Investing in the post-Trump world is quite the wild card... Now, investors are generally a freaked out bunch... at least the ones I've been running into at dinner parties, family gatherings, the gym, the grocery store, the DMV — you know, pretty much everywhere I go. When someone finds out I'm a financial writer, they immediately ask two questions: what is the market going to do when Trump b
[Investing in the
post-Trump world is quite the wild card...
Now, investors are generally a freaked out bunch... at least the ones I've been running into at dinner parties, family gatherings, the gym, the
grocery store, the DMV — you know, pretty much everywhere I go.
When someone finds out I'm a financial writer, they immediately ask two questions: what is the market going to do when Trump b]
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The Only Investment Guaranteed to Go Up
[Jimmy Mengel Photo] By [Jimmy Mengel]
Written Tuesday, November 22, 2016
Investing in the post-Trump world is quite the wild card...
Now, investors are generally a freaked out bunch... at least the ones I've been running into at dinner parties, family gatherings, the gym, the grocery store, the DMV — you know, pretty much everywhere I go.
When someone finds out I'm a financial writer, they immediately ask two questions: what is the market going to do when Trump becomes President, and what stocks should I invest in that will never go down?
Now, if I knew the answer to either of those questions, I'd already be sailing around the world in a yacht without a care in the world. Nobody can accurately predict the next crash, and there isn't a stock on Earth that has never gone down — at least in the short term.
But never fear, I tell the scared, huddled masses. Even if stocks go up and down there is one sure thing in the stock market...
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Dividends.
Dividends are the single best way to ride out financial storms — period. If you own solid dividend stocks you get paid regardless of what happens in the market. If we're riding high like we've been for the better part of the last decade, the dividends flow like water. If we see a crash like we did in 2008, guess what? The companies still have to send you the checks...
Over the past 25 years, dividends are responsible for almost 50% of the S&P returns. If you did the smart thing and reinvested those dividends back into buying more shares of stock during that time, you would have about doubled your gains.
Keep in mind that over those 25 years, we've seen two major market crashes. But solid dividend stocks have weathered the storms and continued showering shareholders with cold, hard cash. They have outpaced the market as a whole, and with far less volatility. In other words, dividend stocks are not only safer — but they pay you to own them.
But there are two ways of thinking about dividend stocks — as short-term income while the market works itself out, or as a long-term investing plan. It's all a matter of your time frame: do you want a guaranteed 20% kickback right now, or would you rather slowly build your portfolio to eventually double your money over a couple of decades?
Let's look at both scenarios and you can decide which will work better for you...
If you're looking for quick cash and want a juicy income stream, you're going to want to find companies with double-digit dividend payouts. Here are the highest-paying dividend sectors:
-
Financial — 3.58%
-
Basic Materials — 2.69%
-
Utilities — 2.61%
-
Conglomerates — 1.99%
-
Technology — 1.92%
-
Consumer Goods — 1.84%
-
Industrial Goods — 1.36%
-
Healthcare — 0.94%
Within some of these sectors, there are some serious cash machines, some of which pay around 20-30% back to you! Here are some of the heaviest hitters...
- Memorial Production Partners LP (NASDAQ: MEMP) — 29.27% Memorial Production Partners LP is an upstream Master Limited Partnership (MLP) focused on the acquisition, production, and development of oil and gas properties in the United States.
- Ferrellgas Partners L.P. (NYSE: FGP) — 27.41% Ferrellgas Partners, L.P. distributes and sells propane and related equipment and supplies primarily in the United States.
- Equity Residential (NYSE: EQR) — 20.40% Equity Residential, a real estate investment trust (REIT), engages in the acquisition, development, and management of multifamily properties in the United States.
- TICC Capital Corp (NASDAQ: TICC) — 18.65% TICC Capital Corp. is a business development company and operates as a closed-end, non-diversified management investment company. The firm invests in both public and private companies.
- Resource Capital (NYSE: RSO) — 18.10% Resource Capital Corp., a diversified real estate investment trust, primarily focuses on originating, holding, and managing commercial mortgage loans and other commercial real estate-related debt and equity investments in the United States.
This data is according to [Dividend.com], and these numbers change drastically every single day. Which is to say, do not start dumping money into them based on the dividend alone.
You can see that the highest dividend comes from an MLP, or master limited partnership. MLPs are most typically in the energy industry, providing and managing resources such as oil and gas pipelines.
Now, as you can see, they do pay out a handsome dividend, but the drawback for me is that they are heavily affected by commodity prices and the stock price can swing wildly based on factors completely out of your control.
In fact, the highest-yielding dividend stocks in every sector are far more turbulent — according to Fidelity “on average during the past two decades, 9% of stocks with the highest yields cut or suspended dividends within one year, and in 2009, during the great recession, that number reached 40 percent.”
I hate dividend cuts more than anything...
So when I'm looking for dividend stocks to weather stock market storms, I look at another measure of dividend strength: the ability to keep raising the dividend payouts in good times and bad...
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Enter the mighty dividend aristocrats...
These are companies that have been solid enough to increase dividends each and every year for the last 25 years. Some of these are household names like AT&T (NYSE: T) and Coca-Cola (NYSE: KO) and some lesser known companies like Nucor (NYSE: NUE) and Illinois Tool Works (NYSE: ITW). Not only have they been rewarding investors with ever increasing checks, but the companies themselves have outperformed the market.
[aristocrats vs s and p]
These stocks are fit for nobility. However, you can go a step further with "Dividend Kings." The 20 or so companies in this group have increased their dividends each year for 50 years running. That is a crowning achievement...
Hormel Foods Corp. (NYSE: HRL) has increased its dividends for a solid 50 years. Johnson and Johnson (NYSE: JNJ) has upped its payouts for 54 years in a row. And Proctor and Gamble (NYSE: PG) has raised its dividend for a whopping 60 years running.
Dividend Kings have also outperformed the S&P 500 by a resounding margin. Over the last 15 years, the S&P has averaged around 9.8% a year. Dividend Kings have returned over 14%.
Now, the average dividend yield for Aristocrats and Kings is around 2.4% — not too shabby, but hardly the double-digit payout you could get with the companies above.
But if you are just starting out a dividend portfolio today, there is one little known market sector that you need to seriously look at for both juicy dividend payouts and a long track record of increases...
There is one group of dividend-paying stocks that I like to call my secret dividend stash. I own several of these and they have been generously padding my portfolio with double-digit returns for years now...
These companies have the sturdiness of the aristocrats and kings, but the juicy yields you see in trusts and business development companies. This type of stock has beaten the S&P 500 for the past three-, five-, 10-, 15-, 20-, 25-, 30-, 35-, and 40-year periods. That's about as ironclad as it gets...
They also, by law, have to pay out 90% of income as dividends to shareholders.
Any investor who is serious about both reaping short-term income and long-term gains cannot afford to ignore these [“Secret Stash Assets.”]
There's no doubt about it, we will see stock market volatility — it's not a matter of if, but when. But when it comes, make sure you are getting paid handsomely either way.
[Start your own secret stash with these three companies...]
Godspeed,
[Jimmy Mengel]
Jimmy Mengel
[follow basic] [@mengeled on Twitter]
Jimmy is a managing editor for [Outsider Club] and the Investment Director of the personal finance advisory [The Crow's Nest.] You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he's brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor's [page].
*Follow Outsider Club on [Facebook] and [Twitter].
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