It’s a classic death spiral.

I’m talking about the flight to dividend-paying—and dividend-growing—stocks in the past eight years.

It’s easy to see what triggered it: US Treasuries don’t offer pay enough to cover inflation, and despite President-Elect Trump’s inflationary policies—more on those below—that won’t change anytime soon.

That’s prompted income-starved investors to pile into higher-yielding options, like municipal bonds, utility stocks, corporate bonds and dividend-growth stocks. These are all good choices, of course.

But here’s where the death spiral comes in: the rush into these investments has dragged down their dividend yields (because you calculate yield by dividing the annual dividend by the current share price), sending investors into even riskier areas of the market.… Read more

Donald Trump has income investors scrambling for rate-hike (and even inflation) insurance. Fixed yields are out, while floating yields – which adjust higher in tandem with rates – are in.

Even if you’re skeptical (as I am) that we’ll see rates continue meaningfully higher anytime soon, inflation insurance is never a bad thing provided that:

1. It pays a decent current yield (sorry, gold).
2. We can buy it at a fair price.

The sudden popularity of “floating rate” issues may have you rightfully wondering whether or not this trade is already too crowded. Fortunately, my preferred vehicle for buying them is currently out of favor itself!… Read more

If you’ve invested in municipal bonds lately, you may be coming down with a serious case of buyer’s remorse.

But you shouldn’t, as I’ll explain in a moment. In fact, now is the perfect time to double down and buy more of these high-yielding, ultra-stable investments.

First, let’s look at why “munis” have fallen off a cliff, setting up an excellent buying opportunity for you and me.

“Off a cliff” is no exaggeration. Take a look at what’s happened to the five biggest muni-bond ETFs in the past month:

Muni Bonds Tank

When investments as stable as these put on a drop like that, you’d expect, say, a looming global financial crisis.… Read more

Forget the pundits—they totally blew the call on this election. And I sure hope you didn’t take their stock advice, either.

Ahead of the vote, one economics professor said the market would drop 7% if Trump won. Another analyst said you should go to cash “if you’re not already there.”

I could go on.

If you followed that advice, you’ve missed a 2.1% rise in the S&P 500 since Election Day. It’s worse if you were overweight financials, as the sector has been on an absolute tear, with the iShares US Financials ETF (IYF) surging 7.0%.

Sad!

But not surprising, as banks will benefit most from higher interest rates—and a selloff in the bond market has pushed the yield on the 10-year Treasury to around 2.25% from 1.87% on November 8.… Read more

Donald Trump’s win has done something extraordinary to the financial sector. Just look at this one-month chart for the Financial Select Sector SPDR ETF (XLF):

Banks Love Trump

This is unexpected on two levels.

First, of course, Trump’s very election came as a shock to many. Second, there was no shortage of people saying stocks would tank if the real estate mogul won. Meantime, not only has the market reached new heights since November 9 but financials have gone from one of the worst-performing sectors to one of the best—almost overnight.

The reasons are simple. First, Trump has promised to repeal the financial reforms brought in under the 2010 Dodd-Frank Act, which have limited banks’ activities, and their growth potential along with them.… Read more

You’ve probably been told you can’t have high yields and high growth in the same investment.

If you want growth, the traditional thinking goes, you need to accept little or no dividend income. And if you want high dividends, you can forget about growth.

Today I’m going to show you two investments that turn this outdated thinking on its head. They’re closed-end funds (CEFs) that hold convertible bonds, a powerful asset class most investors ignore.

More on these two funds in a moment.

First, let’s take a quick look at how convertible bonds work, and why so many investors are making a big mistake by not including them in their portfolios.… Read more

If you hold dividend stocks today, you’re facing a particularly high risk of a dividend cut.

That’s based on the latest numbers from FactSet, which show that 42 S&P 500 companies had payout ratios above 100% as of the end of the second quarter—so they’re paying out more in dividends than they’re earning.

Worse, this is the third-highest total in a decade.

While that may seem like a small percentage, at just 8.4% of the index, would you get on a plane that had an 8.4% chance of crashing?

I know I wouldn’t.

And yes, it’s also true that not all of these companies will be forced to reduce their dividends.… Read more

It may sound crazy, but if you were to invest $1 million in the S&P 500 right now, you’d generate just $1,750 in monthly income.

That’s just barely above the poverty line for a family of three.

When that much capital fetches such a pathetic amount of income, something’s wrong.

You came blame the Federal Reserve and its ultra-low interest rates. Or a retirement system that has thrown Americans to the wolves, replacing defined-payout pensions with 401(k)s that are too often designed to take—rather than grow—your savings with absurdly high management fees and low returns.

In such an environment, our parents’ retirement strategies just don’t work anymore.… Read more

With the S&P 500 recently off a 9-day losing streak – its longest since 1980 – this is a great time to go shopping. Especially for dividend growers.

These special types of stocks are rarely cheap, because who doesn’t want yield AND upside? But general market jitters about the Fed, the election and the economy have presented us with some early holiday bargains.

Let’s start with five stocks that have traded up over the last three months while the broader market dipped 3.7%. Price strength amidst market weakness is an admirable trait. It can be worth asking yourself why investors and money managers are buying these particular stocks while they dump the rest of their portfolios in a panic.… Read more