3 Funds To Sell Now, 1 High-Yield Replacement

Brett Owens, Chief Investment Strategist
Updated: October 21, 2016

The Wall Street Journal reports – yet again – that stock picking is dead. We’re being told that passive index funds outperform actively managed funds over the long term, and smart investors should choose passive because actively beating the market isn’t possible.

On one level, this is true. If your plan is just to buy and hold for 30 years or more, and if you don’t need any income right now, you are probably better off with a low-cost index fund than a higher-cost actively managed fund. But what if need income NOW? Then the “wisdom” of passive investing isn’t so great, and you need to consider alternatives.

Let’s look at two passive S&P 500 funds, the SPDR S&P 500 ETF (SPY) and Vanguard’s alternative, the …
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Beware Of These 5 “Low Beta” Dividend Traps

Brett Owens, Chief Investment Strategist
Updated: October 19, 2016

There’s a lot of buzz about beta these days. Should we contrary-minded investors fade the fad?

Beta is industry slang for volatility. It’s generally used when judging a particular investment or portfolio with respect to the broader market, with 1.0 as the benchmark. Lower is better, as that (in theory) means the issue is less volatile than the market.

For example, Campbell Soup (CPB) has a listed beta of just 0.37 – which (again, in theory) means CPB shares are 63% less volatile than the overall market. If the S&P drops 2% in a day, CPB shares should hold steadier and lose less than 1% or so.

Steady share prices are especially desirable traits in this global manhunt for yield. After all, if stocks are being bought as bond proxies, investors don’t actually want them to …
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5 Dividend Growth REITs With 100% Upside

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

REITs have been on a wild ride in 2016. With some names up over 50% year-to-date just a few months ago, the recent correction has come as a bit of a shock. Some REITs have fallen by 10% in the past month, and more declines are feared for many names.

In this situation, investing in REITs requires care and selectivity. We can’t just buy any REIT, or the Vanguard REIT Index Fund (VNQ), because we may be buying overpriced stocks that are destined to fall further. On the other hand, we want to get into this sector now – before the global manhunt for dividends sends these prices soaring.

We can buy 5 high-quality, large cap REITs whose average year-to-date price return is actually slightly negative – which indicates the REIT correction is mostly or fully priced in. …
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The Single Worst Retirement Investment Today (and 3 Better Buys Now)

Brett Owens, Chief Investment Strategist
Updated: October 17, 2016

It’s an old investing saw that should have been taken out behind the barn years ago.

You’ve no doubt heard it before: “As you get closer to retirement, you should shift out of stocks and into fixed-income investments.”

You’ll often hear it in combination with some arbitrary rule, like: “The percentage of your portfolio devoted to stocks should be 100 minus your age.”

An Overblown Fear

On the surface, it seems like sound advice, right?

After all, CDs, Treasuries and the like guarantee your principal, and stocks don’t.

But it’s based on a dangerous misconception: that “guaranteed principal” and “no risk” are the same thing.

They’re not. Because moving from stocks to fixed income really amounts to swapping one risk for another: market-volatility risk for its silent—and deadlier—cousin: …
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A Safe 4-Fund Retirement Portfolio That Yields 5%

Brett Owens, Chief Investment Strategist
Updated: October 14, 2016

The key to beating the market – AND keeping your nest egg intact – is diversification. If you don’t put all your eggs in one basket, you can avoid the pitfalls of exposure to one particular company.

For example, people who bought and held Wells Fargo (WFC) after seeing Warren Buffett praise the bank as a safe, reliable pick have been horrified to see the stock plummet on the recent fake account scandals. You could have avoided this by investing in a diversified financials ETF like the Financial Select SPDR Fund (XLF). With that fund, you’d be up 1.5% year-to-date and have a 2.6% yield based on today’s current price.

That’s not bad, but we can do much better.

In fact, we can avoid being exposed just to the financial sector. …
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4 Dirt-Cheap Dividend Growth Stocks

Brett Owens, Chief Investment Strategist
Updated: October 12, 2016

Dividend growth stocks deserve a place in your portfolio, no matter how modest the allocation, simply because they often return 100% to 200% or better relatively quickly as their payouts rise.

You’ve probably noticed you rarely see your favorite stock paying more than 2% or 3%, even if the company raises its dividend every year. That’s because its price gets bid up as its payout rises – so you never quite get the bargain 4% yield you’re always waiting for, unless something really bad happens (like 2008).

Take industrial firm 3M (MMM), which boosted its dividend by 141% over the past decade for 170% total returns:

3M’s Dividend Growth Drives 170% Returns


Yet aside from the financial crisis, you never had a chance to buy the stock at a yield above 3%. …
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2 REITs to Avoid, 3 to Buy Now

Brett Owens, Chief Investment Strategist
Updated: October 11, 2016

The REIT market has been on a tear in 2016. From the start of the year to October 1, the SPDR Dow Jones REIT ETF (RWR) gained over 6% while heavy-hitters like the Realty Income Trust (O) and Digital Realty Trust (DLR) rose more than 28%.

Now we’re in the midst of a REIT correction, and it’s hitting the best-performing REITs the most. That’s to be expected—after so many months of relentless strength, these names need to come back to Earth. And now it’s happening – just look at this chart:

What Comes Up Must Come Down—But How Far Down?


After months of massively outperforming the market, both O and DLR are now falling fast. Fundamentally they remain good investments, though. …
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4 Stocks to Buy for Big October Dividend Hikes

Brett Owens, Chief Investment Strategist
Updated: October 10, 2016

Looking for consistent, double-digit dividend hikes?

Bad news: your job is getting harder.

According to S&P Dow Jones Indices, US companies collectively increased their dividends by $6.0 billion in the third quarter (net of cancellations).

Sounds great, right? Too bad that number has plunged from the $7.3 billion in hikes announced in the second quarter—not to mention the $10.0 billion of increases rolled out in the third quarter of 2015.

The bottom line? Dividend growth is slowing—and faster than most investors think.

Worse, your odds of getting whacked by a surprise dividend cut are on the rise: the number of companies slashing their payouts hit 667 in the 12 months ended September 30, up 55.5% from the previous 12-month period.

Dividend Aristocrats Cheap Out

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How To Retire Comfortably On Just $500,000

Brett Owens, Chief Investment Strategist
Updated: October 7, 2016

Most financial advisor hacks are dead wrong. You CAN comfortably retire on a modest $500,000 investment portfolio.

Of course you’ve heard the warnings that retirement is getting harder – and they’re true. With U.S. Treasuries paying paltry returns, it is harder to find a risk-free income stream for your golden years.

But there are low-risk “bond proxies” that can offer over $50,000 in dividends per year on an initial investment of $500,000. All you have to do is buy now and sit tight. The secret is a superstar dividend growth portfolio that follows a few simple principles.

First, we don’t want to overpay – so we’re only going to choose stocks with P/E ratios below 25 (and most of these stocks actually have a P/E ratio below 20). …
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High Yield Closed-End Funds With 15% Price Upside

Brett Owens, Chief Investment Strategist
Updated: October 5, 2016

Closed-end funds (CEFs) are finally starting to get their due attention as the yield machines they are. Some can still be purchased at a steep discount to their net asset values (NAVs) – which means you can buy the underlying assets for $0.90 on the dollar, or less.

Last week we discussed how to select the safest 7% yields in the field. In a 2% dividend world, many of these funds look great paying more than triple that.

But you’ll need to choose your CEFs carefully. A steep discount is a great start, but many funds simply grind sideways (including dividends) because they have no means to close that discount window.

For example, check out these three popular funds. They trade at 11.5% discounts or better today, but for good reason – they never make their shareholders any money: …
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