If you’re like many income investors I hear from, you’re probably worried that 2019 is already shaping up to be a repeat of 2008. The media doesn’t help – the talking heads like to conjure up fear because it draws eyeballs to the TV screen and clicks to Internet articles.

But what if they’re right? In a moment we’ll discuss the safest dividends for a serious pullback.

First, let me calm you down and add that a 2008 rerun is not our most likely scenario. As generals tend to fight the last war, investors tend to fear the last bear market. The next bear is likely to have its own unique “charm” – causes and effects – and we’d like to figure out that flavor ahead of time.

If there’s more to this pullback than we’ve seen, then its affinity for utility stocks is worth noting. The S&P 500 made its recent high on September 20, but don’t tell that to these dividend payers because they’ve shrugged off the broader market’s pullback

This Bear’s Favorite Buy: Utilities?

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

The problem with “dividend desperation” – paying too high a price for too low a yield – is that you end up collecting your payout but losing as much or more in price when the stock’s multiple contracts to its usual levels. And that’s exactly what’s played out with DUK and SO. Their price-to-earnings (P/E) ratios have contracted by 5% and 6% respectively as investors pay less for the same dividend. This has resulted in total returns of… not much:

Our Utility Pans Treaded Water

Is this recent “divergence” between these two large utilities and the broader market a significant tell? Perhaps, but neither stock interests me yet because both are still pricey. Their current P/Es, still around 20, are higher than they’ve been over much of the past decade. And their yields, at 4.3% and 5.4% respectively for DUK and SO, aren’t yet high enough to qualify for our 8% No Withdrawal Portfolio.

Fortunately we don’t have to settle for these pedestrian utility yields or their expensive stock prices. We can run these stocks through my Dividend Conversion Machine to double their yields to 8%, 9% and more – without adding any additional risk!

A Dividend Party Like It’s 2009

Nobody wants a repeat of 2008, but everyone wants another chance at 2009! Unfortunately most investors were too scared then to take advantage of once-in-a-lifetime yields. Our two utilities, for example, were paying their highest levels in years:

Generous Dividend Yields – For a Moment

More dividends for your dollar. Such were the “good times” that income investors could have enjoyed in 2009:

Why am I living in the past and telling you this now? Isn’t this an opportunity resigned to history forever? Fortunately NO – I’ve actually found a secret way for you to “force” blue chip names just like these to pay you massive, 2009-style dividend yields today.

Just Released: How to “Force” a 7.5% Dividend From Duke Energy

I’ve found 4 mysterious “Dividend Conversion Machines” that let you rewind the clock: buy stocks like Duke, but instead of grabbing today’s 4.4% dividend, you’ll get the same incredible 7.5% CASH payout folks who bought in 2009 bagged instead!

But there’s a vital difference: you won’t have to take a stomach-churning plunge to get it, like you would have back then.

Sure, handy slogans like “Buy when there’s blood in the streets” are easy to say. But actually overcoming fear and hitting the buy button at a time like that is almost impossible for most people.

But with these 4 amazing “Dividend Conversion Machines,” you’ll grab the same massive dividend yields the best blue chips were paying in that fleeting moment back in 2009 right now—TODAY.

And these life-changing payouts are safe, backed by these very same household-name stocks.

Massive Upside and 7.5% to 8%+ Dividends—in 1 Buy

What’s more, you can grab these lofty payouts whenever you’re ready: all at once, on an automatic yearly or monthly schedule … or simply whenever you have new money to invest.

It’s all up to you!

Best of all, each of these 4 incredible investments are about to explode and give us massive price upside, too.

How massive?

I’m talking 20%+ yearly price gains, on top of dividends of 8%, 10% and up—without having to buy in the middle of a meltdown, like our 2009 buyers did.

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

Investing in stocks with strong dividend growth has historically proven to be a powerful total return strategy. Mathematically, for a stock to stay at a certain yield, the share price must increase at a rate that equals the annual dividend growth rate. Long term results show that dividend growth stocks produce average annual returns that end up very close to the average dividend growth rate plus the average dividend yield.

Energy infrastructure stocks have a long-term record of attractive current yields and steady dividend growth. These are the companies that own pipelines, storage facilities, and loading/unloading terminals.

The energy commodity crash of 2015-2016 forced a lot of companies providing infrastructure services to restructure their growth plans and strengthen the balance sheets. A further drag on the energy infrastructure sector was that many of the companies in the group were organized as master limited partnerships (MLPs).

Over the last three years, MLPs have gotten a bad rap from investors. Few investors want to jump into a sector where values are falling and there are additional tax reporting requirements.

While many energy midstream (another term for the infrastructure sector) companies chose to cut or stop growing dividend rates, a handful of quality businesses have continued or restarted dividend growth. However, the market has not rewarded stocks with growing dividends with higher share prices to match the dividend increases.

In the midstream group, dividend cuts have resulted in lower share prices, but dividend increases have not. Currently dividend growth by midstream companies has not resulted in matching share price gains. The result is attractively high yields and the likelihood that share prices could move significantly higher to match both recent and future dividend increases.

Let’s take a look at three high-yield stocks from the energy sector to consider for attractive total return potential going forward.

Kinder Morgan Inc. (NYSE: KMI) is one of the largest energy infrastructure companies in North America. The company owns an interest in or operate approximately 84,000 miles of pipelines and 152 terminals. The pipelines transport natural gas, gasoline, crude oil, carbon dioxide (CO2) and more. Terminals store and handle petroleum products, chemicals and other products.

At the beginning of 2016, the KMI dividend was slashed by 75% to a $0.50 per share annual rate. For the 2018 first quarter the dividend was increased by 60% to a current $0.80 annual rate.

Management has stated the dividend will increase by 25% for 2019 and 2020. Dividends are expected to continue to grow strongly after 2020. In contrast the KMI share price was above $22 at the end of 2016 and now trades around $16.

The market has not yet rewarded the strong resumption of dividend growth with a higher share price.

KMI yields 5.0%.

Magellan Midstream Partners LP (NYSE: MMP) is a publicly traded oil pipeline, storage and transportation company organized as an MLP. Currently, Magellan has 9,700-mile refined products pipeline system with 53 connected terminals as well as 26 independent terminals not connected to the pipeline system and an 1,100-mile ammonia pipeline system.

Also owned are 2,200 miles of crude oil pipelines and storage facilities with an aggregate storage capacity of about 28 million barrels, of which 17 million are used for leased storage.

The company operates five marine terminals located along coastal waterways with an aggregate storage capacity of approximately 26 million barrels.

For investors, Magellan has increased its dividend rate for 17 straight years. Unlike the typical MLP practice, the company has not issued additional equity to fund growth. Internal capital generation pays for growth projects.

The MMP distribution increases every quarter, currently at a high single digit growth rate yet the current unit price is down 28% over the last two years.

Current yield is 6.9%.

EQT Midstream Partners LP (NYSE: EQM) is an MLP that owns and operates a natural gas transmission and storage system serving the Marcellus and Utica basins.

The company owns a 950 mile FERC-regulated interstate gas pipeline that connects to seven interstate pipelines and is supported by 18 natural gas reservoirs. EQM has been a high distribution growth rate MLP, with the payout to investors growing at a 20% plus annual clip for the past five plus years.

Despite the distribution growth, the EQM value has dropped by 45% over the last two years.

Going forward, the company expects to continue distribution growth at a high single digit/low double digit rate.

Add that growth to the current 10% yield and you get very attractive total return potential.

Starting today you can stop worrying about the market and instead fundamentally transform your income stream from a string of near misses to a steady, reliable flow of income right into your bank account.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.

Each year I am asked to participate in the MoneyShow “Top Picks” report. The folks at MoneyShow “ask the nation’s leading advisors for their favorite investment ideas for the coming year.” The Top Picks are run in series in January on the MoneyShow.com website. Highlights of the picks will also be featured on Forbes, TheStreet and on Yahoo! Finance.

The request is for two stock recommendations. One as an aggressive stock bet and the other as a conservative stock selection. Today I am sharing the two stocks I sent in to the MoneyShow editors.

My aggressive stock pick for 2019

Antero Midstream GP LP (NYSE: AMGP) is an energy midstream services company in transition. The company came to market with a May 2017 IPO. The assets at that time were general partner incentive distribution rights (IDR) ownership interest in high growth, midstream MLP, Antero Midstream Partners (NYSE: AM). The MLP was sponsored and controlled by Marcellus natural gas producer Antero Resources (NYSE: AR).

Complicated, multi-publicly traded entity structures were the vogue in the energy sector until energy commodity prices and energy sector stock prices crashed in 2015-2016. Over the last two years (2017-2018) the MLP sector, related infrastructure stocks, and their sponsor companies have announced simplification events to hopefully make the resulting business structures and forecast results more appealing to investors. On October 10, 2018 the Antero companies announced a simplification transaction that will close in the first quarter or 2019.

The transaction involves AMGP acquiring all the AM units, and then changing its name to Antero Midstream and using the AM stock symbol. For now, call the resulting company new AM. The effect of the transaction will be to turn the current Antero Midstream Partners into a C-Corp and the elimination of the IDRs paid to the general manager. This means starting in 2019, the current AMGP, which derives its revenue from the IDR payments will change into a high dividend growth midstream services provider. This discussion is about the soon to be Antero Midstream Corporation — new AM.

Antero Midstream will be a roughly $10 billion market cap energy midstream company focused on natural gas gathering and compression for Antero Resources in the Marcellus and Utica Shale plays. The company also provides wellhead water services (fresh water delivery and waste water takeaway) and owns one take away natural gas pipeline. Currently about 65% of EBITDA is from gathering and compression, with the remaining 35% from water services.

The growth of AM revenues depends on production growth from Antero Resources. Antero is the largest natural gas liquids (NGLs) producer in the U.S., across all energy production areas. The exploration and production company hold the largest core, liquids rich inventory of production sites in Appalachia. Of the undrilled locations in the region, Antero has rights to 40% of the total. Production growth from Antero Resources is forecast to generate 50% compounding annual gathering and processing volume growth through 2021.

This growth in throughput will fuel cash flow and distribution growth for Antero Midstream. The company projects 27% annual distribution growth through 2021. The midpoint of dividend guidance for new AM in 2019 is $1.24 per share.  The AMGP Q3 dividend annualized is $0.576 per share. With a mid-teen share price at the end of 2018 the market isn’t close to factoring in the higher dividends for 2019 and the future dividend growth prospects. AMGP evolving into the new AM is one of my highest conviction total return prospects for the next three years. To keep the yield at the current 4%, AMGP at the end of 2018 must double in 2019.

My Conservative stock pick

Starwood Property Trust, Inc. (NYSE: STWD) is a finance REIT whose primary business is the origination of commercial property mortgages. As one of the largest players in the field, Starwood Property trust focuses on making large loans with specialized terms. This gives them a competitive advantage over banks and smaller commercial finance REITs.

Over the last several years, the company has diversified its business, branching into commercial mortgage servicing, acquiring real equity properties with long term revenue stability, and recently a portfolio of energy project finance debt. This diversification will allow Starwood Property Trust to thrive and continue to pay the big dividend in any financial environment.

In the commercial loan business, over 95% of the commercial mortgage portfolio has adjustable interest rates. This means that as the Fed increases interest rates, Starwood’s net income per share will grow. This REIT provides an excellent hedge against rising rates.

In recent years, the company has acquired what is now the largest commercial mortgage servicing firm. That arm of the business handles servicing, foreclosure workouts (for fees) and the packaging of smaller commercial mortgages into mortgage backed securities. This business segment would see the fees increase exponentially in the event of a recession where commercial property owners were forced to let go back to the lenders.

In addition to the finance side of the company, Starwood has acquired selected real properties, including apartments, regular office buildings, and medical office campuses.  According to STWD’s CEO, “All of the wholly-owned assets in this segment continues to perform well with blended cash-on-cash yields increasing to 11.4% and weighted average occupancy remain steady at 98%.”

The property segment provides assets with long-life revenue streams to offset the shorter term rollover schedule of the commercial mortgage portfolio. Real assets also add depreciation to the income statement, shielding cash flow.

In mid-2018 the company acquired a $2.5 billion energy finance business from General Electric. The loan book is non-recourse to Starwood Property Trust. Starwood Capital, the private equity manager of STWD, already had energy finance experts in house. This business segment has significant potential for growth.

This diversification of business segments by Starwood Property Trust is what separates this commercial finance REIT from its more narrowly focused peers. STWD has paid a $0.48 per share quarterly dividend since the 2014 first quarter. My investment expectation is that the dividend is secure, and I want to earn the 8.5% to 8.8% dividend year-after-year.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.

Thanks to the December selloff, it’s relatively easy to find 9% yields. The stock market was a relentlessly receding tide in the fourth quarter, which is bad for “buy and hope” investors but quite helpful for income specialists like us.

Let’s look first at real estate investment trusts (REITs). Many now pay 9% – some good, some bad. The main index Vanguard Real Estate ETF (VNQ) has only paid this much (4.9%) twice before in the past ten years:

VNQ Is Rarely This Generous

By cherry picking the lot we can find 49 stocks paying 9% or more. But we should avoid names like Government Properties Income Trust (GOV), which frequently pops up on cute recession-proof dividend lists.

Most of the company’s income comes from government entities, so it seems like a smart way to potentially tap Uncle Sam for rent checks. However, its share price is down 66% in five years. Even with the supposedly generous payout, GOV investors have the taste of stale government cheese in their mouths.

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

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

Stay away from this sketchy situation.

Moving Beyond the Pure Landlords

When considering the 9% payers, we should look beyond the landlords collecting rent checks. These firms carry the REIT corporate structure so that they can avoid paying taxes! By doing so, they agree to dish most of their dividends to shareholders.

They are often misunderstood, hence their high payouts – and opportunities for us. For example, let’s consider Arbor Realty Trust (ABR), which makes loans for commercial and multifamily properties between $750,000 and $5 million. This is a niche banks don’t serve much these days.

Arbor is masterfully run by Founder and CEO Ivan Kaufman. Both an operator and shareholder, he is able to peer past Wall Street’s quarterly treadmill to made smart long-term decisions. Ivan has been able to find better business opportunities than slum-lording old government properties:

A Tale of Two 9%+ Payers

Contrarian 9%+ Opportunities in CEF-Land, Too

If you’re smart about your CEF (closed-end fund) purchases, you can diversify your portfolio and fortify your dividend stream. You can even buy these vehicles:

1. For 9% yields or higher,
2. And at discounts so that you can 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! You can literally buy a dollar for less.

And even though stocks-at-large are looking quite precarious today, this scary 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 drumbeat is in their heads, and they’re concerned that their funds are going to keep dropping in price.

In recent years, the bad rap on bond CEFs is that they couldn’t thrive in a rising rate environment. Now, the Fed is ready to hit “pause” indefinitely (traders are pricing in only a 50/50 chance of any rate hike in 2019). Yet basic investors are selling them in a liquidation panic.

Please, don’t follow this misguided herd. Instead, let’s consider a couple of contrarian ideas with big upside potential.

The Kayne Anderson MLP Investment Fund (KYN) pays an amazing 11% today. It holds a collection of master limited partnership (MLP) stocks. Most MLPs will kick you a K-1 tax form around your return deadline and annoy you and your accountant, but KYN gets around this by issuing you one neat 1099 (which is not nearly as messy).

Plus, when energy is out of favor, you can buy KYN for less than the value of the stocks it holds. Today, its portfolio is selling for just 94 cents on the dollar. That’s about as cheap as you’ll ever see it:

Lose the K-1 Hassle and Bank an 11% Yield (at a Discount)

Since KYN’s holdings pipe energy around, it tends to trade with oil prices. A freefall the goo has sent MLPs spiraling lower. When energy prices eventually find a bottom – probably sometime in 2019 – this will be a compelling yield plus upside play.

Finally, let’s give some turnaround credit to Aberdeen’s Asia-Pacific Income Fund (FAX). I issued a sell recommendation for FAX in May 2018 because its NAV was heading the wrong way. Rising rates were pressuring the value of the fund’s fixed-rate bond portfolio, and those bonds weren’t paying enough for FAX to pay its dividend without price appreciation help.

Fast-forward to October and the financial winds shifted. This has helped FAX’s portfolio, which has actually increased in value as broader markets have unraveled. This shift is not yet reflected in the fund’s price, which has drifted 18% below its NAV!

FAX Trades for 82 Cents on the Dollar

FAX has paid the same $0.035 monthly dividend since 2002, which is now good for a 10.7% yield on its depressed share price. If the fund can continue paying its distribution while grinding its NAV sideways or better, it’s going to be a steal at these levels.

We’re not buying FAX or KYN just yet, however. I’ve got three more high paying plays I like even better right now withgreat growth potential on top of their generous current yields.

The 3 Best Bear Market Buys (with 8%+ Dividends) for 2019

With the recent market insanity you’ve probably thought about dumping – or at least reducing – your stock holdings and focus on fixed-income investments as you near and enter retirement. It sounds like a smart move, but going lean on stocks leaves you open to two big risks:

1. That you’ll outlive your savings, and
2. You’ll miss out on the long-term gains only the stock market can offer.

So why not blend a portfolio of 8%+ bond funds with smart stock picks that provide you with similarly high yields with upside to boot? Sure, they may “sell off” a bit if the markets pull back. But who cares. Like a savvy rich speculator, you’ll be able to step in and buy more shares when they are cheap – without having to worry about your next capital withdrawal.

Let’s take healthcare landlord Omega Healthcare Industries (OHI). The firm’s payout is usually generous, and always reliable – yet, for whatever reason, its sometimes manic price action gives investors heartburn.

But it shouldn’t. It’s actually quite predictable. Check out the chart below, and you’ll notice:

1. When the stock’s yield is high (orange line), its price is low. Investors should buy here.
2. When the stock’s price is high (blue line), its yield is low. Investors should hold here and enjoy their dividend payments.

Investing is Easy: Buy When Yield (Orange Line) is High

Of course this simple timing strategy is much easier to employ if you don’t need stock prices to stay high to retire. Most investors who sell shares for income spend their days staring at every tick of the markets.

You can live better than this, generate more income and even enjoy more upside by employing our contrarian approach to the yield markets. We live off dividends alone. And we buy issues when they are out-of-favor (like right now) so that our payouts and upside are both maximized.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!

Last week the Federal Reserve Board announced the expected 0.25% increase in the Fed Funds interest rate. Despite doing the expected, the stock market swung from a 1.5% gain for the day to down as much as 2.5%. That’s an 800 point swing by the Dow Jones Industrial Average. Bloomberg noted “…no matter what the Federal Reserve and Chairman Jerome Powell did and said at the final monetary policy meeting of the year, they couldn’t make stock investors happy.”

It appears we have a battle between the stock market traders and investment firm heavyweights against the Fed. The Federal Reserve Board based their decision on forecasts the economy will grow in 2019 at 2% to 3%, inflation will stay below 2%, and employment will continue to improve.

Those who work in the financial industry use the fact that the stock market has gone down as “proof” that what the Fed sees for 2019 is wrong. The financial market pundits believe (or at least publicly say so) that there will be a recession because they believe in one, even though the usual signs a recession is coming are nowhere to be seen.

It seems that the stock market is going down because investors are selling. I am sure that computer trading programs are pushing prices down with short-selling strategies. As of December 20, its safe to say the stock market has fallen into bear market territory. However, it’s a bear without a reason to be one. It is possible that the negativity of the financial markets will spill over to Main Street, leading to an economic slowdown. However, there is not anything in the financial world that will lead to a crisis such as we experienced in 2000-2002 or 2007-2008. This bear market may go for a few months, but it won’t go deep.

Bear markets are not to be feared. They are the times when you get to “buy low”.

It’s a time when disciplined investors take advantage of fear in the markets that always is later shown to be over blown. Income focused investors get to buy in at very attractive yields and benefit from capital gains as the overall market recovers into the next bull market.

In these days of falling stock prices you want to find dividend paying stocks that are built for tougher economic times. Here are three to consider.

Starwood Property Trust (NYSE: STWD) is a commercial finance REIT. This means it originates mortgage loans for commercial properties, such as office buildings, hotels, and industrial buildings. Starwood has two commercial lending businesses. One is to make large dollar loans to retain in its portfolio.

The company also operates a fee-based CMBS origination business. To further diversify the company as acquired a portfolio of stable returns real estate assets and has added an infrastructure lending arm.

The final piece of the pie is a special servicing division, which will turn very profitable if the commercial real estate sector experiences a downturn.

Investors can expect to earn the dividend, which currently gives the shares a 9.5% yield.

Self-storage REITs are the place to be when the economy gets rough for home ownership. Extra Space Storage (NYSE: EXR) is a large-cap, geographically diversified self-storage REIT.

The self-storage business is counter-cyclical to the economy. When the economy is booming, developers bring a lot of new inventory into the market. When the economy slows, the inventory growth stops and demand increases.

Extra Space Storage is possibly the best managed REIT in the sector. Investors can expect high single digit annual dividend growth.

Current yield is 3.7%.

Utilities are supposed to be the safe sector when the stock market goes into a correction. This time utilities are down right along with the rest of the market sectors. Now is a great time to pick up shares of the Reaves Utility Income Fund NYSE: UTG).

This is a closed-end fund that owns utility and other infrastructure stocks. UTG has paid a steady and growing monthly dividend since it launched in 2004.

The dividend has never been reduced and the fund has never paid return-of-capital dividends.

Current yield is 6.9%.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.

On January 1, 2018, I made my boldest prediction of the year: bitcoin was going to crash. Here’s what happened since:

Crytocurrencies Are Dying

There are lots of reasons why bitcoin has cost investors a lot of money: it’s inefficient; it’s not private; and glitches and hacking cause people to lose bitcoins. But the main reason is this: the dumb money followed the smart money—and ended up holding the bag.

I’ve seen this story play out many times, which is why I urge you to be contrarian and avoid the traps market manipulators set up, whether it was dot-com stocks in the late ’90s, housing in the mid-2000s or fantasy Internet money in the 2010s.

The other side of this coin is why I’m urging you to do one simple thing in 2019: jump into tech stocks. And if you want dividends, don’t worry. I’ve got 2 funds offering 6.3% and 9.3% payouts for you to choose from.

I’ll show you both (and reveal the one I see as the best buy now) a little further on.

My No. 1 Prediction for 2019

If there is anything you can rely on, it’s the ability of tech companies to print money, because the entire world is embracing technology to communicate, interact, trade, learn and buy new products.

The proof is in the numbers: while tech has one of the highest net profit margins of any S&P 500 sector, at 22.1%, its profits are actually growing: 100% of IT companies have reported earnings above estimates in the third quarter of 2018.

That’s right: not a single one missed!

If you looked at FAANG stocks over the last month, however, you’d get a very different impression. On average, these companies are down massively, due in no small part to the 14.5% drop from Apple (AAPL)—with only Facebook (FB) slightly above water (but it’s still down sharply for the year):

An Awful Month for Tech

Zoom out a bit, however, and the picture is much rosier. FAANG stocks are still up double digits, on average, in a year when the S&P 500 is down:

FAANG Still Outperforming

I wouldn’t be surprised if this news comes as a surprise to you. The financial press has been beating up on tech companies for a bunch of reasons—privacy scandals at Facebook and Alphabet (GOOGL), weakening subscription growth at Netflix (NFLX), the trade war for Apple—but the reality is that tech is still performing well.

But the market isn’t rewarding these stocks.

If we look at net fund flows for the Invesco QQQ Trust (QQQ), we see that $1.44 billion has left this tech-focused ETF in just the last three months. Since this is a popular ETF for tracking the Nasdaq 100, a tech-heavy index, those net outflows show the dumb money is panicking and selling off—the opposite of the setup that caused bitcoin to crash.

If we look at the Technology Select Sector SPDR ETF (XLK), things look even better for a contrarian. While hedge funds and institutional investors sometimes buy QQQ, these groups don’t use XLK quite as much. And this fund has seen billions of net outflows for 2018: a total of $2.44 billion has exited XLK in the last three months.

The conclusion is clear: the dumb money is exiting tech, which means there’s an opportunity to buy in before the pendulum swings back the other way and we see inflows.

The Tech Play

Long-time readers know one of my favorite ways to play tech is through closed-end funds CEFs), because these funds hand you generous dividends while you wait for upside—and some tech CEFs have shown serious upside over the years.

But let’s look a bit closer at four options: the two ETFs I just mentioned (XLK and QQQ) and two CEF contenders.

First, let’s look at XLK’s top 10 holdings:

Source: ALPS Portfolio Solutions Distributor

There are a lot of large cap companies in this ETF’s portfolio—household names that have been beaten up recently, but nowhere near as much as some tech stocks with smaller market caps.

Similarly, the other ETF, QQQ, sports holdings that are concentrated on many tech heavyweights, with some important differences:

Source: Invesco

PepsiCo (PEP) and Comcast Corp (CMCSA) aren’t tech companies by any stretch of the imagination (and CMCSA is arguably one of the firms being disrupted by tech upstarts), meaning this portfolio doesn’t give as much tech exposure as XLK. If we want to just invest in tech, then, we should choose XLK over QQQ—but only if we’re going to limit ourselves to ETFs.

But I wouldn’t do that, because there are two better alternatives: the CEFs I mentioned earlier.

2 Tech CEFs Paying Up to 9.3% Dividends

I’m talking about the Columbia Seligman Premium Tech Growth Fund (STK), which pays a 9.3% dividend, and the BlackRock Science and Technology Trust (BST), with a regular dividend of 6.3%. I’ve written of my appreciation for BST many times in the past; it’s up double-digits year to date, while STK is down 9%:

BST Wins Out in 2018

That doesn’t mean BST is the best choice now, though. To decide which is the better pick, we need to dig deep into each fund’s holdings.

Let’s start with BST, which recently made an aggressive bet on payments companies. That’s part of the reason why it’s been strong lately, as bitcoin failed to replace the payments solutions of BST’s major holdings, such as Square (SQ) and Visa (V). But this fund also has a lot of exposure to China:

BST Looks to China …

Source: BlackRock

In total, nearly 10% of the fund is based in China and focused on China-oriented companies. This is fundamentally different from STK, which is much more US focused, while also investing in hardware and payments:

… While STK Focuses on the US 

Source: Columbia Management

STK’s portfolio is why I’ve favored BST throughout 2018: the cryptocurrency mania resulted in intense demand for hardware, but the crash in crypto also means that demand has evaporated in 2018.

As a result, chipmakers and similar firms have struggled, causing the semiconductor sector (seen below through the VanEck Vectors ETF [SMH]) to buckle in 2018:

Semiconductors Fall

But now cryptocurrencies are no longer a factor in semiconductor companies’ performance—and that’s a benefit, not a liability. It’s also why now is the time to favor STK and put some money into this fund if you’re on the hunt for tech exposure.

The kicker? Its 9.3% dividend yield is an enticing income stream while you wait for the market to come to its senses and lift the semiconductor sector back to the valuations it deserves.

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

Later this week the Federal Reserve Board is expected to announce another interest rate hike. The Fed will likely its target short term interest rate by 0.25% to a range of 2.25% to 2.5%. The new Fed Funds rate is up from 0.50% two years ago. While many investor fears concerning higher interest rates and dividend stock values are unfounded, there are certain high yield stocks that will be negatively affected by rising interest rates. To determine whether one of your high-yield stocks is at risk of a big dividend cut, you need to determine if the company is “pitching” or “catching” when interest rates change.

A company is “pitching” in the interest rate game if when interest rates go up, the business generates higher revenues or profits. For example, over the last few years the commercial mortgage REITs and several business development companies (BDCs) have only originated adjustable rate loans. If these loans are held in the company’s portfolio—as is typical—rising interest rates will result in the growth of interest income. If the company has done a good job with its own debt by locking in interest rates, rising rates will lead to growing profits.

If a company is “catching” an interest rate increase, it pays interest on variable rate debt which will require higher interest payments due to the Fed Funds rate increase. For the period from 2009 through 2015, short term rates were very low, near zero percent for a high-quality borrower. If a company took on variable rate debt, it was like getting free capital to invest to generate revenue. However, those short-term interest rates are now increasing, which means interest expense will be increasing and profit margins could be squeezed. The type of company that is most at risk is one which has a fixed rate revenue stream and variable rate debt. The residential mortgage backed securities (MBS) owning REITs are a good example of this type of company.

These REITs are the opposite of the commercial mortgage REITs. The residential MBS REITs own pools of fixed-rate, government agency backed, mortgage backed securities. These AAA quality bonds pay fixed interest rates with current yields at 3.5%. To turn those low yields into double digit dividend yields, an MBS REIT borrows large amounts of short term debt to leverage up the interest rate.

When short term interest rates are low this strategy produces a large amount of free cash flow. However, as short-term rates start to rise, the rate margin gets squeezed between the owned MBS bonds rates and the cost of the money borrowed to buy those bonds.

The Fed Funds rate stood at 0.50% near the close of 2016. The rate has been increased seven times since last year and is now at 2.25%. With this next Fed rate increase, short term rates will effectively be 2.5%. Long term rates have not increased, and the 10-year Treasury yield is about 2.5%. The 10-year minus the 2-year Treasury rate is a common way to view the spread between short term and long-term rates. Here is the 10 minus 2-year yield chart since last December 1.

You can see the rate spread has shrunk from over 0.80% in February to just above 0.10%. For a business model based on capturing the long minus short interest rate spread, that does not leave a lot of room for profits. Especially after spending money to hedge against rising interest rates and paying business expenses.

Do not believe management comments that they have hedged to protect from rising rates. Hedging only works for a short time against a portion of the interest rate change. It will not protect from a serious profit squeeze.

Here are three high yield stocks with significant variable rate debt leading to a high probability of a dividend reduction:

Annaly Capital Management, Inc. (NYSE: NLY) is a high-yield, agency MBS owning REIT. In its 2018 third quarter earnings report the company owned $91 billion worth of agency MBS.

The company owns $9 billion of other assets, including $2.7 billion of commercial property mortgages. This large pile of assets is held aloft by a total of $77 billion of debt.

In the quarter, Annaly reported an average asset yield of 3.21% and an interest cost of 2.08% leaving a net spread of 1.13%. This spread was almost half of the 2.28% spread reported in the first quarter of 2016 when the Fed got serious about rate increases.

The most recent 0.25% rate increase could reduce NLY’s profit margins by up to 25%.

AGNC Investment Corp (Nasdaq: AGNC) is another agency MBS REIT. NLY and AGNC are the two largest companies in this REIT sector. As of the third quarter AGNC owned $70.9 billion of agency MBS.

The company had $65.7 billion of debt. This works out to 8.2 times leverage of the company’s equity. Reported net interest spread was 1.30%.

The company reported net interest income of $0.61 per share and paid dividends of $0.54 per share. AGNC has some cushion against higher short-term rates, but that is because the company has reduced the dividend by 18% over the last three years to stay ahead of fallen net interest income.

You can expect another dividend cut after this or the next Fed rate increase.

Two Harbors Investment Corp (NYSE: TWO) is a smaller agency MBS REIT that is trying to stay relevant with its recent merger with CYS Investments Inc (CYS).

The $3.5 billion market value makes it a mid-cap residential MBS REIT. As of the 2018 third quarter, the company own $27.7 billion of mortgage backed securities. The portfolio was leveraged to five times the company’s equity. Reported interest margin was 1.93%.

The company has diversified with a significant investment in mortgage servicing rights, also called MSRs. These will offset some of the effect of higher interest rates, but there is still a lot of interest rate risk in the core MBS portfolio.

With the 0.25% Fed Funds rate TWO could be pushed into a dividend cut just six quarters after its last payout reduction.

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.

Source: Investors Alley 

5G wireless service is coming and it will change the world. The new fifth generation of wireless networking is just starting to roll out. 5G will soon start replacing 4G, which has been the standard for wireless data transmission for the last half-decade. If you remember how great it was to go from 3G to 4G, 5G is going to be 50 times better. As in 50 times faster than the current 4G average.

More importantly, several new, likely life-changing technologies need the higher data speeds of 5G to function properly. At the top of the list is self-driving cars, or even human driven cars with automatic driving features. To avoid running over cats, children, the center median and other traffic on the road these vehicles will need to gather and process huge amounts of data.

5G will eventually lead to smart buildings and homes – the so-called Internet of Things or IoT. (If you’re interested in IoT be sure to check out new research from my colleague Tony Daltorio.) Life will catch up with science fiction. It is likely that it may be possible to use your new 5G smartphone or a dedicated 5G hotspot device as your all-the-time connection to the Internet.

Before we and our cars can enjoy the benefits of 5G, the infrastructure to support the tremendously higher speeds and much larger amounts of transmitted data must be built out. The current 4G network does not have sufficient capacity to handle the coming increase in data flow.

Much of the wireless and Internet infrastructure is owned by companies that specialize in providing specific parts of the infrastructure. These specialties include data centers, cell towers, and fiber communications networks. Here are three stocks that will see huge benefits from the shift to the next gen 5G wireless system.

Digital Realty Trust, Inc. (NYSE: DLR) is a data center services provider that is organized as a REIT. The company develops and operates data centers. Digital Realty owns almost datacenters located around the globe. In addition to storage solutions, the company provides interconnectivity solutions between datacenters and the Internet.

The coming 5G speeds means an exponential increase in data that will need to be shared and stored. That’s the business of Digital Realty. Since it’s a REIT, DLR can be counted on as a steady dividend paying stock.

As a player in the high-growth data storage space, this is an income stock that will provide attractive dividend growth.

The company has increased the dividend for 13 straight years, with an average double-digit compound growth rate. Investors can expect the low teens dividend growth to continue, or even accelerate in the 5G era.

The shares currently yield 3.5%.

5G connectivity will require more cell towers, spaced closer together.  American Tower Corp. (NYSE: AMT) is the largest independent owner of cell towers.

5G will require a shift to small cell and micro-sites to provide uninterrupted, high-speed coverage. AMT owns 40,000 towers that will be retrofitted to provide 5G service. The company has also formed business alliances to install micro-sites in light poles and information kiosks.

AMT is also organized as a REIT. The company has a very high path of dividend growth, increasing the payout by 24% per year compounded for the last five years. Investors can expect AMT to remain at the heart of the 5G roll-out and be able to continue the rapid dividend growth. The shares currently yield 3.3%.

AMT is also organized as a REIT. The company has a very high path of dividend growth, increasing the payout by 24% per year compounded for the last five years.

Investors can expect AMT to remain at the heart of the 5G roll-out and be able to continue the rapid dividend growth.

The shares currently yield 3.3%.

Uniti Group (Nasdaq: UNIT) is a telecommunications REIT focused on fiber optic assets. In recent years the company has focused on acquiring backhaul fiber assets. These are fiber connections between cell towers and the wired Internet.

Uniti Group has been acquiring fiber networks that connect cell towers to the wired data network. These networks can be leased up to handle higher 5G data speeds without the need to build out additional network infrastructure. This mostly unknown and underground part of the overall data network will be a big winner for Uniti as 5G rolls out.

Currently UNIT is under a legal cloud due to a lawsuit against its largest customer, Windstream Holdings (Nasdaq: WIN). The trial has been completed and the companies are waiting on the judge’s ruling. Until that ruling comes out, the prospects and dividend safety of UNIT are unclear.

Thus, the current 12% yield.

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.

Source: Investors Alley 

Today I’m going to show you why this market isn’t as spooked as you might think. Then I’m going to reveal the 1 sector (and 1 fund boasting an incredible 8.7% dividend yield) that’s a screaming bargain now.

Let’s start with the state of play as I write this.

Here’s a question: of the 11 sectors that make up the S&P 500, how many do you think are negative for 2018?

If you said more than 5, the pessimism of the financial press has tainted your worldview. Take a look at this table:

5 in the Red, 5 in the Green

A close look at the 11 sectors of the S&P 500 is crucial, because we quickly see that 5 sectors are green, 5 are down and 1 is flat for 2018. While the red sectors are down big (financials energy, and materials have all dropped more than 10%), solid returns in tech, healthcare and utilities tell us most regular investors haven’t hit the panic button.

Let me explain.

Remember that there are “risk-on” and “risk-off” sectors. If investors are really worried about a big downturn, they go head-first into the “safe” and usually countercyclical consumer-staples sector—but the Consumer Staples SPDR ETF (XLP) is down 3.8% on the year, and the cyclical Consumer Discretionary SPDR ETF (XLY) is up 4.8%.

There’s a simple reason for that: everyday Americans are buying more because they’re earning more and getting jobs more easily. Therefore, it makes no sense in such an environment to run away from so-called risky assets, because those assets are the ones bagging higher revenues and earnings.

Likewise, tech and healthcare are typically high-risk sectors, with higher P/E ratios, that get sold off when a major market downturn is supposedly around the corner. But the Health Care SPDR ETF (XLV) is up nearly 10%, and tech’s 2.4% gain is after the heavy selloff of Apple (AAPL), on trade-war fears.

The lesson is obvious: while some sectors are suffering a short-term downturn, others are fine, thanks to economic growth of 3% and earnings growth of more than 20%. But the big financial media’s cavalier attitude toward the details has resulted in a lot of news about a market panic that simply isn’t there.

What About the Losers?

Before we get to one of my favorite sectors for 2019 (and that 8.7% yielder I mentioned earlier), let me quickly touch on a couple particularly beaten-down corners of the market. No, we’re not going to bottom-fish here—but these sectors’ misery has a key role to play in the nice price pop (and income) our pick is poised to hand us in the months ahead.

The first is materials, which saw earnings growth fall sharply, to 10%, in the third quarter, largely due to sluggish commodity prices across the sector, which lowers their pricing power because materials companies can’t increase prices of the commodities they sell to factories and property developers. That’s weighed down materials stocks—but it’s been a boon to the sector (and fund) we’ll discuss in a moment.

The other is energy, which has has been hit hard by the fall in oil. Just look at the price action with the Energy Select Sector SPDR (XLE) and WTI oil futures:

Low Oil and Lower Energy Stocks

While that’s bruising for the sector, it’s great for an economy like America’s, where energy demand from consumers and manufacturers is the main engine of growth. So XLE’s 12.7% loss should be seen as the rest of the economy’s gain.

What to Buy Now

That brings me to the sector I want to dive into today: real estate.

It’s a direct beneficiary of lower costs for energy and materials, because both lower property builders’ expenses, resulting in greater inventories for real estate investors and higher profits for real estate developers.

Secondly, the real estate sector has been brutalized because of fears of higher interest rates—fears that are proving to be wrong.

Rate Burden Gets Lighter

Over the last 3 years, the return on the Real Estate Select Sector SPDR (XLRE) has been less than half that of the broader market, for one reason: higher interest rates. Almost 3 years ago to the day, the Federal Reserve kicked off the current rate-hike cycle, and the real estate market freaked out (see the dip in the orange line in early 2016). It has only slightly recovered since—with several “mini-freakouts” along the way.

On Sale Now: An 8.7% Dividend With Upside

Now that rates are set to rise more slowly than previously expected, real estate is a particularly appealing “sleeper” sector, because the market still hasn’t gotten the message. You can compound your returns through a closed-end fund (CEF) like the Nuveen Real Estate Income Fund (JRS).

JRS invests in many companies that make up XLRE, but there’s one huge difference: JRS trades at a 10.2% discountto the market value of the companies it owns, while XLRE trades at the whole market value of its portfolio. So you can get this already very cheap sector at a discount!

Another great thing about JRS? Its income. With an 8.7% dividend yield, this fund trounces the still-impressive 3.6% dividend XLRE provides. So you’ll be pocketing a hefty income stream while you wait for the real estate market to come to its senses.

5 More “Must-Buy” 8%+ Dividends for 2019

Here’s the thing about 8.7% payouts like these: the pundits will tell you they’re unsafe, but that’s nonsense!

The truth is, dividends like these are absolutely necessary if you want to achieve the “retirement holy grail”: clocking out and living on dividends alone. Because when your dividends cover your bills (and then some!) and roll in like clockwork, who cares what Mr. Market gets up to on a day-to-day basis?

This is how everyone should approach retirement investing. And the good news is that there are plenty of CEFs—like JRS—throwing off rock-solid 8%+ payouts that will get you there.

But where do you start? Easy: with the 5 hidden gems (including one CEF paying an incredible 9% dividend) I’ll reveal when you click right here.

And before you ask, no, you won’t give up a cent of upside to get your hands on the 8% average payouts these 5 funds deliver. Take a look at how one of these buys—pick No. 3, to be exact—has manhandled the market since inception:

Market-Crushing Gains and 8.7% Dividends—in 1 Buy!

Source: Contrarian Outlook

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.

Personally, I get to this point in the month and tell myself to stop spending money. I have been buying gifts, plus stuff on sale from my favorite vendors. If you are in the same boat, or even if you have exhibited outstanding spending discipline through this holiday season, I want to recommend giving your self the gift of a special dividend payment.

Today’s stock will pay a nice special dividend before the end of December and then continue to pay monthly dividends throughout the year. You can think of this as the gift to yourself that keeps on giving.

Main Street Capital (NYSE: MAIN) is a monthly dividend paying business development company (BDC).  The company has also paid semi-annual, supplemental dividends since 2013. The next supplemental payout lands in investor brokerage accounts on December 27 and is equal to 150% of the normal monthly dividend.

To earn this special 27.5 cents per share dividend, you must buy shares at least a day before the ex-dividend date of December 17. That means buy shares on December 16 or earlier. Your new shares will start earning the monthly dividends, with a payment on January 15.

A BDC is a closed-end investment company, like closed-end mutual funds (CEF). The difference is that a CEF owns stock shares and bonds, while a BDC makes direct investments into its client companies. A BDC will have up to hundreds of outstanding investments to spread the risk across many small companies. The client companies of a BDC will be corporations that are too small or too new to be able to issue stock or bonds into the publicly traded markets.

As a risk control factor, BDCs are limited to no more than two times its equity in leverage. This means that if a BDC has $500 million of equity raised from selling shares, it can borrow another $1 billion. The company can then make $1.5 billion of loans or equity investments.

Main Street Capital Stands Apart

Main Street Capital Corp. is really quite different from the rest of the BDC crowd. Since its 2007 IPO, MAIN has tripled the total return average of its BDC peers. Here is a list of some of the reasons why this company stands apart from its peers in the industry:

• MAIN is internally managed with insiders owning over 2.8 million shares. Co-founder, Chairman, and CEO Vince Foster is the single largest individual shareholder.
• Main Street is the most conservatively managed BDC in the industry and holds an investment grade BBB credit rating. Investment grade is rare among the BDC crowd and allows Main Street to borrow at a much lower cost of capital compared to most other BDCs.
• Operating, admin, and management costs are 1.5% of assets compared to 3.2% for the average BDC and 2.7% for commercial banks.
• Net debt is just 0.62 times company equity, well below the 2.0 times maximum set by law.
• The share price is about 1.5 times the book or NAV value.

MAIN uses a two-tier approach to its portfolio. This unique strategy allows Main Street to generate a high level of interest income and capital gains from equity investments. In the middle market, MAIN provides debt financing to companies with stable finances and low risk of default.

The rules governing BDCs make it difficult to generate growth. Most companies in the sector experience declining book values and are eventually forced into dividend cuts. Main Street Capital has a different business model that has resulted in dividend growth and share price appreciation. This is a stock that should be in every income investor’s portfolio.

Starting today you can stop worrying about the market and instead fundamentally transform your income stream from a string of near misses to a steady, reliable flow of income right into your bank account.

It all starts with a simple to use, yet powerful calendar – called the The Monthly Dividend Paycheck Calendar, like the one below, only with more details. It’s kind of like the one you might have on your desk, only this one tells you when you’ll get paid and how much you’ll receive each and every month.

No more guesswork, no more confusion, no more worrying if you did the right thing… just steady paychecks coming like clockwork…

Paychecks currently averaging $3,409.21 every month. That’s money in the bank for you regardless how volatile remains for the rest of the year.

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.

Source: Investors Alley