The Best Defense Stock to Buy for 2016

Brett Owens, Chief Investment Strategist
Updated: November 9, 2015
FighterJet

Many first-level investors hear “defense stocks” and immediately start worrying about budget cuts.

But the two aren’t actually as connected as they think. And they’ve missed out on triple-digit gains as a result.

Despite the endless talk of reining in military spending on Capitol Hill, the defense business is booming.. Just look at how the sector’s top stocks have performed.

Let’s say, for example, you bailed out of Northrop Grumman Corp. (NOC) on December 1, 2012, at the height of the fiscal cliff debate. You’d have missed out on 183% stock-price gains, along with dividend hikes averaging 15.2% a year.

Same with Lockheed-Martin (LMT) – it’s up 138% since then, with dividend hikes averaging 14.5% a year.

It’s no surprise, then, that while the politicians were hammering out a deal that shaved $5 billion from the defense budget last month, top military suppliers were rolling out earnings reports that blew away the Street’s expectations. …
Read more

4 More Solid Dividends From Tech Stocks

Brett Owens, Chief Investment Strategist
Updated: November 6, 2015

The most interesting offering from Big Tech actually isn’t the latest phone, app, platform, watch or tablet – it’s dividends. Tech darlings Microsoft (MSFT), Apple (AAPL), International Business Machines (IBM) and Cisco (CSCO) are delivering strong earnings and increasingly attractive dividends.

First-level investors usually gravitate towards utilities, energy, and large caps for yield. Few income investors immediately think of big tech. And that’s a shame, because some tech titans are now paying a secure 2-4%. (I highlighted two of them a couple weeks ago).

Where did these big dividends come from? A lack of love from investors. Many older tech firms are transitioning into new products and segments. These concerns are weighing on these companies. So their stock prices languish while their earnings continue to grow – which they in turn shovel back to shareholders. …
Read more

These Stocks Will Soar After Credit Markets Collapse

Brett Owens, Chief Investment Strategist
Updated: November 4, 2015
calculator-v2-200

High yield bonds are starting to wobble a bit. The average Morningstar-rated fund is down 1.8% over the last three months, while the S&P U.S. High Yield Corporate Bond Index is down 1.3% over the same time period. For most “junk bond” investors, these principal losses wiped out their entire quarter’s worth of yield, and then some.

The credit markets can flip from dangerous to disastrous in a hurry. From May to December 2008, the S&P U.S. High Yield Corporate Bond Index plummeted 32% in just six months. A 6% annual yield doesn’t buffer a drop like that.

And whether a collapse is imminent or not, you can be sure it’s only a matter of time – be it quarters, or years – because that’s just what credit markets do every so often. …
Read more

The Best Biotech Company to Buy Right Now

Brett Owens, Chief Investment Strategist
Updated: November 1, 2015
Pills

Many investors are almost addicted to the dividends that drug stocks pay. It’s easy to see why: Pfizer (PFE), Johnson & Johnson (JNJ) and Merck & Co. (MRK) all pay a secure 3%, thanks to the profits they reap from their pills.

But today’s dividends are merely a product of today’s cash flow. If you’re interested in the best long-term returns tomorrow and beyond, you need to dig deeper. Which is why my second-level assessment of any drug company starts with its R&D pipeline.

Few can boast bigger homeruns in that area than Gilead Sciences, Inc. (GILD). In December 2013, the FDA greenlighted its Sovaldi hepatitis C treatment. Ten months later, the next iteration, Harvoni, got the nod.

The result was a revolution in hep C treatment: …
Read more

3 Small Banks To Buy For Big Buybacks in 2016

Brett Owens, Chief Investment Strategist
Updated: October 27, 2015

There’s a select, newly flush group of small banks that appear every year. They essentially mint their own pile of money by taking advantage of a financial phenomenon known as a second-step conversion. In the ensuing months and years after the event, management often shovels it back to shareholders in the form of buybacks and dividends.

The “Class of 2016” is getting ready to swing into action, and many of them will reward their shareholders with double-digit returns next year. It’s a simple formula – they’re going to use their extra cash to buy back lots of their cheap shares.

You’re probably familiar with initial public offerings, or IPOs. Companies put their stock shares up for sale to the public for the first time and get cash back in return. …
Read more

2 Tech Stocks to Buy for Solid Dividends

Brett Owens, Chief Investment Strategist
Updated: October 27, 2015

Many investors think tech stocks are simply too risky to put in their income portfolios. They’re missing out, because these days, tech companies are throwing off more dividend cash than any sector this side of financials.

According to second-quarter numbers from FactSet, the tech sector paid out a combined $59.6 billion in the 12 months ending June 30, just shy of the $67.7 billion financial firms handed out to investors. The sector’s top dividend payers likely won’t surprise you: Apple (AAPL), kicked out $11.4 billion, with Microsoft (MSFT) close behind at $9.9 billion.

Even bearish analysts are giving the thumbs-up to dividend-paying tech stocks. In Barron’s fall survey of money managers, Ernest L. Jahnke of Seattle-based Washington Capital Management predicted the Dow could fall as low as 13,400 in the coming months. …
Read more

These Dividend Stocks Are Poisonous To Your Portfolio

Brett Owens, Chief Investment Strategist
Updated: October 27, 2015

It happened again. Income-seeking investors piled into a 3% payer under the guise of dividend growth and safety… and they lost 10% in a single day.

Wal-Mart (WMT) lured them in and lowered their net worth this time. Before the drop, the company’s yield was at an all-time high of 3.1% thanks to 42 years of consecutive payout increases. The aristocratic allure of this dividend-payer tempted forward-looking fans. They envisioned today’s payout compounding itself in their portfolio at previous growth rates.

But Wal-Mart bulls missed several risk factors while fantasizing about their 2025 dividend payments. And they mistakenly believed a 3% yield would be sufficient to buffer any bad news. It wasn’t, and the stock suffered its worst day ever after cutting its earnings outlook for 2016. …
Read more

3 Auto Stocks To Add To Your Income Portfolio

Brett Owens, Chief Investment Strategist
Updated: October 27, 2015

China’s slowdown and a raft of scandals—Volkswagen’s (VW) emissions clunker being the latest—have kept nervous investors away from auto stocks this year.

Their first-level knee-jerk reactions are costing them income. Right now, General Motors (GM) and Ford Motor Company (F) offer yields around 4%. And both companies should have no trouble paying their shareholders for years to come, thanks to robust sales that, despite mainstream naysaying, actually still have plenty of room to run.

US Car Demand: Shifting Into Second Gear

US car sales have been on a tear, and that continued in September, when consumers drove 1.44 million cars and trucks off dealers’ lots, up 16% year-over-year. If that pace holds up, Car and Driver sees US sales topping 18 million units this year, the highest total in at least 15 years. …
Read more

3 Big Dividend Cuts Coming Soon

Brett Owens, Chief Investment Strategist
Updated: October 27, 2015

Many income investors are so desperate for dividends today that they’re piling into practically any large stated yield they find. On the surface this may seem like a sound approach. After all, if the market pulls back again, dividends should support the stock prices of those that pay.

If the dividend is still there, that is. When companies slash dividends, investors typically slash their stock prices by double-digits. Recent dividend cutters have been pummeled in the months after announcing lower payouts ahead:

Div-Cut-Table

Fortunately it’s possible to steer clear of the next dividend disaster, thanks to a new “DIVCON screen” put together by the income strategy gurus at Reality Shares Advisors. I interviewed company principals Eric Ervin and Ted Meyer about it last week. …
Read more

Microsoft’s Dividend Has Limited Upside

Brett Owens, Chief Investment Strategist
Updated: October 27, 2015

Is Microsoft (MSFT) still a big dividend grower?

The software giant yields a respectable 3.1% today. That’s not enough income for my high single-digit income goals. Granted, it could be in a few years if Microsoft is able to continue its breakneck rate of dividend growth.

It’s boosted its payout at an annualized rate of 17.6% in the last five years. It also managed to hold its payout steady during the dark days of the Great Recession.

But can it keep up this pace? I’m concerned that it can’t. Let’s take a closer look using some of the benchmarks I use to pick stocks for my Hidden Yields research service.

Hitting a Dividend Ceiling?

If you’re wondering why I’m zeroing in on Microsoft’s dividend and not, say, its new(-ish) CEO or the products it rolled out last week (including two new smartphones and its first-ever laptop), the reason is simple: …
Read more