Dividend growth investors like me don't look
at high yielding stocks.
Not exact matches
You'll be surprised
at what the correlation has been between the
high -
yield bond market and the overall
stock market.
Take a look
at any retiree's portfolio and you'll see the same thing: it's filled with
high -
yielding dividend
stocks.
Looking
at the forward earnings
yield for S&P 500
stocks, BAML finds dispersion is the
highest since 2009, when the market was just starting to recover from the financial crisis.
At some point, investors who are conflating
high -
yielding consumer staples
stocks with bonds or who are taking interest rate risk in long - dated Treasurys will see drawdowns as well.
There are a multitude of reasons as to why this occurs but it's a powerful enough force that many investors have done quite well for themselves over an investing lifetime by focusing on dividend
stocks, specifically one of two strategies - dividend growth, which focuses on acquiring a diversified portfolio of companies that have raised their dividends
at rates considerably above average and
high dividend
yield, which focuses on
stocks that offer significantly above - average dividend
yields as measured by the dividend rate compared to the
stock market price.
In other words,
at a certain level
higher bond
yields create real competition for
stocks, particularly dividend
stocks, and put downward pressure on multiples.
With Group of Seven (G7) sovereign bond
yields at historically low levels, some income - seeking investors have turned to
higher - volatility securities like dividend - paying
stocks in an attempt to capture additional income.
With rates
at historic lows, many investors have used
high - dividend
stocks, rather than low -
yielding bonds, in pursuit of income.
This is a sneak peak
at all the
high -
yield dividend
stocks that we are currently evaluating for possible additions to our «Best Dividend Stocks»
stocks that we are currently evaluating for possible additions to our «Best Dividend
Stocks»
Stocks» list.
As a reminder, each year's Dog pack is made up of the 10
highest yielding Dow
stocks at the close of the previous year.
Holding a lower
yielding stock with a
higher growth rate will
at some point provide
higher returns assuming the growth rates don't change.
Among them are factors I've discussed
at length elsewhere — a weaker U.S. dollar, a steadily flattening
yield curve, heightened market volatility, overvalued U.S.
stocks, expectations of
higher inflation, trade war jitters, geopolitical risks and more.
In theory, you could sell
at a
higher value and re-invest in a different
stock with a similar dividend growth rate and
higher yield resulting in a larger annual return without ever investing any additional money.
Wall Street looks
at high -
yield bonds as a leading indicator for
stocks.
As usual, I don't place too much emphasis on this sort of forecast, but to the extent that I make any comments
at all about the outlook for 2006, the bottom line is this: 1) we can't rule out modest potential for
stock appreciation, which would require the maintenance or expansion of already
high price / peak earnings multiples; 2) we also should recognize an uncomfortably large potential for market losses, particularly given that the current bull market has now outlived the median and average bull, yet
at higher valuations than most bulls have achieved, a flat
yield curve with rising interest rate pressures, an extended period of internal divergence as measured by breadth and other market action, and complacency
at best and excessive bullishness
at worst, as measured by various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of credit spreads and weakness in the ISM Purchasing Managers Index in the months ahead, and; 4) there remains substantial potential for U.S. dollar weakness coupled with «unexpectedly» persistent inflation pressures, particularly if we do observe economic weakness.
One of the fundamental ideas behind looking
at high -
yielding Dow
stocks it that they tend to involve companies that have hit hard times recently.
So if you think investing in
high yield dividend
stocks is a good thing, you must be looking
at steady payouts.
But I am concerned that late - cycle entrants into risk assets like
stocks and
high -
yield bonds are taking a leap of faith
at a time when there is less room for markets to move up and growing risks of them falling back.
At the end of the day,
high -
yield corporate debt generates returns that are highly correlated to the returns of
stocks, and it's for that reason we regard them as a kind of «equity light» or «decaf equity.»
The fall in oil prices that culminated in big declines for
stocks, emerging market assets and
high yield bonds
at the beginning of this year is the most recent manifestation of this linkage.
My retirement plan is to get my ROTH up to
at least 250K in value and generate the bulk of my retirement income through it by investing in
high yield dividend income
stocks.
View our latest analysis for RGC Resources 5 questions to ask before buying a dividend
stock Whenever I am looking
at a potential dividend
stock investment, I always check these five metrics: Does it pay an annual
yield higher than 75 % of dividend payers?
At the same time, lots of
stocks that trade on low PE's, low price to book values and
high dividend
yields have turned out to be terrible investments.
Low - growth,
high -
yield stocks are thought to be among the least risky
stocks; we believe,
at today's prices, they are among the most risky
stocks.
Depending on where the
stock market and bond market are
at the time, I'd like to deploy $ 300,000 of the proceeds in low risk investments that have a
high chance of producing a 4 % gross
yield.
At the time,
stocks were expected to have a
higher dividend
yield than bonds to compensate investors for the extra risk carried by equities.
As the Federal Reserve contemplates
higher interest rates, Jeff Rosenberg looks
at past market reactions, and what the
yield curve may be saying about
stocks.
Another option, though may be not as safe as CDs or money market accounts, is
high quality dividend paying
stocks (always understand that investing in the
stock market is riskier than putting money in bank accounts), some with more than 5 % dividend
yield at the end of 2010.
The fall in oil prices that culminated in big declines for
stocks, emerging market assets and
high yield bonds
at the beginning of this year is the most recent manifestation of this linkage.
Our
high -
yield trading strategy is simple: We sell a cash - secured put or a covered call on a
high - quality dividend growth
stock when it appears to be trading
at a reasonable price.
Historically,
stocks do tend to trade
at higher valuations when bond
yields are lower.
Their dividends are usually qualified dividends, which get taxed
at a lower tax rate, their
yield is usually
higher than common
stock yields, and they may provide less share price volatility.
This, when combined with
higher cash levels
at companies, including penny
stocks, will drive companies to increase their dividend
yield over the next decade.
The S&P
High Yield Dividend Aristocrats ® is designed to track a basket of
stocks from the S&P Composite 1500 ® that have consistently increased their dividends every year for
at least 20 years.
Barron's columnist Mark Hulbert identified the five
stocks that have the
highest yields in the S&P 1500, and which also are recommended by
at least one of the top - performing newsletters that he tracks.
The positions the bloggers and commentary took against reinvesting dividends centered on whether the
stock price would be good
at the time of the reinvestment; and it mentioned strategies like pulling the dividends out and either putting them into a
high -
yield savings account or accumulating them until such time there was enough to make a new investment into some other
stock or
stock fund.
One idea I have is that rather than staying in TIPS and knowing that my account balance «will decline» while I wait for a PE / 10 to decrease to 14 or so (which might not happen in my lifetime) it might be better to look
at getting
yield from Preferred Stocks, REITs, MLP's or maybe even High Yield B
yield from Preferred
Stocks, REITs, MLP's or maybe even
High Yield B
Yield Bonds.
Continuously declining long - term rates created two tailwinds for his portfolio: 1) It continuously reduced borrowing costs for highly leveraged companies; and 2) Drove up values of
high yielding stocks (look
at what utilities, MLPs and REITs have done over the same time period).
I have already discussed in one of my article that how important it is for investors to buy
stocks which are trading
at high earning
yields and has
high return on capital (ROC).
By using this method of earning
yield and ROC, an investors will get a list of
at least 5/10
stocks at time which ranks well in the ranking based on
high earning
yield and ROC.
In other words, you can sell that
stock at $ 50, and you have $ 50 of cash that you could potentially deploy into some other
stock (either with greater capital appreciation potential or
higher yield).
Bottom Line: Either way this «10 % Trade» works out offers me the opportunity to generate a 10 % - plus annualized
yield from Wells Fargo (WFC)-- a
high - quality, dividend growth
stock that appears undervalued
at current prices.
Bottom Line: Either way this «10 % Trade» works out offers me the opportunity to pull in
at least a 10 % annualized
yield from Apple (AAPL), a
high - quality dividend growth
stock that appears to be trading
at a reasonable price.
That's because bond
yields and
stock valuations tend to track each more closely
at higher levels of inflation.
The
highest yielding Canadian dividend
stock is Aimia
at over 9 %, the company is a data - driven marketing and loyalty program provider (ie.
And don't forget: steady dividend hikes not only make a
stock more alluring to new income investors, but also reward existing investors with increasingly
higher yields on shares purchased
at lower prices in the past.
That's why we recommend that you look beyond dividend
yield when making investments in
high growth dividend
stocks, and look for dividend
stocks that have also established a business and have
at least some history of building revenue and cash flow.
The orange line tracks a portfolio of
stocks that don't pay dividends
at all, the purple line tracks
stocks that pay the lowest 30 % of dividend
yields, and the green line tracks
stocks in the
highest 30 %
yield group.
James O'Shaughnessy looked
at the returns of large
high -
yielding stocks from 1951 to the end of 2003 in his book What Works on Wall Street.