Articles

Vanguard’s offerings don’t usually attract much attention from income investors. But they should – and I’m going to analyze five of the firm’s highest yield (and low cost) offerings shortly.

Three of them are compelling portfolio conveniences, while two have lagged their competitors in disappointing un-Vanguard-like manners.

While Vanguard provides a few actively managed funds, for the most part, it sticks to basic index funds and straightforward smart-beta funds in both the equity and bond arenas. The firm doesn’t delve much into the kinds of riskier strategies that tend to result in higher yields, nor does it deal in exchange-traded notes or leveraged funds that would allow it to gin up extra income.… Read more

What will 2017 hold for income investors?

Let’s sort through the current hysteria regarding interest rates, Trump and inflation. Thanks to some first-level insanity, there are once again pockets of value that pay meaningful dividends of 6%, 7% or better.

And many have some price upside to boot! Why?

Because Rate Hikes Will Probably Disappoint

This time last year, the Fed was promising four rate hikes over the next twelve months. The “smart money” crowd (via Fed Funds futures prices) was betting on two. And both parties were too aggressive as we saw just one rate hike in 2016.

Today we have Yellen & Co promising three hikes in 2017, while the futures markets say just two:

The Smart Money Bets 2 Hikes in 2017

Given their track records, I’m inclined to take the “under” on both predictions.… Read more

2016 is in the books, and the S&P 500 gained over 11% on the year. That’s great news if you’re already in the stock market … but it’s bad news if you’re looking to buy.

The market’s price-to-earnings (P/E) ratio is now 26.1, which is 17.6% higher than it was at the beginning of the year. In other words, if you buy stocks now, you’re paying nearly a fifth more for those companies’ earnings than you would have nearly 12 months ago.

Stocks Getting Expensive

Making matters worse is the fact that the S&P 500 has soared over 8% in the last two months alone—accounting for much of the year’s total gains.… Read more

The S&P 500 is near record highs. The pundits see an elderly bull market with more room to run. The Federal Reserve says it will likely hike interest rates multiple times in the next 12 months.

Sound familiar? It should. Because it’s exactly what we were as 2016 dawned.

Here’s what happened in the following six weeks:

I know what you’re thinking: Yes, but the index did go on to recoup those losses and more, with big rallies following the Brexit vote in June and Donald Trump’s surprise win last month. In the end, it wound up the year with a 10.1% rise.… Read more

It’s been a great year for high-yield bonds. If you’ve held them during 2016, congratulations.

But if you’re like me, you’re probably wondering whether to keep holding or take your profits and invest them somewhere else.

That’s the question I’m facing with a high-yield bond fund that has gone up over 22% since my purchase.

To decide what to do, I first want to look at how the asset has performed relative to alternatives. The leading index for this asset class (the Bank of America Merrill Lynch US High Yield B Total Return Index) has risen 17% in 2016:

High-Yield Bond Index Soars

Meanwhile, the S&P 500 has gone up 13% in the same period, including dividends:

Stocks Doing Well, Too

Of course, no one will be crying themselves to sleep at night for getting “only” 13%, but it is less than high-yield bonds paid out.… Read more

When you think of emerging markets, what comes to mind? Growth opportunities are likely first on the list … followed ever so closely by stomach-churning volatility.

What you probably don’t think about is income. But even in EMs, investors can dredge up some considerable dividend yield.

We all know the basic emerging market investment thesis: These “emerging” countries typically feature much more robust economic growth and quickly expanding middle classes. As a result, the companies there are expected to rapidly grow as they both feed off that greater economic pie, and as their operations become international in nature, building revenues around the rest of the world.… Read more

I’m sick of hearing people worry about the Federal Reserve raising interest rates.

The mainstream media and the market go into panic mode when they fear rates are going up. I’m hearing more worries about a major stock correction coming in 2017. Since Janet Yellen’s interest rate hike, the market has taken a dip—and the trend is worrying:

The Rally Is Over

Investors are losing faith in the Trump rally, and many people are anticipating more declines to come. The Fed said it’s going to raise rates three times next year—and each rate hike is expected to drive more investors out of the stock market and into safer and better-yielding US Treasuries.… Read more

Looking for cheap stocks throwing off double-digit dividend hikes in 2017?

Bad news: it’s getting tougher to dig up these hallowed companies—and easier to fall victim to a dividend cut.

Consider the S&P 500, the be-all-and-end-all for most people when it comes to stock picking.

According to FactSet, 44 of the index’s constituents had payout ratios (or the percentage of earnings headed out the door as dividends) that were above 100% in Q3. That’s nearly 9% of the index, the second-highest total in a decade.

Not good.

Meantime, the S&P 500’s average payout ratio hit 40.2% during the quarter, the highest level in seven years.… Read more

2016 has been a crazy year—so it’s no surprise closed-end funds (CEFs) have been offering crazy returns.

As we’ll see in a moment, the best fund is up over 50%, which crushes just about every unleveraged ETF and mutual fund out there. Plus, that fund pays a whopping 7.6% yield—which is pretty typical for CEFs. If you bought in when it was at its 52-week low, you would have been getting an unbelievable 14.7% yield throughout 2016, while also seeing your portfolio’s market value go up and up.

This is the power of getting into the right CEF at the right time, and it shouldn’t be ignored.… Read more