The Dividend Aristocrats: An Untapped Passive Income Opportunity?

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In the world of investments, people are hungry for the next greatest passive income opportunity. Something that allows them to make a maximum amount of money with a minimal amount of effort exerted.

And for that purpose alone, few options beat the promising world of dividend stocks.

To describe this opportunity as briefly as I can: When you own a set number of shares in a company, you get a small percentage of said company’s profits every month or quarter.

So someone who owns 200 shares of a company that trades at $200 per share and pays out 5% in dividends, you can expect to get $10 per share and thus get paid out at $2,000 per year (assuming a once-a-year payout). Therefore, owning more shares in as many companies offering dividend payments as possible is your end goal.

But the main issue is choosing WHICH companies to invest into for the maximum ROI on dividend payments. And for absolute beginners, you would be missing out if you didn’t look at the Dividend Aristocrats.

This is not a made-up term… a Dividend Aristocrat is formally defined as any company who meets the following criteria:

  • Must be listed in the S&P 500
  • Must average a minimum of $5 million in daily share trading for the past 90 days prior to being re-evaluated for its admission every year
  • Must increase its “per-share base dividend” every year for a minimum of 25 consecutive years
  • Must have a minimum float-adjusted market capitalization of $3 billion (or greater)

In other words, these are the types of companies who dominate their sectors and consistently demonstrate great financial performance. So for that reason alone, the companies who qualify to become Dividend Aristocrats are usually the same and rarely get booted off the list.

Companies such as Coca-Cola, Johnson & Johnson, 3M, and Emerson Electric have had over 55 consecutive YEARS of dividend growth. On the other hand, newcomers such as Realty Income Corporation and Albemarle Corp just hit the 25-year milestone. All in all, there are 66 Dividend Aristocrats as of July 1st of this year.

So what should you do? Focus on the groups that have the longest likelihood of handing out dividend payouts over the long-term. The companies with higher-paying dividends look tempting, but they are not necessarily guaranteed to last the longest.

And considering the current recession the USA is going through right now, several sectors are at risk of getting booted off the Dividend Aristocrats. Sectors such as oil & gas, along with financial services.

Take a look at what companies are in the list, see which ones suit your investing preferences best, and be willing to consistently invest in them once every month (or quarter) as you slowly but surely rack up some handsome dividend payments.

What companies do YOU think are worthwhile additions to any dividend investment portfolio? Reply to this newsletter and share your winners with us!

Even During a Recession, There Have Never Been THIS Many 401(k) Millionaires!

One emergent theme from the COVID-19 crisis is the fall of the little guy and the rise of the big guy. And sadly, we don’t even have to look at mega-sized corporations to see this trend being realized in real-time.

401(k) provider Fidelity just released a report titled Building Financial Futures that aggregates the financial performance of their 401(k) accounts and makes some interesting conclusions about how this investment account is being managed by their clients.

And in a surprising discovery, it turns out a LOT of people are sitting pretty on a 7-figure retirement nest egg…

  • In Q4 2019, 208,000 IRA accounts and 233,000 401(k) accounts had at least $1 million or more
  • In Q3 2020, the number of 7-figure 401(k) accounts is 262,000 (+17% from Q2 2020)

The explanation for this phenomenon is dead simple: The main indices of the stock market have been performing quite well and managed to recover all of the losses brought about by the COVID-19 pandemic.

Unfortunately, the good intentions of the Federal Reserve to inject trillions of dollars into the economy may have some disastrous outcomes. As ZeroHedge beautifully put it:

“…the Fed is unintentionally worsening economic inequality by providing the most help to capital markets while leaving the working-poor to fend for themselves with lousy government stimulus checks that expired at the end of July.

Like I said earlier… the big guy comes out better than ever, while the little guy gets screwed.

A SURPRISING Sell-Off From “2008 Housing Crisis Predictor” Michael Burry

Even if you have never cared about finance or Wall Street, everyone recognizes the name Dr. Michael J. Burry from the famous movie The Big Short. This film, despite some flaws, did a fairly good job at showcasing the disaster that was the 2008 housing crash and how a few outsiders successfully predicted it years in advance.

His company, Scion Asset Management, is currently doing well for itself with $336 million in assets under management. And to this day, whenever Dr. Burry makes a move, everyone sits in silence and pays very close attention.

According to a 13F he filed with the Securities and Exchange Commission last week, here are the moves he made:

  • Sold ALL his shares in Bed Bath & Beyond
  • Sold ALL his shares in Booking Holdings
  • Sold 38% of his position in GameStop
  • Sold 50% of his Facebook position
  • Sold 50% of his $58 million call position in Alphabet, which compromised ~18% of his total portfolio

I’m not an investing genius, but I suspect that Burry feels as if he has either maximized his earnings in select companies and/or sees an inevitable decline for some of them.

Bed Bath & Beyond is a homeware retailer, GameStop is a video game retailer, and Booking Holdings is a travel company. All of which belong to industries that have been hit the hardest by the pandemic.

As for his moves on Facebook and Alphabet… this might be a sign that Dr. Burry foresees a sell-off of tech stocks due to being massively overvalued. But that’s just me, and who knows what’s going on in that mind of his…

On December 26th, 12 Million Americans Lose Their Unemployment Benefits

Back in July, the markets exhibited some volatile and erratic behavior due to the expiration of the $600/week in unemployment benefits granted by the CARES Act via the Pandemic Unemployment Assistance plan. In total, Americans went from receiving $812/week in benefits to $257/week.

According to Century Foundation, personal incomes in America could drop by $226 million when unemployment benefits expire completely on December 26th. When this happen, it will directly impact 12 million workers in the country – primary the jobless and those who are self-employed in any capacity.

Why this particular date? It marks off the maximum number of weeks where an individual is eligible for unemployment benefits from their state. As for the states most affected by this transition, you won’t be surprised by the answer: New York and California.

Anybody who has been unemployed knows how devastating this will be. Being jobless for longer without benefits makes it that much more likely that you won’t get a new job and your skills consequently erode. Even in the off-chance you find employment, desperation leads you taking something that pays you less than what you were previously making.

Whether it’s Trump or Biden, SOMEBODY has to do something about this. The delays in releasing the second stimulus package are hurting Americans with each passing day that negotiations in Congress fail to materialize something tangible…

JPMorgan Predicts United States’ GDP to Be Negative in Q1 2021

Until now, all of Wall Street was uniformly predicting positive economic growth in the first quarter of 2021. This belief was supported by the assumption that by this time in the future, the COVID-19 pandemic would be somewhat resolved and relaxed lockdown restrictions would lead to a consequent boost in productive labor.

But economists at JPMorgan are going against the grain, predicting the gross domestic product will actually be NEGATIVE in Q1 2021:

  • Q4 2020 will have growth of 2.8%, Q1 2021 will contract by 1%, Q2 2021 will grow by 4.5%, and Q3 2021 will grow by 6.5%
  • $1 trillion in stimulus funding will likely come about in the end of Q1 2021
  • COVID-19 will continue to be the #1 topic of discussion, due to the increasing counts in daily cases and the increasing lockdown restrictions being implemented by cities and states
  • Employment will experience monthly declines over the next few months, followed by monthly job gains resuming at the end of Q2 2021

In their own words:

We think the trends in the labor market should roughly follow what we expect for consumer spending — job growth should weaken noticeably around the turn of the year as the virus weighs on the economy, and then pick up again early next year once vaccine distribution eases virus concerns and fiscal support boosts growth.”

What do YOU think about JPMorgan’s predictions? Will the COVID-19 vaccine be enough to help open up the economy and put a halt to the non-stop exponential rise in COVID-19 cases and deaths? Reply to this newsletter and share your opinions with us!

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