Volatility is back! With the market whipsawing again, youre likely seeing more red in your portfolio these days.
At times like this, you might be tempted to give in to emotion and sell. Thats understandableself-preservation is, after all, our most powerful instinct.
But keep your nerve. Because now is the time for contrarians like us to get greedy for yieldand upside.
Heres why: American companies earnings are strong, their revenues are rising, and there are no indications of a recession anytime soon.
Ill go through these points one by one, because its important to see how the data disagrees with the panicky noise the media publishes these days. Then Ill show you two ways to play into this marketboth throw off juicy dividends of 6.7% and even 7.4%.
Just the Facts
So far, 77% of S&P 500 companies have reported second-quarter earnings and three-quarters are showing profits above estimates.
Thats a huge surprise. And bear in mind that before companies began reporting, expectations were for a 4.2% profit decline. But so far, weve seen earnings fall just 1%.
That may sound bad, but remember that this 1% earnings decline was more than priced in, thanks to 2018s bear market. More importantly, a 1% drop in a quarter is nothing. Earnings are still up over 30% in the last three years.
Its also critical to look at where the earnings declines are focused: materials and industrials. Those drops are actually good for the rest of the market because companies like health-care firms, utilities and consumer-discretionary producers depend on materials and industrials to make their products. Weaker prices in those areas mean bigger profits elsewhere.
Top Line Tells the Tale
And theres yet another positive indicator: revenue growth has smashed expectations. Previously, there was an expectation of a 3% sales increase for S&P 500 firms, but so far thats come in at 4.1%, and the growth rate has been going up as more firms report. This means demand for goods and services is still rising, which suggests were nowhere near a recession.
The key takeaway? When you ignore the scary headlines, you quickly realize that the American economy is just fine.
And because of the recent downturn, your upside from now to the end of the year has increased. When the investors stop panicking about the trade war noise (which has proven to have little long-term impact on stock returns in the US over the last two years), this latest downdraft nicely sets stocks up to make a nice move higher.
How to Profit
What should you buy?
Well, you could take the route many folks do and buy the SPDR S&P 500 ETF (SPY), a low-cost index fund that tracks the S&P 500 and will give you roughly the same return as that index over the long term.
Over the last 10 years, the S&P 500 has returned 13.2%, on average, per year. Put another way, if you were to extrapolate this return over three decades and put $1,000 per month in this fund every month, youd have $3.6 million after a 30-year career.
2 Ways to Tap the S&P 500 for 6.7%+ Dividends
But what if youre not starting your career now and youre facing retirement in 10 or 15 years?
What if you want to retire now? Thats where my two high-yield plays come in. Both are a unique type of fund called a closed-end fund CEF.
The first is the Nuveen S&P 500 Dynamic Overwrite Fund (SPXX), which has all the S&P 500 companies: Microsoft (MSFT), Apple (AAPL), Amazon.com (AMZN), Facebook (FB), JPMorgan (JPM), Visa (V) and so on. But SPXX also has a 6.7% dividend yield, much more than SPYs 2%. That has huge relevance to retirees.
Anyone looking for passive income will get a measly $842 per month from SPY on a portfolio of $500,000, but SPXXs bigger yield means getting $2,792 per monthhigher than the average income in America. All while getting the same exact stocks that youd get from SPY.
And SPXX isnt the only option; if you want returns better than the S&P 500, you could pick up the Eaton Vance Tax Advantaged Dividend Income Fund (EVT), which is up 14.3% annualized over the last decade. It also hands over a 7.4% income stream to investors. Thats over $3,000 per month in income, over three times as much as SPY pays out.
These 5 Funds Are Screaming Buys (for 8% Dividends and Fast 20% Upside)
This is also a terrific time to buy the 5 overlooked CEFs Im pounding the table on now. These 5 stealth income plays are throwing off cash dividends even bigger than that of SPXXIm talking 8% yields, on average!
Plus, each of these 5 funds trades at ridiculous discounts nowso much so that I fully expect 20%+ price gains out of them in the next year. Add in their big dividends and youre looking at 28%+ total returns here.
But youll never hear about these 5 picks from your adviser, or in the media. The truth is, the CEF market is simply too small for the Wall Street hotshots to bother with.
Thats great news for us, because it sets up crazy mispricings, like the ridiculous discounts on the 5 cash-spinning CEFs were going to jump on now.
Youre very close to discovering their names. All you have to do is click here and Ill tell you everything about these 5 cash machines: names, ticker symbols, how I zeroed in on them before the mainstream crowd and everything else you need to know before you buy.