Right now, I’m betting you’d jump on a stock that pays a high dividend (I’m talking 5% and more here) and doesn’t sink with the market in a crash.
I have great news: today I’m going to reveal 2 such stocks. Each hands us growing 5%+ dividends now—and each steered through the market’s stomach-churning autumn without a scratch.
And these 2 are just getting started: both of these “pullback-proof” dividends have baked-in price upside we’ll enjoy in 2019 and well beyond.
Because both of these 5%+ payers are riding unstoppable megatrends that will lift their stocks for decades to come. So all we have to do is pocket their fat payouts.
I think you’ll agree that this only makes sense: there’s not much point collecting fat dividends if you’re giving those payouts back (and more) in share-price declines.
I’m going to unmask these 2 steady Eddies in a moment. First, we need to talk about an overhyped Dividend Aristocrat whose payout you might be tempted to jump on now. But doing so is begging for your savings to steadily trickle away.
Dump Exxon’s Pullback–Prone Dividend Now
Oil giant Exxon Mobil (XOM) pays a nice 4.3% dividend today. Plus it’s raised its payout for 31 years running.
An Airtight Dividend …Right?
(Ignore that dip in 2001—it was a special dividend that went with XOM’s 2-for-1 stock split.)
All sounds great so far, right?
After all, if Exxon’s stock can hold more or less steady, you’d pocket a decent 4.3% return in the next year—all in cash, too. That’s better than the 4.0% the S&P 500 has returned year to date. And remember that the market’s upside is almost entirely here-today, gone-tomorrow paper gains, due to the average S&P 500 stock’s pathetic 1.8% dividend yield.
Here’s where the trouble starts, though.
You see, XOM is the last place to look for a stable share price, shackled as it is to the goo, which has knocked the shares for a crippling 23% plunge, even as the market went 41% the other way!
The Real Reason for Exxon’s High Yield
Heck, just since the market peak in September, XOM has dropped 7%. In other words, that decline alone would have cost you a full 7 quarters (nearly 2 years!) worth of dividends in just over 2 months.
And don’t expect the company’s hallowed Dividend Aristocrat status to rescue you. The payout eats up a high 80% of free cash flow (FCF), meaning the nice growth curve I showed you earlier is likely to flatten out—or worse.
I think you’ll agree this is no way to fund your golden years. So let’s move on to ….
“Pullback-Proof” Dividend No. 1
When I say “pullback-proof” dividends, I’m really talking about stocks boasting 2 things: a cheap valuation (which hedges your downside) and a history of sailing through earlier calamities unscathed.
And we get both from Brookfield Infrastructure Partners (BIP). During the market’s dismal autumn, BIP investors happily picked up their dividends—BIP currently yields a nice 4.8%—while the stock held firm. These folks may have wondered what all the fuss was about!
Smooth Sailing for BIP Holders
Even better, BIP trades at a bargain 12.6-times funds from operations (FFO). (Even though BIP isn’t a real estate investment trust, FFO is a better measure of its performance than earnings per share).
This deal is available to us now because first-level investors just don’t have the attention span to “get” what BIP does—it’s a global juggernaut that owns a basket of pipelines (including in Western Canada, where oil and gas is mostly landlocked), electrical utilities, ports and toll roads.
It’s even a great play on our unshakable Internet addiction, with 3,000 miles of fiber-optic line and 7,000 towers across France—including the right to broadcast from the top of the Eiffel Tower itself!
But at the end of the day, all you really have to watch here is management, which concentrates on 2 things—and does both really well:
- Buying assets cheap and selling them high, and …
- Growing the dividend—BIP has a stated goal of increasing the payout by 5% to 9% every year.
BIP is more than meeting both of these benchmarks: it recently unloaded its Chilean electrical-transmission business, fetching $1.3 billion. Said management:
“Essentially, we exchanged an asset generating a 7% FFO yield for newly acquired utilities, data infrastructure and energy businesses that will provide an 11% FFO yield on an annualized basis.”
If that sounds like a great deal to you, that’s because it is!
And about that dividend: it’s on a growth tear, soaring 47% in just the last five years:
A Textbook Pullback-Proof Dividend
The kicker? BIP won’t break a sweat meeting its dividend-growth goal. With the payout eating up just 60% of FFO (a very low ratio for a company like this), it’s got plenty of bandwidth for more hikes.
Which brings me to…
Pullback-Proof Dividend No. 2
Just when you thought there was an ETF for everything, along comes the Long-Term Care ETF (OLD), complete with cheeky ticker symbol.
But we’re not going to tap the relentless greying of America with a 1-click ETF.
Because even though it sailed through the pullback (it’s flat since the market peak on September 20), OLD is old news—it’s clobbered the market in 2018:
This Buy Window Closed 11 Months Ago
Instead, we’ll save ourselves OLD’s 0.35% management fee and jump on one of its top holdings directly: Ventas (VTR).
By doing so, we’ll grab a nice—and growing—5.1% dividend that easily tops the 2.0% OLD dribbles out.
Ventas is a healthcare titan, with 1,200 properties, including 727 senior-housing communities, 360 medical-office buildings and 17 skilled-nursing facilities.
That split puts it square in the train tracks of 2 relentless trends: the greying of America (the 65+ population is forecast to more than double by 2060) and spiking healthcare spending, which now sits at $10,348 per person in America.
Those 2 trends alone make Ventas a great pullback-proof play in my book. But there’s a lot more to like here.
For one, the stock not only held its own in the recent market dive, it actually gained 9% (that’s nearly 7 quarters worth of dividends, if you’re keeping track at home)!
A Pullback-Proof Income Play in Action
Not only that, but unlike with OLD, you can snag this stock at only a slightly higher price than you would have paid in January. Plus, you’ll pick it up at a bargain 15-times FFO, too! These are crucial numbers that give us downside insurance as we enjoy VTR’s growing 5.1% payout.
An Overlooked Bargain
Finally, let me loop back and tell you more about that dividend, which has a lot going for it beyond a nice current yield.
For one, it’s a snap for Ventas to maintain at a manageable (for a REIT) 75% of FFO.
Second, you’ll want to make your move now—Ventas has a habit of announcing dividend hikes in early December, and with revenue up 4.5% in Q3, FFO steady and long-term debt headed lower (down more than 7% in the past year!), we can bank on another nice hike any day.
— Brett Owens
Brookfield and Ventas are terrific “dividend lifeboats” when the markets get rough. One reason for that is that their growing 5%+ payouts give you more of your profits in cash, rather than here today, gone tomorrow paper gains.
By focusing on stocks like these—high yielders backed by surging sales and steady cash flows—you can make sure your nest egg stays intact—and grows for the future.
$40,000 in Income on $500k
I’ve got 6 more dividend plays just like this waiting for you now—but they have one critical twist: instead of 5% dividends, they’ll pay you a rock-solid 8% cash dividend right off the hop!
That could very well be enough to let you retire on dividends alone with a $500k nest egg, thanks to the $40,000 yearly income stream these defensive superstars give you.
That’s why I call this my “8% No-Withdrawal Portfolio.” I can’t wait to show it to you.
That’s not all, either.
Because the newest issue of my Contrarian Income Report publication will publish this Friday, with fresh updates on the 19 stocks and funds in our service’s portfolio, which hands our savvy CIR members massive yields up to 11%!
I want to send all 19 of these cash-rich plays your way, too. Don’t miss out.
Source: Contrarian Outlook