{"id":11041,"date":"2023-12-03T17:55:30","date_gmt":"2023-12-03T17:55:30","guid":{"rendered":"https:\/\/connectwithfund.com\/markets\/how-to-collect-big-yields-with-less-heartburn\/"},"modified":"2023-12-03T17:55:32","modified_gmt":"2023-12-03T17:55:32","slug":"how-to-collect-big-yields-with-less-heartburn","status":"publish","type":"post","link":"https:\/\/connectwithfund.com\/?p=11041","title":{"rendered":"How To Collect Big Yields With Less Heartburn"},"content":{"rendered":"
\n

First-level investors think the key to retiring on dividends alone is to find the largest yields they can and ride them into the sunset.<\/p>\n

But while it\u2019s important to lock down fat yields\u2014like the five-pack of 5.5%-10.4% yielders I\u2019ll share with you today\u2014that\u2019s only part<\/em> of the puzzle. We need two more things from our long-term income holdings:<\/p>\n

    \n
  1. Dividend safety.<\/strong> A 10.4% payout is only helpful if it\u2019s actually going to get paid<\/em> for quarters and years to come. No dividend cuts, please.<\/li>\n
  2. Principal safety.<\/strong> We\u2019re also not looking to lose 10.4% per year in price. Or anything in price, for that matter. We want our principal to stay steady or better.<\/li>\n<\/ol>\n

    One of the best ways to find safe dividends that will protect our principal is in \u201clow-beta\u201d stocks. We could call them \u201clow-heartburn\u201d just as well. These are equities that move less than the broader market.<\/p>\n

    <\/fbs-ad><\/p>\n

    Perfect for us payout-focused investors.<\/p>\n

    Here\u2019s a quick example of beta. Let\u2019s say a stock has a beta of 0.5. It moves half as fast as the market.<\/p>\n

    If the S&P drops 10%, we would expect our 0.5 beta stock to be down only 5%. Less bad, in other words.<\/p>\n

    A low volatility (beta) strategy has performed well since the bear market started in 2022. A popular \u201clow vol\u201d ETF beat the market with\u2014wouldn\u2019t you know it\u2014less heartburn.<\/p>\n

    But as you know, we can do better than a lazy ETF! Today we\u2019ll discuss five low-beta dividend stocks that pay between 5.5% and 10.4% to see if they meet our safe dividend and principal intact<\/em> standards.<\/p>\n

    Tobacco companies like Philip Morris International
    \n
    \n PM
    \n <\/fbs-ticker> (PM, 5.5% yield)<\/strong>, somehow, keep churning cash flow. Governments hate \u2018em, but smokers gotta have \u2018em. And ol\u2019 Flip Mo actually grows faster than our average tobacco peddler.<\/p>\n

    Shares have been left behind over the past year or so as the market has found its groove. But PM has performed exceptionally during downturns as a store of safety. And that\u2019s in part because Philip Morris keeps finding ways to bring in more money.<\/p>\n

    While cigarette sales are struggling, PM is finding ways to offset that weakness\u2014specifically in heated and oral tobacco products, which it has bolstered by raising its stake in (and eventually outright acquiring) Swedish Match. Also, its positioning in foreign markets makes Philip Morris more attractive than its U.S.-locked peers. So while other cigarette makers might be treading water or worse, PM is expected to grow its top and bottom lines this year and next.<\/p>\n

    Philip Morris\u2019s shares boast one- and five-year betas of 0.68 and 0.8, respectively. Dividend stability is every bit as nice\u2014the company has increased its dividend every year since splitting from Altria (MO) <\/strong>in 2008, by more than 7% annually.<\/p>\n

    LTC
    \n
    \n LTC
    \n <\/fbs-ticker> Properties (LTC, 7.0% yield)<\/strong> is a national real estate investment trust (REIT) that\u2019s roughly 50\/50 split between senior housing and skilled nursing properties. This type of real estate was long considered can\u2019t-miss\u2014that is, of course, until COVID wreaked havoc on the sector. The upside? Most operators (including LTC) likely have the worst of it in the rear-view, with occupancy and rent coverage generally on the upswing.<\/p>\n

    LTC\u2019s one- and five-year betas are both just under 1, so you\u2019re not getting noticeably calmer performance than the rest of the market. But that could very well mellow out as the industry\u2019s conditions continue to improve. The dividend needs to get in gear, though\u2014LTC\u2019s 7% yield is nice, and a monthly payout schedule is even nicer, but the payout has been idling for years at 19 cents, losing a lot of ground to inflation.<\/p>\n

    Fashion retailer Buckle (BKE, 10.4% yield)<\/strong> is a strange name to see here, on two counts.<\/p>\n

    For one, it\u2019s generally surprising to see a retailer with consistently low beta\u2014fashion is fickle, and as a result, fashion stocks tend to be mercurial as well.<\/p>\n

    But Buckle\u2019s five-year beta is a hair under 1.0, and it\u2019s been downright sleepy over the past year with a beta of 0.59. This is a case where beta doesn\u2019t tell the whole story, though. After a few years of boom times, Wall Street sees Buckle\u2019s earnings dropping 17% and revenues falling 6% this year; its results through three quarters are right in line with those projections. No wonder BKE shares are off double digits in 2023 while the S&P 500 has returned nearly 20%.<\/p>\n

    If there\u2019s any silver lining, it\u2019s that Buckle\u2019s results are largely expected to stabilize next year.<\/p>\n

    The other oddity is Buckle\u2019s double-digit yield, which is extremely unusual for any stock, but especially one in retail. But BKE\u2019s payout is more than meets the eye, for better or worse. Buckle is a special dividend payer\u2014one that prefers to augment its regular dividend with special distributions as profits allow. Of the Buckle\u2019s 10.4% yield, only 3.6% of that comes from its quarterly dole. So while Buckle does provide income potential, it\u2019s perhaps not the best source of stable<\/em> income potential. Let\u2019s move on.<\/p>\n

    VICI Properties (VICI, 5.7% yield)<\/strong> is another eyebrow-raiser, as it\u2019s involved in one of the market\u2019s more cyclical businesses: casinos and hospitality.<\/p>\n

    VICI Properties\u2019 portfolio includes 54 gaming facilities\u2014including Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas\u2014as well as 38 non-gaming experiential properties. All told, its real estate includes 60,000-plus rooms and 500-plus restaurants, bars, clubs, and sportsbooks. So VICI Properties\u2019 properties are a little more than just a place to sit down and play slots.<\/p>\n

    All of the above is discretionary nonetheless, but, then, VICI\u2019s business isn\u2019t collecting chips\u2014it\u2019s merely collecting the rent. And that\u2019s really it, in fact. VICI is a triple-net lease property, so its tenants are responsible for taxes, insurance and maintenance.<\/p>\n

    From that perspective, business is good. In fact, so good that, despite a lukewarm forward-looking price-to-adjusted funds from operations (AFFO) of 14 or so, it\u2019s possible the market is sleeping on this REIT.<\/p>\n

    VICI just barely qualifies as low-vol\u2014its one- and five-year betas are both just under 1. Still, that\u2019s about as cool and collected as you\u2019ll get from the gaming business, and it offers a 6% yield to boot\u2014on a dividend that has been rising since its 2018 IPO.<\/p>\n

    One REIT that screams stability is Getty Realty<\/strong> (GTY, 6.2% yield), which is one of the most boring landlords in America.<\/p>\n

    And boring, as I like to say, is beautiful.<\/p>\n

    Getty Realty owns nearly 1,100 single-tenant retail properties in 40 states and the District of Columbia. Sure, the mention of brick-and-mortar retail doesn\u2019t exactly inspire confidence, but Getty\u2019s tenants will. More than two-thirds of the portfolio involves convenience store companies like 7-Eleven and gas stations from the likes of BP (BP)<\/strong>. Its other tenants include car washes, repair shops, auto service stations, and more.<\/p>\n

    Much of the above is either recession-proof or at least recession-resistant. That said, Getty isn\u2019t exactly invincible\u2014higher interest rates have weighed on GTY, much like other REITs. And there\u2019s an open question about whether a gradual shift to electric vehicles will weigh on its gas-station properties, though the convenience-store aspect of these locations should make them plenty resilient.<\/p>\n

    Getty will never be a font of explosive growth. But it\u2019s a smooth operator\u2014one- and five-year betas are 0.67 and 0.91, respectively\u2014and it boasts a well-above-average yield that keeps getting bigger as time marches on.<\/p>\n

    Brett Owens is chief investment strategist for <\/em>Contrarian Outlook<\/em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n

    Disclosure: none<\/em><\/p>\n<\/div>\n

    Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

    First-level investors think the key to retiring on dividends alone is to find the largest yields they can and ride them into the sunset. But while it\u2019s important to lock down fat yields\u2014like the five-pack of 5.5%-10.4% yielders I\u2019ll share with you today\u2014that\u2019s only part of the puzzle. We need two more things from our long-term income holdings: Dividend safety. A 10.4% payout is only helpful if it\u2019s actually going to get paid for quarters and years to come. No dividend cuts, please. Principal safety. We\u2019re also not looking to lose 10.4% per year in price. Or anything in price,<\/p>\n","protected":false},"author":1,"featured_media":11042,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[],"class_list":["post-11041","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets"],"yoast_head":"\nHow To Collect Big Yields With Less Heartburn | ConnectWithFund<\/title>\n<meta name=\"description\" content=\"First-level investors think the key to retiring on dividends alone is to find the largest yields they can and ride them into the sunset. 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