Author Archive: Michael Foster

Things are tough for contrarian investors these days.

Back in August, for example, I recommended buying financial stocks. It was an easy call to make.

At the time, the Financial Select Sector SPDR Fund (XLF) was down 4% from a year earlier, and the worst performers had fallen much further. I specifically saw value in Wells Fargo (WFC), KeyCorp (KEY) and PNC Financial Services (PNC), which had fallen 14.5%, 17.6% and 12.0%, respectively.

I bought heavily into these three stocks at the time, expecting financials to recover over the short term, especially if Trump won the election.

Here’s how they’ve done since then:

Financials Rebound With Gusto

The strong recovery since August has convinced me to back off on financials, since the market has finally seen in these firms what I saw in them last summer.… Read more

I love passive investing—but not for the reason you might think.

I love it because, as I’ll demonstrate in a moment, it’s caused plenty of stocks to become mispriced, creating opportunities for active stock pickers who do their homework.

This makes the market more of a meritocracy: the people who work harder, smarter and spend more time and energy on their investments can get a higher return than those who buy index funds like the Vanguard Total Stock Market ETF (VTI) and call it a day.

Why?

Because the more people buy VTI and other index products, the more they drive up the prices of all the stocks in that index.… Read more

Let’s say you want to lock in a passive retirement income of $80,000 per year.

If you go with what most investors mistakenly see as the safest route, long-term US Treasuries, you’re going to need $3.3 million. That’s because 10-year Treasuries are paying a wimpy 2.4% interest rate today.

Investors who buy Treasuries often shrug off numbers like that. “So what?” they say, adding that Treasuries are about as low-risk as you can get.

Too bad they’re wrong.

If you buy into Treasuries and want to resell them before they mature—perhaps to deal with a big expense that comes out of nowhere—you have a pretty good chance of losing money.… Read more

In my last article, I talked about Apple’s (AAPL) destiny as a Dividend Aristocrat. The company doesn’t have even five years’ worth of payouts under its belt, but there are clear indicators that it will never struggle to pay dividends.

In a moment, I’ll show you how you can combine Tim Cook’s company with 3 other stocks and get a 4.6% yield in 10 years or less—and triple-digit upside in the meantime.

First, back to Apple.

The company’s strong—and rising—free cash flow and its operating margin, which has surged over the last 20 years and stayed at historically high levels, indicate that Apple has turned into a cash-producing machine investors should not ignore.… Read more

There are two ways to get big dividends: you can buy stocks that boast high current yields, or you can buy stocks that consistently grow their payouts.

A well-balanced portfolio will include both types of companies, with dividend-growth stocks being the cornerstone of a longer-term income strategy.

Still, investors sometimes get frustrated with dividend growers because to get their outsized payout growth, you often have to settle for a low current yield. And why buy a risky asset that yields 1% when you can get a long-term Treasury that pays 2%?

There are two answers to this question. The first is that Treasuries aren’t risk-free.… Read more

We all know financial stocks have gone through the roof since President Trump’s win. So the question becomes: what do we do with these companies now?

There’s no one answer for every financial stock, of course. Some are still great, undervalued buys—but there are two that have gotten grossly overvalued and should be avoided, or sold if you hold them. (Below, I’ll reveal 2 better high-yield stocks to buy instead.)

These 2 Financials Are Headed for Trouble

Bank of America (BAC) is the first bank on my hit list.

A Breathtaking Rise

After spending most of 2016 in the red, BAC has soared more than 37% in three months.… Read more

Real estate investment trusts (REITs) just don’t get the respect they deserve. And that’s too bad, because owning just a handful can make a huge difference in your investment returns.

I’ll reveal four of my favorite REIT buys now in just a moment.

First, let me explain why I’m pounding the table on the sector today.

The main reason: REITs often pay dividend yields far above your average S&P 500 stock. What’s more, they’re obligated to pay out 90% of their taxable income as dividends, which forces management to take a disciplined approach to growth.

In addition, REITs give you a very liquid way to invest in physical assets; your shares represent a part of the actual buildings the trust owns.… Read more

Many people think a conservative, disciplined approach to retirement will help you reach your financial goals. They’re wrong.

If you invest too conservatively, you’ll never retire. At the same time, if you educate yourself about the financial options out there and invest accordingly, you can retire much, much earlier.

Let’s take a look at the math.

Higher Returns, Earlier Financial Freedom

In the chart above, I’ve broken down how much money you need according to how much you spend per month and what rate of return you get on your investments.

At one extreme, if you spend $1,500 per month and get a 9% annual rate of return, you need just $200,000 to retire.… Read more

Goldman Sachs recently recommended over 80 stocks that are poised to jump during President Trump’s administration.

That’s a lot of stocks. Not all of them are dividend payers, and many of them have already jumped dramatically in the last few weeks, bringing them at or near their 52-week highs.

You might think this means it’s too late to buy into the Trump rally, but it isn’t.

I’ve gone through Goldman’s picks and selected a dozen high-quality, low-priced stocks with a history of strong dividend payouts and the potential for dividend growth. Half the portfolio has a history of very high dividend growth, while the other half has very good dividend coverage and the potential for future dividend growth.… Read more