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 

Recently, as part of my ongoing research in the high-yield investment world, a newswire release crossed my screen that had me scratching my head. One reason to invest in a fund-type of product is to diversify and reduce risk. However, this exchange traded note (ETN) that I found seems to be structured in a way that increases the level of risk, rather than reducing risk through diversification. If you own shares in this particular high-yield ETN with hopes that the 10% dividend is secure, think again.

An exchange traded note (ETN) is like an exchange traded fund (ETF) with one big difference. While an ETF is shares in a portfolio of securities, an ETN is an unsecured debt obligation of the issuer.

These notes are not backed by a portfolio of securities. Fund issuers use the ETN structure when there would be structural or tax problems in the construction of an actual securities portfolio. An ETN will track a specified index without actually owning the components of the index. Since an ETN is an unsecured debt obligation of the issuer there is a small, but real risk that the issuer could just fold one of these notes with investors receiving nothing for their shares.

More Reading: Interested in Preferreds? Collect a Safe 8% Yield from this New Preferred Stock ETF

The Morgan Stanley Cushing MLP High Income Index ETN (NYSE: MLPY) tracks the performance of an index composed of higher-yielding publicly traded midstream energy infrastructure companies, including master limited partnerships (MLPs) and non-MLP energy midstream corporations.

The index includes 30 stocks, ranking them by yield. The 10 highest yield stocks get a 5% weight in the index. The next 10 for yield are at 3.5% each, and the bottom 10 as measured by current yield are at 1.5%. What a concept.

The highest yield, meaning the 10 stocks most likely to cut dividend rates make up 50% of the index and the lowest yielding, indicating safety and dividend growth potential, account for 15% of the fund. That is a mathematical recipe for losing money.

To illustrate, here are the latest quarterly dividend coverage ratios of the ten stocks with 5% weightings in the index:

• Golar LNG Partners LP (Nasdaq: GMLP) covered 56% of its dividend.
• Buckeye Partners LP (NYSE: BPL) had 87% coverage.
• NGL Energy Partners LP (NYSE: NGL) covered 44%.
• USA Compression Partners LP (NYSE: USAC) had 109% coverage. This is the coverage you want from a high-yield stock.
• Enbridge Energy Partners LP (NYSE: EEP) will be absorbed by its sponsor and the 12.3% yield will be slashed.
• Sunoco LP (NYSE: SUN) had 120% coverage but is also in danger of being rolled up by its sponsor, reducing the dividend income to SUN investors.
• Alliance Resource Partners, LP (Nasdaq: ARLP) has great dividend coverage, but the baggage of being a coal producing MLP.
• Energy Transfer Partners, LP (NYSE: ETP) will experience an effective dividend yield reduction of 20% when the merger with its sponsor goes through.
• SemGroup Corporation (NYSE: SEMG) provided solid 140% dividend coverage. This is a solid, high-yield income stock.

You can see this is not a list of 10 stocks to make up 50% of a high-yield portfolio. Eight of them are at risk or in the process if dividend cuts. The 10% yield of the MLPY ETN is a value trap and to be avoided.

Pay Your Bills for LIFE with These Dividend Stocks

Get your hands on my most comprehensive, step-by-step dividend plan yet. In just a few minutes, you will have a 36-month road map that could generate $4,804 (or more!) per month for life. It's the perfect supplement to Social Security and works even if the stock market tanks. Over 6,500 retirement investors have already followed the recommendations I've laid out.

Click here for complete details to start your plan today.

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), a 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 monthly. So 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

Something strange is happening in the investment-bank and hedge-fund world: a growing sense that the next recession (which, by the way, Wall Street has long been wrongly predicting for years) finally has a due date: 2020.

The number of Wall Street firms predicting this date is staggering.

Bloomberg’s Joe Wisenthal has collected a few predictions, such as one from Moody’s Analytics chief economist Mark Zandi, who said 2020 will be the economic “inflection point,” and Société Générale’s economic team, who said the likelihood of a 2020 recession has risen due to, among other things, a tight labor market and higher borrowing costs.

Even former Federal Reserve Chairman Ben Bernanke is getting in on the act, saying a boom “is going to hit the economy in a big way this year and next year. Then in 2020, Wile E. Coyote is going to go off the cliff.”

Doom and Gloom = Cheap 7%+ Dividends for You

This all sounds scary, but the stock market doesn’t care—it’s been too busy surging to new highs:

What, Me Worry?

Stocks’ 10% year-to-date gain means that, if this trend continues, we’ll see a 13% total return for the S&P 500 for all of 2018. That’s far from the kind of market Wall Street seems to be panicking about.

So let’s dig into the fears behind this gloom and doom, and why there’s nothing to fear at all. Then I’ll show you 2 funds you can buy now that will get you all that is best about this still-strong US economy.

And when I say “best,” I’m talking huge dividends up to 10%, and long-term performance that tops the market’s return, too.

But first, let’s dive into 3 fears that are driving the market today, so we can see what’s setting up the 2-fund opportunity I’ll show you toward the end of this article.

Hysterical Fear No. 1: An Inverted Yield Curve

By far, the biggest panic of 2018 has been over the yield curve.

When the difference between the yield on the 2-year US Treasury and the 10-year US Treasury goes negative for longer than a few days, America falls into recession. This is pretty much clockwork: it’s happened every time for decades, making this the most reliable recession indicator.

And the yield curve—that is, the difference between these two yields—has been narrowing since February 2018, when the market’s last major sell off hit:

A Worrying Indicator?

Note, however, that the fast decline from February to July has abated, and we are now about where we were in July.

This doesn’t mean an inverted yield curve isn’t coming (it still looks likely), but it isn’t coming yet. And since a recession typically happens about 12 to 18 months after the inverted yield curve appears, we still have plenty of time to tap the market’s rising gains (and dividends), starting with the 2 funds below.

Hysterical Fear No. 2: Declining Profits

The second fear is so silly it almost isn’t worth taking seriously—until you realize a close look at this fear shows just how wise it is to buy stocks now.

And that worry is that corporate profits are perfectly positioned to start falling.

That sounds bad—until you look into why they are so well positioned to fall: because they’re so absurdly strong right now.

Let me quote FactSet: a “record-high percentage of S&P 500 companies beat EPS estimates for Q2.” That sounds good—and then when you realize just how high expectations were, you realize this isn’t just good, it’s amazing.

Despite expectations of 23% earnings growth (itself higher than the first quarter’s 20% rise), the market reported 25% growth. A staggering 80% of companies beat expectations—far beyond the former record holder, the first quarter of 2018.

Earnings Crush (High) Expectations

Here’s the Chicken Little logic: with earnings growth this high, how can it possibly get any higher?

Of course, this is an old fear we saw in the third quarter of 2014, when oil prices were crashing and pundits warned that a 2008-style disaster was about to unfold. Here’s what the market has done since then:

62% Gains in Just 4 Years

The bottom line? If you sell into today’s fears, expect to miss out on gains like these.

Hysterical Fear No. 3: Tariffs, Tax Cuts and Trump

The 3 “Ts” that are driving many financial fears are largely political, with a lot of attention honing in on two moves by Donald Trump.

The first move was the 2017 tax cuts that many economists have said could overheat the economy. The second, and more alarmist, fear is that Trump’s tariffs, specifically those aimed at China, will result in a trade war that kills US exports.

The trade-war fears largely drove the market correction in February, but there’s just one problem: the tariffs are too small to matter. Even at their recent expansion to $250 billion in imports, tariffs on Chinese goods represent about 1% of America’s economy. And those tariffs are effectively a tax of about 13% of those $250 billion—meaning the actual impact on the US economy is about 0.17% of GDP.

These are microscopic numbers. Yes, they could increase—but until they do, the drag on the economy from tariffs is too small to matter, meaning it’s too early to respond from an investment point of view, no matter what your politics may be.

The Right Response

Still, these fears feel like they warrant some type of response, so what should it be?

Simple! As canny contrarians, we’re going to pounce on these overdone worries and buy stocks now.

But what’s the best way to do it?

If you choose to buy stocks individually, you’ll need to invest a lot of time and/or money in research. Pick a low-cost index fund like the SPDR S&P 500 ETF (SPY) and you’ll likely enjoy a strong return. But that return will, by definition, be mediocre, because SPY doesn’t try to pick winners or losers. Plus, SPY’s dividend yield is a joke at 1.7%.

Then there’s the path less traveled: high-yield closed-end funds (CEFs) that invest in many S&P 500 stocks and offer a shot at better price gains, along with a higher income stream (and not just a little higher: payouts of 7% and more are common in CEF land).

2 Funds Set for Big Gains (and Dividends) as Wall Street Frets

Our first pick is the Nuveen S&P 500 Dynamic Overwrite Fund (SPXX), which provides a mix of equity exposure and insurance on a big market slide to provide returns, because this fund uses call options (a kind of insurance against stock exposure) to limit downside risk.

It also boasts an outsized 6.7% income stream that’s nearly 4 times the S&P 500’s average yield. Plus, SPXX has closely tracked the market in terms of overall performance while providing that bigger income stream:

SPXX Hands You Your Win in Cash

Or you could snap up the Liberty All-Star Equity Fund (USA) and its incredible 10% dividend yield, as well as its portfolio of mid-cap and large-cap US stocks. This one has actually beaten the “dumb” index fund over the last decade, too:

A Massive Return Over the Long Haul

Whatever path you take, it’s pretty clear that now is not the time to panic—even as we keep our eyes peeled for whatever 2020 may bring!

Michael Foster has just uncovered 4 funds that tick off ALL his boxes for the perfect investment: a 7.4% average payout, steady dividend growth and 20%+ price upside. — but that won’t last long! Grab a piece of the action now, before the market comes to its senses. CLICK HERE and he’ll tell you all about his top 4 high-yield picks.

The U.S. economy is growing nicely, with any recession at least a few years out in the future. Average wages for working folks are also starting to increase after years of stagnation. Confidence in the economy and more money in their pockets will have people more willing to spend on recreation activities. Now is a good time to consider income stocks backed by consumer discretionary spending, especially for recreation activities.

Real estate investment trusts (REITs) own a wide range of property types lease the many kinds of businesses. It is often financially more efficient for a retail or services business to lease property or buildings rather than own them. REITs typically specialize in a specific property type. This gives them expertise to generate superior returns and often help their tenants be more successful in their own businesses. As noted above, this is a good time to look at REITs with properties used in the recreation and leisure industries.

Here are three specialty REITs focused on gaming and other recreation activities.

VICI Properties, Inc. (NYSE: VICI) was spun-off by Caesars Entertainment (Nasdaq: CZR) with an October 2017 IPO. The company’s portfolio includes 20 market-leading gaming properties in nine states, including the world-renowned Caesars Palace, and four championship golf courses. The properties are leased to Caesars Entertainment Corporation and operate under leading brands such as Caesars, Horseshoe, Harrah’s and Bally’s.

Caesars doesn’t not have an ownership position in VICI and there are no Board members common to both companies. With the spin-off, VICI is completely independent. Caesars does provide very strong 3.6 times rent coverage on the properties and contracted capex spending commitments to keep the properties at the forefront of the gaming industry. The REIT is internally managed. For growth VICI has rights of first offer (ROFO) on properties Caesar would want to capitalize through a sale lease back. The REIT can also pursue third party acquisitions.

Two dividends have been paid, with a 9.5% increase between the first and second.

The shares currently yield 4.9%.

MGM Growth Properties LLC (NYSE: MGP) was spun-off in April 2016 by MGM Resorts International (NYSE: MGM) in April 2016. The REIT currently owns 11 properties leased to and managed by MGM. All the properties are on a single master-lease, which gives the rental payments to MGM Growth Properties the highest level of safety. The lease has built in annual escalators and a profit-sharing component.

In contrast to VICI, MGM retains a majority ownership in MGP and pays all the operating expenses of the REIT. MGP also has ROFO on properties owned by MGM. The REIT has already made third party acquisitions.

In its history, MGP has produced steady 10% per year dividend growth.

The shares yield 5.9%.

EPR Properties (NYSE: EPR) was founded in 1997 as a pure play owner of movie theater properties. Today the company 169 multiplex theater and family entertainment centers generating $280 million of annual net operating income, 80 golf entertainment complexes, ski areas, and other entertainment attractions producing $182 million of NOI, and 146 charter and private schools generating NOI of $115 million.

The EPR management team has great expertise in its focused property areas and helps tenants be as profitable as possible. All properties are leased to tenants on triple-net contracts. The EPR dividend has grown every year since 2010 with a 7% compound annual growth rate.

Dividends are paid monthly, and the yield is 6.1%.

Pay Your Bills for LIFE with These Dividend Stocks

Get your hands on my most comprehensive, step-by-step dividend plan yet. In just a few minutes, you will have a 36-month road map that could generate $4,804 (or more!) per month for life. It's the perfect supplement to Social Security and works even if the stock market tanks. Over 6,500 retirement investors have already followed the recommendations I've laid out.

Click here for complete details to start your plan today.

If you’re not yet as rich as you hoped you’d be by now, don’t worry – we still have plenty of time to get you there.

And I’m not talking about investing your “growth capital” into risky fly-by-night names like Tesla (TSLA) and Snap (SNAP).

We can scale our money more securely – but just as spectacularly – by purchasing sound dividend payers that happen to be growing their payouts rapidly. Here’s why.

The Most Lucrative Way Shareholders Get Paid

There are three – and only three – ways a company’s stock can pay us:

1. A cash dividend.
2. A dividend hike.
3. By repurchasing its own shares.

Everyone loves the dividend, but investors usually don’t give enough love to the dividend hike. Not only do these raises increase the yield on your initial capital, but also they often are reflected in a price increase for the stock.

For example, if a stock pays a 3% current yield and then hikes its payout by 10%, it’s unlikely that its stock price will stagnate for long. Investors will see the new 3.3% yield, and buy more shares.

They’ll drive the price up, and the yield back down – eventually towards 3%. This is why your favorite dividend “aristocrat” – a company everyone knows and has paid dividends forever – never pays a high current yield. Its stock price rises too fast!

If you don’t believe me, consider 3M (MMM), a “stodgy” company with a ho-hum 2.6% yield. So once inflation bites, you’re left with almost no actual income!

But don’t forget that 3M is a charter member of the Dividend Aristocrats, having hiked its payout for 60 straight years. The connection between its rising dividend and its rising share price is unmistakable.

Check out how the payout drives up the share price at almost exactly the same rate over just about any time period you can imagine, starting with 3 years:

Dividend Up 33%, Shares Up 36%

And then 5 years:

Dividend Up 114%, Shares Up 109%

10 years:

Dividend Up 172%, Shares Up 173%

Since share prices move higher with their payouts, there’s a simple way to maximize our returns: Buy the dividends that are growing the fastest.

The Path to Fast 162% Gains From Safe Blue Chips

Have you always wanted to buy a safe blue chip stock like Coca-Cola (KO) and get rich from it like Warren Buffett?

It’s doable. But most investors “live in the past” and fixate on dividend track records rather than a payout’s forward prospects. And looking ahead is the key to yearly gains of 12%, 27.1% or even 54% or more with blue chip stocks.

(Yes, that’s no exaggeration. It is possible to make 54% annualized gains on a safe blue chip stock. I’ll share an example in a moment.)

Let’s first consider the case of Coke, which achieved its dividend royalty status in 1987 (its 25th straight year with a dividend hike). The firm hit its coronation with a head of steam, rewarding investors with a 362% payout hike in just five years (from 1986 to 1991). Its stock price raced to keep up with its dividend, rising 234% over the same time period:

Great Dividend Growth, Great Returns

It didn’t really matter if you bought shares before or after the company was officially a dividend aristocrat. The driving factor for profits was the dividend’s velocity – it was moving higher quickly, so its stock price followed.

Fast forward to the last five years, and we see that Coke’s youthful exuberance has slowed considerably. The firm still hikes its payout every year, but it’s a slower climb – totaling 45% over the past five years. Which means its stock price merely plods along too (+25% in five years):

Average Dividend Growth, Average Returns

Why is Coke’s dividend slowing down? Simple – just look at the top line.

Shrinking Business is Bad for Payouts

It sounds obvious, but income investors often wade so deep into the dividend weeds that they ignore obvious cues – such as shrinking sales.

Let’s add Coke’s top line into the last chart, and we’ll see that the fact that the payout is growing at all is an act of financial wizardry:

Shrinking Sales Slow the Dividend

Coke’s top line has shrunk by 22% over the last five years. Which makes its dividend growth quite the feat!

Contrast this with the 1986 to 1991 period, when the company was younger and still growing. It boosted its sales by 30% over that time period.

Of course it’s possible to grow payouts faster than profits and sales. In fact, this is what often happens with dividend payers. But even the most gifted managers can only squeeze so much in payouts from a shrinking pie. It’s better to focus on businesses with the winds at their backs.

And That Can Include Spry Blue Chips, Too

Two-and-a-half years ago I told my Hidden Yields subscribers to buy Boeing (BA) because:

• Its business was booming,
• Its stock was quite cheap with respect to cash flow, and most importantly
• Management was plowing profits into payout growth.

Boeing wasn’t a dividend aristocrat like Coke. But it was a much better buy. Here was the tale of the tape in December 2015 (pay special attention to the last column, because it’s the most important):

Boeing vs. Coke (December 2015)

If you want to make real money with stocks, you should always put your money with the faster dividend grower. Boeing was no exception – its two massive dividend raises in the last two years have sent the stock soaring to 150% total returns:

Boeing Soars With Its Payout

Our secret, as usual, is we purchased the payout that was growing the fastest. We enjoyed a 57% cumulative “raise” from Boeing, which in turn rocketed its stock price higher.

Since share prices move higher with their payouts, there’s a simple way to maximize our returns: Buy the dividends that are growing the fastest.

7 Dividend Growers to Buy Now (for 162%+ Upside)

How much money should you allocate to dividend growth?

As you can see – as much as possible. This strategy is such a “slam dunk” for investing returns that there’s no reason to collect more current yields than you need right now. If you can “forego” some amount of income today, I would encourage you to consider investing that capital into dividend growers.

It’s a simple three-step process:

Step 1. You invest a set amount of money into one of these “hidden yield” stocks and immediately start getting regular returns on the order of 3%, 4%, or maybe more.

That alone is better than you can get from just about any other conservative investment right now.

Step 2. Over time, your dividend payments go up so you’re eventually earning 8%, 9%, or 10% a year on your original investment.

That should not only keep pace with inflation or rising interest rates, it should stay ahead of them.

Step 3. As your income is rising, other investors are also bidding up the price of your shares to keep pace with the increasing yields.

This combination of rising dividends and capital appreciation is what gives you the potential to earn 12% or more on average with almost no effort or active investing at all.

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!

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!

One of the best characteristics about dividends is they usually offer a consistent, preferably growing stream of income. However, investors can easily fall into the trap of becoming complacent that future payments will continue to flow in, even when the business isn’t generating enough cash to fund the dividend.

The higher the yield being offered generally means the riskier the dividend is and sometimes losses can outweigh the expected income. For example, Dynagas LNG Partners (DLNG) cut its 16% yield back in April and shares are down 24% since.

With government bonds paying around 2% to 3%, dividends above 10% need to be scrutinized closely and I’ve identified two that are in danger of disappearing.

Dangerous Dividend No. 1: Legacy Investments Could Smother the Dividend

Blackrock Capital Investment (BKCC) is a business development company (BDC) that is trading below its net asset value, which generally signals a potential buying opportunity. That said, the company’s portfolio includes legacy investments that are a wet blanket and could smother the 11.5% dividend yield.

Blackrock Capital generated net operating income (NOI) of just $0.16 a share in the second quarter, which was not enough to cover the quarterly dividend of $0.18. In fact, management has failed to generate enough NOI to pay the dividend four of the past five quarters.

The company’s net asset value actually fell during the period, as management had to write down legacy investments in the industrials, insurance and metals businesses.

Another red flag for Blackrock Capital is the current leadership vacuum in the C-suite. The company has been without a full time CEO since April and its interim CFO has been “filling in” for 11 months now.

Blackrock Capital’s bonds are currently rated BBB- by the major agencies, which is last level before reaching junk status. Debt investors will demand their interest before any dividends are paid and the next management team may have to sacrifice its payout if push comes to shove.

Dangerous Dividend No. 2: Feeling the Margin Squeeze

MFA Financial (MFA) is a real estate investment trust (REIT) that invests in mortgage securities. Like most others in the financial world, the company is feeling the squeeze of the flattening yield curve.

Simply put, mortgage REITs borrow at short-term interest rates and reinvest the funds into higher-yielding mortgage instruments. It’s no surprise that the Fed has been steadily increasing short-term rates, while yields on long bonds have remained stubbornly low, as far as MFA Financial is concerned.

The company earned $0.17 a share in the second quarter, aided by $0.02 of investment gains. Either way you slice it, management didn’t cover the quarterly dividend of $0.20. That’s the second time in the past four quarters MFA Financial has failed to earn enough to support the payout.

Not only is the yield curve working against the company’s favor, as evidenced by the 18% year-over-year revenue decline last quarter, but management also reported higher operating expenses in the period. In my experience, a stock that regularly under-earns its dividend will struggle to sustain the payout for more than a year.

Replace These Dividend Disasters in the Making with 7 Contrarian High-Yielders

Chasing double-digit yields is risky business. The investing graveyard is littered with dividend promises left unfulfilled when the cash was no longer flowing in to sustain these lofty payouts.

A stock like Dynagas or these two potential time bombs can spell disaster for your portfolio, especially when in or nearing retirement. Not only might you have to forego some much-needed dividend income, but you could also potentially lose your hard-earned nest egg.

The good news is: there’s a better way. My colleague Brett Owens has created an “8% No-Withdrawal Portfolio” that generates steady income and impressive capital gains.

Whether you’re already retired, or looking to augment your paycheck with the passive income that dividends afford, you no longer have to choose between measly 2% to 3% yields from dividend “aristocrats”, government-secured interest payments that barely keep up with inflation and dicey double-digit dividends.

Wall Street has tried to address this issue with structured products, such as single premium immediate annuities (SPIAs). But just like the casinos don’t pay for all the glitz and glamour because gamblers usually win, the big financial service firms charge hefty fees to provide you with that steady income.

Instead, Brett’s system could hand you $40,000 a year on every $500,000 invested with under-appreciated income plays like:

• Closed-End Funds (CEFs)- We’ll share our top three CEF picks with you, each of which pay a monthly dividend. Many of these trade at a discount to net asset value; but unlike Blackrock Capital, actually can afford to pay their dividends.
• Preferred Stock- Brett lets you know two of the best active managers in this space to invest alongside with.
• Recession-Proof REITs- discover two REITs that actually benefit from higher interest rates; rather than being crippled by the Fed, like MFA Financial.

Please don't make this huge dividend mistake... If you are currently investing in dividend stocks – or even if you think you MIGHT invest in any dividend stocks over the next several months – then please take a few minutes to read this urgent new report. Not only could it prevent you from making a huge mistake related to income investing, it could also help you earn 12% a year from here on out! Click here to get the full story right away. 

Source: Contrarian Outlook 

Even with the 10-year Treasury “rallying” of late, it still pays just 2.9%. Put a million bucks in T-Bills, and you’re banking $29,000 per year. Barely above poverty levels!

Hence the appeal of closed-end funds (CEFs), which often pay 8% or better. That’s the difference between a paltry minimum-wage income of $29,000 on a million saved or a respectable $80,000 annually.

And if you’re smart about your CEF purchases, you can even buy them at discounts and snare some price upside to boot!

Here’s why: CEFs (unlike their ETF and mutual fund cousins) have fixed pools of shares. Meanwhile their prices trade up and down like stocks – which means these funds can sometimes trade at a discount to the value of their underlying assets!

And even though stocks-at-large are expensive today, this rising-rate (ironically) environment has income seekers scared of CEFs. Many of my readers have actually asked me if they should bail on our high paying vehicles. The financial media is in their heads, and they’re concerned that their funds are suddenly going to drop in price.

Please, don’t toss yourself into poverty by following this misguided herd!

With the markets in flux, we should review the principles of successful CEF investing. They are more nuanced than classic stock picking, because we’re analyzing managers, strategies and holdings versus simple businesses models. After all, for lazy investors, it’s easier to count on dividends via AT&T’s (T) declining subscriptions than it is to determine how much income for payouts Cohen & Steers’ Infrastructure Fund (UTF) has!

(The answer? Plenty. UTF not only pays 8% today, but the fund has raised its payout four of the last five years.)

Step #1: Be Careful With Price Charts

PIMCO’s Dynamic Income Fund (PDI) has been a great performer since its inception almost five years ago – but it’s price chart understates its brilliance:

Looks Like Pedestrian 33% Gains…

… Until You Add the Payouts Back for +192%!

Make sure the chart you’re reading includes dividends paid (so that it reflects total returns).

Step #2: Demand Alpha

Past performance can be an educational indicator about the quality of the management team and its strategy. PDI has had the benefit of the brightest bond minds on the planet calling the shots (from “Bond King” Bill Gross to current superstar Dan Ivascyn) and it delivered 192% total returns over the last six years, with most of these coming in the form of cash payouts.

Meanwhile Alpine’s Global Dynamic Dividend Fund (AGD) has delivered the worst of all worlds to dividend investors. It crashed harder than the broader markets in 2008, then provided almost no rebound as stocks themselves bounced back.

Dynamic dividends? Not here – this dog is still down 18% over the last eleven years!

More Downside, None of the Upside

Don’t be fooled by the siren song of its fat 7.6% current yield. Which brings me to our next point…

Step #3: Check Every Yield’s Back Story

Some funds pay big distributions that look great – but they’re not sustainable. However they continue to attract new (sucker) investors because they are able to fund their payouts – they just happen to shed their net asset value (NAV) at a similar pace!

For example, here are three more dogs that have grinded sideways or worse over the last three years (even when accounting for dividends paid) as the S&P 500 has soared:

Big Yields, But Lackluster Returns

Step #4: Know What’s Funding Your Distributions

A closed-end fund can pay you from some combination of:

1. Investment income,
2. Capital gains, and/or
3. Return of capital.

Of the three, investment income is preferable because it’s usually the most reliable. Many CEFs pay monthly distributions, so it’s best if they match up their payouts with steady income streams themselves.

Capital gains from rising bond or stock prices can further boost distributions. But they are at risk of disappearing if the markets turn unfavorably.

Finally, everyone assumes return of capital is bad, because it’s simply shipping your money back to you. But as my colleague, the “CEF professor” Michael Foster, recently wrote, it’s often very good for investors.

What’s more, if the fund trades at a sizeable discount, this can actually be a savvy way to kick start the closing of a discount window. More on this shortly.

Step #5: Don’t Be Cheap About Fees

Most investors are conditioned by their experience with mutual funds and ETFs to search out the lowest fees, almost to a fault. This makes sense for investment vehicles that are roughly going to perform in-line with the broader market. Lowering your costs minimizes drag.

Closed-ends are a different investment animal, though. On the whole, there are many more dogs than gems. It’s an absolute necessity to find a great manager with a solid track record. Great managers tend to be expensive, of course – but they’re well worth it.

The stated yields you see quoted, by the way, are always net of fees. Your account will never be debited for the fees from any fund you own. They are simply paid by the fund itself from its NAV.

Step #6: Ignore Short-Term Interest Rates

Many funds are selling at bargain prices today thanks to the headline worry that higher rates hurt CEFs. But that’s just not true.

Libor is tied closely to the Fed funds rate. And the last time the Fed hiked its rate significantly, CEFs did just fine.

In June 2004, Fed chair Alan Greenspan began boosting rates from then-historic lows. Over a two-year period, he increased the federal funds rate from 1% to 5.25%. An earthquake.

How’d CEFs perform? Three prominent funds all outperformed the market during Greenspan’s aforementioned run:

Higher Rates No Problem for Top CEFs 2004-06

Regular readers will recognize the Greenspan example quite well, because I’ve been using it repeatedly to drive this point home. And I’m glad to share another data point – our own profits from this rate hike cycle!

The chart below illustrates three of my CEF recommendations rolling higher in lockstep with the Fed funds rate (and that rate is the orange line stair stepping from the lower left to the upper right):

This Rate Hike Cycle, Our CEFs Have Rolled Higher

Once again, the best CEFs are gaining value in the face of rate rises.

Step #7: Demand a Discount

One aspect of the CEF structure lends itself perfectly to contrary-minded investing: fixed pools of shares.

Mutual funds issue more shares whenever they want. But closed-ends have a fixed share count, with their funds trading like stocks. As a result, from time to time a fund will fall out of favor and find its shares trading at a discount to its NAV.

This is basically “free money” because these underlying assets are constantly marked to market. If a fund trades at a 10% discount, management could theoretically liquidate the fund and cash out everyone at $1.10 on the dollar immediately. Or it can buy back its own shares to close the discount window (and boost the share price).

A discount is a great start, but do make sure that management has a plan to close that window!

Step #8: When Possible, Buy Along Insiders

It’s rare to see any fixed income manager put his or her own money on the line at all, unfortunately. According to a recent Barron’s article, nearly half of all closed-end funds have no insider ownership whatsoever.

Why would we want to own any of them, if the managers don’t?

The 3 Best Closed-End Funds to Bankroll Your Retirement

Closed-end funds are a cornerstone of my 8% “no withdrawal” retirement strategy, which lets retirees rely entirely on dividend income and leave their principal 100% intact.

Well that’s not exactly right.

Their principal is more than 100% intact thanks to price gains like these! Which means principal is actually 110% intact after year 1, and so on.

To do this, I seek out closed-end funds that:

• Pay 8% or better…
• Have well funded distributions…
• Trade at meaningful discounts to their NAV…
• And know how to make their shareholders money.

And I talk to management, because online research isn’t enough. I also track insider buying to make sure these guys have real skin in the game.

Today I like three “blue chip” closed-end funds as best income buys. And wait ‘til you see their yields! These “slam dunk” income plays pay 8.7%, 8.9% and even 10.1% dividends.

Plus, they trade at 10 to 15% discounts to their net asset value (NAV) today. Which means they’re perfect for your retirement portfolio because your downside risk is minimal. Even if the market takes a tumble, these top-notch funds will simply trade flat… and we’ll still collect those fat dividends!

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 power of a dividend focused investment strategy is the ability to build a portfolio with an attractive current yield and have the income stream grow over time. Many dividend stocks have histories of regular dividend increases. You can put some extra pop into your brokerage account values by purchasing shares of growing dividend stocks before they come out with their next dividend increase announcement.

The real estate investment trust (REIT) sector includes many companies that pay growing dividends and their shares have attractive yields. Most REITs announce a new, higher dividend rate once a year and then pay the new rate for the next four quarters. I maintain a REIT database that includes the timing of when the companies typically announce dividend increases as a data point for each REIT. The month before the next expected dividend increase announcement, is a good time to buy or add shares of a REIT that you expect to announce a higher dividend rate.  When the market sees the higher rate, the share price often moves higher, and the result can be a nice short-term gain to the upside. You can use this information to either buy shares to hold for the longer term or as an intermediate term trade with the goal of making a profit on the typical high single digit to low double-digit share price gain that often comes with a higher dividend announcement. In many cases the share price will continue to appreciate until just before the next ex-dividend date.

There are REITs that make their annual dividend increase announcements in every month of the year. The majority cluster in the last quarter or the first couple of months of the new year.

As we move into October, there will be more opportunities to make this type of investment. Also, since in recent years September has been very volatile, you may be able to time your purchases to pick up shares when the overall market is in a down period.

Let’s take a look at four REITs that should announce dividend increases in October.

Iron Mountain Inc. (NYSE: IRM) is a niche REIT that provides information and asset storage, records management, data centers, data management and secure shredding services. The company has facilities and provides services in Asia, Europe, Africa and South America as well as in North America.

The company converted to REIT status in 2014 and has increased the dividend each year since. Last year the payout was boosted by 6.8%. FFO per share growth has slowed in 2018, with management guiding to 4% dividend growth for the next several years.

Iron Mountain announces its new dividend rate at the end of October with a mid-December record date and end of the year payment.

IRM yields 6.4%.

Brixmor Property Group (NYSE: BRX) is an owner and operator of high-quality, open-air shopping centers. The Company’s more than 500 retail centers located primarily located in the eastern one-third of the continental U.S.

Brixmor went public in late 2013 and has increased its dividend each year, with typical 5% to 6% increases. Last year the dividend rate was boosted by 5.6%. The current dividend rate is less than 55% of the trailing twelve month’s FFO per share. I expect another 6% increase to be announced in late October. The new dividend rate is for the following year, with the first record and payment date of the higher rate occurring in January.

BRX currently yields 6.0%.

Crown Castle International Corp (NYSE: CCI) owns cell phone towers, which are leased by the various wireless services providers. The company is the nation’s largest provider of shared wireless infrastructure.

Crown Castle converted to REIT status in September 2013 and at that point started to pay dividends. Since the conversion, an increase was not announced for just one year: 2016.

In 2017 the dividend was boosted by10.5%. For 2018 management has guided to 10% per share AFFO growth, which means the next dividend increase should also be close to 10%. Crown Castle has announced a new higher dividend around the 20th of October with the record and payment dates in the last half of December.

CCI yields 3.7%.

Macerich Co (NYSE: MAC) focuses on the acquisition, leasing, management, development and redevelopment of regional malls throughout the United States. Currently the company owns 48 “market dominant” Class A malls located across the U.S. Macerich has paid a growing dividend for over 20 years.

Last year the quarterly payout increased by 4.2%. Management guidance is for 2018 funds available for distribution per share to be flat compared to last year. However, the current dividend rate is just 7% of projected FFO, and management is committed to continuing the annual dividend growth. I expect a moderate 3% to 4% dividend increase to keep the growth streak alive.

A new dividend rate is usually announced in late October with a mid-November record date and early December payment date.

MAC yields 5.2%.

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Source: Investors Alley