2 Popular Dividends In Serious Danger And 3 To Buy Instead

Brett Owens, Chief Investment Strategist
Updated: August 24, 2016
Mining-Truck

Is it time to buy the higher yields that industrial stocks pay, or are their dividends and profits in cyclical trouble?

I’m talking about companies that make big physical products. Their yields of 3% and even 4% or more are 50% to 100% better than the broader market. Many of these stocks are paying at their most generous rates since the financial crisis.

I like buying stocks when their yields are near the high end of their historical averages. It’s an easy, effective contrarian income strategy. And most industrials fit the bill today.

But that flies in the face of another maxim – don’t buy industrials at the top of the business cycle. The global economy isn’t exactly booming, but we are seven years removed from our last recession here in the U. …
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2 Warren Buffett Favorites to Sell Now – and 1 to Buy

Brett Owens, Chief Investment Strategist
Updated: August 22, 2016

This time, Warren Buffett actually IS losing his touch.

Historically, of course, there are few better examples to follow. If you’d invested in the Oracle of Omaha’s holding company, Berkshire Hathaway (BRK.A), 30 years ago, for example, you’d be sitting on a 3,000% gain today, compared to “only” a 953% total return for the S&P 500:

BRK-30yr-Price-Chart

But even Buffett makes the odd bad call, and I think he’s done just that by buying—and holding on to—the two stocks below. Ironically, they’re both moves the Street seems to be giving him the benefit of the doubt on—for now.

Further on, we’ll look at a canny pick the Oracle’s right to hold on to, even though the rest of the “smart money” has thrown in the towel. …
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Danger In Junk Bonds – Sell These Funds Today

Brett Owens, Chief Investment Strategist
Updated: August 19, 2016
danger-of-death-symbol-1316155

More companies are going bankrupt now than any time since the Global Financial Crisis. This is a big problem for everyone, but nowhere is the pain more acute than in the high yield bond universe.

More defaults mean more non-payments on bonds and lower prices for those bonds, causing a junk bond portfolio to fall in both value and income. For anyone who holds corporate bonds or corporate bond funds, it’s time to pay attention.

Usually the market anticipates these trends and discounts bonds before the defaults spike. This happened in 2015. Investors sold junk bonds by the truck full, and a lack of liquidity was a broad market-wide issue. This also caused yields on high yield bonds to rise:

Bond Rates Surged Last Year


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Dividend Cut Alert! Three 12% Payouts In Big Danger

Brett Owens, Chief Investment Strategist
Updated: August 18, 2016

Double-digit yields are seductive – but like sirens coaxing Odysseus’s men from the deep, they can also lead the unwary to disaster. And with more reliable dividend payers yielding less and less in this red-hot stock market, the call from those sirens is getting louder and louder. Here’s why you should plug your ears and stay the course.

One particularly popular dividend payer, Prospect Capital Corporation (PSEC), has many red flags. Currently yielding 12%, it beckons investors to come and get $10 per month for every $1,000 invested. The fact that it’s a monthly payer makes it look even more attractive, and that’s helped the stock perform well for 2016:

A Rare Bull Run for PSEC

PSEC-YTD-Price-Chart


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This is How I Invest My Retirement Money

Brett Owens, Chief Investment Strategist
Updated: August 17, 2016
Retirement

Vanguard just closed its most popular dividend fund to new money. If you’re not already in, I’m afraid you’re out of luck.

But I’ve got a backdoor way to duplicate – and even best – its winning income strategy. We’ll talk specifics in a minute, including stocks to buy now. But first, let’s discuss this dividend investing strategy to appreciate why it works so well in all market environments.

In a world with no shortage of financial worries, the Vanguard Dividend Growth Fund (VDIGX) is the surest long-term bet you can make with a single click of the mouse. It’s a dividend strategy that I plow 100% of my 401(K) contributions into (as I have to choose from a set list of funds – but at least I have one that always wins over time. …
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3 Reasons to Buy These 5 Oil Refineries Right Now

Brett Owens, Chief Investment Strategist
Updated: August 16, 2016
Sunset-Oil-275

It seems oil’s big recovery may never come. Last week, chatter from the IEA and Saudi Arabia helped oil rebound, but we’re still down 50% from 2014 prices. What’s more, continuing concerns about energy companies’ ability to pay out dividends has caused massive declines for many stocks in 2016, even after steep losses spanning two years. Some people are giving up on energy altogether.

But that would be a mistake.

Now that oil is low, we contrarians can see which companies can survive in a world of cheap energy and which companies are woefully unprepared. Surprisingly, a group of oil refineries are able to survive a world of sub-$40 oil, and now that crude has risen to over $43, these refineries are astoundingly underpriced.

Betting directly on oil itself is not only a headache, but also exposes investors to tremendous price fluctuations without an income stream. …
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2 REITs That Could Plunge 20% – and 2 to Buy Now

Brett Owens, Chief Investment Strategist
Updated: August 15, 2016

Are real estate investment trusts in a bubble? The evidence is mounting—especially in the big names many investors see as sacred.

Today we’ll look at two “frothy” trusts you should watch like a hawk if you hold them … and avoid if you don’t. Further on, I’ll show you two REITs that are terrific buys now. Both boast gaudy 6.0%+ dividend yields and have big growth ahead, too.

“O” Is for Overpriced

First, we need to talk about Realty Income (O), a giant among REITs, with a $17.9-billion market cap and 4,600 retail properties across the U.S. The stock has soared 46% in the past year, nearly tripling the 16% gain in the benchmark Vanguard REIT Index ETF (VNQ) and leaving the S&P 500, with just a 3% rise, in the dust. …
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4 Funds With 5% Yields and Almost No Taxes

Brett Owens, Chief Investment Strategist
Updated: August 12, 2016
TheMarkets

Fat 5% dividends are hard to come by as stocks continue to climb. But you can actually still get those high yields – and take on less risk – by looking to the municipal bond market.

Munis also offer something else truly wonderful: tax-free dividends. That’s right, the income from most municipal bonds is tax free for most Americans. However, choosing individual municipal bonds is difficult. High minimum buy-ins force many retirees to concentrate too much of their capital in one project or municipality.

While muni defaults are rare, it’s never safe to concentrate too much money in one place, which is why municipal bond funds are a much safer alternative. Plus, there are still some muni funds that are trading at a discount to their intrinsic market value while paying dividends over 5%. …
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3 Utility Stocks to Sell Right Now

Brett Owens, Chief Investment Strategist
Updated: August 11, 2016
power-plant-1442068

I love utility stocks for their stability and high dividends, but sometimes you have to let go of what you love – especially when things get a bit crazy.

And the insanity many investors are facing now is that many utility stocks have soared in 2016 and far outperformed the S&P 500, even when you exclude their massive dividends. These price gains crushed yields – which is why investors should ring the register, sell these stocks and redeploy profits into better yielding alternatives.

Let’s talk about three regional utility that have soared more than 30% over the past year. A great return, but the charts also tell me that we’re reaching a top and there may be little room for these utility stocks to go further. …
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How To Time Your Dividend Buys and Sells

Brett Owens, Chief Investment Strategist
Updated: August 10, 2016
Unknown

“Are dividend stocks in a bubble? Like… the NASDAQ in 1999?”

A reporter from Kiplinger called me last week, concerned investors were bidding up these issues to irresponsible heights.

While not quite a bubble, many of the “safest” names are the worst places you could put your money today. Some are doomed to grind sideways for years while others have serious downside potential. But there’s an easy test you can run to see if you should buy, hold or sell your favorite dividend stocks – simply chart the share price versus the dividend.

Your Total Returns = Current Yield Plus Payout Growth

Over time your stock market returns will roughly equal the yield you buy today plus the dividend growth you enjoy in the years ahead. …
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