5 Overhyped Dividend Stocks You Must Avoid Now

Michael Foster, Senior Analyst
Updated: November 18, 2016

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

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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. …
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2 Ignored Investments With 8.3%+ Yields And 15% Upside

Michael Foster, Senior Analyst
Updated: November 16, 2016

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Today I’m going to show you two investments that turn this outdated thinking on its head.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.

In a nutshell, they offer the best of stocks and bonds: high income and tremendous growth potential. …
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4 Dangerous Dividend Stocks You Need to Dump Now

Brett Owens, Chief Investment Strategist
Updated: November 14, 2016

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.

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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. Some will find ways to juice their earnings, either by growing sales, cutting costs, or a combination of the two. …
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How to Get a 9.4% Yield From Your Favorite Dividend-Growth Stocks

Michael Foster, Senior Analyst
Updated: November 11, 2016

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. We need to go deeper to uncover income opportunities most people don’t take the time to learn about.


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5 Dividend Growers That Are Finally Bargains

Brett Owens, Chief Investment Strategist
Updated: November 9, 2016

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.

Weak Market? No Problem

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5 High-Yield Funds to Buy Before the Fed Hikes Rates

Michael Foster, Senior Analyst
Updated: November 8, 2016

Today I’m going to show you a crystal-clear, highly predictable market pattern we can cash in on—and 5 safe, high-yield funds we can use to do it.

It’s all thanks to the Federal Reserve’s cat-and-mouse game with interest rates.

Let me explain.

Now that we’re past the days of quantitative easing boosting stocks, investors’ attention has shifted back to rates, with a quarter-point rise in December looking more likely after last Friday’s strong jobs report.

Fears of a rate hike pulled the rug out from under stocks, including six straight days of declines at the start of November. The financial press has fanned the flames with doomsayer headlines that have amped up investors’ panic.

I love it, because this is a predictable pattern of human behavior. …
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Best Dividend Growth Stocks to Buy in November

Brett Owens, Chief Investment Strategist
Updated: November 7, 2016

If you’ve read my columns on Forbes and Contrarian Outlook, you know my heart belongs to dividend-growth stocks.

The reason is simple: dividend growers outperform every other kind of stock there is.

But don’t just take my word for it. Study after study backs that up, including an exhaustive one by Ned Davis & Associates that zeroed in on the 43-year period from January 1972 through December 2014.

Here’s what they found:

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It’s tough to argue with those numbers—especially over a period spanning nearly half a century!

But as I wrote last week, you can’t just run out and buy an exchange-traded fund like the Vanguard Dividend Appreciation ETF (VIG).

VIG is a long-time investor favorite, but for the life of me, I can’t figure out why. …
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How to Generate $112,000 in Retirement Income From a $500,000 Portfolio

Brett Owens, Chief Investment Strategist
Updated: November 5, 2016
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Today I’m going to show you an easy way to use the S&P 500 Dividend Aristocrats—companies that have hiked their dividends for 25 straight years or more—to build a durable income stream you can retire on.

But before I do, there’s something I need to tell you about these 50 companies, which are “sacred cows” in many investors’ eyes: the fact they’re in this exalted club today doesn’t mean they will be in the future.

Consider ExxonMobil (XOM), a long-time Aristocrat that’s losing money fast and may be forced to slash its payout.

I know I don’t have to tell you what investors who are relying on XOM’s 3.6% dividend would do if their quarterly “paycheck” suddenly dropped in half. That’s why I recommend staying well clear of XOM today. …
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3 Recession-Proof REITs With 20% Upside in 2017

Brett Owens, Chief Investment Strategist
Updated: November 4, 2016

What a difference three months makes.

Back in the summer, real estate investment trusts (REITs) were all the rage—especially after a dismal May jobs report put the final nail in the coffin of a summer rate hike.

Fast-forward to today, and we’re looking at a rate hike that’s a 72% certainty at the Fed’s December meeting, according to traders betting through the Fed funds futures market:

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It’s no coincidence that the air has gone out of the SPDR Dow Jones REIT ETF (RWR), a popular REIT index fund, as that late-year increase has grown more certain:

RWR’s Big Rise—and Fall

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It’s a classic case of the herd falling for an old myth: …
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How To Live Off $500,000 Forever

Brett Owens, Chief Investment Strategist
Updated: November 2, 2016
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A half-million dollars is a lot of money. Unfortunately, it won’t generate much income today if you limit yourself to popular investments.

The 10-year Treasury has “rallied” to 1.85%. Put your $500K in them and you’re well below the single-person poverty level at $9,250 annually. Yikes.

Dividend paying stocks are masquerading around as bond proxies for this reason. But they still don’t yield enough. Vanguard’s popular Dividend Appreciation ETF (VIG) pays 2.1%. The iShares Select Dividend ETF (DVY) pays 3.2% – better, but that’s still just below the poverty level for two people at $16,000 per year.

When investment income falls short, retirees sell their investments to supplement the income. Of course the problem here is that when capital is sold, the payout stream takes an immediate hit – so that more capital must be sold next time, and so on. …
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