Author Archive: David Peltier

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.

Any income investment can be priced relative to government interest rates, currently between 2% and 3%, 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.

However, following the 7% loss suffered by the S&P 500 in October, more stocks are sporting a double-digit yield that at any other point in 2018.… Read more

Another one bites the dust.

That’s what I thought when I saw earlier this month that Sears Holdings (SHLD) was throwing in the towel and filing for bankruptcy.

The news was not too surprising for anyone that’s been following the retail sector, but with nearly 200 Sears and KMart stores that are now slated to close, it could be the blow that knocks some mall REIT dividends to the mat for a 10-count.

That’s because in addition to Sears, Mattress Firm, Brookstone, Claire’s and Bon-Ton are just a few of the retailers that also went under in 2018.

The mall was already on life support before Amazon.com… Read more

Do you want to generate income that increases along with interest rates, with the potential upside from private equity investments? A Business Development Company (BDC), a type of closed-end investment company, could be the answer you’re looking for.

BDCs were created by the U.S. Congress back in 1980, as a way to help small- and mid-size businesses grow. They invest in debt and/or equity and often provide operational assistance to the internal management team. Similar to real estate investment trusts (REITs), a BDC distributes at least 90% of its profits as dividends.

It’s the dividends that really make BDCs stand out in this rising interest rate environment, especially since trading volatility has spiked of late.… Read more

One of the best characteristics about dividends is they usually offer a consistent, preferably growing stream of income. However, investors can easily fall into the trap of becoming complacent that future payments will continue to flow in, even when the business isn’t generating enough cash to fund the dividend.

The higher the yield being offered generally means the riskier the dividend is and sometimes losses can outweigh the expected income. For example, Dynagas LNG Partners (DLNG) cut its 16% yield back in April and shares are down 16% since.

It’s very tempting to reach for higher yielding stocks, especially when the 10-year government bond is at a seven-year high and north of 3.2%.… Read more

By most measures, 2018 has been a solid year for U.S. investors. Including dividends, the S&P 500 has generated a 10% total return in the first three quarters of the year.

However, trading volatility has steadily increased throughout 2018 and the Fed just enacted its third of an expected four interest rate increases this year. Sprinkle in some cautionary economic headlines coming out of Europe and the chances are increasing that stocks could experience a pullback between now and the end of the year.

Rather than worry or panic about any selling that could materialize in the near term, I’ve created a list of low-dollar stocks with secure dividends that could weather any potential storm.… Read more

Earlier this week, the Fed raised short-term interest rates for the third time this year, to a range of 2% to 2.25%. History suggests that higher rates can hurt dividend stocks in two ways:

First, companies that regularly borrow a lot of money (like REITs and utilities) now have to pay more to do so. Second, money market accounts, CD’s and short-term bonds are actually paying meaningful returns for the first time in a decade, offering a competitive alternative to dividends.

However, higher interest rates don’t have to sound the death knell for all dividends. By looking for the companies whose earnings expectations have actually been rising of late, you can sometimes find a healthy yield today and a business that is either resilient to, or even benefits from higher rates.… Read more

The best way to learn about a company is directly from the executives that run the business on a day-to-day basis. However, there are thousands of actively traded stocks in the U.S. alone and CEOs rarely make the time to speak directly with anyone outside of their largest investors.

That’s why I keep an eye out for Form 4’s, which is the SEC filing insiders are required to submit within two business days of trading shares in their own company.

You don’t need to take my word for it, rather famed investor Peter Lynch is my inspiration to sift through a virtual stack of regulatory filings.… Read more

One of the best characteristics about dividends is they usually offer a consistent, preferably growing stream of income. However, investors can easily fall into the trap of becoming complacent that future payments will continue to flow in, even when the business isn’t generating enough cash to fund the dividend.

The higher the yield being offered generally means the riskier the dividend is and sometimes losses can outweigh the expected income. For example, Dynagas LNG Partners (DLNG) cut its 16% yield back in April and shares are down 24% since.

With government bonds paying around 2% to 3%, dividends above 10% need to be scrutinized closely and I’ve identified two that are in danger of disappearing.… Read more

Investors tend to gravitate toward low-dollar stocks for multiple reasons, but they’re not usually known for offering high dividend yields. That’s why I look for companies trading under $10 that offer attractive “starter dividends.”

The current yield might not stand out in these cases, but that’s often because the underlying stock has been a steady gainer. If management is growing the business and rewarding investors with a relatively new dividend, these stealth names can quickly build wealth both through higher prices and a growing payout.

Starter Dividend Under $10 No. 1: Recurring Revenue Offers Much-Needed Security

ADT (ADT) offers security monitoring services and was taken public in January at $14, by the private- equity firm Apollo.… Read more

No one likes digging through pages of regulatory filings, but they can often yield valuable information.

For example, institutional investors with at least $100 million of assets must file a 13F form with the Securities and Exchange Commission once a quarter. Think of this as a quarterly scorecard or a window into the holdings of some of the most successful and often secretive investors in the market.

Should you follow suit and piggy-back some of these trades? Well, it’s certainly cheaper than the $1 million minimum buy-in it often takes to invest with the most successful hedge funds, if you’re even invited.… Read more