As a rational investor, I understand that sentiment and irrational expectations can impact the market over extended periods of time. When this happens, I focus on the longer-term picture in order to retain conviction in my positions. But sometimes the market gets so disconnected from reality that I can’t help but wonder whether a significant change in asset prices is imminent. In these instances, which I believe is happening now, I take short-term, contrarian positions. #-ad_banner-#Even if I am early to the party and lose money on the position over a few months, I am positioned to win big when… Read More

As a rational investor, I understand that sentiment and irrational expectations can impact the market over extended periods of time. When this happens, I focus on the longer-term picture in order to retain conviction in my positions. But sometimes the market gets so disconnected from reality that I can’t help but wonder whether a significant change in asset prices is imminent. In these instances, which I believe is happening now, I take short-term, contrarian positions. #-ad_banner-#Even if I am early to the party and lose money on the position over a few months, I am positioned to win big when the bubble bursts. Unlike past bubbles in the stock and real estate markets, a new bubble is emerging in the fixed-income markets.   Take My Money, Please Switzerland recently became the first country to sell 10-year Treasuries at a negative yield. In effect, investors are paying the Swiss government to hold their money for ten years and asking nothing in return. Do investors really expect rates to go nowhere for the next decade? If that were not enough to signal something terribly wrong in the world of fixed-income, then consider this. The 10-year U.S. Treasury bond yields… Read More

By any measure, $104 billion is a lot of money. That’s the dollar value of share buyback announcements made in February — the largest monthly figure since these flows were first tracked 20 years ago. It was also nearly double the amount from a year earlier, according to money flow tracker TrimTabs Investment Research. (Companies make share buyback announcements throughout this year, but February is typically the high watermark as companies release full-year financial results.) Companies in the S&P 500 spent $564.7 billion on share repurchases over the past 12 months, which was a year-over-year increase of… Read More

By any measure, $104 billion is a lot of money. That’s the dollar value of share buyback announcements made in February — the largest monthly figure since these flows were first tracked 20 years ago. It was also nearly double the amount from a year earlier, according to money flow tracker TrimTabs Investment Research. (Companies make share buyback announcements throughout this year, but February is typically the high watermark as companies release full-year financial results.) Companies in the S&P 500 spent $564.7 billion on share repurchases over the past 12 months, which was a year-over-year increase of 18%, according to FactSet Research. In fact, 72% of all companies in the index bought back shares in the fourth quarter of 2014. Make no mistake, the powerful waves of buybacks are a clear positive for stocks — in the near-term. For proof, look no further than the five-year chart for the PowerShares Buyback Achievers ETF (NYSE: PKW). Simply put, the more than $2 trillion in cash that has been returned by S&P 500 companies since 2009 has been a key factor behind the bull market’s extended run. Said another way, a steady reduction in shares outstanding has… Read More

They’ve officially become more popular than dividends. Top companies are shelling out these extra payments in droves. The goal is to give shareholders more bang for their investment buck than dividends alone. They are a favorite of Warren Buffett and many other billionaire investors. There’s a good chance you’ve received one of these “tax-free dividends” before and didn’t even realize it. That’s because they’re buried in a company’s financial statement. But since 1982, when the SEC enacted a rule called 10b-18 as a measure of boosting the economy, these “tax-free dividends” have become a favored form of payment among shareholders. Read More

They’ve officially become more popular than dividends. Top companies are shelling out these extra payments in droves. The goal is to give shareholders more bang for their investment buck than dividends alone. They are a favorite of Warren Buffett and many other billionaire investors. There’s a good chance you’ve received one of these “tax-free dividends” before and didn’t even realize it. That’s because they’re buried in a company’s financial statement. But since 1982, when the SEC enacted a rule called 10b-18 as a measure of boosting the economy, these “tax-free dividends” have become a favored form of payment among shareholders. And companies have responded. Just look at the chart below to see how companies have been paying shareholders since 1982, especially since 2005 (hint: it hasn’t been just with traditional dividends)… Now, not every company pays these “tax-free dividends,” but the easiest way to identify which ones are making “tax-free dividend” payments is to explain the payment method itself. As I mentioned, its roots trace back to 1982. It was an awful time for the U.S. economy. We were in a recession, and still suffering from the aftershocks of gas rationing and oil shortages of the 1970s. Loans… Read More

You’ll find the best investment opportunities among companies in clear need of a tune-up. Back in 2012, aircraft builder The Boeing Co. (NYSE: BA) was in seemingly dire straits. Its newest jumbo jet (the Dreamliner) was proving tricky to build and management didn’t actually produce a trouble-free plane until the 66th Dreamliner left the factory. At that point, shares looked ripe for take-off and have more than doubled since I profiled this Dow component. If you are a subscriber to our premium service Total Yield, then you’re likely familiar with Boeing’s progress. Nearly a year ago, Nathan Slaughter,… Read More

You’ll find the best investment opportunities among companies in clear need of a tune-up. Back in 2012, aircraft builder The Boeing Co. (NYSE: BA) was in seemingly dire straits. Its newest jumbo jet (the Dreamliner) was proving tricky to build and management didn’t actually produce a trouble-free plane until the 66th Dreamliner left the factory. At that point, shares looked ripe for take-off and have more than doubled since I profiled this Dow component. If you are a subscriber to our premium service Total Yield, then you’re likely familiar with Boeing’s progress. Nearly a year ago, Nathan Slaughter, who pens the newsletter, noted that Boeing’s smoother-running production lines and swelling backlog have enabled the company to return huge sums of money to shareholders. He added Boeing to his Total Yield portfolio last summer and is now reaping the gains. I’ve recently taken a fresh look at Boeing and think this company — and its Total Yield potential — may be even better than Nathan realizes. Simply put, Boeing’s cash flow in 2018, 2019 and beyond, will likely blow past even the most bullish Wall Street forecasts. And credit goes to tough steps management is taking right now. Re-Examining… Read More

We’ve still got about two weeks to go until April 15 (thankfully). But the clock is ticking, and most of us will need to start gathering W-2s, brokerage statements and other information to file our tax returns soon (if you haven’t already). If you’re like me, all those dividends and interest payments that you cheered through the year will start to elicit more of a groan once the distributions are tallied up and reported to Uncle Sam. #-ad_banner-#If you’re in the upper income tax brackets and haven’t done so already, now may be an opportune time to explore options in… Read More

We’ve still got about two weeks to go until April 15 (thankfully). But the clock is ticking, and most of us will need to start gathering W-2s, brokerage statements and other information to file our tax returns soon (if you haven’t already). If you’re like me, all those dividends and interest payments that you cheered through the year will start to elicit more of a groan once the distributions are tallied up and reported to Uncle Sam. #-ad_banner-#If you’re in the upper income tax brackets and haven’t done so already, now may be an opportune time to explore options in the municipal bond arena. As you may know, muni bonds are used to fund things like roads, schools and bridges in cities all over the country. They are generally exempt from federal taxes, and possibly state taxes as well, depending on where you live and where the bond was issued. I’ve had several of my High-Yield Investing readers ask about muni bonds over the past few weeks. This is an asset class we’ve invested in before, albeit sparingly. My biggest problem with this particular group is that I think it’s only suitable for a portion of readers (lower income readers… Read More

It started out as an experiment. It wound up being one of the greatest investment discoveries we’ve ever found. A little more than five years ago, StreetAuthority co-founder Paul Tracy approached me with an idea. He wanted me to build a portfolio of dividend stocks that would pay out more than 30 dividend checks a month — one for every day of the year. In order to show he was serious, he gave me $200,000 and a dedicated brokerage account to get started. I must admit, I was a little skeptical at first. The idea seemed too good to be… Read More

It started out as an experiment. It wound up being one of the greatest investment discoveries we’ve ever found. A little more than five years ago, StreetAuthority co-founder Paul Tracy approached me with an idea. He wanted me to build a portfolio of dividend stocks that would pay out more than 30 dividend checks a month — one for every day of the year. In order to show he was serious, he gave me $200,000 and a dedicated brokerage account to get started. I must admit, I was a little skeptical at first. The idea seemed too good to be true. But in just over five years, 1,889 dividends and $79,578 worth of dividend income later, the results have been far better than anyone could have imagined. Since I started my portfolio back in December 2009, my initial $200,000 investment has grown to more than $310,000, giving me a total return of more than 55% in a little more than five years. As of this month, the total dividends I’ve received amount to $79,578. In its first full year of operation, my portfolio generated an average of $809 in dividends a month. But my portfolio’s ability… Read More

The search for yield in a world where the benchmark 10-year U.S. Treasury note offers less than 2% is a tough task. Fortunately, there are stocks that still offer attractive income and the potential for trading gains.  By nature, stocks are risker than bonds, especially default-risk-free Treasuries, but with that risk comes the potential for greater reward. #-ad_banner-#Not all stocks offering high dividend yields are good investments. Yields rise as share prices fall. If a company is in trouble, it is unlikely it will be able to sustain its dividend payout. One way to predict whether… Read More

The search for yield in a world where the benchmark 10-year U.S. Treasury note offers less than 2% is a tough task. Fortunately, there are stocks that still offer attractive income and the potential for trading gains.  By nature, stocks are risker than bonds, especially default-risk-free Treasuries, but with that risk comes the potential for greater reward. #-ad_banner-#Not all stocks offering high dividend yields are good investments. Yields rise as share prices fall. If a company is in trouble, it is unlikely it will be able to sustain its dividend payout. One way to predict whether a stock’s high yield is a potential sign that the dividend may be cut is to look at the chart. A falling price trend is a red flag, as the market often seems to know what lies ahead before analysts figure it out. But if a stock with a big yield has a positive chart, it could wind up rewarding investors with both high income and capital gains. One of my favorite dividend stocks right now that is showing a turnaround on its chart is Kimberly-Clark (NYSE: KMB).  Shares of the personal products maker have had… Read More

#-ad_banner-#There are 253 million cars and trucks driving along U.S. roads. And the average age of those automobiles is roughly 11.4 years old, according to a recent study by IHS Automotive, a leading auto industry research firm.  That bodes well for companies offering replacement parts and services on the population’s aging vehicles. And growth investors buying shares of these companies have reaped serious rewards in the past.  But if you’re an income investor, then you may have noticed that the biggest players in the industry don’t exactly offer much of what you’re looking for.  Leading firms Advance Auto Parts, Inc. Read More

#-ad_banner-#There are 253 million cars and trucks driving along U.S. roads. And the average age of those automobiles is roughly 11.4 years old, according to a recent study by IHS Automotive, a leading auto industry research firm.  That bodes well for companies offering replacement parts and services on the population’s aging vehicles. And growth investors buying shares of these companies have reaped serious rewards in the past.  But if you’re an income investor, then you may have noticed that the biggest players in the industry don’t exactly offer much of what you’re looking for.  Leading firms Advance Auto Parts, Inc. (NYSE: AAP) and AutoZone, Inc. (NYSE: AZO) offer close to nothing in the way of dividend yields — 0.2% and 0.0%, respectively.  Genuine Parts Co. (NYSE: GPC), however, which sells its parts and accessory items through more than 6,000 NAPA Auto Parts stores nationwide, pays a healthy 2.6% dividend yield.  Now I know what you’re thinking: a 2.6% yield is nothing to write home about. But as history as shown, shareholders of this company can expect that dividend to keep growing.  That’s because GPC is a member of a group of top dividend payers known as the Dividend Aristocrats. These… Read More

On March 18, the Federal Reserve gave  its clearest hint yet that interest rate hikes are coming. The Fed will no longer “remain patient,” which suggests that the time for action is near. Against that backdrop,  real estate investment trusts, or REITs, have been punished. In the last month and half the Vanguard REIT Index (NYSE: VNQ) has fallen 3%. #-ad_banner-#Yet is such concern warranted? After all, the yield on the 10-Year Treasury bill just slipped back below 2.0%, even after the Fed shifted its tone. Even if 10-year yields were to rise from the current level to 2.5% or… Read More

On March 18, the Federal Reserve gave  its clearest hint yet that interest rate hikes are coming. The Fed will no longer “remain patient,” which suggests that the time for action is near. Against that backdrop,  real estate investment trusts, or REITs, have been punished. In the last month and half the Vanguard REIT Index (NYSE: VNQ) has fallen 3%. #-ad_banner-#Yet is such concern warranted? After all, the yield on the 10-Year Treasury bill just slipped back below 2.0%, even after the Fed shifted its tone. Even if 10-year yields were to rise from the current level to 2.5% or 3%, investors in search of income will not completely abandon REITs that yield between 4% and 6%. Another way to look at an eventual rebound in rates: it signals a firmer economy, which should be beneficial to real estate firms. In the end, speculation about interest rates is just distracting noise. Your goal should be to add great businesses to your portfolio at opportune prices. Use the volatility in high-yield securities to add long-term winners to your portfolio. HCP, Inc. (NYSE: HCP), Digital Realty Trust, Inc. (NYSE: DLR) and Omega Healthcare Investors, Inc. (NYSE: OHI) are all down 8% or… Read More

In search of income-producing stocks, it’s always wise to check in with the dividend aristocrats. Only companies with top-flight management teams and a recession-tested, profitable track record can pay a growing dividend for more than 25 years.   But you shouldn’t just focus on past performance. You want to look for strong dividend growth in coming decades as well. #-ad_banner-#To get a sense of whether companies can sustain a growing dividend, investors often use the payout ratio, which measures dividends against net income. Yet that ratio can only be helpful up to a point. Net income can… Read More

In search of income-producing stocks, it’s always wise to check in with the dividend aristocrats. Only companies with top-flight management teams and a recession-tested, profitable track record can pay a growing dividend for more than 25 years.   But you shouldn’t just focus on past performance. You want to look for strong dividend growth in coming decades as well. #-ad_banner-#To get a sense of whether companies can sustain a growing dividend, investors often use the payout ratio, which measures dividends against net income. Yet that ratio can only be helpful up to a point. Net income can be affected by depreciation, goodwill and other factors unrelated to a company’s ability to send cash to shareholders every three months (sometimes monthly). As a result, the best metric to determine dividend strength is the dividend payout compared to free cash flow, or FCF. The lower the FCF payout ratio, the more flexibility management has to raise it or make other investments to fuel growth. Searching through the list of dividend aristocrats, you’ll find two companies with warning signs. By my math, they will be hard-pressed to boost their dividends in the future. The good news: I’ve… Read More