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A Dividend Investing Strategy To Consider For Lower Interest Rates

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Fri, Sep 27, 2024 06:31 PM

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Just be careful not to chase yield A Dividend Investing Strategy To Consider For Lower Interest Rate

Just be careful not to chase yield [View in browser]( [The Juice Logo] BROUGHT TO YOU BY: [Logo]( A Dividend Investing Strategy To Consider For Lower Interest Rates Just a day after the Federal Reserve lowered interest rates by half a point, The Juice looked at our savings account and saw that the bank we use already dropped our interest rate from 4.95% to 4.44%. That didn’t take long! To their credit, Wealthfront (who we don’t use) sent us an email that said: “The Fed just announced a 50 bps rate cut, but Wealthfront’s award-winning high-yield Cash Account is still offering 5.00% APY for all clients (10x the national average), and 5.50% APY for clients who refer a friend.” We thought something like this might happen. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D631968?utm_medium=ic-nl&utm_source=122543 ) Brought to you by [UpMarket]( [Access Hedge Funds and Pre-IPO Deals]( [ UpMarket - Access Hedge Funds and Pre-IPO Deals]( Join UpMarket for free and start investing in hedge funds and pre-IPO companies today. No membership fees. No pressure to invest. Start building your diversified portfolio now. [Sign Up Now]( Disclaimer: All investments have the risk of loss. UpMarket is not associated with or endorsed by the above-listed companies. Only available to eligible accredited investors. View important disclosures at www.upmarket.co Continued... In early August, we discussed what banks and firms such as Wealthfront and competitor Betterment might do when the Fed starts acting. We [conducted the analysis]( by comparing their rates today to what they were back in the day when the Federal Funds Rate was low: If you go to Betterment’s website today, it puts in bold type so you can’t miss it, a 5% APY offer for its “Cash Reserves” account. We used the Wayback Machine, which lets you look at old, archived web pages, and found that, in August 2022, the same Betterment page didn’t highlight the interest rate on this very same account. It merely touted it as a “smart, secure home for your cash” and, in the fine print at the bottom of the page, listed a 1.6% APY! So, this news from Wealtfront is encouraging. And could be part of a strategy to keep savers from closing their accounts as interest rates fall. We’ll keep an eye on this and see what happens. But it’s not a bad move to keep your rates high and find other areas of the business where you can offset the amped-up payments you continue making to savers when everybody else — we anticipate — starts cutting interest rates on deposit accounts alongside Fed cuts. For the record, like Wealthfront, Betterment still has its APY set between 5.0% and 5.5%. Betterment’s conditions for the 0.5% perk are a qualifying deposit with a three-month window. Of course, savers might close their accounts and become investors with that money. If and when they do, they’ll quite possibly quench their thirst for income with dividends stocks. Something The Juice has long advocated. Let’s get more specific with a strategy you can implement, after we cover some basics on and things to watch out for with dividend investing. A dividend growth stock is a stock that increases its dividend consistently. Ideally, on an annual basis. So, we’re not talking about revenue or profit growth here. Though, those are two nice things to have and often go along with consistent dividend increases. For example, take Intel (INTC), a stock we would not be buying right now. It is cutting its workforce. Sales and profits are down. Guidance is weak. And the dividend is going down. In 2022, Intel paid out $1.46 per share annually. In 2023, Intel cut its dividend to a payment of $0.74 per share annually. Now, as part of its fiscal Q4/2024 earnings report, Intel announced it will stop paying its dividend for the time being. The poor performance was the writing on the wall. Ideally, you want to buy revenue and profit growth, industry leaders with rising dividends. The other thing to look out for, which is in direct relation to the strategy we think you should consider, is dividend yield. Earlier this year, The Juice [explained]( dividend yield: Dividend yield tells you how much a company pays out in dividends relative to its stock price (dividend divided by stock price, multiplied by 100 to get a percentage). For example, if a stock trades for $50 and pays a $2 annual dividend, its dividend yield is 4%. A high yield means more income. If you own 100 shares of that $50 stock that yields 4%, you can expect to receive $200 in annual income (all else, such dividend reinvestment, equal). You can also get to this number by multiplying the dividend ($2.00) by the number of shares you own (100). Of course, as a stock price fluctuates, so will its dividend yield. Holding the annual dividend constant, as the share price decreases, dividend yield increases. The inverse holds true. Therefore, a high yield can be — and often is — the function of a falling stock price. Tying it all together, as we noted then, “Ideally, you want a rising stock price alongside regular dividend increases.” So the strategy to keep generating income in a lower(ing) interest rate environment. Buy sold, high-yielding dividend stocks. This doesn’t mean look for the highest number in the yield column. It means buy dividend stocks with impressive yields alongside other impressive metrics, such as dividend, revenue and sales growth. Some great examples of stocks like this to help get the wheels turning. - Exxon Mobil (XOM): The stock is undervalued and hasn’t performed all that well lately. It has a P/E ratio of about 14 and pays an annual dividend of $3.80. It has increased its dividend for 41 consecutive years and yields about 3.3%. - IBM (IBM): It’s a tech stock that gets left out of the conversation even though it’s OG AI. Remember Watson! IBM’s P/E is 24 and it pays an annual dividend of $6.68 that it has increased for 29 straight years. IBM yields around 3.2%. [The REVOLT against electric vehicles has begun...]( You may not have heard much about this in the Green Media, but America appears to be quietly initiating a global uprising against EV mandates and coerced adoption — one that could soon turn the auto business on its ear. The upshot? There are 10 specific money moves we believe investors could and should make immediately to capitalize on this historic situation. [Get full details right here.]([Ad] The Bottom Line: Find a good stock screener. Like our favorite, which you can find in today’s Freshly Squeezed section. Set it for the minimum yield you seek alongside revenue and profit growth parameters. Have fun with it. The key is to find growing companies with dividend increase streaks and solid yields. Often, they’ll be undervalued, which means you might be getting in at the time when you can expect the stock to start strengthening. While this might lower the yield, it’s all good. The best dividend investors combine stock price appreciation with sound and reliable dividend income. Paint a comprehensive picture like this and you’ll be good to go. In a future Juice we’ll go over exactly how to screen for good dividend stocks. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D631968?utm_medium=ic-nl&utm_source=122543 ) Proprietary Data Insights Top Dividend-Paying Stock Searches This Month Rank Ticker Name Searches #1 [NVDA]( Nvidia 858,815 #2 [AAPL]( Apple 269,128 #3 [MSFT]( Microsoft 155,744 #4 [INTC]( Intel 134,339 #5 [AVGO]( Broadcom 119,750 #ad [Unlock Daily Stock Gems - FinPro Secrets Spilled!]( News & Insights Freshly Squeezed - [Ignoring The Biggest Crisis Facing The Nation]( - [Diversify Your Portfolio: Beyond Stocks]( - [The Juice’s Favorite STOCK screener]( - [Check Out The Juice’s Favorite ETF Screener]( [News & Insights-facebook-share]( [News & Insights-twitter-share]( [News & Insights-linkedin-share]( [News & Insights-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D631968?utm_medium=ic-nl&utm_source=122543 ) [We want to hear from you. Let us know your thoughts by clicking here]( [Pixel] [InvestingChannel Logo](#) Follow us on: [Facebook Logo]( [LinkedIn Logo]( [Twitter Logo]( [Instagram Logo]( To ensure delivery of all emails, [allow us on your list](. Manage your subscriptions with our [preference center](. [Unsubscribe here.]( View our privacy policy [here](. Copyright ©2024 InvestingChannel. All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc., newsletter is for information purposes only and is based on opinion. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or eliminate losses. InvestingChannel, Inc., makes no representation or implication that using any of the methodologies or systems in this newsletter will generate returns or insure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](

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