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

Two Stocks to Buy in Japan’s Quiet Bull Market

It’s the bull market that almost no U.S. investor has heard about. But it is a very real and vibrant bull market. What am I talking about?

The Japanese stock market, which last week hit a 27-year high!

After Japan’s “bubble economy” collapsed in the early 1990s, its entered a long period of recession and stagnation. In the late 1990s, conditions got even worse as a financial crisis hit some of its leading financial companies, such as Yamaichi Securities and the Long-Term Credit Bank of Japan. The Nikkei index continued drifting downward after that, hitting the 7,054.98 mark on March 10, 2009 as the global financial crisis took its toll.

But then, the second Abe government began in December 2012, and its so-called Abenomics economic strategy, including an ultra-easy monetary policy from the Bank of Japan, took both Japan’s economy and stock market into a long upward trend, which has continued to this day.

Clear evidence of that was seen in the second quarter of 2018 when Japan’s economy grew at the fastest pace in more than two years, as the country witnesses its longest stretch of economic growth in a generation.

Japan Regains Former Glory

This economic growth is reflected in Japan’s stock market, which this past summer regained its place as the world’s second largest stock market, as it surpassed a struggling mainland Chinese stock market. It lost the second spot to China in 2014.

Why has Japan’s stock market come to life? There are a number of reasons.

First of all, Wall Street was wrong about the effects of the U.S. – China trade war on Japan. It thought Japan would suffer, but instead it has flourished. As CLSA equity strategist Nicholas Smith told Bloomberg, “If China and the U.S. are going to throw bricks at each other’s windows, it pays to be the one that sells glass to both sides.”

But there’s a lot more at play here than the trade war. Earnings have been spectacular. In the last quarter, about two-thirds of the companies listed on Japan’s benchmark Topix index had big earnings beats. And we’re talking here about the big familiar names like Sony.

And these Japanese companies are thrashing earnings forecasts while their valuations are dirt cheap. The average Japanese stock is selling for about a 20% discount to the average European stock, which in turn is selling at a 20% discount to the average U.S. stock. In other words, in many cases, you are getting growth that is outpacing their U.S. counterparts and at a much, much lower valuation.

One look at Japanese companies’ pre-tax profits will show you what a good story Japan is. Over the past five years, Japanese companies’ average profit margins have risen from about 4.5% to 7.7% – well ahead of where margins were even at the peak of the late 1980s bubble era when market valuations were stratospheric. The profitability growth arises, in large part, from cost-cutting exercises conducted across much of corporate Japan following the global financial crisis.

Look at the chart (based on Ministry of Finance data and compiled by the brokerage firm CLSA) below that shows the profitability of corporate Japan (including unlisted companies) surging to its highest level since comparable data started being compiled in 1954.

Japanese companies have also found enthusiasm for corporate governance, which had always been a problem. The 2014 publication of the stewardship code encouraged investors to demand more from companies and the companies have delivered. Increasing dividends and share buybacks are becoming much more commonplace in Japan.

Finally, there is also direct support for Japanese equities from the Bank of Japan (BOJ), which for years bought Japanese stocks as part of its massive monetary easing program to lift the country out of deflation and hit a 2% price-stability target.

Under governor Haruhiko Kuroda’s quantitative and qualitative monetary easing (QQE) plan, stock-buying through exchange-traded funds (ETFs) started in 2013 at a pace of about 1 trillion yen ($8.873 billion) annually, expanding to about 3 trillion yen in October 2014, and further to about 6 trillion yen in July 2016. The BOJ though has begun to taper its purchases as well as shifting the emphasis from ETFs focused on the Nikkei 225 index to the Topix index.

This form of QE makes the BOJ a predictable buyer in the event of a sharp market sell-off. Since the start of Abenomics in 2013, the index has never fallen for more than eight days in a row.

Japan’s ‘New’ Stock Leaders

It is interesting to note that this run to a 27-year high has not been led by the usual ‘suspects’ – the giant exporters like Toyota.

Instead, retailers, healthcare and pharma companies and other more defensive shares have been driving the increase, with companies such as Fast RetailingFamilyMart UNY Holdings and Eisai at the forefront. On the broader Topix index, it’s the same story with pharmaceutical companies, utilities and service firms among the standout performers.

The top 10 ranking of Japanese stocks today is vastly different from the last time stocks traded at the current level in 1991. Back then, banks claimed seven of the top 10 spots. Today, there are only two. And even Toyota, which occupies the top spot currently is only valued at about 80% of its pre-financial-crisis level.

Four of the companies in the current top 10 had not even listed yet in 1991. Technology and investment giant Softbank Group (OTC: SFTBY) went public in 1994 and currently sits behind only Toyota, with a valuation of more than $105 billion. Third-ranked NTT Docomo – the mobile unit of fourth-ranked Nippon Telegraph & Telephone listed in 1998. Telecommunications company KDDI, at No. 8, went public in 1993. And the 10th-ranked stock, staffing company Recruit Holdings, did so in 2014.

Companies, like Softbank, that are overseas powerhouses are also in the top 10. For both automation equipment maker Keyence, the No. 7 player, and sixth-ranked Sony (NYSE: SNE), at least half of sales come from outside Japan. By the way, Keyence’s market cap of 8 trillion yen represents 19-fold growth from 27 years earlier.

How to Invest in Japan

If you are looking to invest into Japan’s bull market, please do NOT use ETFs. If you do, your performance will be held back by the banks and other similar companies in the index that offer little growth.

Instead, stick with individual stocks as I have with the Growth Stock Confidential portfolio that currently holds three Japanese stocks with great growth potential. There are many possibilities that offer you growth at a good price.

Related: Buy These 3 Growth Stocks on Robinhood and Pay NO Commission

For instance, there is Sony, which this year has racked up record profits. Quite a change from losses totaling more than $8.8 billion over the prior decade!

The company is shifting away from consumer electronics to more growth-oriented area such as artificial intelligence and has increased its focus on subscription revenue from online gaming and streaming of videos and music (EMI Music). As part of that strategy, Sony will take a more strategic approach to collecting data from its users across a range of devices and platforms, spanning PlayStation games, financial services and mobile phones.

In February, Sony announced plans to launch a ride-hailing service in partnership with several Japanese taxi companies to obtain data on vehicles. The company is looking to expand the sale of image sensors, which are used in Apple’s iPhones and other mobile devices, for use in self-driving cars. Sales of its sensors to the automobile industry have become a big business for Sony.

Another stock worth your consideration is Softbank. It is led by its founder Masayoshi Son, whom I believe is the best tech investor of his generation. Just his investment of $20 million into Alibaba (NYSE: BABA) in 2000 makes him so. He ignored all the naysayers (as is currently) about investing into China. That $20 million turned into an incredible $70 billion when Alibaba had its IPO in 2014.

The naysayers are out again about his $100 billion Vision Fund, which is equivalent in size to all the world’s other venture capital funds combined! The investments made so far all have one thing in common – they are all make heavy use of artificial intelligence and big data. As Son said recently, “It may look like we are investing on a whim without any consistency, but one common theme is artificial intelligence.” Here in the U.S., Son has established positions in Nvidia, Uber, WeWork, and GM’s autonomous vehicle unit, Cruise.

Add in the fact, despite its recent price rally, that Softbank sells well below its net asset value and below even just the valuation of its holdings in Alibaba and Yahoo Japan and you have a long-term winner for your portfolio.

And there are many more stocks like Sony and Softbank in Japan that are worth a look and that I may be adding to both the Growth Stock Advisor and Growth Stock Confidential portfolios in the months ahead.

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