Author Archive: Michael Foster

If you’re like pretty well everyone else, you’re closely watching Gilead Sciences (GILD), creator of remdesivir, a drug that, last week, showed progress in treating the coronavirus in a US government study.

But does that make Gilead a good stock to buy now, particularly if you’re focused on income? Let’s take a look.

First up, unlike many other stocks these days, Gilead boasts a safe payout, with the dividend accounting for just 38% of free cash flow in the last 12 months. And the company has increased its dividend every year since initiating it in 2015:

A Reliable Dividend

It’s on the current-yield front where the dividend story starts to fray.… Read more

If you’re like many investors these days, you’re warily eyeing your portfolio, wondering where the next dividend cut will come from.

Fear of dividend cuts is reasonable, even if you hold the Dividend Aristocrats—the 63 S&P 500 firms that have raised their payouts for 25 years (or more). This club includes well-known names like McDonald’s (MCD), Lowe’s (LOW), Kimberly-Clark (KMB) and Procter & Gamble (PG), as well as less familiar firms, like Sysco (SYY), VF Corporation (VFC) and Linde (LIN).

For many folks, the Aristocrats are sacred cows. But the crisis will inevitably force some of these companies to cut payouts in the weeks and months ahead.… Read more

If you have cash to deploy in this market, you’re in luck: dividend yields on some top-name stocks are scraping historic highs. And these same stocks are often so oversold they’re primed for big upside, too.

The obvious question follows: how do you find these income-and-growth plays? Let’s dive into a two-step “screen” that does just that. It starts with the lifeblood of share prices (and dividends): corporate earnings.

Unfortunately, growing profits are getting rarer these days. Look at this chart from FactSet, showing projected earnings for the just-completed first quarter, as more S&P 500 firms report:

Earnings Drop, But Look to the Left

So far, it appears that most companies will see earnings declines in the first quarter of 2020, but when we take the market apart sector by sector, we see that there are a few sectors, like consumer staples, utilities and health care, showing rising earnings—and in the case of utilities and telecoms, significant earnings gains.… Read more

It happens in every crisis: far too many people miss out on big gains (and dividends!) because they’re too focused on the last wipeout.

You can see this tragic mistake throughout history—and many folks are in danger of making it now. I don’t want you to be one of them, so let me explain where I’m going here.

The Generals Always Fight the Last War

Let’s start with the dot-com crash of 2001. After that collapse, many people feared any kind of tech stock. But those who disavowed tech missed out on a monster return. For example, the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, has more than doubled up the S&P 500’s gain since.… Read more

When you think about the biggest returns you could get on the market today, what do you think of? Tech? Biopharma? Gold stocks?

What about utilities?

This “boring” sector is known for high-yield stocks with little volatility. The (usual) downside to that income is lackluster capital gains, with many utilities staying range bound for years.

Except when they don’t.

Today we’re going to look at two utility funds that, over time, have crushed the S&P 500: the Cohen & Steers Infrastructure Fund (UTF) and the Reaves Utility Income Fund (UTG). Over their near 20-year histories, these funds have returned an annualized 11% per year.… Read more

Far too many investors ignore dividends, especially in a bull market. It’s easy to see why: with stocks racking up yearly double-digit gains, it’s tough to get worked up about a sub-2% payout (which is what most S&P 500 names pay).

But a crisis flips the script, making safe cash dividends a lot more attractive. And luckily for us, there’s one ignored corner of the market where we can grab payouts that triple what the typical stock dribbles out.

That would be in municipal bonds, or “munis,” for short. They’re a kind of debt instrument issued by local governments throughout the US.… Read more

When it comes to protecting—and growing—your dividends (and portfolio) in these trying times, there are two sectors you should watch like a hawk: technology and energy.

Both are standouts in this crisis, but in completely different ways. Energy, for example, is a big reason why the second-quarter earnings outlook for the S&P 500 looks so grim:

Take a look at the chart below and you’ll see that energy is by far the biggest loser. Along with a few other industries, it offsets other areas where profits are forecast, such as tech, utilities and healthcare—all three of which are also great spots to shop for big dividends now.… Read more

Right now, thousands of Americans are making a mistake that threatens to lock in the losses they’ve suffered in this downturn.

Worse, these folks will be stuck on the sidelines in the rebound, watching helplessly as other stocks soar and their holdings stagnate, or even drop further.

I’m talking about people who hold master limited partnerships (MLPs) and buy into the myth that these companies—owners of oil and gas pipelines and storage facilities—are simply “toll bridges,” making them a relatively safe play on energy.

Worse, many of these folks think MLPs can benefit from the huge glut of oil and gas building up around the globe.… Read more

Has the market bottomed, or are we headed for another leg down before we can start to even think about any upside? It’s a debate that will be with us for a while yet.

But maybe not in every corner of the market. Because there’s a funny thing happening with closed-end funds (CEFs): for some of these high-yield investments, the recovery has already come.

Let me explain.

In a selloff, a CEF can get hit in a couple ways, namely from the market and from investors. In the case of regular stocks, these are the same. But for CEFs, there’s a key difference: while CEFs trade on the open market, like stocks, they have a fixed number of shares (hence the name“closed-end funds”).… Read more

These days, we’re hearing a lot of pundits pontificating about which way the markets will go. But let me suggest something none of them are talking about:

What if stocks trade more or less flat for the next while?

It’s a contrarian call, to be sure, but there’s reason to think markets may be, well, kind of quiet in the coming days or weeks. And there’s a way we can squeeze a big 9.2% income stream out of just that kind of market.

The Flat-Market Theory

I know what you’re thinking: how on earth could stocks just hold their breath while America is on lockdown, possibly for a long time to come?… Read more