Will Warren Buffett ever pay a dividend?

Brett Owens, Chief Investment Strategist
Updated: November 16, 2015

Every time Warren Buffett issues his annual shareholder letter, investors ask:

“Will Berkshire Hathaway (BRK.A, BRK.B) ever pay a dividend?”

Uncle Warren’s answer is always the same: Berkshire shareholders are better served when the company’s immense riches (it ended Q3 with upwards of $66 billion in cash) are plowed back into the business.

Still, you shouldn’t take that to mean the Oracle of Omaha is against putting cash in shareholders’ pockets. He just he prefers another way of doing it: through share buybacks.

But here too, there’s a caveat. To keep from overpaying (a key buyback risk we’ll talk about in a moment), Berkshire will only repurchase its stock when it’s trading below 120% of book value.… Read more

3 Stocks to Rally First When Natural Gas Bottoms

Brett Owens, Chief Investment Strategist
Updated: November 13, 2015

With the S&P 500’s current yield at just 2%, we have to go beyond the blue chips and search some unpopular sectors to find meaningful dividends.

Sometimes the negative “first-level feelings” on the dogs are justified, and their big payouts are merely yield traps. Other times, we’re rewarded with dividends that are “higher than they should be” thanks to the negative sentiment

Few sectors are as unloved today as energy and natural gas. That’s where I recently uncovered three pipeline plays that are paying high yields that are funded by actual profits.

The case against natural gas has been piling up lately.… Read more

2 REITs To Buy When Yellen Raises Rates

Brett Owens, Chief Investment Strategist
Updated: November 11, 2015

Frantic investors are blindly selling the big dividend payers in an all-out “rate hike panic.” But you’ll usually make money buying into panics rather than selling them. And this time it’s no different.

There are high quality stocks that pay yields of 5-6% or better that should be at the top of your watch list. Conventional wisdom says that they’ll perform poorly in a rising rate environment. That’s a lazy blanket statement from “first-level thinkers” that just hasn’t been the case historically.

If you’re a regular reader, you know that I’ve been eyeing Real Estate Investment Trusts (REITs) lately.… Read more

The Best Defense Stock to Buy for 2016

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

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.… 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.… Read more

These Stocks Will Soar After Credit Markets Collapse

Brett Owens, Chief Investment Strategist
Updated: November 4, 2015

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

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.… 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.… 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