Monthly Archives: May 2019

Dividends

Separating Real News from Fake News in the Stock Market

For an investor trying to build wealth, the massive amount of news coming out of the financial media can be contradictory and confusing. Investors often don’t realize that there are two sides to every stock trade.

The seller doesn’t want to own the shares for a range of reasons, and the buyer does so with the belief that the share price will go up. One key to success is to understand which financial news is “real” and which is rumor or opinion, and thus “fake.”

Here are some tips that help you decide whether the stock market information you are hearing, or reading is actual, useful information, or is something we can drop into the “fake news” file.

• Real News: Information provided directly from the company behind the stock. The best of these are the quarterly and annual earnings reports. Income statements and balance sheets give accurate pictures of how a company is operating. Also useful are press releases on other topics and management comments during conference calls and Q and A sessions.

• Fake News: Short term market reactions and financial news comments about an earnings report. Wall Street analysts generate earnings forecasts that are just estimates, and the stock market treats it them as hit or miss targets. Also, in the fake news category are financial writer analysis articles. They can be useful to get an educated opinion, but they are not a substitute for doing your own analysis.

• Real News: Dividend payments. Dividends are a cash return on your investment that cannot be clawed back. Dividends are how a company shares profits with shareholders. If a company can grow profits, it will also grow the dividend payments. Looking at history and monitoring continued dividend payments are a great way to monitor a company’s financial success.

• Fake News: Counting on share price gains as sustainable and predictable profits. It can be surprising how quickly a stock that shows as a profit in your brokerage account can drop and wipe out your gains, and even go to a loss.

The challenge of expecting share appreciation to fuel your expected investment returns is that at some point you need to find another investor willing to buy your shares at a higher price. Trying to pick tops and bottoms in the stock market and share prices is a very difficult, if not impossible, way to build and sustain wealth.

• Real News: To build wealth or sustain a nest egg to last for decades, you need an investment strategy that will work through the stock market cycles. This means being ready to manage and invest during corrections and bear markets as well as when stocks are going up. In my newsletters I discuss strategies focused on building a dividend income stream. Whatever system and strategy selected, you should know how you are going to handle the periods when stock values are falling.

• Fake News: Hot tips and get rich quick offers are designed to separate investors from their money and not to help them actually succeed in reaching their investment goals. Think about this: If someone has a system that will turn a few thousand dollars into millions, why do they need to sell it?

The bottom line to this discussion is that successful investing for the long term will be based on fundamental analysis of the companies behind the shares. Dividend history and payments are a great way to track how well a company is doing, and an attractive yield is a great return in itself.

Here are three stocks currently out of favor with the market with great long term potential.

Tanger Factory Outlet Centers, Inc. (SKT) is a pure play owner of outlet style shopping centers. It is the only REIT focused on this type of retail space. Tanger has increased its dividend rate every year since the company’s 1996 IPO.

The recent “fake news” about the end of brick and mortar retail has driven the SKT share price down to around $18, compared to a high over $41 two years ago. The company is financially conservatively managed, and at some point, will resume a growth trajectory. Right now, value oriented investors can pick up shares with a 7.9% yield and annual dividend increases.

History shows that retail trends go through repeating cycles, and when retailers are again opening more stores than closing them, Tanger will be a great stock to own.

Aircastle Limited (AYR): is an aircraft leasing company that has almost 300 commercial planes leased to airlines around the world.

There are many factors that have “fake” news effects on the Aircastle share price. These include the global economic predictions, forecast travel plans, and the Boeing 737 Max problems. Good news is that Aircastle doesn’t own any 737’s.

Despite all the events that investors believe will affect the company’s results, Aircastle is a very profitable company with steady revenue and free cash flow growth. The dividend will be increased by 6% to 9% per year, generating attractive long term total returns, especially if you add shares on any dips.

Current yield is 6.0%.

CNX Midstream Partners LP (CNXM) is a is a master limited partnership that owns, operates, develops and acquires gathering and other midstream energy assets to service natural gas production in the Appalachian Basin in Pennsylvania and West Virginia.

This MLP is managed and sponsored by CNX Resources Corporation. The share values of both CNX and CNXM are down on lower natural gas prices. However, as a midstream services provider, CNXM operates as a fee based business whose revenues are not dependent on natural gas prices.

The MLP’s management team has stated they are targeting 15% annual distribution growth. Combine that growth with a current 9.7% yield and you have tremendous total return potential.

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Pot Stocks

4 CBD Stocks to Buy for Mainstream Marijuana Profits

acb stock Aurora Cannabis stock
Source: Shutterstock

[Editor’s note: This story was previously published in March 2019. It has since been updated and republished.]

Traffic stats don’t lie: among investment categories, few have the draw of legal marijuana. And within this broad segment, companies specializing in cannabidiol, or CBD, have generated significant buzz. But what exactly is this three-letter acronym, and how can CBD stocks boost your returns?

Let’s start with basic definitions. Cannabidiol represents one of several cannabinoids, or chemical compounds found in the cannabis sativa plant. But unlike the most famous cannabinoid tetrahydrocannabinol (THC), CBD does not trigger any psychoactive effect. In other words, users can enjoy this compound’s benefits without getting high.

This opens up profound opportunities for marijuana stocks that have exposure to CBD. First, since this compound inherently lends itself to medicinal use, it tends to be treated favorably by legislation. Most states allow CBD use for therapeutic purposes. Given political and public sentiment, it’s not inconceivable that all states will eventually green-light cannabidiol.

Second, CBD has the potential to help solve a huge societal problem. Turn on the news, and you’ll eventually find stories about the raging opioid crisis. What is less reported is that pharmaceutical companies contributed to the problem with highly addictive painkillers. Since CBD is not physically addictive, it could be a viable replacement for many addictive opioids.

Finally, the U.S. may be the leader of the free world, but it stymies itself with antiquated laws. Our neighbors to the north became the first G7 nation to legalize recreational weed, while we still classify cannabis as a Schedule I narcotic. Still, our laws will eventually reach the 21st century. When they do, marijuana stocks of all stripes should realize their full potential.

In the meantime, here are four CBD stocks to consider adding to your portfolio:

Tilray (TLRY)

Marijuana stocks

Source: ShutterstockWhen it comes to medicinal marijuana, few cannabis stocks have generated as much positive traction as Tilray(NASDAQ:TLRY). Last fall, TLRY stock soared to the stratosphere as the underlying firm received approval from the Drug Enforcement Administration to import weed for medical research.

While shares have since come down significantly from those highs, Tilray remains a powerful name among CBD stocks. Recently, management signaled that it will aggressively compete in the cannabidiol sector with its acquisition of Manitoba Harvest. Manitoba specializes in CBD-infused food and health products, providing Tilray a key advantage in the North American market.

From a technical perspective, speculators may want to dive into currently discounted levels. After the crazy phase in marijuana stocks dried up, several names fell under the radar. One of those is TLRY stock, which has mostly moved sideways this year.

But with CBD gaining momentum stateside, who knows how long this discount will last?

Aurora Cannabis (ACB)

Wait for the Next Big Correction to Jump on Canopy Growth Stock

Source: Shutterstock

Much of the enthusiasm towards Edmonton-based CBD (and THC) firm Aurora Cannabis(NYSE:ACB) came off the back of an analyst upgrade. Cowen Equity Research initiated coverage of ACB stock, rating it as “outperform,” and giving it a rich price-target premium.

But it’s also interesting to note why Cowen is so optimistic. Analysts there view favorable international opinion towards marijuana as being beneficial to ACB stock over the long term. It’s not an unreasonable thesis. Among CBD stocks, Aurora has made a significant dent in the global medical-marijuana field.

Plus, the company has a massive market down south. While we’re fiercely divided politically, marijuana legalization is something Americans agree on more than most things.

Hexo (HEXO)

TIlray stock is driven by hype, until it's not

Source: ShutterstockInvariably, marijuana stocks are incredibly risky. While legalization initiatives have opened opportunities, this is a double-edged sword as competitors swarm into the arena. What you’re left with are several companies like Hexo(AMEX:HEXO), which suffer from severely-challenged financials.

But despite the risks, cannabis investors should strongly consider CBD stocks like HEXO. Since cannabidiol doesn’t produce any psychoactive or addictive responses, it facilitates surprisingly broad synergies. A prime example is the budding relationship with marijuana firms and beverage-makers.

Last summer, Hexo entered a joint venture with Molson Coors Brewing(NYSE:TAP) to produce CBD-infused drinks. Naturally, HEXO stock jumped off the news before giving up those gains late last year.

However, shares are making a strong comeback this year, jumping to a 100% lead. While it’s incredibly volatile, further positive developments could easily lift HEXO stock to its prior highs.

BlissCo Cannabis (HSTRF)

cronos stock

Source: ShutterstockI always warn folks that cannabis and CBD stocks are risky because that’s God’s honest truth. But BlissCo Cannabis (OTCMKTS:HSTRF) is an entirely different ballgame. HSTRF stock is so speculative that it makes other companies in this sector look stable.

We can start with the fact that shares currently sell for 29 cents a pop. Unlike some of the established names, the historical trend for HSTRF stock is decidedly negative. Finally, I don’t think I need to say this but BlissCo has severe fiscal challenges.

So why am I mentioning this company? Simple…upside potential. Partnering with both medical professionals and alternative therapists, BlissCo is a known commodity in Canada’s medicinal-cannabis industry.

Year-to-date, shares are up nearly 39%. As BlissCo remains undervalued relative to its historical averages, there’s probably substantial room for growth.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

Dividends

Warning: These 10 Funds Could Pull a 2008 Repeat (sell now)

I want to show you 10 funds that yield up to 9.4%—and that you should sell now (or steer clear of if you don’t own them).

Of course, near-10% yields are attractive, and I often see attractive funds yielding as much as (and more than) the 10 funds I’ll reveal in a second. But sometimes a big yield is too good to be true, and that’s the case here.

The reason I’m saying this now? These funds have been on a tear in the last few months, which is far out of character for both them and their asset class.

I’m talking about utilities funds.

Utilities are typically seen as a boring investment and, historically, a good one to be in. An investor who stuck to just utilities over the last 20 years has crushed the S&P 500 SPDR ETF (SPY), even if they simply bought the Utilities Select Sector SPDR ETF (XLU) and left it at that:

“Boring” Picks Crush the Market

This is one reason why I love utilities for the long term, but sometimes the market gets irrational and bids these stocks up too much.

Now is such a time.

There are two trends at play here. The first involves all utilities funds; after a short dip in late 2018, investors are running back to utilities, as they are with many other investments. The idea is that utilities fell too hard in late 2018, creating value that needs to be scooped up now.

It’s a good hypothesis, and it’s true for many assets. But it’s not true for utilities.

Too High, Too Fast

What investors forget is that utilities didn’t go down in 2018; in fact, they were one of the few asset classes to have a positive year, gaining about 5%. That means they’re now up nearly 24% in the past year and 16.7% since the start of 2018.

That’s just too much too soon.

Why? Because utilities aren’t terribly surprising assets. They buy commodities and produce electricity and other, well, utilities for consumers, while hedging their commodity exposure. It’s a predictable industry, which makes for a strong cash flow and a high yield (XLU’s 2.9% yield is one of the highest among passive stock funds).

While that means XLU is best avoided now, there are also warning signs in the world of utility-focused closed-end funds (CEFs). Of the 10 utilities CEFs out there, seven have had year-to-date market-price returns exceeding their NAV returns—or the performance of their underlying portfolios:

With the exception of DNP, these funds have pretty much priced in their NAV returns (which are all exceptional) for 2019, which curbs their upside.

That might make DNP look appealing here—especially when you consider that it has a decent track record compared to its peers:

With an annualized 10.7% return over the nine-plus years since its IPO, DNP is just a bit better than a typical utilities CEF, even if it has trailed XLU’s 12.5% annualized return over the same period. But DNP’s reliable dividend and 6.7% yield more than make up for that. With this in mind, DNP isn’t a bad fund, despite the market privileging other utilities funds over it.

Unfortunately, that doesn’t mean DNP is an option for income investors right now. Remember, one of the key benefits of buying CEFs is getting a strong collection of investments at a discount, yet DNP currently trades at the second-highest premium of any utilities CEF:

While DNP’s 15% premium is nowhere near as massive as GUT’s near 40% premium, it’s still a large amount that could feasibly disappear any minute if the market decides to turn on utilities—which appears to be an imminent threat.

And while the discounted CEFs above could all be considered attractive, only GLU, DPG and MGU have discounts wider than their long-term averages. But in the case of GLU and DPG, that discount makes a lot of sense; both funds are duds, being the worst performers in the CEF utilities universe and trailing the index by a wide margin.

And as for MGU, its foreign exposure at a time when global growth is slowing and American growth is strengthening makes it a high-risk venture—which explains its big discount.

The bottom line? Utilities are a reliable sector for income, and utilities CEFs are a great high-yield way to buy into that sector, but now is clearly not the time to buy these funds.

Forget Utilities: This 10.7% Dividend Grew 150% (and it’s just getting started)

Now that we’ve covered the 10 funds you need to sell in this soaring market, let’s talk about what we’re going to buynow.

Because contrary to popular belief, there are still plenty of bargain dividends to be found out there—especially in CEFs.

Like the ignored fund my team and I just uncovered: it boasts something most people will tell you is impossible: a 10.7% dividend that’s growing triple digits!

That’s right: this unsung fund yields a mammoth 10.7% as I write, and its payout has exploded 150% in the last decade:

1 Click for a Massive Yield and Soaring Payout Growth

How does this fund do it?

My 10.7%-paying pick is run by a hand-picked investment “all-star team.” These pros have quietly assembled a “no-gimmicks” portfolio of value and growth stocks from across the economy, such as Visa (V), Microsoft (MSFT), Alphabet (GOOGL) and Abbott Laboratories (ABT).

I know what you’re going to ask next: how has this so-called “all-star team” performed in the past?

See for yourself:

A 10.7%-Paying Market Dominator

Best of all, this monstrous return includes dividends, a huge slice of it was in cash, thanks to my pick’s massive dividend payout.

Finally, this fund trades at an unreal 5.1% discount as I write. When you consider its market dominance, 10.7% dividend and 150% dividend growth, you can only come to one conclusion:

It’s only a matter of time before investors bid this CEF up to a huge premium—driving its price through the roof!

The time to buy is now.

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.
Options

Make This Covered Call Trade on Copper for a Quick 21%

The trade war with China is having far-reaching effects on the market. The impact is being felt across most industries and business types despite trade with China only accounting for a relatively small portion of GDP. It just goes to show how tied into the global economy most US companies are these days.

It’s also very interesting to see how traders are positioning themselves due to or in anticipation of the economic conflict. It’s clear that most of the short-term trades have been bearish (just look at chip makers and agricultural stocks for example). However, in the long-run it wouldn’t surprise me to see investors quietly loading up on good companies which will rebound when the trade war is over.

Of course, trying to time the end of the trade war is probably a fool’s game. Who knows how long this situation will drag on and what the results will be. It’s also impossible to know how the crowd will react to any piece of related news.

As I’ve already pointed out, actual trade with China is not a huge part of our economy. I believe the heavy selling in certain stocks has to do with lowered expectations more than anything. The market doesn’t like bad news in any form.

There is also the issue of interruption of the global supply chain. That may be more of a concern as it isn’t easily quantifiable. For instance, what happens to the US soybean crop if China is no longer a big buyer? It’s not just the farmers that are impacted. Think of the bulk transportation and the storage capacity involved.

There’s certainly more to tariffs than just paying a higher price for goods. The impact may not fully known for some time.

Still, it’s not hard to find some very interesting options trades which are likely related to effects of the trade war. I just came across an intriguing trade in Freeport-McMoran (FCX)a company most certainly influenced by the tariffs. FCX’s main product is copper, and in recent years, China has been the world’s biggest consumer of copper (a big component of industrial production and residential construction).

Related: Make this Trade on Silver for 18.6% Returns That Are Almost as Safe as Bonds

At least one strategist believes FCX may have limited upside through the summer. The trader executed a large covered call trade, which is moderately bullish for the stock. The trade generates a bit of income while allowing for some upside appreciation in the stock.

More specifically, with FCX trading at $10.28, the trader purchased 350,000 shares and sold 3,500 September 12 strike calls against the stock. The calls were sold for $0.44, which amounts to $154,000 in premium.

This covered call does a few different things. First off, the 44 cents in income provides a cushion down to $9.84 in the share price before the trader loses money. That 44 cents also provides a juicy 4.3% yield over a 4-month period. Annualized, that’s about 13%.

Furthermore, since the 12 calls were sold, there is upside potential in the stock up to $12. That’s an additional $1.72 that can be made, or 16.7%. All told, the covered call can make 21% in 4 months if FCX gets to $12 or above.

You can see from the chart that FCX has clearly not been a favorite of investors. However, this big covered call trade I just described could be a signal that some (likely savvy traders) believe the stock is near a bottom.

Moreover, this is a trade you could easily (and inexpensively) set up in your own account. Almost certainly, any positive news about the trade war will cause an upturn in the stock. And if not, you are still generating a nice yield to hold the shares through the summer.

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Source: Investors Alley

Growth Stocks

3 Small Caps That Could Be the Next Amazon Stock

When it comes to tech stocks, most investors think bigger is better. They believe the FANGs or dot-com survivors such as Microsoft (NASDAQ:MSFT) and Cisco(NASDAQ:CSCO) are the way to go in the sector. And there is some truth to that feeling. After all, these giants still produce billions in revenues, cash flows and profits. Heck, some of these giant tech stocks even pay hefty dividends these days.

However, bigger may not be better. This is especially true when it comes to tech stocks.

The truth is, the big boys aren’t the always the ones dominating their respective technology subsectors. In fact, there are many small- and mid-cap tech stocks that are the leaders. Moreover, they offer a bigger opportunity to find above-average growth in both revenues and profits. And they are able to grow their share prices much faster than the bigger tech stocks as well. After all, doubling a $1 billion market cap is much easier than a $1 trillion one.

For investors, the reality is, going small in the technology sector could be really smart and pay-off over the long haul. And these three small-cap tech stocks are the ones to buy.

Domo Inc (DOMO)

AAPL

Source: Shutterstock

Market-Cap: $989 million

There’s no secret that cloud computing is huge these days as Software as a Service (SaaS) platforms have become the rage with businesses. The problem is, there’s just so many of these firms. How do you analyze data from your Salesforce (NASDAQ:CRM) applications and Amazon (NASDAQ:AMZN) AWS services at the same time.

The answer is small-cap tech stock Domo (NASDAQ:DOMO).

Recently IPO’d unicorn tech-stock DOMO provides analytic data solutions for the cloud. The best part is that it isn’t trying to compete with the big tech names, but ties them together to provide customers the ability to get to the big picture. This strategy seems to be working, DOMO has more than 1,500 customers. And those customers are spending some big bucks for the firm’s tech. Last quarter, billings at Domo rose 35% year-over-year and total revenues grew by 31%.

Analysts expect that DOMO will continue to see continued success as more firms look to query their data across various platforms. And as the linkage between these platforms, the firm should be able to score additional customers and increase its offerings to existing ones. And yet, the firm still has only a $1 billion market cap. That leaves it plenty of room for capital appreciation.

Box (BOX)

Will Box Stock Be Bought Out… or Run Out?

Market-Cap: $2.82 billion

The collaborative workplace is here. Managing documents, products and other content across various locations and workers is now the norm for many businesses. Cloud computing specialist Box(NASDAQ:BOX) is facilitating that trend.

BOX offers a variety of apps and programs designed to help businesses facilitate collaboration and storage of everything from emails to jpg files. The idea is that work can flow between customers and employees of the firm — all on a secure network/platform. Enterprise seems to be keen on the idea — with BOX courting major customers like General Electric (NYSE:GE) and AstraZeneca (NYSE:AZN). As a result, BOX has experienced some torrid growth over its history. Since 2016, the firm has experienced a 23% compound annual growth rate in its revenues. Moreover, the firm has posted positive cash flows for the last five quarters.

And the gains can keep coming. BOX is currently working to score more contracts with the Federal Government to help with record safe-keeping and digitizing the government’s workload.

Now could be the best time to strike on BOX shares. Poor guidance outlook — thanks to the length of time it takes to score those government contracts — has pushed down shares. But with a huge customer base as well as overall long-term growth, BOX seems poised to win and be one of the best tech stocks around.

Etsy Inc (ETSY)

etsy stock

Source: Meaghan O’Malley via Flickr (Modified)

Market-cap: $7.58 billion

Brand recognition is key when it comes to internet properties. And when it comes to hand-made, art and one-of-one objects, Etsy(NASDAQ:ETSY) is the leader. This even Amazon hasn’t been able to compete in this arena.

And it turns out, that brand is worth a lot.

ETSY has now seen its eighth consecutive quarter revenue growth. And while that revenue growth did slip a bit last quarter, this shouldn’t worry investors. Partly because Etsy’s profits and margins have actually increased. The reason is that ETSY doesn’t store inventory, it just serves as middle-man to facilitate transactions between craftspeople and buyers. And its moat and brand-name make it the go-to website to do that.

Additionally, ETSY has been adding additional services to its menu of options. This includes promotion for sellers, facilitating transactions/personalized website design via its Pattern initiatives and more. As ETSY leans more on these products, revenues should once again resume and continue their pace of growth.

In the end, ETSY has positioned itself to be one of the top online merchants and tech stocks. With a market cap of only $7.5 billion, there’s plenty of potential down the road — even buyout potential.

Disclosure: At the time of writing, Aaron Levitt was long AMZN.

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Dividends

Dump These 5 High-Yield Funds Before They Blow Up Your Portfolio

Last week I was an invited speaker at the Las Vegas MoneyShow and made several presentations concerning income and dividend stock investing. I like the Q&A portion at the end of each talk. I benefit from learning what income focused investors are most interested in.

One topic that came up several times was my opinion in general about closed-end funds. A lot of these funds sport double digit dividend yields, which are catnip to income focused investors.

Closed-end funds (CEFs) are actively managed investment portfolios, whose shares trade on the stock exchanges. The closed-end part of the name is because these funds raise their initial capital with a one time sale through investment brokers and after that, the fund managers do not issue or redeem shares. The structure of CEFs produce a few interesting effects.

One is that share prices on the stock exchanges can be at significant premiums or discounts to the individual funds’ net asset values (NAV).

Another is that CEF fund managers cannot readily be influenced by share owners. Also, a lot of these funds are opaque concerning holdings and investment strategies.

It is my opinion that Wall Street firms use closed-end funds as a dumping ground for debt securities they manufacture that turn out to be more toxic than beneficial for investors in those securities.

Because of these reasons, I mostly stay away from the entire CEF sector. It would be too much work to analyze the hundreds of funds trading on the market to find the possible handful that are doing a good job. My recommendation to investors that ask me about CEFs is that there are better, safer ways to invest in high-yield securities.

Here are five CEFs with tempting yields where you should avoid that temptation:

Cornerstone Total Return Fund (CRF) has the stated goal of seeking capital appreciation with current income through investment in common stocks, preferred stocks and convertible stock of large, mid and small cap companies and investment grade U.S. debt securities.

Current yield on the shares is an eye-popping 20.4%. A little digging shows why the yield is so high.

The fund’s policy is to pay out monthly dividends at a rate equal to 21% of the net asset value based on the NAV of the previous year.

The fund’s literature states “The Distribution Percentage is not a function of, nor is it related to, the investment return on a Fund’s portfolio.”

Basically, the big yield on CRF is the fund paying you back your own money. To add insult, CRF trades at a 7% premium to NAV. To buy the shares you pay $1.07 for a dollar’s worth of assets, which are then paid back to you as “dividends”.

Cornerstone Strategic Value Fund (CRM) seeks long term capital appreciation through investment in global equity securities. Like Cornerstone above, this fund also yields 20% because it has the same dividend policy as its stablemate CRF.

Again the 20% is not a real return, but instead is likely to be the fund paying back your own capital. CRM currently trades at a 6% premium to NAV. These two funds, CRF and CRM are ones that I often get asked about. Looking at the distribution history, the dividends have ranged between 50% and 100% as return of capital.

Nuveen Credit Strategies Income Fund (JQC) currently yields 15% and trades at an 8% discount to NAV. The fund invests in corporate debt securities or loans.

At the end of 2018 the fund adopted a capital return plan where now a portion of each dividend is explicitly return of capital. 63% of each monthly dividend is a return of your own money.

I think that is a pretty sneaky way for a fund management company to attract investors with a big stated yield. At least they make it very clear in the fund’s website exactly what they are doing.

But how many investors take the time to dig through a CEF’s website to see where the dividends come from?

In contrast to the previous funds Oxford Lane Capital (OXLC)reports that 100% of its dividends are earned income. The fund sports a 15% yield.

The danger comes from its investment portfolio of debt and equity tranches of CLO vehicles. CLO means collateralized loan obligations. These are the type of securities manufactured out of pools of loans that caused the 2007-2008 financial crisis.

There is a huge amount of risk in this fund’s portfolio. The management team uses almost 40% leverage on the portfolio to leverage the highly leveraged securities it holds.

Finally, the shares trade at a 40% premium to NAV. Holy cow! What a time bomb.

Eagle Point Credit Company LLC (ECC)also invests primarily in equity and junior debt tranches of CLOs. As I noted above, CEFs are a popular home for high risk securities.

For the last seven months 7 cents out of each 20 cent monthly dividend has been classified as return of capital, so the fund is not earning the dividends.

Current yield is 13.8% and the shares are trading at a 22% premium to NAV. That type of premium shows investors are buying shares without any understanding how the fund operates.

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Source: Investors Alley

Pot Stocks

Medical Marijuana States See Major Drop in Opioid Prescriptions

Chart - Medical Marijuana States See a Decline in Opioid Prescriptions

In the late 1990s, pharmaceutical companies began promoting prescription opioids as a treatment for pain. Pharmaceutical companies and medical organizations assured doctors that there was a very low risk for addiction. So doctors began prescribing them at higher rates.

Fast-forward to today. Prescription opioids are now known to be dangerously addictive drugs.

According to the latest CDC data, which was collected in 2017, more than 47,000 Americans died that year from opioid overdoses, including prescription opioids. And about 1.7 million Americans suffered from substance use disorders related to prescription opioid pain relievers.

The crisis would likely be worse if it wasn’t for medical marijuana. Medical marijuana, as we’ve reported many times before, has the potential to treat a long list of medical conditions, including pain, epilepsy and others that are often treated with opioids.

By 2017, 29 states had legalized medical marijuana. And that year, nearly every state that legalized medical marijuana saw a decrease in opioid prescription rates from previous years. Today we’re going to look at three states in particular.

Our chart shows the opioid prescription rate per 100 people in New York, Massachusetts and Minnesota in 2010 (pre-medical cannabis legalization) and 2017 (post-legalization). And the difference is stark.

Massachusetts legalized medical marijuana in 2013. From 2010 to 2017, its opioid prescription rate dropped 41%. Minnesota, which legalized medical marijuana in 2014, saw a 31% drop. New York also legalized medical marijuana in 2014. Its opioid prescription rate fell 25%. New York’s 2017 opioid prescription rate was the lowest in the country.

New York has been building on this progress. In 2018, New York lawmakers authorized the use of medical marijuana to treat opioid addiction.

Enlisting medical cannabis in the fight against the opioid crisis is a smart move – not just for patients, but for the government too. Researchers from the University of California San Diego and Weill Cornell Medical College discovered that medical cannabis was associated with a nearly 30% reduction in Schedule III opioids received by Medicaid patients.

“[I]f all the states had legalized medical cannabis by 2014, Medicaid annual spending on opioid prescriptions would be reduced by $17.8 million,” the study projected.

This is why medical cannabis legalization is a no-brainer. Legalization means fewer patients are forced to settle for addictive (and sometimes ineffective) drugs with nasty side effects. More patients are able to turn to cannabis as a safer option. And the government saves millions of dollars.

Medical marijuana is making a difference. The reduction in opioid prescription rates is a sure sign of that.

Good investing,

Allison Brickell

Assistant Managing Editor, Early Investing

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Source: Early Investing

Dividends

3 “Tariff-Proof” CEFs You Can Buy Now (7% dividends and upside)


You’re no doubt wondering if there’s anywhere you can invest and still get a decent return—without wincing every time you open your brokerage account.

Good news: there is just such a place. And today I’m going to show it to you—along with three specific “crash-resistant” funds yielding up to 7.1%.

The magical place I’m talking about is an often-ignored corner of the market called closed-end funds (CEFs).

Steady Dividends for Rocky Markets

There’s a weird twist that lets CEFs pay us dividends of 7.1% (and a lot higher) without exposing us to the risk of a surprise payout cut.

It comes down to the fact that several CEFs’ prices (on the open market) trade at a discount to the per-share net asset value (or the liquidation value of their portfolios).

In English?

This means that a CEF’s dividend yield based on NAV—the value that really matters to fund managers—is lower than the yield on market price. That simply makes the dividend easier for management to cover than you might think if you just looked at the “headline” yield.

Aside from a safe yield, these discounts to NAV also give us something else: bargains! Like these three ridiculously cheap, high-yielding and—most important—low-volatility funds:

CEF Pick #1: A Mega-Cap Fund With a Mega 6.8% Dividend

The Nuveen Dow 30 Dynamic Overwrite Fund (DIAX) is a large-cap index fund with a difference: it also sells call options against its portfolio.

Call options are a kind of insurance that essentially protects investors if they’re short the market and think it’s going to go down. DIAX sells those short sellers their insurance, meaning DIAX’s options will go down in value when the market goes up.

That’s one way that DIAX limits its downside. But its downside is already theoretically limited by its mandate: to buy Dow Jones blue-chip stocks. That focus on huge, well-established companies has helped the fund decline a bit less than the S&P 500 itself in this latest selloff:

A Lighter Downside

But that isn’t the best part. DIAX gets cash for selling those call options, and it returns that cash to shareholders. As a result, this fund yields 6.8% based on its market price, a whopping nine times more than the SPDR Dow Jones industrial Average ETF (DIA), which holds the exact same stocks.

CEF Pick #2: A Tax-Free 5.1% Dividend Perfect for the “Tariff Tantrum”

Of course, the best way to avoid stock-market volatility is to avoid stocks altogether. But how do you do that without getting a 0% (and worse, after inflation) return in cash or locking your cash up in Treasuries for 10 years for a crummy (and taxable) 2.4% yield?

The answer? CEFs that hold municipal bonds, such as the Invesco PA Value Municipal Income Trust (VPV). This fund pays a nice 5.1% yield on its market price (4.7% based on NAV) that in reality is even higher for many folks, as that dividend is tax-free.

VPV also lacks the volatility of the market, and the best part is that it’s on sale:

A Sale Appears

With a 9.1% discount to NAV, you’re getting $1 of assets for less than a buck. But since the fund recently traded at a smaller discount, you’ll also likely have a chance to sell VPV for a gain if you hold for just a few months. Plus, the stock is much less volatile than the market (blue line below):

A Smoother Ride 

With nearly half the volatility of the SPDR S&P 500 ETF (SPY), VPV will not see 20% drops in weeks like stocks do. But it will keep paying its big tax-free income stream, month in and month out.

CEF Pick #3: A Bargain Real Estate Buy With a 7.1% Payout

With 2008 being still relatively recent history, it’s easy to think of real estate as risky. But not only is real estate less volatile than equities over the long term, it also beats the market by a pretty big margin.

Real Estate for the Win

The SPDR Dow Jones REIT ETF (RWR) has crushed the S&P 500 over the long haul, with over double the total return. Note that this includes the massive bear market caused by the subprime mortgage crisis, which hit real estate much harder than stocks. Yet RWR is still the big winner.

We can do better than RWR’s 2.2% yield, though. The RMR Real Estate Income Fund (RIF) has a 7.1% yield on market price and trades at a huge 20.8% discount (giving it just a 5.6% yield on NAV). There’s a reason for that discount: RIF’s long-term total returns of 4.3% on NAV are far worse than those of the competition. But that’s history. Thanks to some management adjustments, RIF has been doing much better, and has even started to outperform the REIT index fund:

Outperformance—Finally!

When the market realizes RIF isn’t the dud it used to be, expect its 20% discount to disappear—meaning some very nice price upside to go along with the fund’s 7.1% income stream.

NEW: The 4 CEFs You Must Buy Now (8.7% Dividends, Double-Digit Gains Ahead)

The story you just saw with RIF—a fund that has demolishes the market but is still cheap today—is something I see a lot in CEFs.

A situation like that really is the “sweet spot”: the outperformance shows that management has the chops to beat the market, while the yawning discount to NAV sets you up for even more upside!

And you’ll grab a 7%+ cash dividend while you wait for those gains to kick in!

That’s the exact setup you get with one of my four favorite CEFs now, which I’ll show you when you click right here.This bargain-priced fund focuses on high-yield utilities and real estate stocks, and yields an impressive 7.9%.

For good measure, it’s also thoroughly bested the market this year, with a 22% total return:

A Market-Beating Fund

Despite that gain, this fund is still cheap, trading at a ridiculous 13% discount to NAV. That’s why I’m calling for 20% price upside in the next 12 months, to go along with that rich 7.9% payout!

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.

Source: Contarian Outlook

Dividends

Alert: This Life-Changing 7% Dividend Is Vanishing Fast

If you’re like, well, everybody, you’ve been mulling these three questions lately:

Is this “tariff tantrum” the end of the bull market? Is it time to sell? Or buy more?

I’ll deal with the first question in a second. Meantime, let’s start with the second one: no, it is not time to sell. Because after all, we need to stay invested to keep our dividend checks rolling in.

What about buying?

Yes, it’s still a great time to buy—especially in one corner of the market where 6%+ dividends are everywhere: closed-end funds (CEFs).

In a moment, I’ll reveal a CEF whose yield recently soared to nearly 7%! That makes it more than worth your attention, as buying now lets you “lock in” that payout before the next rebound drives the share price up—and the yield down as the stock climbs.

Before we get to that, though, let’s dive into what this trade melee means, and doesn’t mean, for stocks.

This Economy Is Already “Tariff-Tested”

The market has clearly spoken, and it hates the new 25% tariffs on $540 billion in Chinese imports. After all, tariffs raise prices on consumers and sideswipe growth, right?

Well, it’s not that simple.

Consider the previous round of tariffs: at 10%, they didn’t result in higher prices (inflation has actually slowed in the last three months). They didn’t hurt GDP growth, either: first-quarter GDP was up 3.2%, blowing away expectations of 2%.

And while it may be true that the economy could handle 10% tariffs, and not necessarily these far bigger 25% tariffs, that argument misses the point. The thing to keep in mind here is that this market’s reaction to the new tariffs is just plain silly.

That’s where our opportunity comes in.

Here’s what I mean: in total, the tariffs will increase the cost of Chinese imports by $80.9 billion. That may sound like a lot, but it’s just 0.4% of America’s GDP—so tiny it’s almost unmeasurable!

Still if the market wants to price in the risk of a shakier economy that’s fine: but how big should that discount be? There’s no right answer to that, but I can tell you the wrong one: the amount that stocks have already lost.

As you can see, the S&P 500’s single-day loss on Monday was more than the total value of all imports from China! What’s more, this number doesn’t include the losses for stocks not in the S&P 500. For instance, the Russell 2000 has lost $273.6 billion, and the entire market has already lost a bit less than $1 trillion, even after Tuesday’s mini-recovery.

This 6.8% Dividend Is Built for a Correction

Clearly this market swing doesn’t make any sense. And situations like that make a CEF like the Nuveen S&P 500 Dynamic Overwrite Fund (SPXX) particularly appealing.

SPXX holds top-quality dividend payers (and growers), many of which are have been hammered in the panic—and therefore have plenty of built-in upside. Those include companies without much China exposure, like JPMorgan Chase & Co. (JPM), Johnson & Johnson (JNJ) and Berkshire Hathaway (BRK.A).

SPXX Lets Us Pick Up Strong Stocks and a 6.8% Dividend

There’s more, too, because SPXX also uses covered calls (a type of option that the fund’s managers sell against the shares SPXX holds) to generate extra income, so the fund can deliver that 6.8% dividend to investors.

These options trades also smooth out SPXX’s volatility, meaning it has posted a smaller drop during this latest correction, as its options go up while the market falls:

SPXX Rarely Dives as Far as the Market

Finally, high dividend yields like that of SPXX give you a better shot at living on dividends alone in retirement—and not having to sell your stocks into a downturn like this latest one to generate extra income.

Doing This Would Be a Big Mistake Right Now

In light of the big hit stocks took in late 2018, you might still be hesitant to buy SPXX—or any stock fund—during this latest volatility. That’s understandable, but you’re making a mistake if you let your 2018 fears keep you on the sidelines.

Here’s why.

While the trade war was one reason for the late-2018 downturn, it was really just a sideshow: that collapse had the Federal Reserve’s name written all over it.

With the Fed raising interest rates at a breakneck pace in 2018, an inverted yield curve looked inevitable, and parts of the Treasury-yield curve did briefly invert. Since an inverted yield curve is the most reliable recession indicator in the world, the fear behind the late-year collapse was understandable.

But the Fed isn’t raising rates anymore.

In fact, the Fed has made it clear that it will not raise rates in 2019, and futures markets are betting that rates may actually go down in 2019:

Possible Rate Cut Could Ignite Stocks—and CEFs

Source: CME Group

Let me leave you with this: the Fed is much more important to the economy than politics could ever be. The Fed’s easy monetary policy is a big reason why GDP growth was 3.2% at the start of the year, and it’s also why company sales and profits will stay strong.

It’s only a matter of time before the market realizes this and regains its footing (though we’ll likely see some bumps in the road first).

Revealed: 4 Shocking Selloff Bargains Yielding Up to 10.7%

SPXX isn’t the only terrific opportunity this correction has handed us. It’s far from the highest yielder worth jumping on, either.

For example, consider the ignored CEF my team and I have uncovered: it boasts something most people will tell you is impossible: a 10.7% dividend that’s growing triple digits!

That’s right: this unsung fund yields a mammoth 10.7% as I write, and its payout has exploded 150% in the last decade:

1 Click for a Massive Yield and Soaring Payout Growth

How does this fund do it?

My 10.7%-paying pick is run by a hand-picked investment “all-star team.” These pros have quietly assembled a “no-gimmicks” portfolio of value and growth stocks that are great “buy the dip” opportunities now.

I’m talking about the likes of Visa (V), Microsoft (MSFT), Alphabet (GOOGL) and Abbott Laboratories (ABT).

I know what you’re going to ask next: how has this so-called “all-star team” performed in the past?

See for yourself:

A 10.7%-Paying Market Dominator

Best of all, as this monstrous return includes dividends, a huge slice of it was in cash, thanks to my pick’s massive dividend payout.

Oh, and if you hear “investment all-star team” and think “high fees,” fear not. This fund charges just 1.01% of assets, one of the lowest fees in the CEF universe!

Finally, this fund trades at an unreal 5.1% discount as I write. It’s only a matter of time before that shifts to a massive premium, given this fund’s market dominance, 10.7% yield and 150% dividend growth.

The time to buy is now.

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.

Source: Contrarian Outlook

Uncategorized

MoneyShow Crashes The Market

The Las Vegas MoneyShow kicked off on Monday with a 600 point drop in the Dow Jones Industrial Average. Not a good stock market start for a conference focused on investment strategies and idea.

My first presentation was one of the earliest on the schedule for Monday morning. The groups I talked to were very interested in learning about dividend-centric strategies that don’t rely on share price appreciation.

Over the last five years, my presentations have evolved to spend more time on developing individual portfolio strategies. I now like to talk with investors about developing individual strategies.

The fact is that without an investment plan, most investors are doomed to the greed and fear cycle of buying high and selling low. Whatever strategy you develop should be designed to take the emotion of your investment decisions.

Here is a good anecdote from this year’s MoneyShow so far. I know the reps and portfolio managers from Reaves Asset Management well.

They have done exclusive online conference calls with my subscribers. I ran into one of the Reaves guys in the hall, said hi, and he was happy to let me know that utilities were the one stock market sector having a up day.

The folks at Reaves Asset Management run private money and a pair of publicly traded utility focused funds. The Reaves Utility ETF (UTES) is the only actively managed utility stocks focused ETF.

The fund has consistently out performed (by a small amount) the utilities index since its 2015 launch. Through April 30, over the last year, UTES has returned 18.2%. To compare, for the same period the SPDR S&P 500 ETF (SPY) returned 13.3%.

UTES is a nice ETF to hold in turbulent times for the stock market.

My presentations are mostly about strategies and techniques individual investors can use to build their own portfolios. However, I know the attendees love to hear stock ideas, and one from my first presentation was also one of the few stocks going up while the market went steeply down.

That stock is NextEra Energy Partners (NEP). This company is in the “Yieldco” category, similar to sponsored oil and gas infrastructure asset stocks.

NEP owns interests in wind and solar projects in the U.S., as well as natural gas infrastructure assets in Texas. The shares yield around 4% and the dividend grows every quarter.

My morning presentation was one of three in what the MoneyShow calls a Master Class. There were three dividend investing experts speaking. One of the others very much likes a stock that has done very well for my newsletter subscribers.

The company is Arbor Realty Trust (ABR), a commercial finance REIT. This stock has had a great run over the last two years, and its nice to see another well respected analyst express a very positive opinion about the stock’s future. ABR yields 7.9% and has been growing the dividend.

Final note on Las Vegas hotels. I can’t stop turning the wrong way every time I come off the elevator. I know I do it so second guess my first choice and it still turns out to be opposite of the direction I wanted to go.

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