Articles

Floating-rate bonds are supposed to be sailing right now.

So why are they sinking?

Last week we lamented the reason most bond funds are down this year. The runaway long rate is to blame.

Ten-year Treasury bonds began the year yielding 1.5%. Now, they pay 2.4%, a whopping 60% more in a quarter!

Nobody wants the 1.5% vintage when they can “level up” to 2.4%. So the old 1.5% bonds, while still paying their coupons, lose value.

So do funds that own Treasuries. The iShares 20+ Year Treasury Bond ETF (TLT), one of the most popular bond tickers on the planet, is down 10% year-to-date.… Read more

In just over a month, the script has flipped for us dividend investors: Russia’s war on Ukraine has cleaved the world into two teams: east vs. west.

Some pundits have dubbed it Cold War 2.0. But whatever you call it, I think you’ll agree that the risks in this new arrangement are higher for us: we’re likely looking at another pop in the inflation rate, for one, due to (seemingly) never-ending supply-chain issues.

So it follows that Fed Chair Jay Powell will probably hike interest rates further than he otherwise would have as he tries to fix those supply-chain problems by making borrowing more expensive (if you can follow the logic there, please let me know, because it beats me!).… Read more

Today we’re going to dive into a three-fund portfolio that throws off a massive 9.7% dividend yield and that payout is backstopped by stocks everyone knows well.

With a dividend like this, $500k invested gets you more than $4,000 in monthly income!

Big Income from the Big Three

While you might be suspicious of a 9.7% yield (and rightly so!), these three funds are solid. Their combined holdings are built on large caps like Amazon.com (AMZN), Visa (V) and Microsoft (MSFT). 

They then add in fast-growing tech plays like Bill.com Holdings (BILL), a maker of back-office software for small and medium-sized companies, which is up 500% over the last five years; and chipmaker Monolithic Power Systems (MPWR), which has gained 443% over the same period.… Read more

Inflation is a portfolio killer for fixed income investors. And in 2022, with surging prices on gas and electricity and food, many folks are feeling the pain.

According to the latest data, price inflation in the U.S. hit another four-decade high in February as prices surged 7.9% compared with the prior year. And since that’s February data, before global Russian sanctions came down hard and disrupted commodity markets further, that’s a very bleak sign indeed.

What’s more, once-loved dividend darlings like Energizer Holdings (ENR), Clorox (CLX) and Ford (F) are all down 20% or more so far this year – while long-term bond funds like the iShares 20+ Year Treasury Bond ETF (TLT) are down 10% or more since Jan.… Read more

Volatility is high, stocks are shaky and there’s a major land war in Europe. So we’ll take a pass on the highflyers, thanks.

Give us the monthly dividends instead.

Of course, easy enough for us to say. We “retire on dividends” folks have spent years building up a nest egg that would last us forever. Now, it’s time for us to turn this pile of cash into cash flow.

I’m talking about dividend payers that will keep on paying no matter what happens around the world. We’ll discuss some elite monthly dividend payers in a moment—the types that will dish us 9.8% per year, paid every 30 days.… Read more

With the press bleating about the yield curve inverting (again!) and scaring everyone with recession talk, we dividend (and particularly closed-end fund!) investors need to talk strategy.

I’ll drop a ticker that’s perfectly suited for these weird times in a second. First, let’s dive into what the inverted yield curve is—because it actually sets up a nice buying opportunity for us.

The “yield” in “yield curve” refers to the yields on the 10-year and 2-year Treasury notes. In normal times, the 10-year yields more than the 2-year, but in recent days, that gap has shrunk to nearly nothing:

2-Year Yield Reels in the 10-Year: Recession Ahead?… Read more

“C’mon daddy.”

Pause. And a sigh.

“I’ll pay you back?”

Ah, there it was. The fiscal responsibility we’ve been working to instill in our seven-year-old clicking in. An acknowledgement that money does not grow on trees.

(Everyone knows that greenbacks only grow on the Federal Reserve’s balance sheet!)

My daughter’s intentions were sweet. She had successfully lobbied to reroute the “daddy bus” to a boutique retail store. The young boss had her eyes on a toy, and offered to buy one for her sister, too.

Well, I should clarify. Initially she offered me the opportunity to purchase both. Your income strategist offered a compromise:

“How about you pay for your own.… Read more

If this mess of a market has taught us anything (and it’s fair to say it’s taught us many things!), it’s the value of dividend reinvestment plans (DRIPs).

DRIPs are always a popular topic here at Contrarian Outlook—they’re a smart “set it and forget it” way for us to plow the payouts we don’t need back into our favorite dividend-paying stocks.

Markets Crackups Make DRIPs Profitable

At their core, DRIPs essentially take dollar-cost averaging (which you likely used to build your portfolio) and apply it to our dividends. By reinvesting a fixed amount of dividend cash at specific times (i.e.,… Read more

If you’re like most investors I hear from these days, you’re suffering from a serious case of market vertigo.

On the one hand, stocks have posted strong gains over the last couple of years: with an annualized average return of over 19% since the start of 2020, the main US indices are up over double their long-term average of 7.5%.

Stocks Soar—Even With the Early 2022 Dive

But of course, the last two months have been stomach-churning, and more pullbacks are likely: the Fed has made no bones about the fact that it plans to raise rates quickly. And while the US economy recently cracked $24 trillion in annual GDP, an impressive 10.5% jump from before the pandemic, that’s still short of the 19% rise in stocks in that time.… Read more

Sir John Templeton and his 16 rules for investment success are required reading for any serious investor. And amid the volatility lately, I’ve been thinking a lot on one of these rules in particular:

“The investor who says, ‘This time is different,’ when in fact it’s virtually a repeat of an earlier situation, has uttered among the four most costly words in the annals of investing.”

Yes, it feels like the Russian invasion of Ukraine has opened a new chapter in geopolitics. And yes, it feels like we are on the cusp of something big with inflationary pressures, the threat of higher interest rates and other disruptions.… Read more