https://www.forbes.com/sites/brettowens/2018/12/08/3-boring-picks-for-big-beautiful-retirement-returns-in-2019/#15782592709dBrett OwensContributor
Investing
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If you want to retire on dividend income, then you probably need to avoid S&P 500 stocks altogether.
Collectively they yield 1.9% today. This means that a million dollars invested will generate just $19,000 per year. That’s “side hustle” money, not an actual full salary.
Another problem with buying popular stocks and “hoping” they appreciate in price? The odds are actually stacked against you thanks to an uneven business playing field. Check out the returns of “safe” S&P 500 stocks year-to-date. Would you like to throw a dart blindfolded at this board?
If you delved into some of the stocks from this grossly overcrowded index, you …
Had a better-than-50% chance of losing money.
Had a better-than-30% chance of losing at least 10%
Had a roughly 20% chance of gaining, but only around market average or less.
Had a 0.2% chance of actually doubling your money.
Numerous uber-popular growth picks have disappointed wildly, whether it’s Alphabet scraping together low-single-digit gains, Nvidia, plunging 17% in 2018 or Facebook losing a quarter of its value in less than a year.
Momentum giveth, and momentum taketh away just as quick.
Stocks with high, sustainable yields, realistic growth and defensive characteristics might not give you anything to brag about in 2019, but when they help you retire with cash to spare a decade or more from now, you’ll have plenty to crow about.
Let me show you a few stocks I think can leg it out not just through 2019, but through 2029 and beyond. These are decidedly under-the-radar picks that you may not have heard of, but they’re primed to become popular over time as Wall Street gets wise to their total-return potential.
STORE Capital
Dividend Yield: 4.4%
I’ll start with a real estate investment trust (REIT) that I highlighted a couple months back when the stock market was busy scraping its knee. That REIT is STORE Capital, and it was one of a handful of stocks that were printing in green ink when everything else was dripping red.
A quick recap:
“STORE” stands for “single-tenant operational real estate” – in other words, it’s a single-tenant commercial REIT. It’s a triple-net-lease REIT to boot, which means that tenants aren’t just on the hook for rent, but also for taxes, insurance and maintenance costs. The upside for the REIT in this arrangement is that its operational results become a lot more stable and predictable, as they’re no longer dealing with the variation in those other costs.
STORE is interesting in part because of its wide tenant list – it spreads out 412 customers in 109 industries across 2,084 properties in 49 states. In fact, its top five tenants only account for 12% of its base rent, which is tiny compared to a lot of its peers. Also, while other commercial REITs such as Realty Income and National Retail Properties focus on larger tenants, most of STORE’s tenants are smaller in nature; the companies typically generate between $10 million and $1 billion in annual revenues.
I also like STORE’s practice of actually buying up properties from many chains, then turns around and rents those facilities back to the selling companies. And naturally, the steady dividend growth since its 2014 IPO.
But the clincher for STORE is the vote of confidence from Warren Buffett and his Berkshire Hathaway holding company. Buffett became the company’s third-biggest shareholder in June 2017 when he spent $377 million on a 9.8% stake in the company – a rare REIT buy for Berkshire, which makes it all the more notable.
Banner Corporation
Dividend Yield: 2.7%
Bank stocks typically aren’t considered among the juggernauts of dividend stocks, and – thanks in large part to Federal Reserve’s careful watch on how the country’s financial firms spend their profits – but a couple of more regional banks are indeed true payout performers.
Though they certainly fly under the radar.
Banner Corporation – via its wholly owned subsidiary, Banner Bank – is a West Coast financial firm that operates more than 200 locations in its home state of Washington, as well as Oregon, California and Idaho. So it does have some brand power out West, though it’s a virtual unknown elsewhere in the country. And as a $2.2 billion “smid-cap” stock, it typically doesn’t attract much Wall Street attention.
But Banner packs a one-two punch that makes it worth notice.
For one, the company has been steadily growing for years – its $225.8 million in 2014 revenues have shot up to $463.9 million in 2017, and it’s already posted about $370 million in revenues so far this year. It likely will continue expanding as a result of a very recently completed merger. Banner at the start of November finished its acquisition of Washington-based Skagit Bancorp, tacking on $922 million in assets and 12 locations along the I-5 corridor from Seattle to Canada.
becomes even more complex when managing wealth in a family setting. The interplay among different family members, their individual investment expectations, and communication relating to those expectations can make the process a challenging one. When significant wealth is involved, the stakes rise, and the challenges can multiply.
The book Preparing Heirs by Roy Williams and Vic Preisser illustrates the difficulties that can arise when managing family wealth. According to the book, just 30% of the families studied were able to successfully transition wealth while keeping it under the beneficiaries’ control, which indicates that focusing solely on investment strategies without taking into account family dynamics isn’t the best approach to managing family wealth.1 Even when family dynamics are not an issue, the impact human behavior has on investing success is significant. Humans often make irrational economic decisions.
reverse course and either rise or fall just because it has moved in the opposite direction over an extended period of time is an example of the gambler’s fallacy in the investing arena.
Confirmation and Hindsight Biases: Confirmation bias occurs when an investor selectively focuses on research that confirms his or her hypothesis about an investment, rather than treating both positive and negative sources equally. Hindsight bias refers to the tendency to believe that events in the past were easier to predict than they really were. This can make you overconfident about predicting events going forward, while confirmation bias can lead to the trap of making investments based on wishful thinking rather than carefully considered analysis.
Working With a Financial Professional
Given the complexity of modern financial markets and the difficulty investors can experience when navigating them, many work with a financial professional to assist them in this endeavor. Financial professionals offering investment services typically fall into the following two categories: brokers and advisors.
Brokers3
Brokers, also called registered representatives, are not currently held to a fiduciary standard. Instead, they operate under a “suitability” standard, which requires them only to recommend investments that they believe are suitable for a particular client at that moment in time.
Brokers can offer stock in new issues as placement agents.
There is no requirement for full disclosure with regard to multiple fees that may apply.
Brokers act as sales agents for their firms.
In many cases, brokers have selling agreements with particular products due to deals between product vendors and the broker’s parent firm.
When evaluating a broker, their parent firm should be evaluated as well as the custodian the firm uses to hold assets, along with other factors.
for fees and sell investment products for commissions.
Comments
CM Canadian Imperial 5.06% div yield right now. (-18% discount to stock value right now)
BMO Bank of Montreal 4.32% (-12% discount to stock value right now)
BNS Bank of Novia Scotia ("Scotiabank") 4.78% ("fairly valued," -7% discount right now.)
RY Royal Bank of Canada 4.16% (-14% discount to stock value right now)
TD Toronto Dominion 3.84%. (-14% discount to stock value right now)
Stats from Morningstar. I've been tracking BNS and CM forever. Someday, when I build enough of a stash, I'll be buying.
...And Canadian banks are HIGHLY regulated by the gov't. Together, these banks hold 90% of all deposits in Canada. This is not to say that they are very user-friendly for CUSTOMERS. I know this, first-hand. Wanna pay your BMO Visa card bill IN PERSON? There's a FEE. Ouch. That actually started some years ago, and ought to be addressed by regulators... BUT SEE WHAT @DERF wrote, below.
Or, you can do what Mr. Buffett did and buy STOR at a 3-yr low and now be pulling down 4.3% at kissing distance from it's all time high, a roughly 30% gain. Feeling lucky today are you? It's interesting that Mr. Owens would choose an equity CEF as his final pick while ignoring REIT CEF's in his STOR discussion. Vanguard's offering, VNQ, pays nearly the same yield but holds precious little of STOR. Cohen & Steers offers RQI at nearly double the yield but again with little, if any, STOR. I wonder why that is.
I have nothing to say about Banner Corp. other than I'm not a big fan of bank stocks in general.
Gal Pal has BMO Mastercard Platnium & drops her payment off with no fee.
Just some info for you.
Derf