{"id":24271,"date":"2023-10-04T13:11:22","date_gmt":"2023-10-04T13:11:22","guid":{"rendered":"https:\/\/microloannexus.com\/investing\/this-is-our-best-shot-at-cheap-8-dividends-since-2020\/"},"modified":"2023-10-04T13:11:23","modified_gmt":"2023-10-04T13:11:23","slug":"this-is-our-best-shot-at-cheap-8-dividends-since-2020","status":"publish","type":"post","link":"https:\/\/microloannexus.com\/?p=24271","title":{"rendered":"This Is Our Best Shot At Cheap 8%+ Dividends Since 2020"},"content":{"rendered":"
\n

Were you able to refi your home when rates were low? I hope so.<\/p>\n

Don\u2019t tell my wife, but we almost<\/em> missed the low-rate era. My better half kept asking about refinancing. \u201cYeah, yeah,\u201d I said. \u201cWe will when rates bottom.\u201d<\/p>\n

In early 2021, they took off right under my nose. I stare at the bond market all day and nearly missed this thing!<\/p>\n

Fortunately, we got a pullback in rates. I called my buddy, a mortgage broker, who dialed me in with a sweet 2.2% rate on our remaining balance. Two point two!<\/p>\n

Had we missed that deal, I\u2019d never live it down. I may as well have slept in my office for a while.<\/p>\n

Well, this current situation in dividends is like that. Yields are sky high for the first time since, really, the 1990s. Don\u2019t miss the opportunity to \u201clock in\u201d these retirement income streams today!<\/p>\n

Now Is Our Chance to \u201cRefi\u201d Our Dividends<\/h2>\n

As I write this, there are hundreds of dividend payers out there boasting higher yields than they have in years\u2014and they\u2019re plenty safe, too. We can thank the Federal Reserve for that.<\/p>\n

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

Jay Powell and Co. have driven rates through the roof\u2014to the point they nearly broke the banks! But the Fed only controls the \u201cshort\u201d end of the yield curve, which is why the 2-year Treasury yield closely lines up with the Fed funds rate:<\/p>\n

A 5.1%-paying 2-year means a lot more \u201cyield competition\u201d for our favorite high-yield plays, like utilities, real estate investment trusts (REITs) and closed-end funds (CEFs). As I\u2019m sure you\u2019ve noticed, they\u2019ve all been washed out in response.<\/p>\n

But here\u2019s the upshot: their dividend yields <\/em>have gone through the roof!<\/p>\n

Heck, even \u201cfirst-level\u201d utility plays like Verizon Communications
\n
\n VZ
\n <\/fbs-ticker> (VZ)<\/strong> yield big: VZ pays 8.2% today. And that\u2019s just what the mainstream crowd is getting; by digging a bit deeper, we contrarians can grab even higher<\/em> payouts\u2014often paid monthly, too.<\/p>\n

It really is a rich hunting ground of big dividends out there right now. But it won\u2019t be for long\u2014which is where our chance to \u201crefi\u201d our dividends comes in. As the economy slows, rates will fall. Investors will move out of Treasuries\u2014and into high-yielding stocks and funds, sending their prices<\/em> up, and their yields<\/em> back down.<\/p>\n

In other words, now is the time to lock in the big payouts on carefully selected REITs, utilities and CEFs\u2014then ride along as these dividend plays\u2019 prices return to \u201cnormal\u201d!<\/p>\n

Here are two tickers that are worth your consideration now. And I\u2019ve got plenty of timely buys waiting for you in the portfolio of my Contrarian Income Report<\/em> high-yield investing service.<\/p>\n

\u201cDividend Refi\u201d Play No. 1: A \u201cDouble Discounted\u201d 9.5% Payer<\/h2>\n

The Cohen & Steers Infrastructure Fund (UTF) <\/strong>is giving us a nice \u201cdividend refi\u201d opportunity now, thanks to the \u201cdouble discount\u201d it\u2019s throwing us.<\/p>\n

The first is the one every mainstream investor who buys utilities on the open market gets: the chance to buy washed-out stalwarts, like NextEra Energy
\n
\n NEE
\n <\/fbs-ticker> (NEE), Southern Company (SO)<\/strong> and Canadian natural gas provider Enbridge
\n
\n ENB
\n <\/fbs-ticker> (ENB)<\/strong>\u2014all top UTF holdings\u2014cheap. <\/strong><\/p>\n

The second is only available to those of us in the CEF \u201cVIP lounge,\u201d and comes from UTF\u2019s own discount to NAV, which, at 4.5%, is the best deal we\u2019ve seen on this classic \u201crecession-resistant\u201d play since Silicon Valley Bank et al hit the skids last spring.<\/p>\n

And as we discussed last week, it\u2019s not the current discount to NAV that matters with CEF, but the discount as it compares to history.<\/em><\/p>\n

We\u2019ve already got good news about that in the chart above. But the longer-term average is breaking our way, too: in the past five years, UTF has traded at a 0.8% average discount\u2014or basically par. That gives us some nice \u201csnap back\u201d upside as the current 4.5% discount disappears, to accompany the fund\u2019s monthly payout, which yields 9.5% on a yearly basis.<\/p>\n

\u201cDividend Refi\u201d Play No. 2: A 4.5% Payout That\u2019s Movin\u2019 On Up<\/h2>\n

Since we\u2019re talking refis, we\u2019d be remiss not to mention a residential REIT\u2014as today\u2019s high mortgage rates push more folks into the rental market. That\u2019s a big profit driver for Equity Residential
\n
\n EQR
\n <\/fbs-ticker> (EQR), <\/strong>owner of some 80,000 apartment units around major metros like New York, Boston, Seattle and Washington, DC.<\/p>\n

EQR is a net beneficiary of rising rates, with rental rates from its existing buildings rising 3.5% in August and occupancy sitting at basically fully booked 96%. Its balance sheet is also healthy with its debt measuring in at 27% of assets.<\/p>\n

Moreover, EQR has just 11.8% of its debt maturing this year, dropping to a mere 0.1% next year and 7% in 2025, and its loans carry a weighted average rate of around 4%\u2014far less than you and I would pay at the bank!<\/p>\n

Dividend coverage is also solid for a REIT, at around 70% of adjusted funds from operations (AFFO, the main REIT profitability metric.). And payout growth is strong and steady, too.<\/p>\n

That leaves us with a 4.5% \u201cstarter yield\u201d that\u2019s higher than it\u2019s been since 2020. By buying now, we lock that yield in and start to build up the yield on our original buy thanks to EQR\u2019s steady payout growth.<\/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":"

Were you able to refi your home when rates were low? I hope so. Don\u2019t tell my wife, but we almost missed the low-rate era. My better half kept asking about refinancing. \u201cYeah, yeah,\u201d I said. \u201cWe will when rates bottom.\u201d In early 2021, they took off right under my nose. I stare at the<\/p>\n","protected":false},"author":1,"featured_media":24272,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[],"class_list":{"0":"post-24271","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"yoast_head":"\nThis Is Our Best Shot At Cheap 8%+ Dividends Since 2020 | Micro Loan Nexus<\/title>\n<meta name=\"description\" content=\"Were you able to refi your home when rates were low? I hope so. Don\u2019t tell my wife, but we almost missed the low-rate era. 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