More companies are going bankrupt now than any time since the Global Financial Crisis. This is a big problem for everyone, but nowhere is the pain more acute than in the high yield bond universe.

More defaults mean more non-payments on bonds and lower prices for those bonds, causing a junk bond portfolio to fall in both value and income. For anyone who holds corporate bonds or corporate bond funds, it’s time to pay attention.

Usually the market anticipates these trends and discounts bonds before the defaults spike. This happened in 2015. Investors sold junk bonds by the truck full, and a lack of liquidity was a broad market-wide issue.… Read more

Vanguard just closed its most popular dividend fund to new money. If you’re not already in, I’m afraid you’re out of luck.

But I’ve got a backdoor way to duplicate – and even best – its winning income strategy. We’ll talk specifics in a minute, including stocks to buy now. But first, let’s discuss this dividend investing strategy to appreciate why it works so well in all market environments.

In a world with no shortage of financial worries, the Vanguard Dividend Growth Fund (VDIGX) is the surest long-term bet you can make with a single click of the mouse. It’s a dividend strategy that I plow 100% of my 401(K) contributions into (as I have to choose from a set list of funds – but at least I have one that always wins over time.)… Read more

It seems oil’s big recovery may never come. Last week, chatter from the IEA and Saudi Arabia helped oil rebound, but we’re still down 50% from 2014 prices. What’s more, continuing concerns about energy companies’ ability to pay out dividends has caused massive declines for many stocks in 2016, even after steep losses spanning two years. Some people are giving up on energy altogether.

But that would be a mistake.

Now that oil is low, we contrarians can see which companies can survive in a world of cheap energy and which companies are woefully unprepared. Surprisingly, a group of oil refineries are able to survive a world of sub-$40 oil, and now that crude has risen to over $43, these refineries are astoundingly underpriced.… Read more

Fat 5% dividends are hard to come by as stocks continue to climb. But you can actually still get those high yields – and take on less risk – by looking to the municipal bond market.

Munis also offer something else truly wonderful: tax-free dividends. That’s right, the income from most municipal bonds is tax free for most Americans. However, choosing individual municipal bonds is difficult. High minimum buy-ins force many retirees to concentrate too much of their capital in one project or municipality.

While muni defaults are rare, it’s never safe to concentrate too much money in one place, which is why municipal bond funds are a much safer alternative.… Read more

I love utility stocks for their stability and high dividends, but sometimes you have to let go of what you love – especially when things get a bit crazy.

And the insanity many investors are facing now is that many utility stocks have soared in 2016 and far outperformed the S&P 500, even when you exclude their massive dividends. These price gains crushed yields – which is why investors should ring the register, sell these stocks and redeploy profits into better yielding alternatives.

Let’s talk about three regional utility that have soared more than 30% over the past year. A great return, but the charts also tell me that we’re reaching a top and there may be little room for these utility stocks to go further.… Read more

“Are dividend stocks in a bubble? Like… the NASDAQ in 1999?”

A reporter from Kiplinger called me last week, concerned investors were bidding up these issues to irresponsible heights.

While not quite a bubble, many of the “safest” names are the worst places you could put your money today. Some are doomed to grind sideways for years while others have serious downside potential. But there’s an easy test you can run to see if you should buy, hold or sell your favorite dividend stocks – simply chart the share price versus the dividend.

Your Total Returns = Current Yield Plus Payout Growth

Over time your stock market returns will roughly equal the yield you buy today plus the dividend growth you enjoy in the years ahead.… Read more