How To Squeeze Yields Up To 6.9% From Blue-Chip Stocks

Closeup of blue poker chip on red felt card table surface with spot light on chip

Preferred stocks are the little-known answer to the dividend question: How do I juice meaningful 5% to 6% yields from my favorite blue-chip stocks? “Common” blue chips stocks usually don’t pay 5% to 6%. Heck, the S&P 500’s current yield, at just 1.3%, is its lowest in decades.

But we can consider the exact same 505 companies in the popular index—names like JPMorgan Chase (JPM), Broadcom (AVGO) and NextEra Energy (NEE)—and find yields from 4.2% to 6.9%. If we’re talking about a million dollar retirement portfolio, this is the difference between $13,000 in annual dividend income and $42,000. Or, better yet, $69,000 per year with my top recommendation.

Most investors don’t know about this easy-to-find “dividend loophole” because most only buy “common” stock. Type AVGO into your brokerage account, and the quote that your machine spits back will be the common variety.

But many companies have another class of shares. This “preferred payout tier” delivers dividends that are far more generous.

Companies sometimes issue preferred stock rather than issuing bonds to raise cash. And these preferred dividends have a few benefits:

  • They receive priority over dividends paid on common shares.
  • Sometimes, preferred dividends are “cumulative”—if any dividends are missed, those dividends still have to be paid out before dividends can be paid to any other shareholders.
  • They’re typically far juicier than the modest dividends paid out on common stock. A company whose commons yield 1% or 2% might still distribute 5% to 7% to preferred shareholders.

But it’s not all gravy.

You’ll sometimes hear investors call preferreds “hybrid” securities. That’s because they act like a part-stock, part-bond holding. The way they resemble bonds is how they trade around a par value over time, so while preferreds can deliver price upside, they don’t tend to deliver much.

No, the point of preferreds is income and safety.

Now, we could go out and buy individual preferreds, but there’s precious little research out there allowing us to make a truly informed decision about any one company’s preferreds. Instead, we’re usually going to be better off buying preferred funds.

But which preferred funds make the cut? Let’s look at some of the most popular options, delivering anywhere between 4.2% to 6.9% at the moment.

Wall Street’s Two Largest Preferred ETFs

I want to start with the iShares Preferred and Income Securities (PFF, 4.2% yield) and Invesco Preferred ETF (PGX, 4.5%). These are the two largest preferred-stock ETFs on the market, collectively accounting for some $27 billion in funds under management.

On the surface, they’re pretty similar in nature. Both invest in a few hundred preferred stocks. Both have a majority of their holdings in the financial sector (PFF 60%, PGX 67%). Both offer affordable fees given their specialty (PFF 0.46%, PGX 0.52%).

There are a few notable differences, however. PGX has a better credit profile, with 54% of its preferreds in BBB-rated (investment-grade debt) and another 38% in BB, the highest level of “junk.” PFF has just 48% in BBB-graded preferreds and 22% in BBs; nearly a quarter of its portfolio isn’t rated.

Also, the Invesco fund spreads around its non-financial allocation to more sectors: utilities, real estate, communication services, consumer discretionary, energy, industrials and materials. Meanwhile, iShares’ PFF only boasts industrial and utility preferreds in addition to its massive financial-sector base.

PGX might have the edge on PFF, but both funds are limited by their plain-vanilla, indexed nature. That’s why, when it comes to preferreds, I typically look to closed-end funds.

Closed-End Preferred Funds

CEFs offer a few perks that allow us to make the most out of this asset class.

For one, most preferred ETFs are indexed, but all preferred CEFs are actively managed. That’s a big advantage in preferred stocks, where skilled pickers can take advantage of deep values and quick changes in the preferred markets, while index funds must simply wait until their next rebalancing to jump in.

Closed-end funds also allow for the use of debt to amplify their investments, both in yield and performance. Should the manager want, CEFs can also use options or other tools to further juice returns.

And they often pay out their fatter dividends every month!

Take John Hancock Preferred Income Fund II (HPF, 6.9% yield), for example. It’s a tighter portfolio than PFF or PGX, at just under 120 holdings from the likes of CenterPoint Energy (CNP), U.S. Cellular (USM) and Wells Fargo (WFC).

Manager discretion means a lot here. That is, HPF doesn’t just invest in preferreds, which are 70% of assets. It also has 22% invested in corporate bonds, another 4% or so in common stock, and trace holdings of foreign stock, U.S. government agency debt and cash. And it has a whopping 32% debt leverage ratio that really helps prop up the yield and provide better returns (though at the cost of a bumpier ride).

You have a similar situation with Flaherty & Crumrine Preferred and Income Securities Fund (FFC, 6.7%).

Here, you’re wading deep into the financial sector at nearly 80% exposure, with decent-sized holdings in utilities (7%) and energy (7%). Credit quality is roughly in between PFF and PGX, with 44% BBB, 37% BB and 19% unrated.

Nonetheless, smart management selection (and a healthy 31% in debt leverage) has led to far better, albeit noisier, returns than its indexed competitors. The Cohen & Steers Select Preferred and Income Fund (PSF, 6.0%) is about as pure a play as you could want in preferreds.

And it’s also a pure performer.

PSF is 100% invested in preferred stock (well, more like 128% if you count debt leverage), and actually breaks out its preferreds into institutionals that trade over-the-counter (83%), retail preferreds that trade on an exchange (16%) and floating-rate preferreds that trade OTC or on exchanges (1%).

Like any other preferred fund, you’re heavily invested in the financial sector at nearly 73%. But you do get geographic diversification, as only a little more than half of PSF’s assets are invested in the U.S. Other well-represented countries include the U.K. (13%), Canada (7%) and France (6%).

What’s not to love?

Brett Owens is chief investment strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: Your Early Retirement Portfolio: 7% Dividends Every Month Forever.

I graduated from Cornell University and soon thereafter left Corporate America permanently at age 26 to co-found two successful SaaS (Software as a Service) companies. Today they serve more than 26,000 business users combined. I took my software profits and started investing in dividend-paying stocks. Today, it’s almost impossible to find good stocks that pay a quality yield. So I employ a contrarian approach to locate high payouts that are available thanks to some sort of broader misjudgment. Renowned billionaire investor Howard Marks called this “second-level thinking.” It’s looking past the consensus belief about an investment to map out a range of probabilities to locate value. It is possible to find secure yields of 6% or more in today’s market – it just requires a second-level mindset.

Source: How To Squeeze Yields Up To 6.9% From Blue-Chip Stocks

.

Critics:

A blue chip is stock in a stock corporation (contrasted with non-stock one) with a national reputation for quality, reliability, and the ability to operate profitably in good and bad times. As befits the sometimes high-risk nature of stock picking, the term “blue chip” derives from poker. The simplest sets of poker chips include white, red, and blue chips, with tradition dictating that the blues are highest in value. If a white chip is worth $1, a red is usually worth $5, and a blue $25.

In 19th-century United States, there was enough of a tradition of using blue chips for higher values that “blue chip” in noun and adjective senses signaling high-value chips and high-value property are attested since 1873 and 1894, respectively. This established connotation was first extended to the sense of a blue-chip stock in the 1920s. According to Dow Jones company folklore, this sense extension was coined by Oliver Gingold (an early employee of the company that would become Dow Jones) sometime in the 1920s, when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch.

Noticing several trades at $200 or $250 a share or more, he said to Lucien Hooper of stock brokerage W.E. Hutton & Co. that he intended to return to the office to “write about these blue-chip stocks”. It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks.

References:

6 Psychologically Damaging Things Parents Say To Their Kids Without Realizing It

Parents don’t set out to say hurtful or harmful things to their children, but it happens. You’re tired, they’re pushing your buttons, and you’re frustrated after asking them for the 600th time to clear their plates or get out the door on time. You could also be inadvertently repeating things you heard in your own childhood that your parents (and maybe even you) didn’t realize took an emotional toll.

We parents are trying our best, but sometimes — a lot of times — we fall short. That’s why it can be helpful to know some of the potentially damaging phrases parents often resort to without realizing their impact. It’s not about beating ourselves up. It’s about doing better by being a bit more conscious of our language.

So HuffPost Parents spoke with several experts who shared some harmful phrases you should try to erase from your vocabulary — and what to say instead.

1. “It’s not a big deal.”

Kids often cry or melt down over stuff that seems really silly. (Recall the delightful “reasons my kid is crying” meme that had a real moment a few years back.) But while kids’ crying and whining can definitely get under their parents’ skin — particularly when it’s over something you think they should be able to cope with — it’s harmful to diminish their very real feelings by basically telling them to buck up.

“These little problems — and the emotions that come with them — are actually huge to our kids,” said Amy McCready, a parenting educator, the founder of Positive Parenting Solutions and the author of “If I Have to Tell You One More Time.” “When we discount their emotional responses to very real challenges, we tell them, ‘How you feel doesn’t matter,’ or ‘It’s silly to be afraid or disappointed.’”

Instead, try this:

Take a moment and try to understand things from their perspective. McCready recommended saying something like: “You seem really scared or frustrated or disappointed right now. Should we talk about it and figure out what to do?” Ultimately, you’re helping them label their emotions (an important part of developing emotional intelligence) and making it clear that you’re there for them.

2. “You never” or “You always do XYZ.”

Children have their patterns, but saying your kid “always” or “never” does something simply isn’t true. (That’s why marriage counselors advise clients to avoid the word “never” with their partners altogether.)

Using broad statements is a red flag that you’ve stopped being curious about what’s happening in this particular moment with your child, according to Robbin McManne, founder of Parenting for Connection.

“It misses opportunity for you to teach them what they should and what they can do next time,” McManne said.

Instead, try this:

Remind yourself to be curious about why your child is engaging in a particular behavior at a particular time. It really helps to connect by getting physically close to your child in that moment, McManne said, so that you’re not shouting at them from across the house, but you’re right there with them to make sure they’re not distracted by something else.

3. “You make me sad when you do that.”

Sure, it might really bum you out when your child doesn’t listen, but it is important to set (and hold) boundaries without throwing your emotions into the mix. Those feelings are yours, not theirs. Plus, you’re setting a precedent by potentially giving them a lot of negative power.

“When kids feel like they get to decide if you’re happy, sad or enraged, they may happily take the opportunity to continue to push your buttons down the road,” McCready said. “And even when they’re out of your house, this mindset can damage future relationships and set the stage for them to manipulate others to get what they want.”

Instead, try this:

Set whatever boundary you need to set, like, “It’s not OK to jump on couches,” McCready offered by way of example. Then, give some choices such as, “Would you rather play quietly in here or go outside?”

4. “You should know better.”

When you say something like “you should know better,” what you’re ultimately trying to do is guilt or shame your child into changing. But that puts kids on the defensive, which makes them even less likely to listen, McCready said. It also undermines their confidence.

“If we tell our kids they should know better — yet clearly they didn’t — we’re sending the message, ‘You’re too dumb/immature to make a good decision.’ Not exactly what we intended,” she added.

Instead, try this:

McCready suggested saying something like “Hmm, looks like we’ve got a situation here! What can we do to fix it?” The goal is to focus on solutions — not the problem — so children practice problem-solving and fixing their own mistakes, and think about ways to make better choices in the first place.

5. “Just let me do it.”

When you’re rushing out the door or waiting for your child to complete a simple task that is seemingly taking forever, your instinct might be to just take over. But try to avoid doing that if you can.

“You’re telling your child, ‘You’re not capable of this, so I need to get involved.’ This is both discouraging and really frustrating,” McCready said. “Imagine if you were super close to being able to do your own zipper and just needed a few more tries, but then Dad swoops in and stops you in your tracks.”

Instead, try this:

Slow down and give your child the time they need to complete their task. Or at the very least, be clearer about why you have to rush. Say something like, “I’ll help you just this once since we’re running so late, but let’s work on this together later!”

6. “You’re a [insert label here].”

One of the most valuable things parents can do for their children is simply avoid labeling them, McManne said. Labels hurt the parent-child relationship because they get in the way of parents seeing their children as struggling and needing help. Parents start to link certain behaviors with whatever label they’ve given to their child, rather than digging in and really trying to understand what’s happening developmentally.

“Labels take us further out of compassion and curiosity,” McManne said.

Labels also have the potential to become self-fulfilling. If children hear from parents that they’re a certain way, they might come to accept that as true — even if it doesn’t feel true to them.

Even labels that seem positive like “You’re smart!” can actually be harmful, McCready said.

“When we say ‘you’re smart’ or ‘you’re athletic,’ we’re telling our child, ‘The only reason you did well on that test is because you were born brainy,’ or, ‘You wouldn’t have made that goal if it weren’t for your natural ability.’ What’s more, if our child bombs the test next time, they’ll be left confused and discouraged, questioning their own ability. If they’re so smart, why did they fail?”

Instead, try this:

Notice and applaud effort, not outcomes. And do whatever you can to avoid labeling your kiddo as anything, good or bad.

Catherine Pearson - HuffPost

Source: 6 Psychologically Damaging Things Parents Say To Their Kids Without Realizing It | HuffPost UK Parenting

.

Critics:

A dysfunctional family is a family in which conflict, misbehavior, and often child neglect or abuse on the part of individual parents occur continuously and regularly, leading other members to accommodate such actions. Children sometimes grow up in such families with the understanding that such a situation is normal.

Dysfunctional families are primarily a result of two adults, one typically overtly abusive and the other codependent, and may also be affected by addictions (such as substance abuse, such drugs including alcohol), or sometimes by an untreated mental illness. Dysfunctional parents may emulate or over-correct from their own dysfunctional parents. In some cases, the dominant parent will abuse or neglect their children and the other parent will not object, misleading a child to assume blame.

Some features are common to most dysfunctional families:

  • Lack of empathy, understanding, and sensitivity towards certain family members, while expressing extreme empathy or appeasement towards one or more members who have real or perceived “special needs”. In other words, one family member continuously receives far more than they deserve, while another is marginalized.
  • Denial (refusal to acknowledge abusive behavior, possibly believing that the situation is normal or even beneficial; also known as the “elephant in the room“.)
  • Inadequate or missing boundaries for self (e.g. tolerating inappropriate treatment from others, failing to express what is acceptable and unacceptable treatment, tolerance of physical, emotional or sexual abuse.)
  • Disrespect of others’ boundaries (e.g. physical contact that other person dislikes; breaking important promises without just cause; purposefully violating a boundary another person has expressed.)
  • Extremes in conflict (either too much fighting or insufficient peaceful arguing between family members.)
  • Unequal or unfair treatment of one or more family members due to their birth order, gender, age, family role (mother, etc.), abilities, race, caste, etc. (may include frequent appeasement of one member at the expense of others, or an uneven/inconsistent enforcement of rules.)

References

Break The Five Most Common Outsourcing Reform Myths

Break the five most common outsourcing reform myths

With 41 days to comply with the new regulation on Outsourcing, which comes into force on July 24, five myths prevail among Mexican companies. The new regulatory framework applies to companies of all sizes, however, SMEs are under more pressure because they do not have great internal support or consulting firms to carry out this transition.

In addition to the rush to comply with the new regulations, it must be taken into account that there is some confusion about the functions that can continue to be contracted through outsourcing. For SMEs, companies from 10 to 200 or 300 employees, internalizing the functions that were traditionally handled in outsourcing is complex and represents a challenge. Automation and support are key to successfully undergo this transformation and avoid the associated fines.

To dispel the main myths that exist regarding the new regulation, Business Republic organized a webinar to offer real facts and advice for the new regulation. At the event, Carlos Marina COO of Worky , Lorena Atondo and Gabriel Fernández, both from Reynoso & Atondo, Abogados, SC, agreed that this situation is significant, since it impacts more than 4.7 million workers, 17% of the formal jobs in the country.

And it is that urban myths and fake news abound that cause uncertainty and concern among clients and prospects, Carlos Marina warned.

The myths:

  1. “I can continue with my current outsourcing scheme, since the authority does not have the resources to detect it.”
  2. “I can avoid the new regulations by passing my collaborators to schemes of incorporation into the tax regime, fees, cooperatives or unions.”
  3. “We can pay a minimal amount in cash and the rest of the compensation can be handled through bonuses, commissions and vouchers.”
  4. “I don’t worry about the compensation schemes of the past, as there are no retroactive effects.”
  5. “The internalization of the payroll is too expensive, I better risk possible fines”

Each of these statements are not only false but risky. The specialists clarified that the new regulations are designed to improve the conditions of the workers and that in that spirit, the authority has organized itself to avoid precisely any act of simulation. At this juncture, solution providers have emerged that seem miraculous, but in reality only expose the company and its human capital to unnecessary risks.

Advice

“My advice to all employers is to take preventive measures to comply in a timely manner and to focus on the positive aspects that the internalization of staff brings in terms of employee satisfaction, loyalty, and company productivity,” commented Lorenia Atondo .

For his part, Gabriel Fernández, added that the sanctions are structured to promote broader compliance, since they range from 178,000 pesos to more than 4 million and even criminal sanctions are contemplated. It states, “The authority has full visibility of these myths and others, and is organized to detect and punish through mechanisms of collaboration between institutions and information exchange.”

The internalization of workers represents a change of capital dimensions for companies that currently depend on outsourcing for the management of their human resources. “For small and medium-sized companies, which do not have specialized departments or the support of consultants and law firms, this transition becomes even more delicate,” commented Marina, highlighting that Worky is dedicated precisely to companies with 20 and up to 200 employees for whom offers support throughout the internalization process with a 100% Mexican management platform designed to be affordable and relevant for this segment.

Hanz Dieter Schietekat, CEO of Business Republic and who moderated the event, ended the session by urging attendees to act promptly. “I hope it has become very clear that compliance with the new outsourcing standard is imminent and mandatory. Remember that if a solution sounds too good to be true, it probably is. With less than a month and a half remaining for compliance, it is imperative to have the right tools and advice. ”

By:

Source: Break the five most common outsourcing reform myths

.

Critics:

Outsourcing is an agreement in which one company contracts a service bureau to be responsible for a planned or existing activity that is or could be done internally, and sometimes involves transferring employees and assets from one firm to another.

The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981. The concept, which The Economist says has “made its presence felt since the time of the Second World War”,often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call centre support).

The practice of handing over control of public services to private enterprises, even if on a short-term limited basis,[7] may also be described as “outsourcing”.

Outsourcing includes both foreign and domestic contracting,and sometimes includes offshoring (relocating a business function to a distant country) or nearshoring (transferring a business process to a nearby country).

Offshoring and outsourcing are not mutually inclusive: there can be one without the other. They can be intertwined (offshore outsourcing), and can be individually or jointly, partially or completely reversed,involving terms such as reshoring, inshoring, and insourcing.

  • Offshoring is moving the work to a distant country. If the distant workplace is a foreign subsidiary/owned by the company, then the offshore operation is a captive, sometimes referred to as in-house offshore.
  • Offshore outsourcing is the practice of hiring an external organization to perform some business functions (“Outsourcing”) in a far-off country other than the one where the products or services are actually performed, developed or manufactured (“Offshore”).
  • Insourcing entails bringing processes handled by third-party firms in-house, and is sometimes accomplished via vertical integration.
  • Nearshoring refers to outsource to a nearby country.
  • Farmshoring refers to outsourcing to companies in more rural locations within the same country.
  • Homeshoring (also known as Homesourcing) is a form of IT-enabled “transfer of service industry employment from offices to home-based … with appropriate telephone and Internet facilities”.[16][17] These telecommuting positions may be customer-facing or back-office,and the workers may be employees or independent contractors.
  • In-housing refers to hiring employees.
  • An Intermediary is when a business provides a contract service to another organization while contracting out that same service.

See also

The Stop Smoking Pledge


One of the most common New Year’s resolutions of many people from different parts of the world is to put an end to their smoking habit. However, most of them find it hard to keep their pledge and end up going back to their old habit over and over again. If you are now more…
http://bit.ly/2ohbBzQ

%d bloggers like this: