If youre like most income investors right now, youve got one eye on this twitchy marketand the other on red flags like slumping manufacturing numbers, chaos in DC and even the dreaded inverted yield curve.
Im worried, too. But our best play here is not to sit in cash. With your mattress full, youll be forced to stand by as inflation drains your savings.
Worse, youre certain to miss the next rebound. Because thats the real mistake perma-bears always make: staying out of the market too long!
Thats why the smart move here is to buy. But were still going to take out some portfolio insurance by focusing on crash-resistant stocks.
These are firms that hold fast in a crash and hand us growing income until the (inevitable) rebound arrives. Ill have three namestwo high-yielding real estate investment trusts (REITs) and a closed-end fund (CEF)for you shortly.
Each is growing their payout fastlike the 37% raise over five years that one lucky group of investors got.
4 Things Every Stock Needs to Beat a Crash
First, for a stock to be crash-resistant, it needs four key strengths:
- A high dividend, because when trouble hits, investors will be desperate to hedge their downside with a cash stream.
- Surging payout growthbecause a rising dividend acts like a magnet on a stocks price, pulling it up as the payout rises.
- A history of surviving (and thriving) in a crashif a stock fended off the last pullback, it should fend off the next one, too.
- A low beta rating: You can find beta ratings on any stock screener. If a stock sports a beta of 1, its as volatile as the market. More than 1 = more volatile. Less than 1 = less volatile.
Ive put hundreds of stocks through this four-step boot camp. Here are three survivors, ranked from the lowest yield to the highest:
Crash-Resistant Dividend No. 1: Crown Castle International
Dividend yield: 3.3%
5-year dividend growth: 37.2%
Cell-tower landlord Crown Castle is a great way for us to piggyback megatrends like ultra-fast 5G networks, artificial intelligence and data analytics.
In fact, this is why CCI often gets lumped in with volatile tech stocks. But this REIT is far from volatile. That has a lot to do with its fast dividend growth, which pries its share price higher, no matter what the economy does.
Check out how CCIs surging payout drove up its price in the four years leading up to (and through) the crash of late 2018the pattern is uncanny:
Dividend Growth Powers CCI
And dont let that dip at the end of the chart above fool you. Zoom in on the late-2018 pullback (the most recent proving ground we have) and youll see that CCIin blue belowdipped far less than the S&P 500:
CCI Rolls Through the Storm
One thing I love about this management team is that its 100% dedicated to payout growth: they declare their intention to grow the dividend 7 to 8% a year on page one of their investor presentation.
They can easily meet this pledge: adjusted funds from operations (AFFO, a better measure of REIT performance than earnings per share) surged 9% in the second quarter as its tenantsincluding Verizon Communications (VZ) and AT&T (T)bolstered their networks to get set for 5G.
The kicker? CCI pays out a low (for a REIT) 77% of AFFO as dividends. So even if a recession hits, management has plenty of room to keep the payout rising.
Crash-Resistant Dividend No. 2: National Health Investors
Dividend yield: 5.1%
5-year dividend growth: 36.4%
Healthcare is a go-to when times get rough, and with good reason: US healthcare spending is soaring (despite Democrats Medicare-for-All proposals) because Americans are getting older.
According to the Census Bureau, in 2035, people aged 65 and older will outnumber those under the age of 18 for the first time ever.
Thats part of the reason why the Centers for Medicare and Medicaid Services see healthcare spending growing at a 5.5% yearly clip, hitting nearly $6 trillion by 2027and accounting for an outsized 19.4% of GDP:
Enter NHI, which invests in seniors housing, medical centers and skilled-nursing facilities. The stock has proven its mettle in a correction, delivering a steady total return in late 2018, while the market dove:
NHI Investors Skipped the Last Pullback
The beauty of NHI is that it gives you a high 5.1% dividend now and strong dividend growth, too.
Another Dividend Magnet
Just like with Crown Castle, you can see the share price rising to meet that payout as it pops higher (and yes, that gap at the end represents our price upside).
NHI has plenty of room to keep the payout growing: its dividend is 77% of the midpoint of projected 2019 FFO. Thats more than manageable for NHI, which gets predictable interest and lease income from its tenants and borrowers.
Crash-Resistant Dividend No. 3: Reaves Utility Income Fund
Dividend yield: 5.9%
5-year dividend growth: 30.9%
Everyone knows utilities are a rock in unsteady times. But there are two problems with utilities now:
- Ho-hum dividends: The benchmark Utilities Select Sector ETF (XLU) yields 2.9% today.
- Utilities safety is no secret, which is why XLU has beaten the market this year, leaving few bargains in the spaceexcept one.
That would be the Reaves Utility Income Fund (UTG), a CEF holding rock-steady utilities like NextEra Energy (NEE), Verizon and Sempra Energy (SRE).
Just by picking UTG over XLU, youre getting double the dividend (5.9%). UTG also lived up to its beta of 0.5 last year, dipping only half as much as the market.
And the management team at Reaves, an investment firm with nearly 60 years of history, has delivered upside most investors can only dream of, crushing the S&P 500 since inceptionno small feat for a fund focused on low-volatility utilities.
UTG: A True Tortoise-and-Hare Story
Best of all, much of that return was in cash, thanks to UTGs higher yield.
Theres more to come: UTG trades at a 1.2% discount to its NAVmeaning its market price is slightly below the value of its portfolio. That doesnt sound like much, but this fund traded at a 4.9% premium as recently as mid-August.
With more volatility ahead, you can bet UTGs premium will snap back above 5%. When it does, it will pull the funds price along with it.
Yours Now: 19 Crash-Proof Stocks With Safe Cash Payouts Up to 10.4%
The above three stocks are ideal dividend lifeboats because their highand growingpayouts give you more of your profits in cash, rather than here-today, gone-tomorrow paper gains.
Stocks like these ensure your nest egg pays your bills now and grows for the future.
$40,000 in Income on $500K
Ive got 5 more rock-steady dividend plays waiting for youbut with one twist: instead of 5% to 6% dividends, theyll pay you a reliable 8.2% yield off the hop!
And thats just the average! One of these unusual nest-egg sentries throws off a safeand growing10.4% payout.
Every one of these unsung income plays is waiting for you in my 5-stock pullback-proof portfolio, which you can discover yourself right here.
Heres the upshot: you could very well have enough dividend income from this instant portfolio to retire on dividends alone with a $500K nest egg, thanks to the $41,000 income stream these defensive superstars would give you.
Thats not all.
Because the newest issue of my Contrarian Income Report service just published last Friday, with fresh updates on the 19 stocks and funds in its portfolio, which hands CIR members massive yields of 8.5%, 9.1% and even upwards of 10%.
And Im going to send all 19 of these cash-rich plays your way, too!
Click here and Ill give you instant access to my 8.2%-paying Pullback-Proof portfolio. AND youll get the latest issue of Contrarian Income Report, with its 19 powerhouse income plays.