All posts by Brett Owens

This 20.1% Yield is Too Good to Be True (But This 11.8% Payout Isn’t!)

Most dividend investors understandably love the idea of an 8% No Withdrawal Portfolio. It’s a simple yet “game changing” idea that you don’t hear much from mainstream pundits and advisors.

Find stocks that pay 7%, 8% or more and you can retire comfortably, living off dividend checks while your initial capital stays intact (or even appreciates).

Now this strategy is a bit more complicated than simply finding 8% yields and buying them. Granted the recent stock market pullback has benefited investors like us because we can snag more dividends for our dollar. Yields are higher overall, and that’s a good thing.

Next we must smartly select the stocks that are going to pay our dividends securely – without tapping their own shares prices to pay us.

An Ideal 11.8% Dividend Payer That “Pivoted” Properly

As I write to you there are 123 stocks (trading on major US exchanges with market caps above $500 million) that yield 8% or more. A holiday basket of these dividends is going to be a mixed bag, however. While some of these stocks will shower you with quarterly (or even monthly) payouts with price appreciation to boot, others will lose some or all of your cash in price depreciation.

Of our 123 candidates, 99 have not delivered 40% total returns over the past five years. And this is the minimum we ask of an 8% payer – dish us our dividend and don’t lose our initial capital!

Granted this “back of the envelope” study is probably a bit harsh. We’re missing a few elite 8% payers that “graduated” to lower yields thanks to good stock performances. Still, the important lesson here is that 8% payout success is challenging (though not impossible, as we’ll see shortly).

Of these 99 high paying under-performers we have 57 “biggest losers.” These stocks have actually lost their investors money over the past five years. In other words, they have delivered their big dividends yet lost as much (or more) in price. Not good!

And remember, the S&P 500 returned 61% over the time period. So while we can expect our steadier strategy may underperform during roaring bull markets, we would expect a business to at least beat your mattress as a total return vehicle.

Exceptions? Sure. Business models can change, and past performance isn’t necessarily a predictor of future results.

For example a subscriber recently wrote in to ask why New Residential Investment (NRZ) declined in price three years ago. Well, NRZ had a completely different portfolio now than it did then. Let me explain.

Mortgage REITs (mREITs) like NRZ typically buy mortgage loans and collect the interest. Their business model prints money when long-term rates are steady or, better yet, declining. When long-term rates drop, these existing mortgages become more valuable (because new loans pay less).

On the other hand, the mREIT gravy train usually derails when rates rise and these mortgage portfolios decline in value. Historically, rising rate environments have been very bad for mREITs and resulted in deadly dividend cuts.

But NRZ has actually doubled its investors’ money and the value of its own portfolio (its book value) in less than three years. Its secret? Rather than buying mortgages, NRZ has been investing in mortgage service rights (MSRs). This is “the right” to collect payments from a borrower. In other words, the firm doesn’t own these loans – it owns the rights to service these loans.

MSRs tend to rise in value when mortgage refinancing slows down. That’s exactly what happened, and this “pivot” has made many retirement riches. Happy NRZ investors have collected double-digit dividends while enjoying price appreciation to the tune of 151% total returns!

An Ideal 11.8% Dividend Payer

NRZ’s success story is, as discussed, more rare than not in 8%-ville. Let’s now call out a couple of popular “losers” that, despite their high current yields, don’t really belong in retirement portfolios.

2 Stocks Yielding Up to 20.1% to Avoid

Fashion retailer Buckle Inc (BKE) has paid 14.7% of its current share price in dividends over the past twelve months (thanks to a $2 “special” payout). But the dividend well might run dry soon.

Buckle’s sales (the blue line below) have been in a slow-motion nosedive for three years, taking earnings (red line) and free cash flow (FCF, in orange) down with them:

Belt Tightens on Buckle’s Payout

Why are sales suffering? The firm’s revenues are drying up with its retail outlets. Buckle must pivot its business model to sell direct to consumers online in order to survive.

These “death of retail” market stresses, predictably, have driven up Buckle’s payout ratios: in the last 12 months, the company paid out more than it earned in dividends (140% of profits, to be precise), along with 123% of FCF.

I don’t like to see payout ratios above 50% from non-REITs, let alone 100%. This dividend has too high a risk of becoming unbuckled to belong in a No Withdrawal Portfolio.

Government Properties Income Trust (GOV) meanwhile is a real estate investment trust (REIT) that frequently pops up on cute recession-proof dividend lists. Most of the company’s income comes from government entities, so it seems like a smart way to potentially tap Uncle Sam for rent checks.

And GOV’s big dividend usually qualifies itself for No Withdrawal consideration. However its recent run-up in yield is actually a bad thing:

The Wrong Kind of Bull Market

Problem is, this “bull market” in yield has happened because GOV’s stock has collapsed! Its share price is down 66% in five years. Even with the supposedly generous payout, GOV investors have the taste of stale government cheese in their mouths:

GOV Investors Down 46% With Dividends

There are a few reasons GOV has been crushed. First, its stated funds from operation (FFO) have been in decline. FFO per share is 24% lower today than it was five years ago, even though the dividend is the same.

Second, GOV may be overstating its FFO. The firm has been accused of conveniently excluding maintenance-related capital expenditures. Can you imagine old government buildings that don’t require any maintenance?

And finally, even if we give GOV the benefit of the doubt, it still seems to be paying cash it doesn’t have. Its annual dividend of $1.72 per share exceeds its trailing twelve-month FFO of $1.54. A more responsible 90% payout ratio (which is OK for a REIT) would mean a reduced dividend closer to $1.38 per share.

But the market is expecting worse, which is why GOV yields a “beyond contrarian” 20.1%. Stay away from this sketchy situation.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

5 Dividend Doublers That Run Laps Around the Market

If you want to figure out how long it will take to double your money in an investment, you use the “Rule of 72.” But income investors can put this rule to work, too, to figure out just how quickly their dividends will pile up.

I’ll show you how – and I’ll show you five dividend stocks that are on pace to double their dividends in just seven years.

The Rule of 72 is just a simple equation you can use to project the amount of time it would take to double your investment money. The equation:

72 / compound annual interest rate = # of years to double your investment.

So let’s say the S&P 500 returns an average of 8% a year. 72 / 8 = 9. That means it should take about nine years for someone holding a market fund such as the SPDR S&P 500 ETF (SPY) or Vanguard S&P 500 ETF (VOO) to double their money.

Obviously, I aim to do better.

But you can also use this equation to figure out how quickly your dividends should grow over time, which will help you figure out your eventual yield on cost.

For instance, say a stock yields just 3% now, but is on pace to double its dividend in just five years, you can essentially plan for a much healthier 6% yield on cost in a short amount of time. That would be an income play you and I could get behind!

Let’s use the S&P 500 as an example again. The index has grown its dividend at an average of 8.2% per year over the past five years. The math isn’t much different – it’ll take just under a decade for the S&P 500 to double the dividends it pays out.

That’s a little sluggish for my tastes, especially considering there are numerous dividend payers that are acting with a lot more urgency. Today, I’m going to point you in the direction of five stocks whose payouts are booming. These firms have been boosting their payouts by an average of at least 10% every single year (and in many cases more) – putting them on pace to double their dividends in just seven years or less!

Booz Allen Hamilton (BAH)

Dividend Yield: 1.4%

5-Year Average Dividend Growth: 13.7%

American information technology and management firm Booz Allen Hamilton (BAH) isn’t the first, second or hundredth stock on most investors’ lists. But it’s worth a look, both for its array of business arms and the stellar results they’re driving.

Booz Allen Hamilton is perhaps best known for its consulting business, which has been used historically for tasks ranging from World War II preparations to the merger of the National Football League with the AFL. BAH also deals in analytics, digital solutions, cybersecurity and even engineering.

All told, Booz Allen has more than 25,000 employees working across 400-plus locations in more than 20 countries. Nearly 70% of which hold security clearances, which speaks to its heavy ties to the government – in fact, the federal government was responsible for 97% of the company’s $6.2 billion in fiscal 2018 revenues.

This has fueled a general uptrend in both revenues and net income since its 2010 IPO, which in turn have powered a very consistently growing dividend.

Booz Allen Hamilton (BAH): An Unheralded Growth-and-Dividend-Growth Play

The company improved its payout by a pair of pennies to 19 cents quarterly this year – a 12% improvement that’s not far off its five-year average dividend growth of roughly 14%. And that dividend isn’t even 30% of this year’s projected $2.64 in profits, which means the company has oodles of room to write larger checks for years to come.

MasterCard (MA)

Dividend Yield: 0.5%

5-Year Average Dividend Growth: 17.8%

Credit card use isn’t new to you and me. In fact, plastic has been around so long that you probably think almost everyone uses a credit or debit card and that there’s not much market left to grow into.

Wrong. Strategic research and consulting firm RBR’s “Global Payment Cards Data and Forecasts to 2022” report shows that global payment-card use grew 8% worldwide to 14 billion in 2016, and that number is expected to balloon by 22% to 17 billion by the year 2022.

That’s fantastic news for MasterCard (MA) – the No. 2 player not just in the U.S., but in Europe, in Africa and in Latin America.

The important thing to remember about Mastercard and rival Visa (V) is that while they seem like financial stocks, they’re really closer to being technology stocks – they’re not lenders, just payment processors. That means they need to constantly innovate to stay ahead of the game, which Mastercard has been doing via its recently announced Digital Commerce Solutions, which includes a plan to make all its cards support token authentication within two years, and a partnership with Southeast Asia’s Grab to offer virtual prepaid solutions for the ride-hailing company’s 110 million customers.

MasterCard pulls in roughly $12.5 billion annually across its worldwide payments network. The company did nearly $1.5 trillion in gross dollar volume around the globe in the third quarter alone, across some 2.5 billion cards – up 4% year-over-year. MA has produced steady growth for years, which has translated into explosive growth in the dividend – to the tune of roughly 18% annually over the past half-decade.

And its 25-cent quarterly dividend? That comes out to a mere 15% of this year’s projected earnings, which means MasterCard could triple its payout overnight and still have more payout headroom than most established dividend-paying blue chips.

MasterCard’s (MA) Dividend Is Charging Ahead

Better still: Shares have a lot of “catching up” to do with the payout.

Vail Resorts (MTN)

Dividend Yield: 2.2%

5-Year Average Dividend Growth: 48.0%

Vail Resorts (MTN) – a play on the “experience economy” – is essentially the future of ski lodges. Vail, as well as a few other groups, are buying up ski resorts, lodges and other operations across the U.S. and around the world, and bringing them under one brand to better serve wealthy customers whose particular destination tastes may change from time to time.

Vail is split into three divisions:

Mountain: This entails the company’s premier mountain resorts, including the namesake Vail, as well as Breckenridge (Colorado), Northstar (Lake Tahoe, California), Perisher (Australia) and Whistler Blackcomb (Canada), among others.

Source: Vail Resorts’ 2018 Investors Conference Presentation

Lodging: Vail Resorts Hospitality owns several properties around its various resorts, including five RockResorts luxury hotels, as well as a National Park contract at Grand Teton National Park and an airport-to-resort transportation company, Colorado Mountain Express.

Real Estate Development: Lastly, Vail Resorts Development Company helps plan, market and otherwise develop property around the resorts, including communities and private clubs.

One of Vail’s biggest sources of growth is its “Season Pass,” which allows guests to use its various resorts, rather than tethering customers to one particular resort. Pass sales have grown at 13% annually on average since fiscal 2012, to more than 78,000 in FY2018.

The result has been steady growth pretty much across the board, including free cash flow, which has improved every year since 2012 – from $57.1 million then to $338.6 million in FY2017.

Vail has been generous with that cash, too, growing its dividend by nearly half every year on average over the past five years. Its current $1.47 quarterly dividend comes out to 75% of this year’s profits, but just 65% of next year’s. Don’t expect nearly 50% dividend expansion going forward, but as long as MTN’s earnings swell like they’re expected to, Vail Resorts should be a dividend growth machine.

Southwest Airlines (LUV)

Dividend Yield: 1.2%

5-Year Average Dividend Growth: 74.1%

Southwest Airlines (LUV) is, as I’ve said before, a “breath of fresh air” in the airline industry. In a business that seems to pride itself on kicking puppies and pushing down old ladies, Southwest has set itself apart on the most bizarre of concepts: Treating humans like humans.

This year alone, Southwest has topped J.D. Power’s study for customer service among low-cost airlines in North America, took home four TripAdvisor Travelers’ Choice awards and was No. 2 on Indeed’s top-rated workplaces.

Of course, being nice isn’t everything. You have to make money. And Southwest makes money. The airline has been profitable for 45 consecutive years despite its strong price-competitiveness. In the third quarter, LUV brought in $615 million in earnings – its best Q3 in company history.

That same quarter, the company returned $591 million to shareholders via share repurchases and buybacks. The majority of that ($500 million) was repurchases, but LUV is far, far, far from a distribution slouch. Southwest has pumped up its payout from a mere penny per share at the beginning of 2013 to 16 cents as of this year’s distribution – itself a hefty 28% improvement.

And at a mere 15% of this year’s projected profits, the sky’s the limit on future payout hikes.

Southwest’s (LUV) Dividend Takes Flight

Vulcan Materials (VMC)

Dividend Yield: 1.1%

5-Year Average Dividend Growth: 94.7%

I’m not sure what you think of when you think about a company that has been able to nearly double its dividend every year on average for a half-decade … but it’s probably not Vulcan Materials (VMC).

Vulcan Materials produces the stuff construction is made of: crushed stone, sand, gravel, asphalt and ready-mixed concrete.

Vulcan is the king of what it does – it’s the largest aggregates producer in the U.S. And the company says that “75% of the U.S. population growth from 2010 to 2020 is projected to occur in Vulcan-served states,” meaning it’s perfectly positioned to capture the lions’ share of building projects as time goes on.

The company’s third-quarter report showed just what kinds of tailwinds VMC has been riding to turn the business around from its struggles in the Great Recession. Vulcan’s daily shipping rates were up 6% year-over-year, pricing momentum improved by 3% and unit cost of sales actually declined 2% despite a 28% spike in the cost of diesel. Best of all, cash gross profits per ton improved 6% year-over-year.

Vulcan Materials (VMC) Is Fully Recovered From the Financial Crisis

That money is going straight into investors’ pockets. The company has electrified its payout from a penny per share back in 2013 to a current 28 cents per share – and even then, the company isn’t even doling out 30% of its profits in dividends.

Vulcan isn’t your typical dividend play, but then again, we don’t want typical – we want extraordinary.

Earn a 28% Return in 1 Year From America’s Safest Stocks

These stocks will inflate your dividends faster than almost any other plays on Wall Street, but why wait years for thick dividends when you can get them today?

I’m not talking about the slightly better yields you’ll find in slow-growth stocks like consumer staples Coca-Cola (KO)and Procter & Gamble (PG). You know these tired plays: They’ve chugged along for years, so investors hang on to them hoping to squeeze out 3% yields and a few percentage points a year in growth.

But you can do better than these middling yields from these middling blue chips. Much, much better. In fact, this is one of the best income opportunities I’ve researched in years.

What if I told you that you could turn some of Wall Street’s most exciting, growth-oriented stocks, such as Visa (V)and Google-parent Alphabet (GOOGL), into “double threat” holdings that deliver double-digit upside and 8%-plus dividends? Well, given that Visa pays less than 1% and Alphabet doesn’t deliver a single penny in income, you’d probably call me crazy …

These stocks have extremely specialized businesses that allow them to do the seemingly impossible: They can actually wring high-single-digit dividends from some of the most skinflint companies in America. One of my Dividend Conversion Machines takes Visa’s 0.6% payouts and magnifies it to 9.2%. Another one can take Google’s 0% and produce a 9.4% yield out of thin air.

And no, this isn’t an options strategy, or some dangerous derivative, or the “next Bitcoin.” What I’m going to show you is perfectly SAFE – it’s essentially the same as buying traditional American blue-chip stocks. In fact, I’ll even show you the four steps you’ll need right now:

  1. Launch your web browser.
  2. Go to your trading account.
  3. Instead of entering a buy order for, say, Disney by entering the stock’s “DIS” symbol, enter the 3-letter code for one of my 4 Dividend Conversion Machines instead.
  4. Instead of getting Disney’s 1.6% dividend, start collecting an 8%+ income stream!

That’s it!

Contrarian Outlook 

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Rise of the Robots: How to Grab 500%+ Dividend Growth From AI

Are you looking for that “sweet spot” retirement investment that combines growth tomorrow plus dividends today?

If so, let’s talk about a tech megatrend that’s powering a payout with 546% upside.

For this type of dividend growth, we must consider huge breakthroughs, like the Internet of Things—another name for the millions of devices (from your home thermostat to industrial sensors) hooking up to the web every year.

But hands-down the most important disruptor of all, from a dividend standpoint, is artificial intelligence (AI), the move toward “thinking” computers.

That’s because AI is the one revolution that’s baked into just about every tech advance you can imagine, making everything from cybersecurity defenses to self-driving cars faster, smarter every day.

AI: Your Next Big Dividend Play

Before you roll your eyes, let me tell you this: AI is already a huge source of dividends, and it will only line our pockets with more cash in the future.

Now, I know you don’t often hear “artificial intelligence” and “dividends” in the same sentence, but hear me out.

Because there are billions surging into this technology as I write—and you can grab your share safely, through a large and growing dividend payout, just like the lucky investors in the 3 stocks I’ll show you in a moment.

Geek that I am, I could go on about AI all day. But I don’t want you to nod off, so let’s get into how we’re going to grab our slice of these billions. So here, from worst to first, are my top 3 AI dividend plays now.

AI Pick No. 3: An Accelerating Dividend on the Cheap

AI needs a massive amount of computing horsepower and reams of data to work its magic, and you can already see that demand playing out at Intel (INTC). The company’s hardware for data centers—the maze of servers that companies use to store and analyze vital customer data every day—is flying out the door.

For proof, look no further than the third quarter, when Intel’s data-center group (including its Xeon scalable processor, custom-made for high-demand apps like AI) took off, setting record sales that surged 26% from a year ago.

That sent Intel’s overall sales and earnings per share (EPS) up 19% apiece, crushing the Street’s expectation. No wonder Intel’s dividend (current yield: 2.5%) is not only growing but accelerating:

A Sign of Things to Come

Now is a terrific time to buy: thanks to this fall’s “tech wreck,” this top-notch AI play trades at a silly 10-times earnings, well below the 13-times you’d have paid in June.

The kicker? The payout eats up just 38% of cash flow, making it one of the safest dividends on the market—and practically locking in another big hike this January.

AI Pick No. 2: Clockwork Dividend Growth From “the Backbone of AI”   

No doubt Intel is at the heart of the AI revolution, but a safer way to play earth-shaking trends like this is through Crown Castle International (CCI), a “pick-and-shovel” play on AI.

(If you’re unfamiliar, “pick and shovel” refers to the California gold rush, when the only people who really got rich were the shopkeepers who sold the picks and shovels to the gold-seekers, not the prospectors themselves.)

CCI fits that description to a T: it’s a real estate investment trust (REIT) with 40,000 cell towers and 65,000 miles of fiber-optic cable across the US.

That makes it the backbone of AI, the Internet of Things and just about every other tech trend you can imagine!

The company is already converting our smartphone addiction into soaring revenue and funds from operations (FFO, the REIT equivalent of EPS):

Megatrend-Powered Gains

And if you’re looking for predictable dividend growth, CCI is for you. Management has a stated goal of growing the dividend, which yields 4% as I write, by 7% to 8% a year, and it’s easily clearing that bar.

Another Year, Another 7%+ Payout Hike

So why isn’t CCI my top AI pick?

For one, it’s a bit pricey for my taste, at 20-times forecast 2018 FFO.

Second, we want stocks with long dividend histories, and CCI has only been making payouts since December 2014—not nearly long enough to see if management has the chops to stick keep the payout coming in a crisis.

Which brings me to …

My No. 1 AI Play Now: A Cheap Dividend With 546% Upside

My top AI pick is Digital Realty Trust (DLR), an even better pick-and-shovel play on AI than Crown Castle: the REIT owns 198 data centers and boasts a top-20-client list that’s a who’s-who of the tech (and AI) world:


Source: Digital Realty Trust November 2018 investor presentation

The best part? The dividend! DLR yields just under 4% now, but the real story is its explosive payout growth: up 546% since its IPO 14 years ago!

Heck, this one even kept hiking right through the financial crisis, so you can be sure management knows how to keep your income safe (and growing) in a rocky market:

A Battle-Tested Payout

I fully expect the chart for the next 14 years to look a lot like the chart for the last 14. And as I’ve written before, a rising dividend is the No. 1 driver of share prices, so you can expect this unsung company’s stock to ignite in short order, too.

There’s another reason to buy DLR now: the stock has moved lower this year, while FFO has arced higher:

Share Price and Cash Flow Part Ways

We can thank overhyped fears that rising rates will hurt REITs (a worry that’s easily banished by the orange line in the chart above) for this split, which has left DLR trading at a bargain 17.3-times trailing-twelve-month FFO.

I wouldn’t wait to grab this one. With another big payout hike almost certainly headed our way this winter, I expect DLR’s share price to start gapping higher soon.

4 Surefire Ways to Boost Your Income 4X in 2019

My team and I have zeroed in on 4 other investments pay an average 8% cash dividend as I write. That’s double what Digital Realty pays … and these 8%+ payouts are growing, too!

Think of what that could mean for you: $8,000 a year in dividends on every $100k invested. That’s 4 TIMES what you’d get from the average S&P 500 stock’s payout. Plus, your cash stream grows every year like clockwork!

I call these 4 life-changing buys “dividend conversion machines.”

Why? Because they “convert” the pathetic dividends on your typical S&P 500 stock into gigantic cash payouts.

To show you what I mean, consider my No. 1 pick from this 4-pack of “dividend conversion machines.” It takes the 2% average dividend you’d get from well-known stocks like NextEra Energy (NEE), Union Pacific (UNP) and American Water Works (AWK) and “converts” it into a massive 8.6% cash payout!

Not only that—this perfect retirement play lines your pockets every single month! Check it out:

A Monthly—Growing—8.6% Payout

As I write, thousands of folks across America are quietly collecting big dividend checks from these 4 ignored investments every single month. And you can join them today.

Buying in couldn’t be easier: you can do it straight from your online brokerage account, just like buying the blue chips you know well. But instead of their paltry sub-2% dividends, you’ll kick-start your own 8%+ cash stream!   

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

How to Generate $7,050 in “Bonus” Payouts Next Month

“Buy and hope” traders are, understandably, terrified today. Their portfolios are paying nearly nothing in dividends. Don’t you think fat 10% payouts would put them at ease a bit?

The unfortunate situation for our “B&H” friends is that they bought stocks without a plan to generate cash flow from them. They purchased their shares – probably after much of the decade-long run up – and now must hope that this old bull market is not aging in dog years!

A better idea? Demanding big dividends. After all, without cash flow, what is a stock really worth besides what someone will possibly pay us for it tomorrow?

Secure 10% yields are the “rubber duckies” of the investing world. Mr. Market can push them underwater for a period of time, but eventually, they rocket up to the surface.

My Contrarian Income Report subscribers who smartly stayed with Omega Healthcare Investors (OHI) – a big paying REIT – have done much better than their scared low-yield-collecting friends as well as the broader market in general. The year actually started inauspiciously as OHI announced a dividend “freeze.” The stock slipped. But a freeze isn’t the same as a cut – and OHI didn’t cut. Its payout was well covered by its funds from operations (“FFO”).

The misunderstanding would soon be our gain, as the stock yielded 10% (thanks to years of previous dividend hikes). And anytime that OHI has paid double-digits in the past, it marked a major bottom for the stock. So why would this time be any different?

OHI’s Dividend Limits Its Price Downside

Let’s fast forward to see how OHI rallied off its most recent double-digit “yield high” to return a fast 48% including dividends!

How a 10% Yield Leads to Quick 48% Gains

It’s an income investors’ dream – banking 10% yearly payments without having to worry about a pullback for the pricey (and increasingly wobbly) stock market.

Which makes right now a good time to talk about my two favorite strategies for generating current cash flow from the stock market. Because whether stocks go up, down or meander sideways, I always want my money to be working for me – and paying me regularly (preferably 10% or more per year!)

My 10% Yield Play: High Current Yields

Our Contrarian Income Report portfolio pays 7.6% as I write. This is 4X the payout of the broader market. It means a $500,000 portfolio will pay you $38,000 per year.

That’s a lot better than the S&P 500, which would insult us income investors with its measly $9,000 annual check. But even $38,000 is likely less than your local bartender earns per year.

To earn more than $38K we must follow one of these two high yield trails:

  • “Chase” higher yields of 10% or more.

Bad idea. I can get you a safe diversified dividend portfolio paying 7.6% today. But I don’t see enough double-digit payers to get us above a 10% average responsibly. (How about OHI, you ask? As its stock price has been bid up, its yield has compressed to a still-generous 7.5%.)

  • “Accelerate” dividend growth stocks from 2% payers to 20%+.

This is a special system I’ve developed that allows you to collect “instant dividends” worth 5X, 10X and even 20X more than the yields listed for “first-level investors” on most financial websites. Let me explain.

My 20% Yield Play: The “Dividend Accelerator” for 10X Payouts

The beauty of the Dividend Accelerator is that you can collect “instant income” on every trade. This means you can make exponentially higher returns than what’s possible from just traditional dividends.

Most dividend growth stocks pay low current yields because their stocks are too popular. Investors pay up for their track record and prospects of future growth. But my Dividend Accelerator can fix this yield problem by providing a 3X, 5X or even 10X boost to these payouts.

For example let’s consider utility stocks. If there’s more to this pullback than we’ve seen, then its affinity for utility shares is worth noting. The S&P 500 made its recent high on September 20, but don’t tell that to these pullback-proof issues:

Utility Stocks Act Pullback-Proof

I’ve been down on the utility sector for two years now and have specifically picked on blue chips Duke Energy (DUK)and Southern Company (SO) repeatedly. I don’t have anything against these firms, but I also don’t recommend buying them when their stocks are pricey and their yields are low, as they are today.

But not all utilities are growing so slowly they could be confused with fixed income. There’s a notable exception that leaves these tortoises (and their middling dividends) in the dust.

NextEra Energy (NEE) is the largest developer of renewable energy in North America. The firm has been a fast grower for decades. No wonder it’s increased its dividend for 23 straight years!

And these have been meaningful raises – NextEra has shown up its peers with 149% dividend growth over the last decade (versus just 26% – a fraction of NextEra – for the utility sector’s widely marketed ETF):

Why NEE is the Best Utility to Buy

Thanks to the firm’s most recent payout raise, it now shovels out $1.11 per share per quarter (for 2.6% yearly).

But we can accelerate this payout to 19.5% yearly.

That’s exactly what my Options Income Alert subscribers and I have done together. My readers who sold 10 contracts per trade banked $7,050 in cash payouts without ever having to buy NEE!

$7,050 in Payouts in Just 4 Weeks

We turned NEE into our personal dividend ATM. We simply tapped it anytime I saw a setup that I liked – and then placed the put premiums directly on our pockets.

NEE’s Put Premiums: Weekly Payouts Averaging $1,762.50

These trades were as simple as buying or selling any stock or fund. We simply sold put options on NEE instead of buying or selling the stock itself.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

5 Retail Dividends with an Amazon-Proof Story Paying Up to 10.4%

“Brett, I bought something for the girls. From Carter’s. Let me know when you get it.”

My mom thinks that postal delivery is a 50-50 proposition. She hedges her downside by purchasing 4X as many clothes as my young daughters actually need!

“Mom – thanks. Will do. And, you know, they’re probably good on dresses for now. They’ll be up another size in a few months.”

“Oh don’t you worry about that. I’ve got plenty of coupons,” she countered.

My folks live 2,562 miles from their granddaughters. And while long-distance grandparenting can be a challenge, the (increasingly online) experience provided by Carter’s (CRI) satisfies two of my mom’s favorite pastimes:

  1. Spoiling grandkids, and
  2. Shopping.

As much as I appreciate the wardrobe help, the reason you and I are discussing infant and toddler clothing today is that these purchases are powering remarkable payout growth.

In 2018, every “brick and mortar” business must have an “Amazon story” to explain why it won’t be eaten up. A few sentences explaining – succinctly and convincingly – why the firm won’t be swallowed alive by Amazon.com (AMZN)in the years ahead.

Our favorite retail stocks tend to be, well, hidden from Jeff Bezos’ view. The legendary CEO has different investing criteria from you and me. He needs to make big bets. His firm, after all, is Amazonian – it takes large splashes to move his sales tide higher.

So while he’s busy mowing down the mainstream retail landscape, there are many niche retailers who will not only survive, but even thrive as e-commerce continues to boom in the years ahead. And they will all share two important characteristics:

  1. A direct relationship with their customers.

This is what failing department stores like Macy’s (M) are missing. You walk into the store, you pay and you walk out. Their main sales interaction is purely transactional.

And in 2018, transactional is not enough. Firms built to sell in the decade ahead also have:

  1. A deep “online connection” with consumers.

They have a website that is “grandma friendly” to take orders directly. They have a mobile app on their customers’ smartphones – which they can use to buy more stuff from. They have an email address so that they can advertise the next sale.

And they have friendly service reps who will take the phone call when a package is late or missing – which will assure the customer will continue to buy direct from them instead of a black box like Amazon.

I love a handful of retail stocks right now, but I’m also concerned about a couple high-yield bets that are at risk of being “Bezos’d.” Let’s look at these five retail stocks yielding up to 10.4% and separate the winners from the losers.

Best Buy (BBY)
Dividend Yield: 2.6%

Best Buy (BBY) is the little engine that wouldn’t die. Market pundits left this retailer for dead years ago, thinking it couldn’t possibly survive the war on two fronts – big-box retailers Walmart (WMT) and Target (TGT) on the left, and Amazon on the right.

But CEO Hubert Joly – acting almost like a photo negative of Sears’ Eddie Lampert – focused on improving the quality of stores, and used employee expertise to help battle the “showrooming” phenomenon that many believed would sink Best Buy. The result? A return to growth on the top and bottom lines.

Joly isn’t done throwing punches, either.

Best Buy is going “low-tech” in a grab at Toys ‘R’ Us’ customers, announcing it will expand its toy inventory in 1,000 stores this holiday season. Adding Nerf guns and Hatchimals is actually somewhat of a natural fit for BBY, which already sells the likes of video games and drones.

And investors have to love what Best Buy is doing on the income front. Joly has really put the pedal down on the payout, rewarding faithful investors with a 21% dividend hike in 2017 and a whopping 32% payout increase announced in March of this year.

Best Buy (BBY): A Near-Dividend-Doubler in Just Three Years!

L Brands (LB)
Dividend Yield: 7.4%

L Brands (LB), the company behind iconic brands Victoria’s Secret and Bath & Body Works, has a dividend yield that puts most of the retail sector to shame.

And that’s about it.

L Brands’ high yield is entirely a result of its bleeding shares, which have nearly halved in value this year. The dividend hasn’t budged for years, in large part because of shrinking profits as its brands lose their luster, especially among increasingly important Millennial wallets. The formerly premium-priced lingerie dealer has been forced to slash prices to compete, cramping margins and eroding its once prestigious brand. It also has been forced to put the ax to Henri Bendel, finishing off the fashion brand after 123 years of operations “to improve company profitability and focus on our larger brands that have greater growth potential.”

The company’s second-quarter report made income investors do a double-take. L Brands significantly stepped down its full-year profit guidance, from $2.70-$3.00 to $2.45-$2.70. See, LB pays out $2.40 annually in dividends, so it would barely be covering its payout if profits come in at the low end of guidance. A special dividend – a pretty regular occurrence at L Brands – is almost certainly out of the question this year.

Don’t expect the Christmas season to turn around the long-term decay here, but do start expecting a dividend cut in the next couple years.

Bah humbug!

Prologis (PLD)
Dividend Yield: 2.9%

What’s an industrial real estate investment trust (REIT) got to do with the holiday season?

Everything, when you’re talking about Amazon’s largest landlord.

Prologis (PLD) is a warehouse-focused REIT that boasts 771 million square feet across 3,742 buildings in 19 countries on four continents.

The shift to e-commerce directly benefits Prologis, whose properties are increasingly necessary for any retailer shifting their goods from brick-and-mortar stores to warehouses, where they’ll sit until delivery. And this is a rapid shift, with the company and Goldman Sachs estimating 152% projected growth of e-commerce sales between 2015 and 2020.

E-Commerce Sales Are Exploding

You can see this potential in Prologis’ tenant lineup. Amazon is a major presence, at 16 million square feet as of last year, and Walmart and Best Buy are among other retail customers. But other major tenants include delivery companies such as UPS (UPS)FedEx (FDX) and DHL – more e-commerce beneficiaries.

Prologis has its hand in a lot of other pies, too – 5,500 customers, to be specific, also including companies such as BMW, PepsiCo (PEP) and even the U.S. government.

The REIT doubled down on its opportunity earlier this year when it acquired rival DCT Industrial Trust for $8.4 billion, adding 71 million square feet of space on the East and West Coasts. That, and Americans’ growing love affair with online ordering, makes it all the more likely that PLD will continue growing both its bottom line and its dividend, which have been exploding for years.

Home Delivery Is Making Prologis (PLD) Shareholders Rich

GameStop (GME)
Dividend Yield: 10.4%

GameStop (GME) would seemingly have it made right now. The Nintendo (NTDOY) Switch is selling like hotcakes, Sony’s (SNE) early-year PlayStation 4 sales were ahead of projections and NPD Group says Xbox One sales have doubled from 2017. Take-Two Interactive’s (TTWO) Red Dead Redemption 2 did $725 million retail in just three days, prompting the company to call it “the single-biggest opening weekend in the history of entertainment,” as it actually beat out Disney’s (DIS) Avengers: Infinity War’s opening-weekend box office.

Video games are doing great.

GameStop is not.

The company’s last quarterly results, out in September, included smaller revenues and a net loss of $24.9 million that was wider than the year-ago period; adjusted profits of 8 cents per share missed the mark, too. All told, sales should decline 2% to 6% this year.

GME is still making enough of a profit to comfortably cover its dividend, by almost double. But management tipped its hand at its own problems earlier this year by keeping the payout flat after years of token improvements.

This is ominous. If GameStop can’t catch a break while console sales are red-hot, it’s going to be staring at an enormous problem when the console cycle slows down again, and as more game purchases are done online.

Packaging Corporation of America (PKG)
Dividend Yield: 3.4%

Packaging Corporation of America (PKG) is another non-retailer that you can nonetheless leverage to profit off the rise of e-commerce.

Packaging Corp offers a laundry list of solutions, from corrugated containers to retail packaging and displays to storage boxes to packaging supplies and so, so much more. And if all of that sounds like the kind of products that are going to be in high demand during the busiest time of the year for online retailers … that’s because it is. However, PKG also has a robust industrial operation that means its growth isn’t wholly dependent on the boom in e-commerce.

So far, almost all important metrics point up, up, up. Operational cash flows have grown from $608 million in 2013 to $856 million last year. Earnings have spiked from $4.53 per share in 2015 to $6.31 in the trailing 12 months.

Boxes Are a Booming Business. Who Knew?

What’s even more outstanding: Even though the dividend has almost doubled since 2004, the company has paid out just $2.21 per share through the first nine months of this year, against a $5.64 profit – a 39% payout ratio. That means PKG can keep throttling ahead with aggressive dividend hikes going forward while still being able to spend what it needs to spark continued business growth, too.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

The 3 Best Big Dividends (Up to 9.5%) for This Uncertain Market

Dividends or growth? Why choose?

There’s a widespread belief that stocks and funds can deliver red-hot capital gains or substantial income, but not both. Fortunately for us that’s not true.

It is possible to collect big dividends and capital appreciation. I’m going to show you how to safely collect 32% in total returns in less than a year from a big dividend payer. And while this “easy dividend money” has been made, we’ll discuss three more stocks yielding around 8%-9% that can deliver 20%+ in dividends and upside over the next twelve months..

Income investors like you and me should focus on total returns, which are made up of dividends and price appreciation. The latter, price gains, are driven by a combination of:

  • Growth in the actual business, which naturally makes a stock worth more.
  • Dividend increases, which drives investors to buy up stocks and funds alike.
  • A climb toward fair value (say, the closing of the discount window in a closed-end fund, or a higher multiple on a REIT’s funds from operations)

The first two drivers are what sent AllianceBernstein (AB)which I highlighted back on Dec. 16, 2017, to market-clobbering returns ever since. I pointed out some optimistic analyst outlooks for the stock, as well as widening operating margins and an unorthodox but upward-trending distribution. Sure enough, AllianceBernstein proceeded to churn out 35% in adjusted profit growth over the next three quarters, then returned every cent of that back to investors.

The results? Total returns of 32%. That’s 22% in growth, and another 10% in dividends, for a total return that has quintupled the S&P 500 over the same time frame!

AB Delivers 10% in Dividends Plus 22% Upside

Now, let’s look at some more high-yield stocks of about 8%-9% that can deliver similar upside over the next year.

Senior Housing Properties Trust (SNH)
Dividend Yield: 9.5%

Senior Housing Properties Trust (SNH) is a Baby Boomer play that’s pretty much exactly what you would expect from its name, but also more. Of its 443 properties across 42 states and Washington, D.C., 50% are senior living communities. However, SNH also boasts life science centers (23%), medical office buildings (21%), wellness centers (3%) and skilled nursing facilities (3%) – other types of businesses that should flourish with the aging of the Boomers.

But there’s another reason to like Senior Housing Properties’ business right now, and that’s its focus on privately paying customers. In fact, the company boasts “limited government funding exposure,” with 97% of its net operating income coming from private-pay properties. That looks like it could be increasingly important with Congress starting to beat the drums on “entitlement reform” (that’s politician-speak for reducing Medicare, Social Security, etc.)

The basic business case is there. What should give SNH an extra kick in the pants? For one, analysts are expecting an outsize year of profits in 2018 before it “pulls back” in 2019 – though still to levels about 34% higher than they were in 2017. Value should play a role, too. A pullback in real estate this year has swept up Senior Housing and brought it to a valuation of less than 11 times its TTM funds from operations. Tack on a nearly 10% dividend, and you’re looking at likely total returns of 20%-plus over the next year.

Starwood Property Trust (STWD)
Dividend Yield: 8.9%

Mortgage REIT Starwood Property Trust (STWD) has a portfolio of more than $12 billion, primarily invested in first mortgage loans but with exposure to mezzanine loans, subordinated mortgages, commercial mortgage-backed securities (CMBS) and a few other investments.

This is a diversified pie no matter which way you slice it. By property type? Office (32%), hotel (22%), multi-family (13%), mixed use (12%) and several others. By region? West (27%), Northeast (26%), Southwest (16%) and again others, and even including 9% international exposure.

But the thing I love most about Starwood is its one big imbalance.

Mortgage REITs historically have performed poorly when interest rates head higher. However, roughly 95% of Starwood’s portfolio is floating-rate in nature, and in fact the company expects to its cash flow to increase in a rising-rate environment. And what do we have right now?

A Rising-Rate Environment

The Federal Reserve has signaled that more rates are coming at least this year and next, and Starwood Property Trust is well-positioned to ride this wave higher. Its 9% dividend yield, meanwhile, will pad those returns.

Sabra Health Care REIT (SBRA)
Dividend Yield: 8.4%

Next up, I want to double down on one of the other picks I made last December – Sabra Health Care REIT (SBRA), which also has had a nice run since my call, tripling the total return of the S&P 500.

Let’s Double Dip in Sabra!

Sabra is similar to SNH in that it’s a Boomer play – 72% of the portfolio is skilled nursing/transitional care real estate, as well as 23% senior housing (89 properties leased, 24 managed) and the rest in “specialty hospitals and other.”

Sabra did hit some turbulence after a multibillion-dollar merger in 2017, as well as a prorated dividend, though it made good on that and even hiked the payout after that.

The business clearly is on the right path. Full-year adjusted AFFO came to $2.31 in 2017, up from $2.26 the year prior. And in 2018, AFFO for the first six months of the year has come to $1.14 – that’s up from $1.10 during the same period last year, and makes for a safe 127% dividend coverage.

Earn a 28% Return in 1 Year From America’s Safest Stocks

I like the three stocks I’ve outlined above, but I’m in love with a set of four new high-yield, total-return plays that my research has produced.

In fact, I haven’t been this excited about an income opportunity in years.

What if I told you that you could turn some of Wall Street’s most exciting, growth-oriented blue chips, such as Visa (V)and Google-parent Alphabet (GOOGL), into “double threat” holdings that deliver double-digit upside and 8%-plus dividends? Well, given that Visa pays less than 1% and Alphabet doesn’t deliver a single penny in income, you’d probably call me crazy …

… right until the moment you saw my new discovery: “Dividend Conversion Machines.”

These stocks have extremely specialized businesses that allow them to do the seemingly impossible: They can actually wring high-single-digit dividends from some of the most skinflint companies in America. One of my Dividend Conversion Machines takes Visa’s 0.6% payouts and magnifies it to 9.2%. Another one can take Google’s 0% and produce a 9.4% yield out of thin air.

And no, this isn’t an options strategy, or some dangerous derivative, or the “next Bitcoin.” What I’m going to show you is perfectly SAFE – it’s essentially the same as buying traditional American blue-chip stocks. In fact, I’ll even show you the four steps you’ll need right now:

  1. Launch your web browser.
  2. Go to your trading account.
  3. Instead of entering a buy order for, say, Disney by entering the stock’s “DIS” symbol, enter the 3-letter code for one of my 4 Dividend Conversion Machines instead.
  4. Instead of getting Disney’s 1.6% dividend, start collecting an 8%+ income stream!

That’s it!

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Your Post-Crash Action Plan for 600% Dividend Growth

If you’re wondering what to do in this panicky market, I’ve got a few “get rich quick” words for you: buy cheap, high-quality dividend growers with both hands.

I know that’s easy to say, but overcoming fear is vital, because history proves it’s the path to serious wealth. I can show you why in 2 charts. Here’s the first one:

A Snapshot of Terror

This is the CBOE’s S&P 500 Volatility Index, which captures panic in a picture, spiking when the market tanks and dozing off when markets gently rise. When you overlay the VIX with the market’s ups and downs, a can’t-miss pattern emerges: folks who “bought terror” have ridden every dip to big gains!

When Fear Is High, Buy the Dip

Be greedy when others are fearful? You bet!

(I’ll have 3 perfect buys for you—with one of these rate-friendly stocks boasting 600% dividend growth in the last 5 years—in a moment.)

But wait, is this time different? After all, stocks-at-large do seem pricey. I wouldn’t dive into an S&P index fund today (trading at a rich 24-times earnings) just because the VIX spiked.

And no matter how many times President Trump says the Fed has “gone crazy,” interest rates will keep rising. A December hike is baked in, according to futures markets, and 3 more increases are likely next year:


Source: CME Group

So what do we buy now?

I’ll answer that in 3 words: dividend-growth stocks. But not just any old dividend growers.

We Need Dividends That “Outrun” the 10-Year

We want stocks whose dividends are growing faster than the yield on the 10-year Treasury note.

Because why would you sit in “dead money” Treasuries when you can grab a dividend that’s doubling every 5 years (or, better yet, rising 600%!)?

And (for once) Wall Street (kind of) agrees with me.

Just last week, the suits at Jefferies Group said the following:

“Ultimately, companies with either high FCF (free cash flow) yield, net cash and/or positive earnings revisions will be able to live with long-term rates. Companies simply offering a dividend with no growth will fare poorly, in our view[italics mine].”

Translation: stocks with rising payouts and heaps of cash won’t even notice a slight rise in borrowing costs.

The Proof   

Here’s the truth: if you’d jumped on cash-rich stocks with fast-growing dividends 3 years ago, when this rate-hike cycle started, you’d have demolished the market.

Consider the case of Boeing (BA), which I pounded the table on in December 2015—the same month the Fed started nudging rates higher.

The reasons?

  • Free cash flow was soaring—at the time, the company’s FCF yield was 8.4%. In other words, in just a year, BA was throwing off nearly 10% of its market value in FCF!
  • The dividend was accelerating, having doubled in the previous 5 years, with each year’s hike eclipsing the last.

The result? Boeing shredded rising rates and handed us a massive 206% total return in 2 years!

3 Dividend Growers to Crush Rising Rates

But enough about past wins. Let’s dive into the 3 “next Boeings” I have for you now:

  • Apple (AAPL)
  • Broadcom Inc. (AVGO)
  • Marathon Petroleum (MPC)

We’ll start by stacking them up by free cash flow yield, one of the yardsticks Jefferies talked up last week.

3 Cash Machines

As you can see, all 3 are generating at least 5% of their market value in FCF, with Marathon clocking in at 10%. Those are terrific numbers. And the FCF backstopping them is soaring.

Cash Flow on the Rise…

Best of all, our 3 buys are raining cash on investors as fast-growing dividends:

… Driving Dividends Through the Roof

Now let’s take a closer look at each and see what’s driving these gains, starting with Broadcom (AVGO), whose cash flow has exploded 1,430% in the last 5 years.

Rising-Rate Buy No. 1: A Post-Selloff Tech Play

The chipmaker says it plans to give 50% of its prior-year FCF to shareholders as dividends, and it’s close to that target, sending out $2.7 billion in the last 12 months.

That, plus the fact that it pays out a low 36% of FCF as dividends are dead giveaways that a big hike is on the way this December, building on the unbelievable 600% in increases Broadcom has handed out in the last 5 years.

And there’s another way Broadcom rewards investors that few people consider: soaring R&D spending, which translates straight into a higher share price.

R&D Drives “Lockstep” Gains

Finally, Broadcom’s soaring cash flow has the stock trading at just 13.7-times FCF, way down from 22-times five years ago.

That’s ridiculous for a cash machine like this, and any further pullback—especially on overdone fears that its $19-billion purchase of CA Technologies will face a national-security review—makes it even more appealing.

Because even if Broadcom were to lose out on CA, it would just dump more cash into R&D, driving the stock higher still.

Rising-Rate Buy No. 2: Apple’s Ignored Shift

Jefferies also named Apple (AAPL) as a great buy when rates rise, and I agree.

For one, you can see the same connection between R&D and the stock price as at Broadcom:

R&D Keeps Apple Healthy

And thanks to its soaring FCF and legendary cash hoard, Tim Cook’s company can keep this tango up for decadeswithout breaking a sweat.

No wonder the dividend has jumped 92% since Apple started its payout in 2012, making the company’s tiny 1.7% current yield go down a lot easier.

To be sure, the stock isn’t as cheap as it has been, at 19-times FCF, but when it comes to Apple, swing traders need not apply. The key is to hang in as the company evolves into more of a service provider and less of a device maker.

Consider this: in Apple’s latest quarter, sales of high-margin services like Apple Music subscriptions, apps and streaming video spiked 31%, making services easily the company’s fastest-growing business.

That’s literally changing the face of Apple. In Q3, services were 18% of total sales, nearly doubling their 10% share in the same quarter just 5 years ago.

So now’s the time to climb aboard as more investors catch the hint. The “locked-in” dividend hikes make the deal even sweeter.

Rising-Rate Buy No. 3: A Dividend Doubler With a Buyback Kick

When most folks think of Marathon Petroleum (MPC), they think of refining.

And the company does own 16 refineries, making it America’s biggest refiner. But it also has 3,900 company owned gas stations and 7,800 branded stations. Marathon also has stakes in MLPX LP (MPLX) and Andeavor Logistics LP (ANDX), giving it access to 15,000+ miles of pipelines, as well as shipping terminals and processing facilities.


Source: Marathon Barclays CEO Energy-Power Conference Presentation, Sept. 4-6, 2018

A diversified energy play like this is exactly what you want when rates rise.

Check out how MPC has taken off since the Fed’s “kickoff” in December 2015, and really caught fire as rate hikes accelerated in the last year and a half:

Your Shelter From Rising Rates

Here’s another safety valve: management is jumping on MPC’s cheap valuation (9.8-times FCF) to boost share buybacks. That throws a cushion under the stock because it boosts per-share earnings—and share prices with them.


Source: Marathon Barclays CEO Energy-Power Conference Presentation, Sept. 4-6, 2018

The thing to keep in mind is that these moves have come on top of MPC’s 2.2% dividend, which, as I showed you above, has more than doubled in the last 5 years.

And like our 2 other rising-rate plays, MPC can easily keep up the pace. On top of its soaring FCF (remember that huge 10% FCF yield I showed you earlier?), it boasts $5 billion in cash. Put another way, when you add its cash on hand to its last 12 months of cash flow, you get an incredible 25% of market cap!

Throw in a low 20% of FCF paid as dividends and the fact that MPC sometimes announces more than one dividend hike a year and you can only draw one conclusion: now is the time to buy—before the next dividend is announced in late October.

Revealed: Apple’s “Secret” 10.2% Dividend

What if I told you I’d found a way to take a big-name stock like Apple, with a paper-thin 1.7% current dividend and turn it into a massive 10.2% cash stream?

Payouts like that mean up to $10,200 a year in dividends on a $100k investment. That’s 6 TIMES what you’d get from Apple’s “normal” payout!

I urge you to take a second and think about what this could mean to you: incredible double-digit cash dividends right now—straight from the stocks you know well.

It’s that simple: no risky options, dangerous derivatives or short selling.

Simply buy the stocks you love, straight from your online brokerage account. But instead of their paltry sub-2% dividends, you’ll get their “secret” payouts of 7.5%, 8% and even 10.2%!

The “Perfect Investment”

In know that sounds crazy, but I assure you it’s 100% real.

It’s all thanks to an unsung group of investments I call “dividend conversion machines”—so named because they “convert” pathetic S&P 500 dividends into gigantic cash payouts.

They’re the closest thing I’ve ever seen to the perfect investment!

20%+ Price Gains … in 12 Months or Less

My team and I have pinpointed the 4 best Dividend Conversion Machines for your portfolio now, including that 10.2% payer I mentioned earlier.

PLUS, we’ve got these 4 powerful investments pegged for massive price upside, too. I’m talking 20%+ gains, on top of those massive dividend payouts.

So to go back to that 10.2% payer I mentioned earlier, you’d be set for $20,000 in gains, plus your $10,200 in dividends, just 12 months out from now.

A $30,200 windfall!

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook 

Here’s My No. 1 Stock Market Prediction (and a 7.2% dividend to buy now)

A game-changing story about stocks just broke—and you almost certainly missed it.

That’s why I’m writing about this surprising news today: because it’s just what you need to know if you’re struggling with how to approach this interest rate–obsessed market, especially in the wake of the recent pullback.

Why haven’t you heard it?

Because good news like this doesn’t grab as much attention as Chicken Little panic articles, so the financial press skips it. But what I’m about to tell you is crucial to your financial well-being—and something I’ve been saying on Contrarian Outlook and in our CEF Insider service for months now.

Luckily, not everyone is ignoring the story. Bloomberg Businessweek just wrote an in-depth analysis of this piece of news, which is simply this: fears of a recession are way overblown, and the market is set for strong gains in the months ahead.

(In a moment, I’ll reveal a fund set to roll higher as the market surprises the doomsayers and takes off. Best of all, this ignored fund pays a safe 6.9% dividend.)

I was glad to read this upbeat news, because it echoes a piece I wrote over a year ago. The theme of that article was simple: there are several clear recession indicators and none of them have been in the danger zone for a while. Fast-forward to today and they still aren’t—and aren’t likely to be for a long time.

First, let’s take a look at the data Bloomberg compiled; as you can see, the chances of a recession happening in the next 0 to 12 months have nosedived:

Doomsday Predictions Turn Sunny

Also note that chances of a recession happening in the next two to three years have also plummeted, bringing all readings except for the 12- to 24-month one to at or near their lowest levels in the last couple years.

Taking this at face value, it seems the chances of a recession happening soon are diminishing.

But let’s dig a little deeper. What exactly is the data being charted by these lines? Bloomberg’s recession predictor blends a lot of information, but the factor that has caused the red and black lines above to fall steeply is US Treasuries.

The Yield-Curve Horror

A couple weeks ago, I took a close look at the “yield-curve panic” that has been facing markets in 2018. If you were paying attention in February and March, when the markets sold off, you’ll remember that the bears couldn’t stop talking about the flattening yield curve—specifically, the difference between 2-year and 10-year Treasury yields.

When this yield curve inverts (or when 2-year yields are higher than 10-year yields), a recession tends to follow in the next 12 months. And that curve has gotten flatter throughout 2018—up until my article a couple weeks ago, which said that “An inverted yield … isn’t coming yet.”

Recession Indicator Pulls a 180

Notice how this isn’t the first time that downward trend suddenly saw a reversal. The same thing happened in February.

But this time is different.

Back then, the widening yield curve happened during a sharp, sudden decline in stocks; and while stocks have had a rough few days, the decline we’ve seen (as I write, we’re just 6.7% down from the all-time high the S&P 500 set on September 20) is still well below the 10.1% plunge we saw in February. What’s more, compared to February, the current market downturn has lasted longer and been much less severe:

To call this the start of a bear market is just silly. What we are seeing over the longer term is a new trend: higher stock prices happening alongside a steeper yield curve.

This is a really good pattern to see.

Steep yield curves indicate higher expectations for inflation and, more crucially, economic growth. Just as negative yield curves are the market saying a recession is going to come, a positive yield curve is the market saying growth is going to get faster.

And what benefits when the economy is growing faster? Stocks.

A 6.9% Dividend From Your Favorite Blue Chips

So what should you buy?

An index fund like the S&P 500 SPDR ETF (SPY) would get you exposure to the stocks that will win in such a market, but you can compound your gains and get a higher total return by buying an equity fund that’s trading at a large discount to its portfolio value, or NAV.

While ETFs almost never trade below their NAVs, closed-end funds (CEFs) do—and that unusual inefficiency in CEFs is an opportunity for contrarian investors to get high-quality stocks at a discount.

For example, the Dividend and Income Fund (DNI) has a 7.2% dividend yield while also holding high-quality stocks like Apple (AAPL)CVS Health (CVS) and AutoZone (AZO), but it trades at an almost unthinkable 24.8% discount to NAV, meaning $1 of those shares is up for sale with DNI for just 75.2 cents.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook 

3 Imminent Special Dividends Ripe for Buying Now (yields up to 9.7%)

If you want to double—or even triple—your dividend income overnight, there’s an easy way to do it: buy stocks that pay special dividends.

And today I’ve got 3 totally ignored special-dividend payers for you. Each of these top-notch income plays throws off “hidden” payouts yielding up to 9.7%!

We’ll unmask all 3 as we roll through this article. We’ll also look at the almost comical reason why stocks like these get completely overlooked, and I’ll give you everything you need to get in on the next big special payout before it drops.

A $2-Trillion Cash Stash Looking for a Home

It happens like clockwork: a company announces a blowout quarter or a hike in its regular payout … and rolls out a big special dividend either days before or just after.

It’s the ultimate attention getter!

Because let’s be honest, there’s no better way to get first-level investors to take notice than by doling out free money. With S&P 500 firms sitting on a $2-trillion hoard, plus billions more in overseas cash headed back to the US due to tax reform, there’s a boatload of extra greenbacks to go around these days.

And when a surprise special dividend drops into your account, it can turn a ho-hum payer into an income investor’s dream—like what happened with my first pick.

Special-Dividend Buy No. 1: A “Pick-and-Shovel” Play for 5.9% Cash Payouts

Duke Realty (DRE) is a real estate investment trust (REIT) I pounded the table on a few weeks ago in “3 Shocking Ways to Get a Double-Digit Dividend From Amazon.”

As I wrote in that piece, Duke owns 499 warehouses across 32 states, and Amazon.com (AMZN) is its No. 1 tenant, making Duke a perfect “pick-and-shovel” play on the e-commerce megatrend.

(If you’re unfamiliar, “pick and shovel” refers to the California gold rush, when the people who really got rich were the shopkeepers who sold picks and shovels to the gold-seekers, rather than the prospectors themselves.)

Last December, Duke paid out a hefty $0.85 special dividend—its second “bonus” payout in three years! That came on top of a growing “regular” dividend:

An Off-the-Radar Cash Machine

Here’s the thing, though: if you go to, say, Yahoo! Finance, you’ll see that DRE’s current dividend yield is 2.9%.

That’s not bad, better than the S&P 500 average of 1.7%. But it’s a shadow of DRE’s “true” yield, because the popular stock screeners don’t count special dividends in their yield calculations.

Take a look at this screen grab on Duke from Yahoo! Finance:

Special Dividend: MIA

Source: Yahoo! Finance

But when you add DRE’s $0.85 special dividend back into its regular payouts, you get its “true” dividend yield of 5.9%!

And Duke can easily keep these extra payouts coming: its regular dividend eats up just 52% of its funds from operations (FFO, the best standard of REIT performance), very low for a REIT.

Finally, even though Duke goosed its full-year guidance in its Q2 earnings report, the stock boasts a far lower price/FFO ratio than a year ago: a reasonable 20.9 now vs. 23.5 then.

So go ahead and grab a piece of “Amazon’s landlord” before it drops its next special payout and/or big dividend hike in 2019.

4 Proven Ways to Spot Special Dividends Early

“So,” you’re probably thinking, “if you can’t spot a company’s special dividend on a stock screener, how on earth do you find stocks that offer these payouts?”

I zero in on 3 things when I’m filtering out special-dividend payers to recommend in my Contrarian Income Reportservice:

  1. Healthy balance sheets, with low (or no) debt and a high cash balance;
  2. Strong free cash flow; and
  3. High insider ownership—because special dividends are an indirect way to reward top execs.

The second of our 3 picks, truck maker PACCAR Inc. (PCAR), ticks off all 3 boxes—and it’s dirt cheap, too!

Special-Dividend Buy No. 2: A “Hidden” 94% Income Boost

PACCAR makes big rigs flying the Peterbilt and Kenworth names on their hood ornaments, and the company’s dividend is just as rugged as its products: PACCAR has paid a regular dividend every year since 1941.

But the first-level crowd still shuns PACCAR because it only sports a “regular” dividend yield of 1.6%. That’s too bad, because if you’ve been watching the company, you know this isn’t its real payout.

The ignored truth here is that the big-rig maker has rolled out special dividends every single January for the last eight years. Check it out:

“Hidden” Payout Doubles Your Yield

When you add in PACCAR’s last special dividend, its “real” yield jumps to 3.1%—94% higher than most folks think it is!

And as I said a second ago, this one is blaring all 3 of our special-dividend signals:

  1. Healthy balance sheet, with $3.5 billion in cash and $9.2 billion in debt (the difference, $5.7 billion, is a modest 23% of PACCAR’s market cap);
  2. Strong free cash flow (FCF), up 75% on a trailing-12-month basis in the last 5 years; and
  3. High insider ownership, with 4% of PACCAR’s outstanding shares in the hands of its execs.

To be sure, this is a cyclical business, but PACCAR still has a lot of upside as it cashes in on surging US consumer and business spending: profits soared 50% in the second quarter, while revenue spiked 23%, to a record $5.8 billion.

Thank Trump for This Bargain

Here’s the kicker: Despite those sizzling results, trade worries have pushed the stock down about 2% on the year, giving us a chance to steal this one for just 12 times earnings.

But it’s only a matter of time before the herd realizes that the new USMCA deal between the US, Canada and Mexico frees PACCAR from those fears; the company gets 63% of its sales from these 3 countries.

Oh, and management typically announces its next special dividend in early December, making now the time to buy.

Which brings me to …

Special-Dividend Pick No. 3: A 9.7% Payout at a 16% Discount

The third pick I have for you is the General American Investors Fund (GAM), closed-end fund (CEF) I recommended back on August 14.

GAM is the classic example of an overlooked special dividend. Right now, its “regular” payout of $0.50 yearly, paid in February, yields just 1.4%.

But we need to look closer.

Because the lion’s share of GAM’s dividend rolls out as a special payout every December. (This year-end payment is based on management’s estimate of income from the fund’s portfolio for the full year, plus capital gains from January through October.)

When you factor in GAM’s last regular payout and the special dividend, the fund’s trailing-12-month yield jumps to 9.7%!

“Regular” Payout a Red Herring

Source: CEFConnect.com

Funny thing is, the so-called “regular” dividend is nothing more than spillover: capital gains or income GAM racks up in the last two months of the year!

This may seem like a bizarre dividend policy, but it’s there for a reason: it gives management leeway to invest in fast-growers like Gilead Sciences (GILD), Microsoft (MSFT) and Berkshire Hathaway (BRK.A).

This strategy has paid off in spades. Check out the beat-down GAM has laid on the S&P 500 since its inception 20 years ago. And of course, due to those outsized payouts, nearly all of that gain has been in cash:

Hands-On Approach Pays Off

The upshot? Thanks in part to this bizarre dividend policy, whose value has been completely missed, GAM trades at a ludicrous 16% discount to its net asset value (NAV, or the value of its underlying portfolio).

Let’s buy now, before the first-level crowd takes a second to actually look at the charts.

The Dream Portfolio: Special Dividends and 8%+ Monthly Payouts

When you combine these 3 special dividend payers with my NEW 8% Monthly Dividend Portfolio, you get something truly magical indeed.

Imagine this: you’re banking a safe-and-sound 8% from your investments (either in your golden years or while you’re still working). So if you’ve got a $500k nest egg, that amounts to a steady $40,000—year in and year out!

It gets better, though, because the 6 cash-rich buys in my 8% Monthly Dividend portfolio drop their dividends into your account monthlySo you can count on $3,333 every single month on your $500k.

You can use that cash however you like: either to pay your bills or plow straight back into your portfolio, growing your income stream further!

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

7 REITs to Buy Now and Hold Forever

Real estate investment trusts (REITs) and their typically high dividend yields are a key part of a payout-powered retirement portfolio that’s built to dish out higher and higher dividends every single year.

The five REITs we’ll discuss today will pay you 4% to 7.3% per year in dividends alone. And this income stream will only grow as time passes, because these firms have growing cash flow streams they must pass on to shareholders in order to keep their privileged REIT status.

REITs may not get much mainstream coverage, but the academics are starting to catch on to these dividend machines. Last year, I pointed you to a study from Wilshire Research that showed “dramatic” results when REITs were added to a retirement portfolio.

Let’s also consider recent research from global benchmarking company CEM Benchmarking that shows publicly traded real estate has no equal in retirement-focused accounts:

Equity REITs Are the Best of the Best

Source: Alexander D. Beath, PhD & Chris Flynn, CFA CEM Benchmarking Inc.

Their important finding: “Listed equity REITs had the highest average net return over the period, averaging 11.4%.”

Ready to retire? Stick with REITs. They’re the best asset class for retirees who, ironically, aren’t invested in them! More from CEM Benchmarking (emphasis mine):

Although they had the highest arithmetic average annual net return of 11.4 percent over the period, listed equity REITs were the least used asset class covered in the study. Allocations to listed equity REITs averaged just 0.6 percent of total assets.

If you’re looking to live off of dividends in your retirement, you must consider REITs. Here are five candidates that pay 4% and up today:

MGM Growth Properties (MGP)
Dividend Yield: 5.8%

MGM Growth Properties (MGP) is a relatively new kid on the block in the REIT world, spun off of MGM Resorts International (MGM) in 2016. This REIT owns seven Las Vegas properties including Mandalay Bay, Luxor and the Mirage; a handful of regional resorts in places such as Atlantic City and Washington, D.C.; and a right-of-first-offer on an MGM property being built in Springfield, Massachusetts.

I like this regional coverage for two reasons:

  • It provides diversification against Las Vegas’ inevitable ups and downs.
  • It gives MGM and MGP exposure to the eventual boom that I expect to see across the rest of the U.S. as other states begin to legalize sports betting.

I also like what I see in examining MGP’s dividend: The REIT has hiked its payout four times in nine quarters, and the company has done so with a very reasonable payout ratio of just under 80%.

Just remember: The success of gaming stocks and REITs is heavily tied to a strong economy, so all bets are off if America’s current economic boom starts to peter out.

Until then, game on.

MGM Growth Properties’ (MGP) Price Should Follow Its Dividend Higher

Gaming and Leisure Properties (GLPI)
Dividend Yield: 7.3%

Speaking of the virtues of regional gaming, Gaming and Leisure Properties (GLPI) is intriguing for its “pop” potential.

GLPI is another spinoff, carved out from Penn National Gaming (PENN) back in 2013. The company owns a few dozen regional casino and gaming properties in 14 states and leases them out on a triple-net basis to the likes of Penn National and Pinnacle Entertainment (PNK). Their six Mississippi properties may get a lift from the state’s new legalized sports betting, too.

Management seems to believe in their own stock, too. Gaming and Leisure Properties enjoyed some aggressive insider buying earlier this year. And Wall Street analysts are high on its growth prospects, too, modeling 7% EPS growth this year followed by a 22% burst in 2019.

Pebblebrook Hotel Trust (PEB)
Dividend Yield: 4.1%

Pebblebrook Hotel Trust (PEB) is a play on another one of my favorite mega-trends: the “experience economy.”Americans increasingly seem to value experiences more than acquiring a mountain of stuff, and we’re especially seeing this trend play out in the ever-important (and affluent) Millennial generation.

Pebblebrook is a hotel REIT that targets the most important economic class: the rich. The United States’ middle class is shrinking rapidly, meaning you’re either chasing low-income Americans or the well-heeled – and you and I both know which route leads to fatter profits.

Pebblebrook has a tight portfolio of just 28 properties, but most of these house elite properties such as the LaPlaya Beach Resort & Club in Naples, Florida; the Hotel Monaco in Washington, D.C.; and the Hotel Palomar in Los Angeles. There’s some geographic diversity, though PEB’s properties are primarily crowded along the West Coast’s largest cities.

This is a potential turning point for Pebblebrook. This month, the company beat out Blackstone Group LP (BX) to buy up LaSalle Hotel Properties (LHO) for $5.2 billion, which will boost its portfolio of hotel properties to 66 – though the company’s expected to sell at least three LaSalle properties and execute other asset sales to tamp down debt.

This merger is a double-down on the strong U.S. economy. If America keeps it up, Pebblebrook stands to come out smelling like a rose.

Pebblebrook (PEB) Will Try to Spark Growth Through M&A 

CubeSmart (CUBE)
Dividend Yield: 4.0%

Self-storage REIT CubeSmart (CUBE) is a model operator that continues to grow like a weed. It also has been a serial dividend raiser for years, boosting its quarterly payout by 217% over the past five years.

CubeSmart (CUBE): 419% FFO Growth Since 2010

Unsurprisingly, Wall Street has priced it at a premium.

CubeSmart owns 981 self-storage properties across the U.S., providing not just traditional personal storage solutions, but also business, vehicle and boat storage options. That gives it reach.

Demand comes from the very nature of CubeSmart’s business. Self-storage is an “anytime” industry – economic expansions see a greater need for storage as people accumulate more stuff, and economic contractions usher in a greater need for storage as people need to find a place to store their things as they scale back into smaller living quarters.

But what makes CubeSmart the dynamo you see today is a brilliant set of proprietary systems that help manage inventory and maximize space efficiency, as well as a sophisticated rate-increase system to help squeeze out more profits from customers while still retaining them for the long-term.

That’s how the company has more than doubled FFO over the past five years alone, and why analysts continue to project high-single-digit top-line growth over the next few years. That in turn should keep CUBE chugging higher, rain or shine.

Welltower (WELL)
Dividend Yield: 5.2%

Baby Boomer plays will continue to be an investing gold mine for the next decade or more. America’s 65-plus population is expected to explode by 36% by 2025. In the REIT category, we can primarily play the boomers through either healthcare or senior living.

Welltower (WELL) gives us a little bit of both.

You might remember Welltower as Health Care REIT, but the company rebranded in 2015 (and changed its ticker from HCN in 2018), and has widened its focus over the past few years, too.

This monster of a real-estate company owns 1,502 properties. Importantly, 93% of NOI comes from private-pay sources, so Welltower’s success doesn’t hinge on what the government decides to do with programs such as Medicare and Medicaid.

The wild card to watch right now is a first-of-its-kind joint venture with top-15 U.S. health system Promedica, which includes a 15-year absolute triple-net master lease.

Under that system, Welltower is expected to generate 67% of net operating income coming from senior housing (under brands such as Sunrise Senior Living and Silverado), 16% from outpatient medical, 10% from long-term post-acute care and 7% from health systems.

Just keep an eye on the dividend: While the payout ratio is perfectly healthy at a little more than 80%, the payout didn’t come up at its normal time earlier this year. The company has one more quarter to keep up its streak of dividend hikes.

Income Investors Are Waiting on Welltower (WELL) 

My Top 2 REIT Buys: Recession and Rate-Proof Landlords for 7.5%+ Yields with 25% Upside

These five REITs are laudable, but they’re not quite elite – not like my two favorite REITs, which are comfortably positioned in recession-proof industries.

They’ll have no problem continuing to raise their rents – and reward their shareholders – no matter what the Fed decides at its next meeting, what President Trump tweets or when the stock market finally takes a breather.

My favorite commercial real estate lender (a 7.7% yielder!) lets us play Monopoly from the convenience of our brokerage accounts. They do all the legwork, building a secure, diversified loan portfolio featuring offices, retail space, hotels and multifamily units.

Management then collects the monthly payments, deposits the checks, and then it sends most of the profits our way as dividends (a legal requirement to have REIT status).

Better still, this firm has also smartly eliminated interest rate risk because it uses floating rates. In fact, it’s actually set up to make more money as interest rates move higher:

More Income as Interest Rates Rise

Another REIT favorite of mine is a 7.5% payer backed by an unstoppable demographic trend that will deliver growing dividends for the next 30 years. Interest rates are no problem for this landlord because it will simply continue raising the rents on its “must have” facilities.

Its founder Ed admitted that, 14 years ago, he had “zero assets, a dream, and a business plan.” Well, his dream and plan were plenty – the visionary entrepreneur parlayed them into more than $6.7 billion in assets!

Right now is the best time yet to “bet on Ed” because his growing base of assets is generating higher and higher cash flows, powering an accelerating dividend:

I love dividend increases because they are proof that management is actually making more money, so it can afford to pay us shareholders more. And an accelerating payout is a flat-out cry for help!

These two REITs are both “best buys” in my 8% No Withdrawal Portfolio – an 8% dividend paying portfolio that lets retirees live on secure payouts alone. Now, as active recommendations for my premium subscribers, it wouldn’t be fair to reveal their names here.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook