tend to be, higher).… Read more

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9% Dividends, 54% CEF Gains and More Income Q&A

Thank you to our 1,405 Contrarian Income Report subscribers who attended our “VIP” Q4 webcast a couple of weeks back! We chatted about bond funds paying 9%+, Federal Reserve “fueled” funds for 54% yearly returns, and more.

Prior to the webcast, we collected over 30 questions from thoughtful subscribers. We addressed most of these on the call. However, during the session, 70 more great income questions came in!

As promised, I read everyone one. Let’s chat about the most common questions today.

Q: I’m 64 years old and am just concerned about retiring on dividends. I own PCI which pays a high dividend but trades at a high premium.… Read more

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4 mREITs Yielding Over 8%

“Regular” REITs typically buy physical properties, find someone to manage them, and lease them out. They collect rent checks and avoid paying taxes on most of these profits if they distribute 90% of their profits as payouts. This is the reason REIT stocks typically boast big yields.

Mortgage REITs (mREITs), on the other hand, don’t own buildings. They own paper. Specifically, they buy mortgage loans and collect the interest. How do they make money? By borrowing “short” (assuming short-term rates are lower) and lending “long” (if long-term rates are, as they tend to be, higher).

This business model prints money when long-term rates are steady or, better yet, declining.… Read more

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Forget the Banks: These Lenders Dole Out Dividends up to 10.1%

America’s in a dividend desert, and that’s forcing income hunters to get creative. Are 10.1% paying mREITs the answer?

The S&P 500 hasn’t yielded this poorly (1.7%) in roughly a decade. T-notes deliver a fractional yield. Worse, even areas of traditionally elevated yield are offering just so-so payouts right now. At less than 4% on average, high-yield stocks and real estate investment trusts (REITs) will put retirement investors well short of their income goals.

The good news? A pair of market niches—business development companies (BDCs) and mortgage REITs—can put 3x that amount of money into our pockets.

I recently pointed readers to a “3-click” BDC portfolio yielding 10.9%, which is a little less than the BDC average of 12%.… Read more

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This 20.1% Yield is Too Good to Be True (But This 11.8% Payout Isn’t!)

Most dividend investors understandably love the idea of an 8% No Withdrawal Portfolio. It’s a simple yet “game changing” idea that you don’t hear much from mainstream pundits and advisors.

Find stocks that pay 7%, 8% or more and you can retire comfortably, living off dividend checks while your initial capital stays intact (or even appreciates).

Now this strategy is a bit more complicated than simply finding 8% yields and buying them. Granted the recent stock market pullback has benefited investors like us because we can snag more dividends for our dollar. Yields are higher overall, and that’s a good thing.… Read more

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