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We’re in a yield-barren market … Neil George’s latest thoughts on where to find 9% income … “side hustle” income outside the investment markets
That’s the Fed’s target interest rate for as far as the eye can see.
By extension, that means income-investors can expect to earn about …
According to the FDIC, the national average interest rate on savings accounts is 0.06%.
It improves only marginally if we look at CDs. Whereas in 1984 the average 1-year CD paid over 10%, today, it’s 0.37%.
Using yesterday’s data, the 10-year Treasury bond offers a whopping yield of 0.60%.
To bring this anemic rate home, that means a $1 million portfolio invested in government 10-years will churn out a whopping $6,000 a year.
If we look to dividends from stocks, the situation improves a bit.
As I write, the dividend yield on the ETF, SPY (which tracks the S&P 500 index) comes in at 1.76%.
Unfortunately, as the market continues climbing, this yield continues dropping.
You can see this decline in the graph below. The SPY dividend yield has already fallen 32% from its recent spike on March 23rd.
The purple line is SPY’s value climbing. The orange line is SPY’s dividend yield falling.
Bottom line — we’re in a barren income environment today.
Unfortunately, as the mass unemployment from the coronavirus has revealed, having sources of passive income can be critical for investors.
Our CEO, Brian Hunt, made this point in a recent essay. He highlighted how evaluating your wealth by asking the question “how many days rich are you?” (answered by looking at your various streams of passive income) can reveal far more about your financial health — and freedom — than your paycheck.
So, if you’re struggling with income today, where might you turn?
Our income expert, Neil George, just offered a few suggestions in his Tuesday update.
In his newsletter, Profitable Investing, Neil helps his subscribers find overlooked, high-quality income plays, whether through high-yielding dividend-stocks, bonds, REITs, or more obscure investment vehicles.
Today, let’s look over his shoulder to see where he’s finding yields of 3.7%, 7.0%, and even 9.7%.
That’s how Neil introduced his suggested income plays in his update.
Petroleum stocks are also getting some attention with the belief that the economy is recovering.
One interesting gauge of U.S. economic strength is the price of gasoline, as it is the single largest refined product consumed in the U.S. and a barometer for the economy.
Gasoline Current Future Price — Source: NY Mercantile Exchange & Bloomberg Finance, L.P.
Gasoline prices are soaring, up 210.4% since March 23. This could be a confirmation that folks are getting back to some sort of economic activity.
In turn, petrol stocks up- and down-stream are getting more attention.
Neil’s preferred way to play petrol is Viper Energy (VNOM).
Here he is from a past issue, describing Viper:
Viper Energy is the leading landlord of the petroleum patch, primarily in the Permian Basin. This is the current epicenter of shale oil development in the U.S.
As a landlord, the company doesn’t drill or operate a single well. Instead, it leases out its land for exploration and production (E&P) companies for fee income and royalties on the oil and gas that gets pumped out of its land.
This means little capital is needed beyond the land and that the company doesn’t have to worry as much about the price fluctuations in oil and gas for its operations.
In his update, Neil noted how Viper just reported earnings, with better numbers than expected (beating estimates). All wells are back online, and thanks to hedged gas and oil prices, revenues were up last quarter.
Viper’s stock has surged 110% since market-lows in March. But Neil tells us its price is still a bargain to its book value by 0.04%.
Now, looking at the sector more broadly, we all know there’s been chaos in the oil markets in recent months. That’s another reason why Viper stands out. The company has been hoarding its cash, amounting to 540% of its current liabilities. This provides some breathing room as our economy tries to emerge from the coronavirus.
As to its income potential, Neil tells us that Viper’s dividend yield comes in at 3.7%.
That’s solid income, but it’s nothing compared to Neil’s next two suggestions.
***Huge income from America’s energy pipelines
At the beginning of this month, Warren Buffett made news by finally putting some of Berkshire’s $137 billion cash pile to work, buying Dominion Energy’s gas pipeline network.
Pipelines like Dominion’s move shale oil and natural gas all throughout the U.S. They’re literally the veins of the sprawling U.S. energy complex.
It’s in this pipeline sector that we find Neil’s remaining two suggestions — Enterprise Products Partners and Kinder Morgan.
Enterprise Products Partners and Kinder Morgan have both strongly recovered, up 42.3% and 38.8%, respectively, since March 23.
Both of their capital bases are heavily defended, and each company remains firm to their commitments to shareholders for dividends.
Enterprise Products Partners & Kinder Morgan Total Returns — Source: Bloomberg Finance, L.P.
Enterprise is keeping its distributions at 44.5 cents for a yield of 9.7%, and while Kinder announced that it will curtail distribution growth, it still plans for a 5% annual increase for a yield of 7%.
Both stocks are good income plays right now.
***Keep in mind, there are plenty of “side hustle”income opportunities out there, even with social distancing needs
Last fall, Neil released a book that tackles this issue head-on. It’s called Income for Life: 65 Income Streams ANYONE Can Collect. The book includes 65 different income plays. There are investment ideas, as well as unique “side hustle”opportunities (all-the-more important in light of today’s unemployment numbers).
Here’s Neil on the investment opportunities in the book:
There are many securities which I outline that offer yields that are multiples greater than that of the S&P 500 and the general U.S. bond market — all with minimal risk from proven companies’ stocks, bonds, preferred shares ETFs, closed-end funds, and other funds.
All of these are buy-and-own — with no need to trade anything or deal with options strategies. And yes, I have plenty of yields running from 7%, 8%, 9% and over 10% — all vetted and proven in their capability to deliver income for any individual investor.
But as just mentioned, the book also includes non-market-related income ideas.
Back to Neil:
And it also provides numerous means to generate additional income outside the markets.
There are countless ways to generate income beyond regular paychecks. And I present a wide variety of ideas and the steps needed to make them pay and pay well — all while doing many things that folks are interested in already.
To learn more about Income for Life: 65 Income Streams ANYONE Can Collect, click here.
As we wrap up, yes, it’s a tough market for income-investors today. That said, you still have good options if you know where to look.
As Neil continues to offer new ideas, we’ll keep you in the loop here in the Digest.
Have a good evening,
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