Author Archive: David Peltier

The market consistently rewards faster earnings growth in stocks, even with more income-oriented names. Higher profits can lead to higher future dividends, which in turn helps investors build wealth, even as inflation is rising.

I’ve found two companies with hefty dividends that more than doubled earnings per share in the latest quarter. However, chasing the highest growth from one quarter to the next doesn’t always pay, if those profits aren’t passed down to investors as dividends on a consistent basis.

Earnings Growth Could Stem Tide of Dividend Cuts

Ellington Financial LLC (EFC) is a specialty finance company with over $7 billion in assets that invests in everything from mortgage backed securities, to collateralized loan obligations and distressed corporate debt.… Read more

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.… Read more

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.… Read more

One popular investing myth is that the market always efficiently prices stocks. The truth is that active traders have a herd mentality, and often push prices to extreme levels in the short term.

That’s when it truly pays to be a contrarian, to be able to buy when prices are down and dividend yields are up.

I believe this is currently the case with energy master limited partnerships (MLPs). Crude oil fell 7% in July, which was its worst monthly performance in two years. Natural gas also declined more than 4%.

However, the two names I’ve found are pipeline and transport firms that have largely fee-based businesses and are not affected by a temporary drop in energy prices.… Read more

When investors look for dividends, they usually think about blue-chip names that are just as common on Main Street as they are on Wall Street. However, there are a large number of single-digit stocks flying under the market’s radar that also offer attractive yields.

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.… 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 25% 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

Bigger isn’t always better when it comes to dividends. Deutsche Bank recently pointed out “the first half of 2018 has seen the sharpest underperformance of dividend stocks since the financial crisis”, as measured by the Dividend Aristocrats.

Most readers are already familiar with this group of 53 names within the S&P 500 index, many paying out billions of dividends each quarter, with the most common trait being they’ve each boosted payouts a minimum of 25 consecutive years.

However, another item several of the Aristocrats share in common, is that the Law of Large Numbers is catching up to them. They may be paying out more to investors each year, but as my colleague Brett Owens has often pointed out, it’s how much the dividend is growing that is the best predictor for building wealth over time.… Read more

Each June, the National Association of Real Estate Investment Trusts (NAREIT) hosts a conference that brings all of the key players in the sector together. For REIT investors, it’s the equivalent of the Super Bowl and it offers a window into who’s poised to perform well in the second half of the year and beyond.

This year, the focus in real estate remains about mergers and acquisitions, as small- and mid-range companies are combining to better compete with the larger players. Even the REITs that plan to go it alone for the time being are raising capital by selling non-core assets, with private equity and foreign capital bidding up prices.… 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. The problem is, 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

Groucho Marx famously said: “I refuse to join any club that would have me as a member.”

When it comes to dividends, the 10% Club isn’t usually a badge of honor either. 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 question if the dividend is sustainable.… Read more