How would I invest a chunk of money today? Say $10K or even $100K?

I’d load up on dividend magnet stocks, sit back and watch Fed Chair Jay Powell pump them to the moon!

Want to know what happened the last time the Federal Reserve cut interest rates? The broader market soared 124%! Powell printed so much money that the stocks popped:

Last Fed Rate Cut: Stocks Soared 124%

Today, select dividend stocks are set up for 124%-like returns too. Buying them now is the best way to build wealth. And protect ourselves from inflation.

Yeah, the last time Powell printed money, inflation followed for the first time in 40 years! It was quite the feat.

Now, we have Jay taking a victory lap for solving the problem that he created. This is our cue to find stocks that sold off on recession fears and buy them before they bounce out of the bargain bin.

Kinda sorta like how we buy dividend grower UnitedHealth Group (UNH) whenever it dips. We discussed UNH at the start of the year—I called it a “perfect for 2024” stock. My point was that UNH’s stock price was lagging behind its payout, a rare occurrence that should always be bought.

UNH benefits from health insurance premiums that are always rising. (The kind that contributed to Powell’s inflation mess—ha!) Price hikes plus profits from UNH’s technology-driven Optum unit—which provides pharmacy benefits, runs clinics and supplies data analytics—trickle down to a yearly double-digit dividend increase.

We’ve bought UNH twice in my Hidden Yields advisory. And twice we’ve profited. Our gains are so reliable that UNH is basically an “in-house” ATM for us!

Why UNH is our Hidden Yields ATM

That said, there are times we need to be patient. When I hosted our Q2 “Subscribers-Only” Webcast in June, UNH had traded sideways for over a year. Yours truly fielded several impatient questions. On cue, UNH took the hint and took off in pursuit of its payout:

UNH’s Dividend Magnet Always Delivers

As you can see above, UNH’s price has rallied above its dividend. The stock is back to a Hold. But fear not if you ignored my recent advice to buy UNH here and here and here and here and here. (I’m not mad—I’m just disappointed. Same thing I tell my kids!)

Amgen (AMGN) is another dividend magnet play we discussed back in May. Remember? We called it out as a likely beneficiary of the “lovey dovey Fed.” (Hawkish Jay didn’t fool us back then, either!) Amgen had the setup that we love—a price trailing its payout:

Flashback to May: Amgen’s Dividend Magnet Setup

Mr. and Ms. Market were blue on the blue-chip biotech at the time, but they were missing the key catalyst for Amgen: rare diseases. Of more than 10,000 identified today, only 5% have approved medicines. As an established biotech with seemingly endless resources, Amgen has the R&D and manufacturing know-how to research, create and bring these drugs to market profitably.

Since 2020, the drug maker has boosted rare disease product sales from $2.2 billion to $3.9 billion. BINCYTO, a treatment for acute lymphoblastic leukemia, is up 48% year-over-year. And the company’s $28 billion acquisition of Horizon Therapeutics expanded Amgen’s rare disease portfolio even further. For example, Tepezza, a Horizon product, treats thyroid eye disease.

The result for Amgen? A top line that is accelerating. Wall Street finally figured this out—shares are up 26% (good for 61% annualized) since we added them to our Hidden Yields portfolio in April.

If you missed UNH and AMGN, please, keep your head up. There are other divvie magnets to buy now thanks to our prolific and dovish money printer, Mr. Powell.

Just one example. NextEra Energy Partners (NEP) delivered yet another dividend raise last month.

NEP is the “yieldco” spun off from NextEra Energy (NEE) back in 2014. Renewable energy is the mission of the spinoff. The yieldco buys a wind farm, for example, and the parent company runs the operation.

Parent NEE is the gold standard for renewable energy in the utility sector, so an NEE-to-NEP connection is about as “blue blood” as it gets.

That was true until 2022 happened.

When Jay Powell hiked rates to clean up his inflation mess, yieldcos were pummeled. Because they constantly need financing, their investors worried whether the companies would survive the hiking cycle. Case in point: NEP yields 13.4% today, a reflection of these concerns. Investors sold off, the price fell, and the yield (of course) rose.

Call me crazy, but if the 13.4% yield was in jeopardy, management wouldn’t be raising the payout!

The company has raised its dividend every quarter for the past nine years. Thirty-nine consecutive quarterly payout hikes—39!

NEP Hikes Its 13.4% Yield Every Quarter

I realize the market views NEP as risky, but CFO Brian Bolster clarified recently that the company does not have any growth equity needs—doesn’t need to raise any cash to grow its business—until 2027. Between now and then, lower interest rates should give Brian a chance to refinance existing debt cheaply and boost cash flow even more.

After all, the Fed is now Brian and NEP’s friend.

— Brett Owens

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Source: Contrarian Outlook