How much money do you need to retire on dividends alone?

This is a better question to ask than the typical “magic number” formula that most “first-level” thinking firms tout. Let’s review why their approach is fatally flawed, so that we can derive a more reliable method of our own based in actual reality (and funded by actual dividend payments.)

Fidelity Says What?

“You should aim to have 10 times your final salary in savings.”

Buy why? I suppose they are claiming that, if you earned $100,000 in your final year working, that you’ll want to earn this much in income every year for the rest of your life.…
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Individual investors tend to gravitate toward stocks trading under $10 for multiple reasons. For one, it can psychologically feel more powerful to buy 100 shares of a company trading for $8 than just eight shares of a $100 name.

While both investments are just as likely to generate attractive returns over time, low-dollar stocks have historically proven to be more volatile. In other words, they can offer active traders more bang for their buck in the short term.

Volatility works both ways, which is why I’ve highlighted two stocks that appear to be trading under $10 for a reason and might not be able to sustain their current dividends.…
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If you noticed American stocks selling off last week and you’re confused as to why, it’s because of an obscure corner of financial markets that might become one of the biggest stories of 2018: the Turkish lira.

Turkey’s Money Implodes

Where a dollar would get you less than four lira at the start of the year, it now gets you more than six lira—in other words, Turkey’s currency has lost nearly half of its value in 2018 alone!

This is something some investors need to fear a lot. And today I’m going to show you how to avoid being on the losing end of this crisis (including 11 funds you need to sell or avoid now, before they get crushed).…
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Moe Ansari, host of the popular Market Wrap radio show and podcast, asked me on air:

“Brett, how do you find dividend paying stocks that will double your money?”

He was intrigued enough by my analysis to ask me on his show, but I knew he was a bit skeptical as well. And that’s perfectly normal – even experienced investors and money managers like Moe think of dividend payers in terms of their current yields only.

Price appreciation potential often gets ignored, and the thought of achieving 100%+ profits from a safe dividend payer sounds absurd. But smart investors bank their payouts while their stocks double in price.…
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First-level investors are at it again, crowing that now is a great time to give the vaunted Dividend Aristocrats another look.

(You’ve probably heard of these darlings of the income world: they’re the 53 stocks that have hiked their dividends for 25 straight years or more.)

Desperate for a Deal

So why is now supposedly a great time to buy these payout poster boys?

Because according to a recent Barron’s article, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), the passive fund that holds all 53 of these stocks, is trading at 18.1 times forecast earnings for this fiscal year. That’s below the average of 18.8 over the last three years.…
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There’s been a massive discount building in a pocket of the market where you can get big dividends that are entirely tax-free.

And I’m going to show you three “1-click” ways to tap this income investor’s wonderland today.

I know that tax-free anything these days sounds impossible, but in this case, I assure you it’s not. The key is investing in municipal bonds, which give you a passive income stream that is entirely tax exempt at the federal level. Plus it’s also exempt from state taxes in many situations, too.

That means a 4%-yielding municipal bond, or “muni,” is more like a 5.3%-yielding dividend stock for a family earning $100,000 per year—and that’s before we factor in state taxes.…
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The average yield among the 25 largest dividend exchange-traded funds is a meager 2.7% right now. That means if you plunked a $1 million on ETFs dedicated to dividend stocks, you’d only make $27,000 every year.

That’s barely higher than the 2018 federal poverty level for a family of four ($25,100)!

But you and I can do better – by double, even triple! I’m talking about turning these lame 2.7% payouts into fat dividends of 7.2% or more.

Serious yield hunters gravitate toward closed-end funds, where it’s common to find distributions of 7.2% or even higher! A retirement income of $72,000, after all, is a lot cushier than scraping by on $27,000 annually.…
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When it comes to dividends, any stock yielding more than 10% these days needs to be taken with a grain of salt. That’s because bigger isn’t usually better when you’re talking about dividend yields.

The FOMC has targeted short-term rates of between 1.75% to 2.00% in the U.S. and the yield on the benchmark 10-year note is hovering around 3%. Almost any other income investment can be priced based off these rates, depending on how much extra risk you’re willing to take on.

Historically-speaking, any time a stock is paying more than seven percentage points above the AAA-rated, government-secured debt, investors begin to worry if the dividend could be cut.…
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What a year it’s been for oil!

Oil Takes Off

With a 43.5% climb in just a year, oil prices have blown by several technical levels to breach $70, and $80 is on the table by the end of the year.

This is the highest price since 2014, and it’s a very good sign for stocks—which is why you should consider buying 2 funds paying massive dividends and boasting top-notch energy-sector exposure.

(And if you prefer to invest in oil through individual stocks, rather than funds, check out this recent article by my colleague David Peltier.)

Before I show you my 2 energy funds, though, let’s talk a bit about what isn’t happening with oil.…
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If you’re looking for tax-free yields, municipal (“muni”) bonds can provide you with 5%+ distributions that Uncle Sam won’t touch. With rates rising, it is a bit tricky to make savvy buying decisions at the moment. But income investors buying smartly today are banking 5%+ yields – and paying as little as 88 cents on the dollar!

For quick profits, it’s best to buy munis after mini-panics. They seem to happen every year or two, presenting us levelheaded contrarians with safe yields for cheap. (Most recently, readers who followed my advice and bought munis after an irrational “tax plan panic” enjoyed total returns up to 16.7% in just 12 months!)

Muni Selloffs Usually Precede Quick Profits

Today: Big Discounts Plus Demand Outpaces Supply

For longer-term income investors looking for steady monthly paychecks, the best time to buy munis is usually anytime – especially for those in a high tax bracket.…
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