Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Stock Market Sectors and Bonds for Higher Investment Income Yields

Stock-Markets / Dividends Dec 04, 2009 - 09:37 AM GMT

By: Mike_Larson

Stock-Markets

Best Financial Markets Analysis ArticleThe Federal Reserve’s policy of pegging interest rates to the floor is having a slew of consequences. It’s driving down the dollar. It’s helping fuel new asset bubbles. It’s leading to the misallocation of economic resources.

And perhaps most importantly for you, it’s punishing savers. By cutting the federal funds rate to a range of zero percent to 0.25 percent, the Fed has forced rates on short-term Treasuries, short-term certificates of deposit, and money market accounts into the gutter. You can’t earn squat on these safe, cash-like investments.


So where can you turn for the income you need to pay your bills … support your family … and maybe someday help put your grandkids through college?

You know I don’t like long-term Treasuries because Washington is torpedoing this nation’s balance sheet. And I’m not a big fan of most longer-term U.S. debt, including corporate and junk bonds. They’ve rallied so far, so fast that they’re looking dramatically overvalued.

Instead, I have three alternatives that are worth considering. Let’s talk about them now …

Income Alternative #1: MLPs Offer a Nice Way to Hunt For Yield in the Energy Sector

We’ve seen a sharp rally in the price of all kinds of energy products. Crude oil prices have surged 139 percent from last December. Gasoline is up 157 percent. Heating oil costs almost twice what it did last winter. Even lowly natural gas has climbed from around $2.40 per million British Thermal Units to around $4.50 now.

MLPs can make money regardless of what happens to  the price of oil.
MLPs can make money regardless of what happens to the price of oil.

But let’s be honest … the business of exploring for, producing, and trading energy is relatively high risk. You can spend years — and hundreds of millions of dollars — drilling for oil and gas. If the price tanks somewhere along the line, your investment can blow up in your face!

Yet consumers and businesses never completely STOP using energy, regardless of the cost. That means the industry still needs to store and transport gas, oil, and other petroleum-based products around the country each and every day.

That’s where energy Master Limited Partnerships, or MLPs, come in. These companies own many of the storage and distribution networks that energy companies use to get their products to market.

They get paid whether energy prices rise or fall. And because of how they’re organized (in the corporate sense), they spin off handsome dividends. It’s not unusual to see yields of 5 percent, 6 percent, 7 percent, or more in the sector.

Don’t get me wrong: MLPs still trade like stocks. So there’s definitely price risk involved. But I believe they’re a solid alternative for yield-starved investors.

Income Alternative #2: Utilities Spinning Off More Income Than Any U.S. Treasury

Another sector that offers juicy yields: Utilities. That includes natural gas providers, electric companies, and even telecommunications firms.

Businesses need electricity, even during a recession.
Businesses need electricity, even during a recession.

These businesses clearly aren’t recession proof. When the economy tanks, so does demand for power and telecommunications services. But the swings are typically much less severe than what you see in housing, technology, or manufacturing. And even during the worst downturns, those core businesses still tend to spin off healthy amounts of cash.

Again, you don’t have to look very hard to find handsome dividend yields in the sector. Many leading utilities yield at least 5 percent or 6 percent. That’s better than you can get anywhere on the Treasury curve, considering that even 30-year bonds yield just 4.31 percent.

That’s not all, either. I’m seeing a heck of a lot of healthy stock charts in the sector, with breakouts all over the place. Buy the right stock at the right time and you can earn a juicy yield AND rack up some capital gains.

Income Alternative #3: Go West … East … South — Anywhere but Here!

Of course, you don’t have to keep all your fixed income money in the U.S. if you don’t want to. In fact, you probably shouldn’t!

A falling dollar can give foreign bonds an extra  boost.
A falling dollar can give foreign bonds an extra boost.

Why? The dollar has been falling virtually nonstop for months now. That hurts foreign owners of our debt. But the process works in REVERSE for U.S.-based investors.

If you buy a foreign, fixed income security, and the dollar falls, the dollar value of your holdings RISES. Any principal and interest payments you receive in the foreign currency translate back into more dollars when you repatriate the money.

On top of that, foreign yields are much more attractive than those offered here in the U.S. Two-year Treasuries yield just 0.77 percent here in the U.S. But the same maturity security yields 1.16 percent in Canada … 1.35 percent in Germany … and 1.65 percent in Spain. In New Zealand, you’re looking at 4.03 percent. In Australia, 4.32 percent. In Indonesia, 5.2 percent.

Bottom line: You can earn higher yields AND get a currency “kicker” by investing in foreign, fixed income securities. Foreign dividend-paying stocks are another alternative. Many yield much more than their U.S. counterparts.

Until next time,

Mike

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules