Dividend Stocks — The Best Is Right Around the Corner
One of my very best friends changes cellphone plans more often than I change the oil in my car. He is always looking for a better deal.
The same is true of institutional bond investors.
Even though the Federal Reserve cut interest rates earlier this month, U.S. rates remain comfortably higher than rates in the rest of the developed world, spurring demand for U.S. Treasury bonds.
A Global Rate Crisis
In fact, there are 19 countries — including Germany, Japan, France, the U.K., South Korea and Canada — whose 30-year yields are lower than our short-term fed funds rate.
Sure, it’s hard to get excited about sub-2% yields on a 10-year Treasury bond, but that’s because we were spoiled by higher rates just a few years ago.
Two percent is actually much higher than what is available around the rest of the developed world.
Some of the world’s most advanced economies — Japan, Germany, France and Switzerland — are selling their 10-year government bonds at negative interest rates.
Heck, even Greece, which only recently climbed out of its economic train wreck, has lower interest rates than the U.S.
In fact, the only way to get a fatter yield is to invest in the debt of high-risk emerging markets like India, Brazil and Mexico.
That is why we will continue to see a steady flow of foreign money into anything that pays a decent yield in the U.S., which includes dividend-paying stocks as well as U.S. Treasury bonds.
A Perfect Storm for Dividend Stocks
I expect the steady trickle to turn into a tsunami, because if Trump gets his way, the U.S. will join the negative interest rate club. And I believe that we will soon see another round of quantitative easing (QE4) from the Federal Reserve.
Whether you love him or hate him, Trump is in charge and he is very committed to keeping the U.S. economy and the U.S. stock market from falling apart.
No question — the very last thing that Trump wants is either a recession or a bear market before the 2020 elections.
The combination of a growing economy and falling interest rates is close to a perfect storm for dividend-paying stocks.
And the right dividend stocks not only offer higher yields than the 10-year Treasury bond but will also enjoy some serious capital appreciation from rising profits.
Now, that doesn’t mean you can throw your money into any part of the stock market.
I wouldn’t touch high-P/E (price-earnings ratio), high-growth tech stocks. Lyft Inc. (NASDAQ: LYFT), for example, has lost about 50% of its value since going public earlier this year.
But the high-quality, dividend-paying stocks I recommend in my Infinite Income subscription service are exactly what you should be looking at.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch