We’re just three weeks into 2020 and it’s already a dividend wasteland!
Happy New Year! Enjoy Your 1.7% Dividend
Drop $500K into the typical (miserly) S&P 500 stock today and you get a pathetic $713 a month in dividend payouts. That’s no retirement; it might cover the cost of your commute and coffee on the way to your job as a Walmart (WMT) greeter—so long as you avoid going to Starbucks (SBUX)!
Treasuries? Forget it. At a 1.8% yield, we’re not retiring on them, either.
No wonder I hear from so many investors wary of putting their cash in a market yielding less than inflation. Meantime, with stocks trading at a bubbly 25.5-times earnings, you’re putting yourself in the tracks of a price correction that would quickly devour your tiny income stream:
The S&P 500 Ate Its Dividend—Nearly 10 Times—in Late 2018
This problem is why I launched my Contrarian Income Report high-yield investing service in August 2015. Buy CIR’s average portfolio pick now and you’ll get a hefty 7.2% dividend stream. That’s right around the market’s long-term annualized return, and you’re getting it in dividends alone.
Add in the price appreciation we’ve seen since launch, and CIR subscribers are pulling in a steady 11.9% annualized total return!
A 15%+ Return Every Year … From Dividend Stocks!?
My Hidden Yields service gives you a chance to bag even bigger returns—I’m talking 15%+ a year, including dividends, in total.
But unlike Contrarian Income Report, Hidden Yields prioritizes tomorrow’s dividends over today’s. So, it is the trajectory of our payouts that is most important.
Why? Because stock prices tend to rise as fast as their dividends.
Call It Contrarian Income Report+
Before you ask, no, this isn’t speculation. Heck, it isn’t even anything we aren’t doing already! All we’re really doing here is slightly accelerating our successful Contrarian Income Report approach. But it’s a slight acceleration that can really ignite your total return.
In fact, Contrarian Income Report gives us a great example of how my dividend-swing-trade system works—and how potent it can be—in mortgage lender Arbor Realty Trust (ABR).
We’ve held this real estate investment trust (REIT) for a relatively short period of 18 months, and bagged a 54% total return, doubling up the S&P 500’s gain!
Arbor Realty: Our Slow-Motion Swing Trade
Here’s how we did it.
First, the dividend: Arbor’s payout was already huge when we bought—an outsized 9.6% yield. We climbed aboard at $10.85 a share and have collected $1.81 so far. In other words, we got 17% of our initial capital back in the following 18 months!
That was just the start.
Dividend Growth Powers Our Price Gains
Not only was Arbor’s dividend high, but it was well-covered by adjusted funds from operations (a better measure of REIT profitability than earnings per share). Arbor was also growing its payout fast—56% in the two years before we bought. (Or, put another way, six increases in the previous eight quarters).
A “Unicorn” 9.6% Dividend That Soared
That’s more than most companies hike their payouts in eight years! Yet Arbor, payer of an already stratospheric 9.6% dividend, pulled it off in eight quarters!
… That Pulls the Stock Higher
I’ve written before about how a growing dividend is the No. 1 driver of share prices. That makes dividend growth the safest, surest way for us to get the price upside we need to push us to a 15%+ yearly total return. This was just starting for Arbor:
Arbor’s Soaring Dividend Awakens Its Stock
Finally, let’s move on to something that’s not easy for us contrarians to do …
Forget the Bargain Bin—Buy Stocks Showing Strength
Here’s somewhere else our Hidden Yields strategy stands out: we’re zeroing in on stocks that at least match—and ideally do better than—the market.
The term for this is “relative strength,” which simply means that strong stocks tend to stay strong, giving them a solid base to jump off from as their dividends soar.
This is what happened with Arbor in February 2018. After pacing the market for a long stretch, the stock gapped higher, powered by its relentlessly rising dividend.
Arbor’s Breakout
Finally, with all these winning elements in place: a high current yield, a dividend that’s growing (and pulling the stock price higher) and a base of relative strength, all we need to do is sit back and let our winners run, which is exactly what we did with Arbor, pacing us to that nice 54% gain.
How to Get in on the Next 54%+ Gainer Now
If fast 54% gains are not a problem for you, then I’d like to invite you to take my dividend growth focused Hidden Yields for a spin. The service is a double- triple-digit return machine, as we recently banked profits of 157.1% in just 2 years, 65.3% in 15 months and 68.8% in less than 3 years!