Displaying items by tag: income

(New York)

This is a difficult time to be any kind of investor, but being one trying to get yields out of equities is particularly hard-bitten at the moment. Dividends are being cut left and right, so investors need to turn to other options, but much of fixed income looks very scary. That said “Quality yield is on sale”, according to a fund manager at Tocqueville Asset management who specializes in income investments. “Don’t ignore the rest of the capital structure”, says another fund manager at Socoro Asset Management. For instance, look for things like a JP Morgan Chase preferred security with a fixed coupon of 5% and yield-to-call of 7.72%, or Invesco’s Variable Rate Preferred ETF (VRP), yielding 4.85%.

FINSUM: These are good suggestions. For a yield that will really knock your socks off, take a look at the Virtus Private Credit Strategy ETF (VPC), which owns many BDCs and CEFs and has been beaten up in the selloff, but yields a whopping ~18% net of expenses.

(New York)

Fixed index annuities, like other annuities, have developed somewhat of a bad reputation for poor sales practices over the years. Many agents sell fixed index annuities by saying things like “7% annual gains, no downside”, which in reality is a gross misrepresentation of how income riders work. So why should one buy annuities, and how in turn should they be sold responsibly? The reality is that fixed index annuities are best bought for what they guarantee, not what they might offer. That means CD-like returns with full principal protection. Any upside gains are a bonus, but should not be the core reason for buying the annuity, or the principal way they are pitched.

FINSUM: This will obviously be second nature to those experienced with annuities, but there are plenty of advisors whose clients are starting to ask them about the product (given the environment), so this is just a reminder for those dealing with unfamiliar inbound requests.

(New York)

Income investors have been frightened by the extent to which the current Coronavirus downturn is going to cause an economic downturn and thus a big cut to dividends. The only good news on this front recently has been that companies are suspending buybacks before dividends. In assessing the damage, Goldman Sachs says overall dividend payouts are going to be slashed by 25% this year. That figure includes a 38% fall for the next nine months added to the 9% rise in dividends in the first quarter.

FINSUM: This is big, but it would be far from catastrophic levels.

(New York)

Anyone paying any attention to the economy or markets knows dividends are in trouble. With the economy set to shrink 30% in Q2 and a likely big negative growth number for the year, companies are going to have a very hard time maintaining profitability and dividend levels. With that said, here are some stocks that should have safe dividends. Texas Instruments and CVS both look attractive, yielding 3.6% currently, as does Intel (which yields 2.5%).

FINSUM: The brightest news for investors is that many companies have announced a suspension of buybacks but have plans to maintain their dividend, so there should still be some decent income.

(New York)

Many people who are thinking about annuities don’t realize that many of them are sellable products—they don’t necessarily have to be held forever (even if that is often the best strategy). So which annuities are sellable and which aren’t? In general, SPIAs (single premium immediate annuities), DIAs (deferred income annuities), and QLACs (qualified longevity annuity contracts) are not sellable; VAs (variable annuities), FIAs (fixed index annuities), and MYGA (multi-year guarantee annuities) are usually sellable. Each of those latter products have surrender charge time periods in them, so it may cost something, but it does mean money is not locked in them forever.

FINSUM: Since selling would usually not be the best idea, this is more of a peace of mind factor than anything else, in our opinion.