Where’s the market going from here? Well, if you own these seven “never go down” dividend payers, you probably don’t care.
My readers are often asking for safe income ideas. For stocks that pay dividends and never drop in price. It’s a very difficult task, but not quite impossible.
For most long-term investors who want big dividends–I’m talking 6%, 7% and even 8%+ current yields–I recommend a combination of a contrarian and “No Withdrawal” approach. This consists of buying safe dividend-paying bonds and funds when they are out of favor and holding them through any market turbulence.
Big dividends are the rubber duckies of the investing world. Wall Street hysteria may push their prices underwater for weeks at a time, but as the months and years pass these stocks bounce back to the surface. Omega Healthcare Investors’ (OHI) performance during 2008 shows this in action. OHI entered the infamous year paying nearly 7%, making it the ideal stock for a No Withdrawal Portfolio:
OHI: A No Withdrawal Favorite
Yes, OHI did drop sharply in late 2008. This was traumatic for shareholders who second-guessed themselves and sold at the worst possible time (in early 2009). Which begs the question I hear most:
Brett, can you recommend dividend stocks that would hold up in a 2008-type environment?
In other words, can I name dividend stocks that won’t drop in price in October 2008, December 2018 and so-far-brutal May 2019?
I can. Here are my top seven “never go down” plays today.
Pivoting From “No Withdrawal” to “Never Go Down”
In the long run (months and years), fundamentals drive stocks. This is why safe dividends and dividend growers are the way to go. They will outperform non-payers and measly-payers over any meaningful time period.
But in the short run (days and weeks), there are “technical” factors that matter more. And I’m not talking about chart patterns, waves or other mythical models. I’m talking about good old-fashioned supply and demand.
We can talk yields, cash flow, profits and business growth but, to be brutally honest, it matters little in the short term. Ever buy a stock with great fundamentals, only to see its price languish for many months? Of course you have. (We all have!) We got the big picture story right, but our timing was off.
Well, how’d your portfolio do last week? Probably not as well as the seven stocks and funds I’m about to list.
These are my current Never Go Down dividend plays. They all pay, and they’re all up during a brutal May. This is an impressive sign of “relative strength,” which means they are acting better than the overall market. Why? Because investors and money managers want these income streams no matter what happens in the trade war—the main headline driving the May drop.
For lack of a better word, these are “momentum income” buys. At current prices they are still in hot demand. So, prices will rise in the months ahead while these stocks and funds continue to pay their dividends.
The upward price motion you’ll see for the rest of 2019 is what the quants call “momentum.” It’s a real thing and it can be a useful tool, even to us income investors. The important thing to remember is that momentum doesn’t last forever, and when it starts to fade it’s time to sell.
How long will these shares stay hot? In my experience they should be as bulletproof as we could reasonably hope for in the coming months. This means, by the end of this year, they will all be trading at higher prices (regardless of broader market action). And these dividends will be paid out while their shareholders wait for stock gains, too.
PIMCO’s Dynamic Income Fund (PDI) has made a mockery of May’s mayhem. The 8.3% payer has returned a steady 2.6% month-to-date:
PDI Says Tariffs No Problem
Now the fund trades at a rich 14% premium to its net asset value (NAV), which would remove it from No Withdrawal contention. But over a shorter timeframe we don’t care–we’re going to collect the monthly distribution, enjoy the price gains and drop the fund when its momentum starts to slow down.
Outfront Media (OUT) is a real estate investment trust (REIT) that owns advertising space such as billboard and transportation displays. At a glance this sounds a bit “old school” but Outfront is increasingly updating its offerings to make them digital and easily customizable. Shares pay 5.8% today but Wall Street is slowly waking up to the renewed viability of this cash cow:
Out in Front of the Broader Market
Community Healthcare Trust (CHCT) is another REIT, and I’ve had my eye on it for a while now. (Between us friends, it’s too small for me to formally recommend.) But what’s not to like? The healthcare landlord is constantly growing its dividend and management regularly buys shares for personal accounts. Thanks to 15 straight quarterly dividend raises, shares now yield 4.3%.
15 Straight Quarterly Dividend Raises: Unstoppable
W.P. Carey (WPC) leases out business space to individual tenants. Its portfolio is diversified across 1,186 properties, a wide range including industrial, automotive, construction and warehouse properties.
I recommended the stock to my Contrarian Income Report subscribers because I believed that recent acquisition of fellow REIT CPA:17 would help turbocharge WPC’s FFO and dividend growth. So far, so good on that front because the assets acquired are spinning off 7% in annual cash. (And so far, so good for CIR subscribers, who have enjoyed 27.4% total returns in just five months!) Shares pay 5% today.
The Tariff-Proof Industrial Landlord
Och-Ziff Capital (OZM) is a publicly-traded hedge fund. Wait, what? If you thought hedge funds were dinosaurs, then you missed the generous 61% dividend raise that this T-Rex dished mid-May (which brings its yield to 5.4%). If you have any investor friends who doubt the all-encompassing power of dividend growth, show them the “dinosaur ‘that delivered 32% returns May-to-date:
Powered By a 61% Dividend Increase
CVR Energy (CVI), which refines oil and makes fertilizer, is a favorite “billionaire buy” according to a recent Kiplinger list. At a glance it’s easy to see why–the stock pays 6.8% today thanks to a generous 50% dividend raise last August. CVI is the lone May loser on our list, but barely. It’s poised to rally when the broader markets bounce back.
A Resilient Billionaire Favorite
Finally, Independence Realty Trust (IRT) is an apartment REIT that focuses on “secondary” Midwest and Southern markets like Austin, Indianapolis and Raleigh/Durham. Its focus on niche markets with positive population and employment trends has helped fill 94% of the firm’s apartments.
Powered by Rent Checks
Introducing the “2008-Proof” Income Portfolio Paying 7.5%
The “cash or bear market” no-win quandary inspired me to put together my 5-stock “2008-Proof” portfolio, which I’m going to GIVE you today.
These 5 income wonders deliver 2 things popular dividend pretenders never could, such as:
- Rock-solid (and growing) 7.5% average cash dividends (more than my portfolio’s average).
- A share price that doesn’t crumble beneath your feet while you’re collecting these massive payouts. In fact, you can bank on 7% to 15% yearly price upside from these five “steady Eddie” picks.
With the Dow regularly lurching a stomach-churning 1,000 points (or more) in a single day during pullbacks, I’m sure safe—and growing—7.5% every single year would have a lot of appeal.
And remember, 7.5% is just the average! One of these titans pays a SAFE 8.5%.
Think about that for a second: buy this incredible stock now and every single year, nearly 9% of your original buy boomerangs straight back to you in CASH.
If that’s not the very definition of safety, I don’t know what is. These five stout stocks have sailed through meltdown after meltdown with their share prices intact, doling out huge cash dividends the entire time. Owners of these amazing “pullback-proof” plays might have wondered what all the fuss was about!
These five “pullback-proof” wonders give you the best of both worlds: a 7.5% CASH dividend that jumps year in and year out (forever), with your feet firmly planted on a share price that holds steady in a market inferno and floats higher when stocks go Zen.