Articles

A Safe 3-Stock Portfolio That Pays 5.9%

Brett Owens, Chief Investment Strategist
Updated: September 9, 2016

When planning for retirement, most investors try to split their assets between stocks (higher risk, higher return) and federal U.S. government bonds (lower risk, and these days, much lower return).

Problem is, stocks are enjoying an overextended winning streak. The S&P 500 is up over 7% year-to-date:

S&P 500 Moves Up and To the Right

SPY-Price-YTD-Chart

That’s quite nice, especially after the 1.4% return that the same index had last year. But when we consider its performance in 2014 (13.5%), 2013 (32.2%), and 2012 (15.9%), investors are right to give pause. Has the market outperformed for too many years in a row?… Read more

How To Front Run the New REIT Index

Brett Owens, Chief Investment Strategist
Updated: September 7, 2016

S&P’s new REIT index is officially live – but don’t worry, there’s still a way to front run it!

I’ll get to specific bargains in the sector shortly. First, let’s review the stocks that have already been bid up by investors and money managers looking for exposure to this newly celebrated sector.

Barron’s reported that investors have been using ETFs to invest in REITs, because most individual names – even the sector’s blue chips – aren’t well known by the first-level types.

I believe it, and they don’t need the “s” in ETFs, because the only REIT ETF anyone really knows or buys is the Vanguard REIT Index Fund (VNQ).… Read more

5 Popular Bond Funds To Sell Now

Brett Owens, Chief Investment Strategist
Updated: September 6, 2016

With all this talk of rising rates, it’s surprising that bond funds are doing so well. The largest bond ETF, the iShares Core Total US Bond Market (AGG), is up over 4% in 2016 and hasn’t paused its bull run throughout the year:

Investors are Hungry for Bonds

AGG-Price-Chart-YTD

Tax-exempt bonds aren’t doing as well, but they’re still strong. The USAA Tax Exempt Intermediate-Term Bond mutual fund (USATX) is up 2% for 2016, and has not pulled back year-to-date, even during February’s market meltdown:

Tax-Free Bonds Hold Their Value

USATX-Price-Chart-YTD

When we look at the yields of these funds, their steady performance is even more surprising.… Read more

2 Bargain REITs to Buy in September – and 2 Losers to Sell Now

Brett Owens, Chief Investment Strategist
Updated: September 5, 2016

Right now, plenty of investors are quaking in their boots, wondering if they should sell their real estate investment trusts (REITs) this month.

Why? Two reasons. Let’s debunk them one at a time. (Then I’ll reveal two REITs that are screaming buys because of this situation and two you need to avoid—or sell right away if you hold them.)

A Costly Mistake

The first worry has to do with an old adage that just won’t go away. Stop me if you’ve heard it before: “REITs perform poorly when interest rates rise.”

It’s true that the Federal Reserve will probably hike rates at least once before we ring in 2017—likely in December, according to traders betting via the Fed funds futures market.… Read more

4 Cheap Dividend Growth Stocks

Brett Owens, Chief Investment Strategist
Updated: September 2, 2016

We all know the secret to successful investing is buying low and selling high. But what does that mean, exactly – do we simply buy companies growing their top lines aggressively in today’s low-growth world?

There are dangers in this approach, which put you at risk for drastic losses. Take, for example, people who bought Twitter (TWTR) when its revenues were doubling, sure that they were getting a piece of the next big thing:

Big Losses for Twitter Enthusiasts

TWTR-Price-Chart

Smart, cautious investors avoid these dramatic losses by buying high quality, established companies when their earnings are cheap. Even better, they buy stocks that pay dividends – and raise them consistently.… Read more

4 Dividend Growers With Heavy Insider Buying

Brett Owens, Chief Investment Strategist
Updated: August 31, 2016

Legendary investor Peter Lynch was fond of saying that corporate insiders may sell their shares for a variety of reasons (estate planning, divorce, sending the kids to college). But there’s only one reason they buy – because they think the price is going up.

Insiders at dividend growers have one more reason, however – they obviously believe their payout is going up, too.

Which means when we’re looking for the next dividend accelerator and its 100% upside, we should consider insiders’ favorite payouts. Here are five candidates with big dividend growth and heavy insider buying:

Western Refining (WNR) CEO Jeff Stevens just picked up 100,000 shares last week for a cool $2.3 million.… Read more

3 Dividends Up To 10.3% For The Coming Retirement Crisis

Brett Owens, Chief Investment Strategist
Updated: August 30, 2016

Utility stocks have had a great year, but it isn’t too late to get into this sector at a reasonable valuation and lock in a 7% yield. Of course, you could always just buy the Utilities SPDR ETF (XLU) and wait for the rising tide to drive this indexing fund higher.

But there are two big problems with this approach. First, the ETF is up over 15% year-to-date thanks to the run-up in utilities:

Too Great a Year for Utilities?

XLU-Price-Chart-YTD

The other problem: this fund yields just 3.2%. Now that isn’t bad compared to the S&P 500, but that’s less than 1 percentage point above the more stable and lower risk SPDR S&P Dividend ETF (SDY):

Low Dividends Not Compensating for Risk

XLU-SDY-Dividend-Yield-Chart

If we’re going to get into utilities after they’ve run up 15%, we’re going to have to be more selective to get a better yield and less risk.… Read more

5 Risky Dividends to Dump From Your Portfolio Now

Brett Owens, Chief Investment Strategist
Updated: August 29, 2016

Today I want to tell you about a deadly retirement-planning mistake millions of Americans are making right now—and five stocks you need to weed out of your portfolio yesterday.

More on those in a moment. First, the miscalculation, which comes down to a single figure: 7%.

That’s the average annualized return most people expect from their stock portfolios over the long haul, and with good reason: it’s just below the 7.9% the S&P 500 returned every year, on average, from 1985 to 2015.

But even with a timeframe that long, you need to remember a disclaimer you’ll find in just about every mutual fund prospectus: “past performance does not guarantee future results.”

A Worrying Forecast

In April, the McKinsey Global Research Institute released a report warning that the 30-year run of near-8% annualized returns will soon be a memory.… Read more

2 REITs With Attractive Yields and Growing Payouts

Brett Owens, Chief Investment Strategist
Updated: August 26, 2016

In a world where you need to hold a U.S. Treasury for 10 years to get a measly 1.5%, real estate investment trusts (REITs) have become an incredibly attractive income-yielding alternative. So attractive, in fact, that the SPDR Dow Jones REIT ETF (RWR) has soared over 12% in the last year:

REITs Rally

RWR-Price-Chart

That also means the ETF’s dividend yield has fallen, and it now pays less than 4%. On top of that, RWR’s dividend is uneven because of the complexity of its constituents’ payouts, making this income stream an unreliable one. Dividends were $1.03 in March and 78 cents in June, and the dividend usually bounces around from quarter to quarter.… Read more

2 Popular Dividends In Serious Danger And 3 To Buy Instead

Brett Owens, Chief Investment Strategist
Updated: August 24, 2016

Is it time to buy the higher yields that industrial stocks pay, or are their dividends and profits in cyclical trouble?

I’m talking about companies that make big physical products. Their yields of 3% and even 4% or more are 50% to 100% better than the broader market. Many of these stocks are paying at their most generous rates since the financial crisis.

I like buying stocks when their yields are near the high end of their historical averages. It’s an easy, effective contrarian income strategy. And most industrials fit the bill today.

But that flies in the face of another maxim – don’t buy industrials at the top of the business cycle.… Read more