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I’m sure you probably know this—but it is usually a really bad idea to pay 43-times sales for a stock.

Note that I did not say earnings. I said sales. Revenues. The ol’ top line. Before everything.

Scott McNealy, the co-founder of Sun Microsystems, famously told investors it was insane to pay 10-times sales for Sun’s stock. Ten!

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends.

 

That assumes I can get that by my shareholders. That assumes I have zero cost of goods… that assumes I have zero expenses… that assumes I pay no taxes… assumes zero R&D.

If the market dumpster fire we trudged through in 2022 taught us anything, it’s that we must swing our portfolios away from this:

We’re Swapping Share-Price “Flameouts” Like This…

That’s the chart of “America’s ticker”—the SPDR S&P 500 ETF Trust (SPY)—last year. I call SPY “America’s ticker” because it’s by far the most popular way to track the S&P 500, a staple in many folks’ portfolios.

But its popularity does not translate into safety. Just holding this simple index fund last year meant taking a 20% haircut—with plenty of heart palpitations along the way! And even with this year’s rebound, the S&P 500 is still 4% below its January 2022 levels as of this writing.… Read more

We’re in a weird time where interest rates are at (or at least near) a peak—but most people haven’t realized it yet. When they finally come around, one group of closed-end funds (CEFs) is likely to soar (and pay us double-digit dividends, too).

I’m talking about bond funds, and the “double-digit dividends” part is already well underway, with yields on some corporate-bond CEFs held by my CEF Insider service breaking over 12%. (An added bonus: most bond CEFs pay dividends monthly, too.)

By the way, it’s not just me talking here: it’s the world’s biggest asset manager, a firm that, due to its sheer size and deep research resources, has access to next-level insight no one else can compete with.… Read more

This retirement portfolio pays 12.4%. Which means, on a million-dollar stake, these stocks dish $124,000 in dividend income alone.

That’s fantastic, needless to say! But are these stocks safe enough to actually retire on?

After all, we’re not looking to collect a 12.4% yield and lose it in price. Heck, we’re not interested in losing capital at all. We want the 12.4% with stocks that are at least steady.

Most common stocks would be in trouble if they paid 12.4%. But these are business development companies (BDCs), which yield so much because they have a special carve out from Uncle Sam.… Read more

I recently read a couple news pieces that brought what’s happening in the US economy these days into sharp focus. It’s a phenomenon I like to call “Cappuccino Effect.”

I’ll admit, it sounds too cute by half. But stick with me as we run through it, because I think it highlights a timely buying opportunity in 7%+ yielding equity closed-end funds (CEFs) whose portfolios are tilted toward consumer names.

Let’s start with inflation, which we all know ran hot last year. Some people didn’t expect this, while others thought it would last for a long time. Turns out both were wrong.… Read more

Sixty percent gains, needless to say, are nice!

They can be the difference between a comfortable retirement and, well, one where we’re a bit too concerned about losses.

A million dollars is plenty to retire on dividends. But isn’t $1,600,000 even better?

With a million, an 8% yielding portfolio dishes $80,000 per year in dividends. Nice.

But that 60%-higher portfolio pays $128,200. Even nicer.

Why am I teasing 60%? Because we have the best opportunity to bank big gains—from safe dividend stocks, no less!—since the fall of 2020.

The opportunity is here thanks to a form of “quiet QE” from the Federal Reserve.… Read more

A recession or more rate hikes in late 2023? We contrarian dividend investors don’t care—we’ve zeroed in on a group of stocks that will prosper no matter what.

Three, in particular, are begging us to buy them now. We’ll talk tickers in a moment, but let me start by saying they boast four key strengths we demand when we buy any stock in my Hidden Yields dividend-growth advisory:

• A healthy yield, so we’re starting off with a strong income stream.
  

• Rising dividends primed to keep soaring—and even accelerate. That increases our income stream, the yield on our original buy and, as we’ll see below, drives share prices higher, too.

People often don’t believe me when I tell them there are great funds out there paying sustainable 8%+ dividends—it just sounds too good to be true.

But there are literally hundreds out there that pay that much and way more, including the 9.6%-yielding Liberty All-Star Equity Fund (USA). Beyond having the best ticker out there, this one just hiked its payout even higher (by 6.7%, to be precise). The move came as no surprise to anyone already in the know about this smartly run closed-end fund (CEF). 

USA (in purple below) has a terrific track record, too, soundly beating the S&P 500, shown below by the performance of the benchmark Vanguard S&P 500 ETF (VOO), in orange, over the last decade.… Read more

Our contrarian investing playbook is simple, but not easy.

We buy stocks that others are neglecting. At least currently! This means we secure prices when they are low and dividends when they are high.

Big tech stocks have been bid to the moon recently. But not all Nasdaq plays are expensive. The rally has been narrow, and believe it or not, we have five tech plays paying up to 6.7% available today.

This is a lot of yield in a sector that, sadly, pays less than 1% at large:

Tech Is Back to Yielding Less Than 1%

This is why the sector ranks tenth in dividend yield.… Read more

One of the most difficult things for me in 2022 was that, with all the doom and gloom in the air, I heard about a lot of people giving up on the dream of financial independence.

The worst part was that they were doing so at exactly the wrong time—right when the market decline had driven the yields on our favorite closed-end funds (CEFs) way up. Even now, after the S&P 500 has posted roughly 15% gains in 2023, as of this writing, plenty of CEFs yield 10%+, including nine in the portfolio of our CEF Insider service.

Worse, these folks were doing it because they’d bought into the media’s false narrative that a recession was looming, a trap I regularly warned about falling into here on Contrarian Outlook and in the pages of CEF Insider.… Read more