Displaying items by tag: yields

(New York)

Rates are rising, and that usually means bad news for income stocks. This time looks no different. Both utilities and real estate have been wounded this year, with both down between 3% and 6% for the year. The sectors are also getting increasingly unfavorable ratings from analysts.

FINSUM: We are pretty worried about losses coming for good income stocks as short-term Treasuries are yielding so much. Additionally, the Fed is sounding more hawkish, which only adds momentum to losses for rate sensitive equities.

(Washington)

In a widely expected move yesterday, Jerome Powell announced the first hike of his stint as the head of the Fed. The move was a quarter point higher to between 1.75% and 2%. Powell promised to be more open and transparent about the Fed’s outlook than in former times. Powell presented the rosiest outlook on the US economy in memory, repeatedly expressing strong optimism. He indicated that there were two more hikes planned for this year.

FINSUM: All the optimism comes across as quite hawkish despite Powell’s intentions to seem gradual. We appear to be on definite course higher.

(New York)

While Treasury yields, especially at the short end of the curve, have improved a great deal recently. Many investors may still be interested in adding some stocks with good dividends to their portfolios. With that in mind, pharma may be a great place to look. The sector is having a tough time this year—down over 6% to-date—but that means dividend yields are looking strong. The sector is averaging 2.9%, but the best payers are near 4%, including some big names. For instance, AbbVie and Pfizer are both yielding 3.7% or over, and both seem to have rock solid outlooks where that dividend is not going to shrink.

FINSUM: These seem to be some great choices. The risk here does not appear to be in the fundamentals, but more related to interest rates.

(New York)

Are you on the look out for income stocks? While their position in one’s portfolio is changing given rising rates, good income stocks, especially safe ones, are always of value. The S&P 500 is currently only yielding about 2%, which is now less than two-year Treasuries. However, one can find very strong stocks with 3-4% yields. Those include Target and Qualcomm, the latter of which is yielding 4.2% and is a very well-covered stock. Also check out Seagate, CenturyLink, Pitney Bowes, and Navient.

FINSUM: These picks come from what seems to be a very diligent dividend-focused manager that was recently profiled in Barron’s. Our big question is how much dividend stocks might suffer in a rising rate period.

(New York)

Safe 5% yields sound very enticing right now don’t they? Well, they are actually not as hard to find as you think if you take a broader perspective. That perspective is to look at standard municipal bonds and examine their real-world yields, or how they compare to taxable bonds. For instance, for a couple living in California with a $250k per year income, a municipal bond yielding 3.0% is equivalent to a taxable bond yielding a whopping 5.8%. This is because of the new tax system brought in by Republicans. One muni expert comments that “I would argue that munis are more attractive than they’ve ever been because, with the loss of various deductions, including SALT, one’s taxable income is higher than it’s ever been”.

FINSUM: This is a very good insight and one to which HNW individuals and advisors need to pay attention. Once investors really come around to this, it could spark a muni bond run.