Author Archive: Brett Owens

The yield curve is now “inverted.” This warning has preceded “seven of four” recent bear markets (more on this in a moment). Time to be safe and sell everything?

Before we stash cash in the mattress, let’s review the actual facts. Fundamental Capital’s Troy Bombardia, one of my favorite historical finance quants, has run the numbers on what happens to the S&P 500 when the 10-year “long” yield dives below the three-month rate:

• In 1966, 1973, 2000 and 2006, an inverted yield curve indeed preceded a big stock market pullback (usually by a year or two).

• Meanwhile in 1978, 1980 and 1989 it didn’t mean much.

Don’t become complacent with your dividends! Your portfolio and your income are at the whim of Fed Chair Jerome Powell—now more than ever.

I realize he’s acting like a “good boy” at the moment. But what if JP decides to go rogue again and exercise his independence? A surprise rate hike would be catastrophic to many income portfolios.

That means you need to “Fed-proof” your nest egg and your dividends. Today we’ll discuss four funds paying dividends up to 10.7% that do just that.

These four closed-end funds (CEFs) have been left for dead in this market rally. That makes them great “Fed insurance”: they’re cheap, so they’ve got built-in upside if the rally goes into overtime.… Read more

Almost every corner of the market is overpriced today. That includes dividend stocks, which cost too much and yield too little.

The S&P 500 is at multi-year highs in almost every valuation metric: P/E, P/B, P/S … you name it. And a lot of that froth is coming from traditional income sectors. Yardeni Research’s latest sector study shows that utility stocks, for instance, trade at 18 times estimates, at the very high end of its 10-year range. The sector’s typically high yields, meanwhile, have dried up to a mere 3%.

Hey! Where’d the Dividends Go?

The real estate industry is getting pricey, too, with the iShares U.S.… Read more

Many retirees like the idea of a “50/50” portfolio that’s half bonds and half stocks. There’s even research that shows withdrawal rates of 3% and 4% may be safer with this mix than they’d be with 100% stocks.

That’s all well and good but doesn’t concern me much. I’m a “No Withdrawal” guy. I spent many late nights in college working up Monte Carlo simulations, where we’d run scenarios 50,000 times to figure out the optimal placement of, say, ambulances in a city to minimize the average response time to an emergency. This type of fancy modeling can work well when you’re able to use the law of large numbers to map the likelihood of every possible situation.… Read more

Don’t be fooled: imitating the picks of famous stock pickers is a road to retirement ruin.

I get it: gurus like Warren Buffett, Dan Loeb and Ken Fisher are the cream of the crop.

Too bad the big cash wads these guys toss around limit them to the lamest dividend investments. And you can bet almost all of them are missing out on one stock that’s paying a lucky group of investors an incredible 32% dividend!

Let’s dive straight into why following the pros’ lead is a big mistake. Then I’ll give you three ridiculously cheap stocks to grab for massive dividends—before their prices take off into the stratosphere.… Read more

Stephen chose a precarious time to buy. He purchased a REIT right before the sector’s ensuing rout. But it didn’t matter because he knew exactly what to buy. He banked an easy $91,405 on this investment while most first-level REIT investors sweated and treaded water.

Park Hotels & Resorts (PK) was a relatively new REIT that was spun off by Hilton Worldwide (HLT) at the beginning of 2017. Director Stephen Sadove, around this time last year, bought 9,600 shares of his own firm – right before REITs sank in an epic rout that soon unfolded.

The “dumb” REIT index VNQ was soon dumped in unison by investors.… Read more

Closed-end funds (CEFs) are increasingly becoming favorites of retirees looking for income. And why not? Many pay 5%, 6% and even 7% or more today. In a world where stocks yield 2% and bonds just 3% or so, the extra dividends can be the key to a comfortable retirement.

The “closed” in CEF technically means that the fund’s pool of shares is fixed. Which is why these vehicles can have wild price swings above and below the values of their actual assets. (Good for us contrarian income seekers – we can buy below fair value to maximize our yields and upside.)… Read more

At some point, someone probably gave you the following investment “advice”—or some version of it:

“All you need to do to make money in stocks is buy a company with a big-name brand, sit back and let the gains roll in.”

Sounds logical, right? After all, a household name is critical if companies want to keep their millions of fanboys (and girls) hooked.

Well, not anymore. Here’s the proof.

Big Brands: Falling Left and Right

Just look at the worst performers last year: this rogue’s gallery was stuffed with companies boasting so-called “unbeatable” brand names.

Like General Electric (GE), whose banner ranks No.… Read more

That dip didn’t last long, did it?

The S&P 500 is back around 2,800, the Dow is back around 26,000, and stocks – which frankly were never really “cheap” even in the December doldrums – are back to being hilariously overpriced. And that’s a problem on two fronts.

1. It makes finding values – an important aspect in collecting big total returns – exceedingly difficult.
2. The more richly stocks are priced, the harder they can fall, making dividend landmines more plentiful in the current environment.

How bad is it out there?

Here’s a look at the short-term, which shows valuations are clearly back to their pre-dip “normal.”… Read more

A stock’s yield is only as good as its cash flow because, after all, a dividend is nothing more than a promise from a company.

CenturyLink (CTL) recently reminded us of this. Its promised $0.54 per share dividend exceeded its ability to pay. The firm’s payout ratio of 130% – the percentage of profits that it was paying as dividends – was an absurd overpromise that couldn’t last forever:

CenturyLink’s Payout Promise Was Always on Borrowed Time

CEO Jeffrey Storey insisted his team remained “committed to and confident in our ability to maintain the dividend.” I understood the commitment, but questioned the confidence – taking on debt to pay dividends is a losing game.… Read more