Last week, U.S. stocks reached their high water marks for the year. Then on Friday, they were in freefall after UK voters narrowly voted to leave the European Union. The historic vote will have far-reaching political, social and economic ramifications. Stock markets around the globe were reeling amid the uncertainty surrounding Britain’s departure from the EU, which will influence everything from mortgage rates to foreign currency exchange. #-ad_banner-#Fortunately, we have limited direct exposure in High-Yield Investing. Most of my remaining holdings either have tangential exposure to UK markets or are well-positioned to ride out… Read More

Last week, U.S. stocks reached their high water marks for the year. Then on Friday, they were in freefall after UK voters narrowly voted to leave the European Union. The historic vote will have far-reaching political, social and economic ramifications. Stock markets around the globe were reeling amid the uncertainty surrounding Britain’s departure from the EU, which will influence everything from mortgage rates to foreign currency exchange. #-ad_banner-#Fortunately, we have limited direct exposure in High-Yield Investing. Most of my remaining holdings either have tangential exposure to UK markets or are well-positioned to ride out this storm. Still, even if my portfolio wasn’t directly in the line of fire, there was plenty of collateral damage. Bank lenders and businesses that rely on cross-continental trade were among the hardest hit. The ripple effects of this vote will be felt for many months to come. As is typically the case in turbulent times, cash is flowing into reliable safe harbors like gold and U.S. government bonds. From my vantage, the biggest upshot for us is that the current turmoil will likely stay the Federal Reserve’s hand and rule out any further… Read More

Well, it finally happened. I’ve been watching oil prices flirt with the $50 mark for some time. On June 7, benchmark West Texas Intermediate (WTI) futures finally pierced through that key psychological level and settled at $50.36 per barrel. That’s the first time oil prices closed above $50 in almost a year. Prices have since retreated slightly since then to around $48, but it’s still a monster comeback. It was only a few months ago that prices were languishing at $26 per barrel. #-ad_banner-#Crude oil dominated the headlines when prices were on the way… Read More

Well, it finally happened. I’ve been watching oil prices flirt with the $50 mark for some time. On June 7, benchmark West Texas Intermediate (WTI) futures finally pierced through that key psychological level and settled at $50.36 per barrel. That’s the first time oil prices closed above $50 in almost a year. Prices have since retreated slightly since then to around $48, but it’s still a monster comeback. It was only a few months ago that prices were languishing at $26 per barrel. #-ad_banner-#Crude oil dominated the headlines when prices were on the way down. But now that the pendulum has turned, the financial media has gone strangely quiet. That’s fine with me. It might allow more time to put additional money to work in this sector while asset prices are still depressed. Could this rally falter and prices retreat again? Sure. We can’t rule out that possibility. But because the upward surge has been driven by improved fundamentals — not speculators — I don’t think we’ll retest the lows again in this cycle. North American oil producers have been dialing back their exploration and production budgets for… Read More

We’re approaching a major milestone. More companies are paying dividends, and those payments are getting increasingly larger as a percentage of profits. In fact, payout ratios recently reached 37%, and aggregate dividend payments among S&P 500 companies have totaled $410 billion over the past year. That’s more than $1.1 billion in dividends per day. #-ad_banner-#At least, that’s the official count. The true payout is actually much higher because there are dozens of supplemental dividends that go unreported each quarter. By unreported, I’m not talking about some secret way of transferring cash to a select… Read More

We’re approaching a major milestone. More companies are paying dividends, and those payments are getting increasingly larger as a percentage of profits. In fact, payout ratios recently reached 37%, and aggregate dividend payments among S&P 500 companies have totaled $410 billion over the past year. That’s more than $1.1 billion in dividends per day. #-ad_banner-#At least, that’s the official count. The true payout is actually much higher because there are dozens of supplemental dividends that go unreported each quarter. By unreported, I’m not talking about some secret way of transferring cash to a select group of well-connected insiders. These extra payments are dished out openly and uniformly to all shareholders. But they are considered “special.” As such, these distributions aren’t reflected in the yields you see quoted on popular financial sites like Yahoo or Morningstar. But trust me, the cash is just as green and spends just the same as any other dividend. And these special payments typically come in much bigger denominations, often 10 to 20 times larger than the firm’s regular quarterly dividend. There’s no special trick or complicated system to capturing these dividends — you… Read More

On April 13, 2015, the S&P 500 closed at 2,081. On April 13, 2016, it closed at 2,082. Of course, there have been innumerable up and down gyrations since then. But in the end, the benchmark index is right back where it started. In essence, we’ve gone nowhere over the past year. #-ad_banner-#There are more than a few pros, including top strategists at Goldman Sachs, who think the most likely trend for future stock prices isn’t up or down, but sideways. Given the macroeconomic cross-currents, you can understand why the market has no clear… Read More

On April 13, 2015, the S&P 500 closed at 2,081. On April 13, 2016, it closed at 2,082. Of course, there have been innumerable up and down gyrations since then. But in the end, the benchmark index is right back where it started. In essence, we’ve gone nowhere over the past year. #-ad_banner-#There are more than a few pros, including top strategists at Goldman Sachs, who think the most likely trend for future stock prices isn’t up or down, but sideways. Given the macroeconomic cross-currents, you can understand why the market has no clear direction. There are several compelling reasons to sell stocks… crumbling commodity prices, ongoing terrorist threats, rising interest rates, excessive valuations, stalling global economic growth. Yet, there are just as many strong arguments in favor of buying… robust job creation, strong consumer spending, cheap and available capital, heated M&A activity. You can see why the bulls and bears are in a tug-of-war right now. It’s quite possible that neither will gain the upper hand, leaving the broader market drifting. There will certainly be volatile day-to-day price swings, but the larger trend could… Read More

There were 4 million children born in 1991, which was squarely in the middle of a surge in birth rates that began in the early 1980s and continued clear through the Y2K era. Of course, we refer to the offspring of this era as “millennials”. Those children are now turning age 25 at the rate of 4 million per year, or about 77,000 per week. This is the prime age for settling into a career and beginning a family. #-ad_banner-#​Millennials aren’t often portrayed in the media as hardworking and industrious — more like starry-eyed… Read More

There were 4 million children born in 1991, which was squarely in the middle of a surge in birth rates that began in the early 1980s and continued clear through the Y2K era. Of course, we refer to the offspring of this era as “millennials”. Those children are now turning age 25 at the rate of 4 million per year, or about 77,000 per week. This is the prime age for settling into a career and beginning a family. #-ad_banner-#​Millennials aren’t often portrayed in the media as hardworking and industrious — more like starry-eyed dreamers at a Bernie Sanders campaign rally. But make no mistake: it’s only a matter of time before millennials control most of the nation’s wealth. Within the next seven years, this generation will comprise more than half of the U.S. workforce. And by the time my son reaches age 25 in 2028, tens of millions of millennials will have reached their peak earning years. At that point, they will be taking home a projected $8 trillion in annual net income, according to Merrill Lynch. Where will they be spending all that cash? Discover the… Read More

I have a feeling that some growth-oriented readers out there might groan a little at this stock pick. But in my experience, some of the most successful investments come from “boring” industries that may not be all what they appear. In today’s fast-paced digital world, the mundane money transfer business seems so last century. Who even carries cash anymore, right? #-ad_banner-#To some, this service is about as relevant as a telegram. That argument is largely true here in the United States. But Western Union (NYSE: WU) serves customers in 200 countries — 199 of… Read More

I have a feeling that some growth-oriented readers out there might groan a little at this stock pick. But in my experience, some of the most successful investments come from “boring” industries that may not be all what they appear. In today’s fast-paced digital world, the mundane money transfer business seems so last century. Who even carries cash anymore, right? #-ad_banner-#To some, this service is about as relevant as a telegram. That argument is largely true here in the United States. But Western Union (NYSE: WU) serves customers in 200 countries — 199 of which are not the United States. And while cash may no longer be fashionable in New York or Los Angeles, it’s still the preferred means of exchange in cities like Johannesburg, South Africa, and Mumbai, India. Here’s what is happening. There is a planet-wide population shift of workers moving from poor countries to wealthier ones in search of higher pay. Odds are, you have probably crossed paths with one of these transplants. My wife has one co-worker from Bosnia and another from Nepal. I recently met a young sales person who had traveled all… Read More

What’s better, a stock that appreciates 7% over the next year along with a 3% dividend yield, or one that appreciates 3% and yields 7%?  Tax implications aside, there isn’t much difference. Both will give you a total return of about 10%. If anything, option two would be preferable, as it throws off income more quickly and would net a slightly higher return when factoring in dividend reinvestment.  #-ad_banner-#But when it comes to popular valuation metrics, all the focus is on the growth side of the equation, while income is all but forgotten. So investors that rely on these yardsticks… Read More

What’s better, a stock that appreciates 7% over the next year along with a 3% dividend yield, or one that appreciates 3% and yields 7%?  Tax implications aside, there isn’t much difference. Both will give you a total return of about 10%. If anything, option two would be preferable, as it throws off income more quickly and would net a slightly higher return when factoring in dividend reinvestment.  #-ad_banner-#But when it comes to popular valuation metrics, all the focus is on the growth side of the equation, while income is all but forgotten. So investors that rely on these yardsticks will be inclined to buy the stock that is poised to grow 7% and overlook the one that is poised to grow just 3%.  That can lead to missed opportunities. Earnings growth usually translates into a rising share price over time. And generally speaking (although there are certainly exceptions), companies that return most of their excess profit through dividends will have slower growth than companies that pump their profits back into the business.  So let’s rewind back to the beginning on the two stocks above. Let’s suppose the first stock had projected earnings growth of 10%, while the second had… Read More

I love to read stories about the rise and fall of business ventures. Not only are they entertaining, but these case studies can also reveal some important investing insights.  One in particular that has stuck with me over the years is the tale of Greyhound Bus Lines. Back in 1994, the transportation company was running on fumes. It had recently made the difficult decision to raise fares, which didn’t sit well with customers. Passenger volume was declining sharply, taking a heavy toll on revenues and earnings.  #-ad_banner-#Even more troubling, there was an ongoing feud between management and labor. Bus drivers… Read More

I love to read stories about the rise and fall of business ventures. Not only are they entertaining, but these case studies can also reveal some important investing insights.  One in particular that has stuck with me over the years is the tale of Greyhound Bus Lines. Back in 1994, the transportation company was running on fumes. It had recently made the difficult decision to raise fares, which didn’t sit well with customers. Passenger volume was declining sharply, taking a heavy toll on revenues and earnings.  #-ad_banner-#Even more troubling, there was an ongoing feud between management and labor. Bus drivers had already walked off the job a few years earlier in a lengthy strike. The two sides eventually reached a delicate agreement, but tensions were starting to flare again.  These issues created quite a bit of anxiety for investors. But the market really panicked when credit rating agency Standard & Poor’s downgraded the firm’s debt to “CCC,” a level indicating high risk of default and bankruptcy. Greyhound shares plummeted as low as $1.50, and the outlook was grim. About that same time, a small group of investors dug into the financial statements and saw something that the crowd had missed… Read More

I’ve said it before, but it bears repeating. There are only two ways to increase a stock’s dividend yield: either raise the payout (which takes time) or decrease the share price (which can happen with lightning speed).  While everyone loves the former, they tend to despise the latter. That’s understandable if the stock is retreating because of a material change that might pose a serious threat to earnings. But in many cases, the fundamentals are sound and then stock is simply moving along with the broad market current.  #-ad_banner-#The S&P 500 has dropped more than 8% just since January 1. Read More

I’ve said it before, but it bears repeating. There are only two ways to increase a stock’s dividend yield: either raise the payout (which takes time) or decrease the share price (which can happen with lightning speed).  While everyone loves the former, they tend to despise the latter. That’s understandable if the stock is retreating because of a material change that might pose a serious threat to earnings. But in many cases, the fundamentals are sound and then stock is simply moving along with the broad market current.  #-ad_banner-#The S&P 500 has dropped more than 8% just since January 1. The overwhelming majority of stocks have fallen by more than 20% over the past three months.  So that $20 stock with the $0.50 per share annual dividend is now a $16 stock. Suddenly, what was once a 2.50% dividend yield is now a stronger 3.12%. We could get the same increase in yield if the dividend rose from 50 cents to 62 cents. But even at a healthy 10% annual pace, that would still take more than two years.  Though we hate it, the falling share price got us to that goal much more quickly. There’s also the added benefit… Read More