Author Archive: Michael Foster

Don’t listen to the permabears: they’re wrong when they tell you that the massive borrowing America is undertaking to fend off the coronavirus will cripple the economy for years to come.

You’ve no doubt heard this argument—it’s an old trope the talking heads roll out to scare investors into selling their stocks and stuffing cash in their mattresses. Imagine being frightened into selling in late March. You would have sold right at the bottom of this:

Giving in to Media Hype Here …

And if you were still sitting in cash today, grinding your teeth and wondering when you should get back in, you’d have already missed this:

… Locks in a Big Loss Here

And this doesn’t include missed dividend payments—payments you’ll continue to miss the longer you sit on the sidelines!… Read more

The dividend-cut parade is starting on Wall Street, and we need to be on the lookout for “payout traps” that could be hiding in our portfolios (often in plain sight).

That task is made tougher because some companies are using unconventional approaches to cutting their payouts. Take the Walt Disney Company (DIS), which released first-quarter earnings last week. Included: news that Disney wouldn’t pay out dividends for the first half of 2020.

Disney’s Dividend Growth Stalls

After decades of growing its payouts (that dip you see in 2012 above is when the company went from annual to semi-annual payments—annualized payouts actually went up 19% that year), Disney isn’t outright announcing its dividend cut; it’s simply telling investors they may have to wait to get cash in their hands.… Read more

Subscribers to my CEF Insider service are asking me a lot about corporate bonds these days, so today we’re going to take a close look at it—and what it means for bond funds.

First, let’s talk about interest rates, which are plunging.

Debt Getting Cheaper 

This means companies pay a lower rate than ever when they issue bonds. When rates fall, it can make sense to take on more debt, because you can use that debt to raise cash. If you don’t need that cash, you can pay off the debt later at a low cost because, again, rates are so low.… Read more

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