Articles

The fat yields on business development companies (BDCs) just got even fatter.  Many annualized yields are now north of 10%, but that’s not thanks to a surge in payouts. Rather, it’s a byproduct of plummeting prices.

BDCs loan money to private companies. Many of the loans are floating rates, so the recent rate hike wasn’t the issue. Investors’ broader concern – and reason why many BDC stocks crashed by more than their annual dividend in a week’s time – is borrower risk.

Regular readers know we’ve been keeping an eye on the free-fall in high yield bonds. Of late, that’s accelerated.… Read more

If you want to double—or even triple—your dividend income overnight, there’s an easy way to do it: seek out companies that regularly pay special dividends.

Management usually announces these one-time payouts (which are always larger than regular quarterly dividends) after reporting a blowout quarter, or if they suddenly find themselves sitting on a ballooning cash pile. And with S&P 500 firms holding onto a combined $2.1-trillion stash, special dividends are becoming a lot more common these days.

They can instantly turn a company with a ho-hum dividend yield into an income investor’s dream.

Microsoft (MSFT) famously paid out a $3.00 special dividend in November 2004 that amounted to $32 billion from its long-term money pile.… Read more

Baby boomers are retiring in incredible numbers – 10,000 a day according to Social Security eligibility. A large majority of these are flush with the dual rewards of stock market investments and Social Security income.

But like death and taxes, growing old is an eventuality that we all must face. The details of how long we live – and where we do it – are as much dependent upon our health as they are money.  The one thing we can say for sure is that it’s not getting any less expensive to live longer.

It’s why the senior housing industry and these two REITs – Welltower (HCN) and Ventas  (VTR) – are permanently attached to my watch list.… Read more

Dividend darling Kinder Morgan (KMI) just reminded us why we need to know what’s funding that payout we love receiving every quarter.

KMI investors who didn’t see the dividend cut coming were flying blissfully blind. Everyone else, meanwhile, saw the business problems from a mile away. They sold the stock down 58% in the six months prior to the actual announcement…

This is the problem with “first-level” income investing. We can’t just buy a stated dividend and trust that it will be there next quarter. Instead, we must employ more nuanced second-level thinking to look beyond the obvious. This way, we can buy bargains the market is missing… and avoid time bombs like KMI.… Read more

On Monday, we reviewed Warren Buffett’s favorite bank stocks. No surprise, they’re all large caps – Uncle Warren has to invest a lot of money for any returns to matter, after all.

His “problem” of having too much cash to deploy is not one that keeps me up at night. But Buffett did once famously say that he’d earn 50% per year investing in smaller companies if he were only managing a few million bucks. So let’s talk about the banks he’d love to buy if he could.

Most sub-behemoth banks have relatively straightforward business models – focused on banking, of all things.… Read more

You can take it to the bank: the zero-interest rate era will soon be dead.

That’s bad news if you have a hefty credit card balance, but it’s terrific if you invest in bank stocks. And now is a great time to do so.

That’s not just my opinion. Some of the country’s smartest investors—including Warren Buffett himself (see below)—share it. They’ve bulked up their bank holdings lately, and it doesn’t take a stock-market genius to connect that to a rate hike the market sees as 78% certain at the Federal Reserve’s December 16 meeting.

Let’s be honest, a one-off, quarter-point increase won’t mean much for bank profits.… Read more

Worried that rising rates are going to hurt some of the bonds you own? If so, you’d better move some of your fixed-rate bond money into “floating-rate” issues.

As I write to you on this first Wednesday of December, traders are handicapping a 78% probability that the Fed will boost rates in two weeks. Overall they’re projecting a half-percent increase between now and June. And renowned government insider Goldman Sachs is a bit more aggressive – it’s projecting a full percentage point of tightening.

A 0.5% – 1% move would be plenty big to pancake many bonds.

The Fed last began a new rate-raising cycle at the end of June 2004 (yes, it’s been over 11 years).… Read more