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.…
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.…
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.…
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.…
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.…
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.…
Read more

Billionaire Howard Marks’ Remarks on Fed Frustrations

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

Earlier this week, Oaktree Capital Group’s billionaire co-founder Howard Marks had some sharp words for the Fed. He told Bloomberg:

“I wish the government would get out of the business of setting rates, and I wish rates would stop being unnaturally low.”

Marks is probably the richest and smartest money manager that individual investors have never heard of. He has a cool $100 billion under management and he’s been a regular on Forbes’ World Billionaires list for several years running.

Oaktree is famous for a number of gutsy, profitable moves – many of which have involved distressed debt. The firm has earned its clients an astounding 19% after fees on its distressed debt funds – helping make Marks himself a billionaire twice over.…
Read more

Easy Double-Digit Returns From No Sales Growth?

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

Most investors think stock prices always follow earnings. So they obsess over profits – and the sales growth needed to drive them higher.

They’re partly right – but they’re more wrong than right. Their first-level thinking is missing a couple of small but critical nuances.

First, stock prices are quoted per share. When you buy a stock, you’re not buying the entire company. Instead, you’re buying a very small percentage as represented by your shares. So as a shareholder, it’s actually irrelevant to you whether or not your company’s earnings go up in absolute terms. What matters to you is that its earnings per share (EPS) go up year-after-year.…
Read more

Put Alcoa’s Spinoff on Your Watch List

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

Aluminum maker Alcoa (AA), down 41% year-to-date, is starting to attract attention from contrary-minded investors. They’re misguided – it’s foolish to buy a stock just because it’s gotten crushed. But they’re actually on the right track (albeit for the wrong reason), because Alcoa’s ugly duckling business is likely to deliver beautiful swan stock returns.

The corporate spinoff – where a company splits into two (and sometimes more) new publicly traded firms – is barely a blip on the radar for many first-level investors. They prefer to fixate on its much-ballyhooed cousin, the IPO.

That’s too bad for them, because while hot new offerings may pop for big gains out of the gate, they’re equally likely to erase those gains—and more—once the hype dies down.…
Read more

Why Preferred Shares Will Be Fine When Rates Rise

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

Many investors are concerned that high yielding preferred shares will not perform well in a rising rate environment. I’ve heard from several readers who share these sentiments. Since April 1st, ETFs like the PowerShares Preferred Portfolio (PGX) and the iShares S&P U.S. Preferred Stock Index Fund (PFF) are down 2% and 3.7% respectively.

These fears are overblown for a couple of reasons:

  1. It’s unlikely that interest rates are going to rise high enough to make these yields unattractive in relative terms anytime soon.
  2. These days, more preferred shares have floating rates anyway.

Not familiar with preferred shares? You’re not alone – most investors only consider “common” shares of stock when they look for income.…
Read more