Displaying items by tag: income

(New York)

Advisors looking for good sources of income for clients should check out this piece, which is comprised of actual advisor ideas. Income is a tricky question at the moment, as one needs to preserve short-term income but also protect against rising interest rate risk. One key point is to focus on total return, or harvesting income not just from coupons and dividends but from portfolio gains too. While reaching for good yields in bonds can be very risky at the moment, considering sticking to traditional short-term bonds, but laddering their maturities from 1 to 5 years. Once you have that in place consider adding some higher-yielding options, like high yield municipals. MLPs are another good potential option given how strong the oil market is.

FINSUM: This is a nice range of specific ideas from other advisors. We favor short-term bonds for income right now, as yields are solid and interest rate risk is comparatively lower.

(New York)

We saw an article that caught our eye today. How does earning a 1.8% yield on cash sound? If that sounds enticing, consider putting some money in Betterment’s new Smart Saver option. Betterment is seeking to compete with digital banks, who have been boosting interest payouts recently, by offering a product for cash that might be stagnating in a savings account. The yield is backed by a mix of 80% short-term US Treasury bonds and 20% US short-term investment bonds. The only catch is that the account is not FDIC insured, which is a hindrance compared to some bank accounts which are offering comparable yields and are FDIC insured.

FINSUM: This seems like a good offering in principle. Betterment’s argument against the competition is that unlike banks, their holdings directly track the Fed instead of being artificially manipulated to optimize net interest margin.

(New York)

The current rate environment has put investors in a pickle. How does one protect short-term income needs while also protecting against interest rate risk? One important factor is to remember is that one can balance short-term losses by holding bonds to maturity, so stringing together groups of short-term bonds can be a solid risk-mitigating, but yield-maximizing strategy. There are a number of funds to look at to make managing the situation easier. These include the Lord Abbott Short Duration Income Fund (LDLFX), Transamerica short-term bond (ITAAX), and the Nuveen Short Duration High Yield Municipal bond (NVHIX).

FINSUM: It is a difficult fixed income environment right now, with corporate bonds broadly in the red for the year. A well-crafted and balanced strategy is a must, and given that short-term bonds currently have strong yields and less interest rate risk, they seem like the best bet.

(New York)

Dividend stocks are in an odd place right now. The yield curve looks likely to invert as short-term rates have risen and long-term yields continue to fall. This has made the average S&P 500 yield look quite weak relative to bonds. However, there are some really good picks out there. All the stocks listed here have dividends of 2.8% or more, and most have dividend growth rates of 20% or more. These stocks include AbbVie, LyondellBasell Industries, Broadcom, Regions Financial, and Starbucks.

FINSUM: What an interesting mix of companies and industries. These definitely seem worth a look. Starbucks is an interesting case for us.

(New York)

If you are interested in getting some strong dividends in your portfolio, and don’t mind adding a little risk, then we have a story for you. Generally, dividend stocks are seen as a steady and low-risk strategy, but this group of 7 stocks, are high risk, high reward. The dividends of all 7 look solid (no cuts seem likely in the near-term), but all have some significant risks in their long-term outlook. The stocks, with their yields, are: Ford (6%), Steelcase (3.9%), Ethan Allen Interiors (3.4%), Macerich (5.0%), Stage Stores (9.7%), ABB (3.6%), and IBM (4.3%).

FINSUM: This is a quite a mix of stocks, each with their own very particular story. Ford seems like an interesting bet.