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Rise of Meta Platforms Shows Potential for Three Software as a Service Investments to Purchase

Meta Platforms Inc. (NASDAQ: META), formerly named Facebook, Inc., is a multinational technology conglomerate based in Menlo Park, California. As the owner of Facebook, Instagram and WhatsApp, Meta is one of the biggest information technology companies in the United States.

Seasoned stock picker Jim Woods, who heads the Bullseye Stock Trader advisory service that recommends stocks and options, chose META for his clients to buy on March 16. He then advised taking profits on April 27. The stock soared 19.77%, while the call options he recommended zoomed 112.42%.

In a volatile market, the profit-taking proved prescient as the stock slid after Woods advised his Bullseye Stock Trader clientele to cash out.

Jim Woods heads Bullseye Stock Trader.

“In the fourth quarter, technology companies made headlines with a large number of layoffs,” Carlson wrote to his Retirement Watch subscribers. “They continued layoffs in the first quarter and were joined by companies in a number of other sectors. In their earnings calls, many firms were careful to reduce expectations for the second quarter and the rest of 2023. They reported sales were slowing and inventories were increasing.”

That backdrop led to share price drops for many technology stocks, but they subsequently have started to rebound.

NAPCO Security Picked as One of the Three Software as a Service Investments to Purchase

Napco Security Technologies (NASDAQ: NSSC) is an Amityville, New York-based manufacturer of security products, featuring advanced technologies for intrusion, fire, video, wireless, access control and door-locking systems. Its products are sold and installed by tens of thousands of security professionals worldwide to serve commercial, industrial, institutional, residential and government applications.

The company has a heritage of developing innovative technology and reliable security solutions for the professional security community, including StarLink Universal Wireless Intrusion & Commercial Fire Communicators and new StarLink Connect Radios with Universal Full Up/Download for major brands. Napco Security also offers Gemini Security & Fire Systems and the NAPCO Commercial Platform of 24V Addressable/Conventional/Wireless Systems and Firewolf Fire Panels & Devices.

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“When the Federal Reserve stops ratcheting up interest rates, I would expect strong growth stories to continue to profit,” said Michell Connell, who heads the Dallas-based Portia Capital Management. The company’s five-year revenue growth has been 10.45% per year and its five-year earnings growth rate has averaged 28% or more every year, Connell continued.

“EPS growth rate is expected to increase exponentially more than 100% this year,” Connell commented. “That’s well ahead of the industry average expected growth rate of 22%.”

The company is a “strong cash generator,” Connell concluded.

Michelle Connell heads Portia Capital Management.

During the past three to five years, Napco Security’s annualized growth rate has topped 20%. The industry average has only been about 5 to 6%, Connell told me.

The Company initiated a dividend when it reported on May 8. While the dividend yield is less than 1%, it’s a start, Connell counseled.

The company’s outlook appears “strong,” Connell opined. Since the beginning of 2023, earnings expectations for the company have climbed.

“While the stock is up over 20% YTD, it could return another 20-25% over the next 12-18 months, Connell conveyed. “However, given its high-octane performance, it can also provide swift downdrafts. The stock has declined more than 60% at certain points. In addition, there is a high short interest of 14%. It makes me cautious in the near-term.”

To avoid overpaying before a potential short-term dip, consider dollar-cost averaging by purchasing shares amid pullbacks, Connell counseled.

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Non-Dividend-paying Clearwater Analytics Does Not Qualify as One of the Three Software as a Service Investments to Purchase

Chicago-based investment firm William Blair resumed coverage of Boise, Idaho-based Clearwater Analytics Holdings, Inc. (NYSE: WAN), with an “Outperform” rating early this month following the SaaS company’s first-quarter results that beat consensus expectations and led its management to raise full-year guidance slightly at the midpoint. The brightening outlook reflects broadened resiliency and the high value nature of supporting enhanced investment compliance and risk management visibility and analysis, William Blair equity research analyst Dylan Becker wrote. Plus, Clearwater Analytics features a balanced mix of growth and profitability, while offering a “durable runway” for continued growth and margin expansion, Becker continued.

Clearwater Analytics’ SaaS platform for automated accounting and investment analytics provides comprehensive compliance, reporting, reconciliation and analytics capabilities across equities, fixed income and other asset classes, according to William Blair. The company currently supports 1,000-plus customers collectively managing more than $6.4 trillion of assets across its platform, providing a unified data set of verified and reconciled reporting data, standardized reporting and analysis framework for asset managers.

In the next several years, demand should grow as asset managers look to modernize their front- and back-end infrastructure and reporting capabilities. Clearwater Analytics also recently transitioned its pricing to a base-plus revenue model. The intent is to mitigate potential assets under management (AUM) volatility across its customer base, Becker noted. It should help provide greater durability and visibility in light of recent market volatility across nearly every asset class, while wielding incremental pricing leverage as AUM’s stabilize and recover over time, he added.

“We believe the company maintains a widening competitive advantage in a large and growing market opportunity that collectively accounts for more than $10 billion, as a leading back-office accounting tool across asset managers, insurance carriers and corporations, while leveraging the company’s historical depth and expertise to deliver incremental platform expansion and product innovation,” Becker wrote. “This is most evident in the company’s recent acquisition of JUMP technologies, a France-based front-to-back investment management offering to highlight the company’s efforts to drive greater penetration across asset management teams, while unlocking greater operational efficiency and revenue-generating capabilities for end-customers.”

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Debt Ceiling Problem May Affect Three Software as a Service Investments to Purchase

The United States thus far failing to raise the debt ceiling and risking default on its financial obligations would be the “ultimate gift” for China, affirmed the CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations.

CEO Nigel Green’s comments come as President Joe Biden, House Speaker Kevin McCarthy and other congressional leaders trying to make progress in budget negotiations to avoid what could be an unprecedented default that would rock the global financial system. Biden has been reluctant to give details about terms of the negotiation but said he believed a deal could be reached.

The standoff is down to Democrats demanding a “clean” increase without conditions to pay debts resulting from spending and tax cuts approved by Congress. Meanwhile, Republicans are saying they will not authorize any additional borrowing without an agreement to cut spending.

According to the U.S. Treasury, the United States may default as soon as June 1, causing a global economic crisis, if the limit is not raised by Congress before then.

The deVere Group CEO said, “A default would upend the global financial system and would likely be worse than the 2008 crash. It would cause upheaval on an unprecedented level. However, there would be a major beneficiary of the economic and financial fallout: China.”

He continued, “The U.S. failing to raise the debt ceiling and defaulting on its financial obligations would be the ultimate gift for China as it seeks global economic and financial dominance. A default would lead to a decline in the value of the US dollar and a loss of confidence in the U.S. financial system. As such, investors would seek alternative destinations for their capital. China would move to position itself as a more stable and attractive investment option, attracting more international investment and capital inflows. In turn, this would boost the Chinese economy and financial markets.”

CDC Reports Rising Vaccinations Against New Bivalent Variant of COVID-19

The COVID-19 pandemic’s public health emergency status in the U.S. expired on May 11, 2023, and the World Health Organization earlier this month declared an end to its January 30, 2020, call that COVID-19 was a public health emergency of international concern. But the virus is still killing Americas each week and remains a public health threat. Even though death rates are dropping, Dr. Robert Anderson, the chief of the mortality statistics branch at the National Center for Health Statistics, said that COVID-19 deaths could top 100,000 in 2023.

The U.S. Centers for Disease Control and Prevention (CDC) reported at least one vaccination against COVID-19 and its bivalent variant has been given to 270,227,181 people, or 81.4%, of the U.S. population, as of May 10. Those who have completed the primary COVID-19 doses totaled 230,637,348 of the U.S. population, or 69.5%, according to the agency.

Also as of May 10, the United States had given a bivalent COVID-19 booster to 52,996,306 people who are age 18 and up, equaling 20.5% of America’s population. Medical studies have shown COVID-19 vaccinations help keep people healthy and reduce the morbidity from contracting the virus, potentially lifting confidence of consumers to encourage them to shop at stores, travel and otherwise spend money.

Russia’s War in Ukraine Remains a Fierce Firefight

Still posing a huge threat is Russia’s ongoing war in Ukraine. Russia’s military attacks against Ukraine have shifted in the last month from targeting energy infrastructure with weekly strikes to much more frequent missile firings during the night.

News from the war zone indicates Russian soldiers and its Wagner mercenary group are continuing to battle in and around the Ukrainian city of Bakhmut as part of President Vladimir Putin’s reported plan to gain control and then advance to other cities in Ukraine’s industrial eastern region. However, some Russian soldiers reportedly fled the fighting and gave up ground to Ukrainian forces, said Yevgeny Prigozhin, the private militia’s leader.

Despite Ukrainian President Volodymyr Zelensky talking of delaying Ukraine’s expected spring counteroffensive, Prigozhin said it has begun and is proving to be “partially successful.” Nonetheless, Russia fired cruise missiles at the Ukrainian capital of Kyiv, as some of its troops participated in a parade across Moscow’s Red Square for the country’s annual celebration of victory in World War II.

The three software as a service investments to purchase for income and growth seem poised to climb, despite economic and U.S. debt ceiling uncertainty, along with ongoing political risk due to amid Russia’s continuing invasion in Ukraine.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal omf Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.

Four dividend-paying infrastructure investments to purchase provide investors a chance to build their portfolios by tapping into government spending.

The four dividend-paying infrastructure investments to purchase offer “good inflation hedges” and a steadier source of growth then other equities, said Bob Carlson, a pension fund chairman who also heads the Retirement Watch investment newsletter. Among the reasons infrastructure businesses hold appeal is that they have fairly steady, reliable revenue, Carlson added.

Bob Carlson, head of Retirement Watch, meets with Paul Dykewicz

Many infrastructure stocks have revenue streams that automatically are adjusted for inflation, Carlson continued. Infrastructure stocks also tend to benefit from gaining a significant amount of their revenue from governments that have consistent sources of funding, compared to recession-vulnerable companies.

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Mutual Fund Included Among Four Dividend-paying Infrastructure Investments to Purchase 

Among open-end mutual funds, Carlson said he likes Cohen & Steers Global Infrastructure (CSUAX). The fund has multiple share classes with different loads — a sales charge or commission — and fees. Many investment brokerages offer the A shares with the ticker CSUAX without any load.

“The fund doesn’t try to track an index,” Carlson said. “The managers can invest in any infrastructure company around the world. They can adjust their sector allocations and stock holdings based on their analysis of the economy and companies. Cohen & Steers first develops an economic outlook and then determines which infrastructure sectors are most likely to benefit from that outlook. Then, it analyzes each company in the sectors before deciding which to buy for the fund.”

The mutual fund tends to be focused on the managers’ favorite sectors and stocks. It recently held 54 stocks with 36% of the fund in the 10 largest positions.

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Top holdings recently were NextEra Energy (NYSE: NEE), CSX (NASDAQ: CSX), Sempra Energy (NYSE: SRE), Grupo Aeroportuario (NYSE: PAC) and Transurban Group (OTCM: TRAUF). The mutual fund’s largest sector holdings consisted of electric utilities, 37%; midstream energy, 10%; freight rails, 10%; gas distribution, 9%; and airports, 8%.

The fund’s recent yield reached 2.91%. It lost 5.21% in 2022 but is up 2.77% so far in 2023 and 2.40% so far this year, through May 11.

UTF Earns Place Among Four Dividend-paying Infrastructure Investments to Purchase

Investors who are interested investing more aggressively in the sector should consider a closed-end fund, Cohen & Steers Infrastructure (UTF), Carlson counseled. The fund uses leverage to enhance dividends and total returns. The amount of leverage varies with the economic and interest rate outlook and recently was close to 30%.

UTF follows the same basic strategy as CSUAX and has the same management team, but there are some differences. For example, UTF has more than four times as many holdings as CSUAX.

In fact, UTF recently had 240 positions, with top holdings were NextEra Energy, Transurban Group, Enbridge (NYSE: ENB), American Tower (NYSE: AMT) and Canadian Railway (NYSE: CNI). About 29% of the fund is in the 10 largest positions.

The leading sectors in UTF were electric utilities (32%), corporate bonds (13%), midstream energy (10%), toll roads (7%), and freight rail (7%). The fund’s recent distribution yield reached 8.03%, with a small portion of the 2023 distributions consisting of return of capital. UTF lost 9.51% in 2022 and is down 1.01% so far in 2023.

Each fund has 50% to 60% of its assets in U.S.-based companies. The rest is invested outside the United States, mostly in developed economies.

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Brookfield Infrastructure Corporation Leads Four Dividend-paying Infrastructure Investments to Purchase

Brookfield Infrastructure Corporation (NYSE: BIPC), of Toronto, is up 10.66% since the stock was recommended by the Forecasts & Strategies investment newsletter on November 8, 2021. Mark Skousen, PhD, heads the Forecasts & Strategies investment newsletter and also teaches at Chapman University, where he is currently a Presidential Fellow. He also is a past winner for the university’s “My Favorite Professor” award.

Professor Mark Skousen leads Forecasts & Strategies.

Brookfield Infrastructure is one of the largest owners and operators of critical global infrastructure networks that facilitate the movement and storage of energy, water, freight, passengers and data. The company is intended to be a pure play, publicly traded, global infrastructure company. It aims to invest in “premier infrastructure assets” with stable cash flows, high margins and strong growth prospects, the company’s management said.

Its experienced management team has a proven track record and has identified a key goal of providing returns to unitholders. With an enticing distribution yield and a distribution growth target of 5-9% annually, Brookfield Infrastructure seeks to produce strong, risk-adjusted total returns for its investors.

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Motorola Solutions Earns Place Among Four Dividend-paying Infrastructure Investments to Purchase

Motorola Solutions, Inc. (NYSE: MSI), a Chicago-based provider of mission-critical communications products and solutions & services for communities and businesses, received an outperform rating from the William Blair & Co. investment firm, also based in the Windy City. Despite beating analysts’ consensus first-quarter results and management boosting its guidance, Motorola’s stock has not lifted off.

“Although numbers and trends were strong, we believe that investors are starting to price in decelerating growth in the second half of the year on difficult comps associated with last year’s price increases,” according to a May 5 research note by William Blair equity research analyst Louis DiPalma. “In addition, the 2023 guidance does not reflect any potential impact from the U.K. price cap. We lowered our 2014 revenue estimate by the full potential impact, although we believe that the ultimate cap may be reduced.”

Motorola’s first-quarter financial results reflected positive local and state budget trends for the largest global provider of public safety technology, according to William Blair. Even though public companies typically do not raise their full-year guidance after the first quarter, Motorola’s management did so, DiPalma noted.

The company reported first-quarter revenue of $2.17 billion, compared with a consensus estimate of $2.13 billion. Motorola’s adjusted earnings per share (EPS) jumped to $2.22 above consensus estimates of $2.06.

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Lack of Payout Excludes Verra Mobility from Four Dividend-paying Infrastructure Investments to Purchase

Verra Mobility Corporation (NASDAQ: VRRM), of Mesa, Arizona, processes millions of transactions each year through connectivity with more than 50 individual tolling authorities and 400-plus issuing organizations. The stock is another “outperform” recommendation of William Blair.

Indeed, Willliam Blair described Verra Mobility as a “smart transportation provider” that reported first-quarter results that topped analysts’ consensus estimates. The investment firm’s full-year outlook for the stock reaffirmed its conservative assumption that travel demand will cool in the second half of the year.

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Alternative to Four Dividend-paying Infrastructure Investments to Purchase

As far as Verra Mobility’s first-quarter 2023 results, its total revenue reached $191.9 million, a jump of 13% compared to $170.4 million for the first quarter of 2022. Service revenue growth rose 15% due to increases in travel volume and related tolling activity in the Commercial Services segment. That business unit grew 17%, aided by a gain in service revenue from Verra Mobility’s Government Solutions segment, which increased revenue 14%, largely due to the expansion of speed programs. Parking Solutions service revenue gained 10% on the strength of the company’s software as a service (SaaS) product offerings and various services related to parking management solutions.

Net income for Verra Mobility’s first quarter of 2023 reached $4.6 million, or $0.03 per share, based on 153.1 million diluted weighted average shares outstanding. For the comparable period of 2022, net income topped out at $10.0 million, or $0.06 per share, based on 160.7 million diluted weighted average shares outstanding. Adjusted EPS for the first quarter of 2023 was $0.26 per share, compared to $0.22 per share for the first quarter of 2022, the company reported.

Verra Mobility’s key business segments consist of:

• Commercial Services, offering automated toll and violations management, as well as title and registration solutions to rental car companies, fleet management companies and other large fleet owners.
• Government Solutions, delivering automated safety solutions to municipalities, school districts and government agencies, including services and technology that enable photo enforcement related to speed, red-light, school bus and city bus lane management.
• Parking Solutions, providing an integrated suite of software and hardware solutions to universities, municipalities, parking operators, health care facilities and transportation hubs in the United States and Canada.

Connell Chooses Non-Dividend-Paying Infrastructure Stock

Michelle Connell, president and owner of Dallas-based Portia Capital Management, said she likes the thesis behind Verra Mobility because the world has embraced travelling and seeking new adventures since the COVID-19 crisis has diminished from its peak. As a result, Verra Mobility will profit, Connell continued.

Michelle Connell heads Portia Capital Management.

Highlights of Verra Mobility cited by Connell included that 53% of the company’s revenues are regarded as governmental and 43% are commercial. Verra Mobility is placing transponders in cars owned by rental car corporations such as Avis, Hertz and Enterprise to track tolls to be paid and driving violations by their customers.

Another plus is that Verra Mobility covers 95% of the toll roads in the United States, as well as many internationally. The business produces lofty margins of about 65% earnings before interest, taxes, depreciation and amortization (EBITDA), Connell told me.

The company also benefits from a growing international trend for cashless tolls of roads, with 90% of its revenues reoccurring, Connell continued. She also added that Verra Mobility is in the process of paying down its debt, as well as buying back $100 million of its equity.

Connell estimated that Verra Mobility’s stock still has upside of 15-20% over the next 12 to 18 months. Since the stock is currently near its all-time high, Connell advised that prospective buyers of the stock stay patient to avoid overpaying for shares during short-term rallies.

Infrastructure Spending Is Increasingly Popular

In Maryland where I live, new Gov. Wes Moore signed into law an infrastructure spending bill on Monday, May 8, aimed at creating a pilot program in the state’s Department of Commerce. The program’s funds would cover certain costs for infrastructure projects in eligible technology sectors.

This legislation is the latest example of state and national governments around the world seeking to target development of key industries. This program will report by July 1, 2026, to the governor and the state’s legislature, known as the General Assembly, about the projects it funded and their economic impact.

CDC Reports Rising Vaccinations Against New Bivalent Variant of COVID-19

The COVID-19 pandemic’s public health emergency status in the U.S. expired on May 11, 2023, and the World Health Organization last week declared an end to what it began on January 30, 2020, to call the COVID-19 public health emergency of international concern, but the virus is still killing Americas each week and remains a public health threat. Even though death rates are dropping, Dr. Robert Anderson, the chief of the mortality statistics branch at the National Center for Health Statistics, said that COVID-19 deaths could top 100,000 in 2023.

The U.S. Centers for Disease Control and Prevention (CDC) reported at least one vaccination against COVID-19 and its bivalent variant has been given to 270,227,181 people, or 81.4%, of the U.S. population, as of May 10. Those who have completed the primary COVID-19 doses totaled 230,637,348 of the U.S. population, or 69.5%, according to the agency.

Also as of May 10, the United States had given a bivalent COVID-19 booster to 52,996,306 people who are age 18 and up, equaling 20.5% of America’s population. Medical studies have shown COVID-19 vaccinations help keep people healthy and reduce the morbidity from contracting the virus, potentially lifting confidence of consumers to encourage them to shop at stores, travel and otherwise spend money.

Russia’s War in Ukraine Remains a Fierce Firefight

Still posing a huge threat is Russia’s ongoing war in Ukraine. The latest news from the war zone indicates Russian soldiers and its Wagner mercenary group are continuing to battle in and around the Ukrainian city of Bakhmut as part of President Vladimir Putin’s reported plan to gain control and then advance to other cities in Ukraine’s industrial eastern region. However, some Russian soldiers reportedly fled their positions and lost valuable ground to Ukrainian forces, said Yevgeny Prigozhin, the private militia’s leader.

Despite Ukrainian President Volodymyr Zelensky talking publicly of delaying Ukraine’s expected spring counteroffensive, Prigozhin said it has begun and is proving to be “partially successful.” Nonetheless, Russia fired cruise missiles at the Ukrainian capital of Kyiv on Tuesday, May 9, as some of its troops participated in a parade across Moscow’s Red Square for the country’s annual celebration of victory in World War II.

The four dividend-paying infrastructure investments to purchase seem prepared to rise, despite economic uncertainty and ongoing political risk due amid Russia’s continuing invasion in Ukraine. With the need for tax-supported government projects such as roads, public utilities and municipal structures, companies that address those ongoing needs offer recession-resistant investments for those wary of economically cyclical stocks.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal omf Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.

Real Estate Investment Trusts (REITs) offer a simple and accessible way for investors to invest in the real estate market without the hassle of directly owning or managing a property.

Legally codified in 1960, REITs are investment trusts (or corporations) specializing in buying, selling or operating income-producing real estate. REITs possess many of the same characteristics as mutual and exchange-traded funds (ETFs) but there are a few key differences.

In order to qualify as a REIT, the trust must satisfy specific criteria under U.S. tax laws. Trusts must follow a 75 / 75 / 90 rule by investing at least 75% of total assets in real estate, cash or cash equivalents, by generating at least 75% of gross income from real estate-related activities and by distributing at least 90% of their taxable income to shareholders. REITs do not pay federal income tax on dividends distributed to their shareholders, avoiding “double taxation.”

When a REIT is first formed, it typically issues shares to investors to generate capital for investments. Trusts can issue shares in public offerings, private placements or direct stock purchase plans. Public offerings are typically done through an initial public offering (IPO), in which the REIT issues shares to the public for the first time. Private placements are offered to a select group of investors, such as institutional investors or accredited investors. Direct stock purchase plans allow individual investors to purchase shares directly from the REIT, bypassing a brokerage firm. Like mutual funds and ETFs, most REIT shares are typically traded on exchanges following the initial offering.

Since REIT shares are securities, dedicated mutual and exchange-traded funds are provided by companies such as BlackRock (NYSE: BLK) and State Street (NYSE: STT) dedicated to tracking different REIT indexes. These funds allow investors to diversify their REIT investments.

In addition to issuing shares, REITs can issue debt securities in bonds or notes. Trusts can also obtain financing from banks or other financial institutions, as well as through mortgage-backed securities (MBSs). REITs employ debt to finance the acquisition or development of real estate properties.

Although all REITs must follow the 75 / 75 / 90 rule detailed above, not all REITs follow the same investment strategy. Equity REITs, the most common type, buy, sell and manage real estate directly. Mortgage REITs (mREITs) follow a different strategy, choosing instead to invest in MBSs, commercial mortgage loans and other real estate debt instruments. Hybrid REITs implement a mixture of both strategies.

REITs can also be split into agency and non-agency categories. Agency REITs only invest in federally insured mortgages, typically through government-sponsored entities such as Fannie Mae and Freddie Mac. Non-agency REITs have no restrictions, opening investors to higher risk and returns.

Individuals typically invest in REITs to hedge against risk and volatility and to receive higher dividend payments. The 75 / 75 / 90 helps provide investors with a consistent cash flow stream. REITs also correlate less with the stock market compared to other asset groups. A low correlation with the stock market allows investors to reduce their losses when the equity markets perform poorly. Combined with physical real estate serving as collateral to a REIT’s value, REITs are often viewed as a safer investment than most other securities.

For most investors, equity REITs and mREITs are the preferred way to go. Their ability to trade on exchanges makes it easy for investors to buy and sell their shares and get real-time pricing. However, some REITs, private and public non-listed (PLNRs), are not found on exchanges.

Private REITs do not require US Securities & Exchange Commission (SEC) registration but can only be sold to institutional investors. PLNRs are registered with the SEC but intentionally avoid their shares being listed on exchanges. PLNR investors must buy and redeem their shares from the fund through brokers, and many funds have a minimum investment requirement between $1,000 and $2,500.

In conclusion, REITs have become a popular investment vehicle for those interested in the real estate market without the burden of directly owning or managing a property. The 75 / 75 / 90 rule and specific U.S. tax laws provide investors with consistent cash flow streams and tax advantages. REITs are divided into different categories based on investment strategies and can issue shares or debt securities to raise capital. The correlation between REITs and the stock market is low, making them an excellent option for investors seeking diversification and reduced risk. Whether through publicly traded REITs or PLNRs, individuals can invest in REITs to hedge against volatility and receive higher dividend payments.

Four dividend-paying bank investments to purchase when Fed-fueled fallout fades feature equities that could climb when shareholder selling stalls.

Price-conscious investors might want to watch for the four dividend-paying bank stocks to purchase when Fed-fearing shareholder selling stops. As expected, the Federal Reserve raised rates on Wednesday, May 3, for the 10th time in a row as it seeks to battle inflation.

The Federal Open Market Committee, the U.S. central bank’s monetary policy-setting body, began its series of 10 consecutive rate hikes on March 17, 2022, moving the Federal Funds rate from 0%-.25% to 5-5.25% on May 3, 2023. The fallout from rate hikes has exposed risk management missteps that caused the failure of Silicon Valley Bank, of Santa Clara, California, on March 10, and Signature Bank, of New York, on March 12.

Four Dividend-paying Bank Investments to Purchase When Fed-fueled Fallout Fades in the Future

The banking sector was rocked on Monday, May 1, when JPMorgan Chase (NYSE: JPM) announced it would pay $10.6 billion to acquire most of the assets of San Francisco’s First Republic Bank (NYSE: FRC) after regulators seized the financial institution. It became the biggest U.S. bank failure since the collapse of Washington Mutual during the 2008 financial crisis. The fiasco of First Republic left shareholders with worthless stock.

“First Republic shares sold for over $200 a share in November 2021,” wrote Mark Skousen, PhD, to subscribers of his Forecasts & Strategies investment newsletter.

Mark Skousen co-heads Fast Money Alert.

On Friday, April 28, First Republic shares traded for around $3, before they sank to zero on Monday, May 1, Skousen commented. The bank had a rising dividend policy and turned a $269 million profit in the first quarter of 2023. However, half its depositors withdrew their money in recent weeks, he added.

“This goes to show you how fast a financial institution can fail when there’s a run on the bank,” Skousen counseled.

Four Dividend-paying Bank Investments to Purchase Even as Fed-fueled Failures Fizzle out

Even though JPMorgan Chase Chief Executive Officer Jamie Dimon predicted the current banking crisis had ended with his company’s takeover of failing First Republic, Skousen expressed his doubts. There is never just “only one cockroach,” wrote Skousen, citing a Wall Street saying.

A sell-off in regional banks followed on Tuesday, May 2, when PacWest Bancorp (NASDAQ: PACW), of Beverly Hills, California, plunged 27.78%; Western Alliance Bancorp (NASDAQ; WAL), of Phoenix, Arizona, fell 15.12%; and Dallas-based Comerica Bank cratered 12.42%. Western Alliance’s share price dove roughly 48% and PacWest plunged a perilous 67% in just five trading days between Friday, April 28, and Thursday, May 4. Even though PacWest powered up 85.2% on Friday, May 5, its shares sank 42.2% for the full trading week, while fellow regional bank, Western Alliance, jumped 44.8% on the day but tanked 29% for the week.

The four dividend-paying bank investments to purchase when the Fed appears poised to halt its rate hikes seem strong enough to surmount the dual risks of high inflation and a possible recession. Big bank stocks are regulated more closely and therefore appear better positioned than smaller regional banks to withstand current economic headwinds.

That sentiment among investors suggests the 3,800 floor in the S&P will hold for now, but may be followed by a rally to 4,100-4,200, according to BofA Global Research. Investors currently prefer large caps over small caps, with quality trumping junk bonds, amid a recent shift of deposits leaving banks at the fastest pace since Russia’s invasion of Ukraine in February 2022, BofA added.

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Four Dividend-paying Bank Investments to Purchase Before Banks Recover

In the Fed’s recent monthly report, the U.S. central bank announced that “loans to commercial banks” jumped to $345.5 billion in March. The Fed’s Discount Window was “wide open,” with the Fed making more short-term loans to banks than it did in the financial crisis of 2008, said Mark Skousen, who co-heads the Fast Money Alert trading service with seasoned investor Jim Woods.

Bank deposits, which free-market economist Skousen equated to the money supply, fell 2.5% as depositors withdrew billions of dollars from their bank accounts. If the trend continues, the United States will face a “major credit crunch,” he added.

Skousen wrote in his monthly Forecasts & Strategies newsletter that he laughed upon reading the headline of a Federal Reserve monthly report: “The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible and stable financial and monetary system.”

Fed policy is anything but stable, Skousen opined.

“While the Biden administration continues to spend money like water, the Fed has imposed a tight money policy, which is likely to create an inflationary recession this year,” Skousen wrote to his Forecasts & Strategies subscribers.

Four Dividend-paying Bank Investments to Purchase Pique Skousen’s Attention

Despite the current risk of investing in banks, Skousen notched a profit of nearly 8% in just 43 days during 2021 by recommending shares of Signature Bank in Fast Money Alert. Skousen also has recommended banking stocks and call options in his Home Run Trader advisory service.

In Home Run Trader, Skousen picked US Bancorp (NYSE: USB), producing a 3.22% gain during 2007. The next year, Skousen recommended buying Bank of Montreal (NYSE; BMO), finishing with a 10.43% profit, before offering another bullish call in 2012 when he recommended Westpac before it climbed 13.92%.

Jim Woods, who heads the Bullseye Stock Trader advisory service, while partnering with Skousen in Fast Money Alert, recommends both stocks and options, and he has shown keen interest in banking stocks.

Jim Woods heads Bullseye Stock Trader.

Woods wrote in his May 2023 Successful Investing newsletter that banks and the financial sector had free money through minimal interest rates for more than a decade. Then, the Fed jacked up rates within about 10 months to levels not seen since the 1990s. The resulting financial stress contributed to the failure of Silicon Valley Bank and others, he added.

Four Dividend-paying Bank Investments to Purchase Face Weakening Macroeconomics

The broad macroeconomic picture shows signs of weakness, BofA reported. As wage growth eases, the Fed will continue to consider relatively strong unemployment levels and the price indices in setting future rate hikes, BofA added.

While there have been signs of prices cooling, BofA is less optimistic for a soft landing, and expects a mild recession to start in second-half 2023. Adjusted retail and food sales, along with credit card balances, are up on a year-over-year basis, as consumers still spend amid high inflation. Plus, the mortgage backdrop has become progressively more difficult, and higher interest rates leading to lower originations overall amid worsening affordability, BofA wrote.

Federal Reserve’s Supervision and Regulation Must Be Strengthened After Failures

The Federal Reserve’s supervision and regulation must be strengthened in the wake of the Silicon Valley Bank (SVB) failure on March 10, said Michael Barr, the Federal Reserve System’s vice chairman for supervision. After the Federal Reserve’s review of its supervision and regulation of Silicon Valley Bank, Barr said upon release of the report on April 28 showed that the failure stemmed from “a textbook case” of mismanagement by the bank, whose senior leadership fumbled basic interest rate and liquidity risk.

“Its board of directors failed to oversee senior leadership and hold them accountable,” Barr said. “And Federal Reserve supervisors failed to take forceful enough action, as detailed in the report. Our banking system is sound and resilient, with strong capital and liquidity. And in some respects, SVB was an outlier because of the extent of its highly concentrated business.”

This report is meant to serve as a self-assessment that takes an “unflinching look” at the conditions that led to the bank’s failure, including the role of Federal Reserve supervision and regulation, Barr said. Individuals not involved in the Silicon Valley Bank’s supervision conducted the review, which Barr said he oversaw.

Pension Chairman Picks ETF in the Four Dividend-paying Bank Investments to Purchase

Investors interested in a diversified portfolio of regional and smaller banks should consider the exchange-traded fund (ETF) Invesco KBW Regional Banking (KBWR), said Bob Carlson, a pension fund chairman who heads the Retirement Watch investment newsletter. It was up 36.09% in 2021, down 7.25% in 2022, and is down 27.19% so far in 2023. Its recent yield reached 4.3%.

Bob Carlson, head of Retirement Watch, meets with Paul Dykewicz

The fund tracks the KBW Nasdaq Regional Banking Index, which is designed to track the performance of U.S. regional banking and thrift companies that are publicly traded.

KBWR has 50 positions with 30% of the fund in the 10 largest positions. Top holdings recently were Cullen/Frost Bankers, Commerce Bancshares, Webster Financial, Prosperity Bancshares, and BOK Financial.

Four Dividend-paying Bank Investments to Purchase Include One Favored by Connell

East West Bancorp, Inc. (NASDAQ: EWBC), of Pasadena, California, is a regional bank stock ripe for investors to buy after its recent price drop, said Michelle Connell, who heads the Dallas-based Portia Capital Management. A key reason to own EWBC shares is its 4.2% dividend yield that pays shareholders to remain patient for the financial sector to recover.

Michelle Connell heads Portia Capital Management.

The bank’s stock has fallen along with its banking peers, Connell added. Year to date, East West Bancorp, the holding company of East West Bank, is down 28.59%, Connell said. In the last 12 months, it’s slid 31.46%, while slipping 8.82% on Tuesday, May 2, she continued.

“However, the Bank had strong earnings when it reported on April 20,” Connell opined. East West Bank beat analysts’ consensus earnings estimates. Connell added.

Since April 20, at least four analysts have reiterated their overweight status on the stock and increased their long-term price targets,” Connell told me.

“The bank is interesting because not only do its 120 branches serve the East and West coasts and some mid-American cities, but the banking company also has branches in China.

Chart courtesy of www.stockcharts.com

East West Bancorp Leads Four Dividend-paying Bank Investments to Purchase

East West Bancorp has labeled itself as a “financial bridge” between the United States and China,” Connell said. Plus, East West Bancorp is “strong fundamentally,” Connell continued.

The bank currently has just 5% of its lending with venture capital organizations, Connell continued. East West Bancorp further has a $64 billion balance sheet, with $28 billion in unused borrowing facilities, Connell indicated.

One point of caution for all regional banks, including East West Bankcorp, is that it has exposure to commercial real estate, Connell counseled. Income lovers may appreciate that the banking company’s dividend has grown 17% on an annualized basis, she added.

“The stock is very cheap,” Connell told me. “Its current price-to-earnings (P/E) ratio is six, while its five-year average P/E ratio is 12.”

East West Bancorp Could Climb 25% or More in Next 12-18 Months

East West Bancorp’s upside during the next 12 to 18 month is 25% or greater, Connell said. She recommended dollar cost-averaging with this stock, as well as adding one or two more strong regional banks to one’s buy list.

East West Bancorp, Inc. reported first-quarter 2023 net income of $322.4 million, or $2.27 per diluted share, up from $237.7 million, or $1.66 per diluted share, in first-quarter 2022. Year-over-year, earnings per share jumped 37%, while total loans reached a record $48.9 billion, as of March 31, 2023.

“East West’s ability to consistently generate industry-leading profitability while maintaining above peer capital ratios are strengths in any business cycle,” stated Dominic Ng, its chairman and CEO. “East West continued to deliver in the first quarter, despite the banking industry and market disruption that occurred in mid-March.”

For the first quarter of 2023, the bank earned “industry-leading returns” of 2.0% on average assets and 22.9% on average tangible common equity, Ng continued.

KeyCorp Makes List of Four Dividend-paying Bank Investments to Purchase

Cleveland-based Keycorp (NYSE: KEY), with a market capitalization of nearly $17.9 billion, received a buy rating from BofA Global Research in late February. However, it plunged 9.42% on Tuesday, May 2.

The bank’s management is investing in growing sectors such as health care, technology, renewable energy and affordable housing. So far, its leaders report staying on track to achieve a goal of organically growing its customer base 20% by 2025.

As for a price objective, BofA wrote in late February that it viewed $20 as realistic, even after factoring in recession risk. KEY’s risks include a prolonged low interest rate environment, greater-than-expected expenses and any inability to maximize balance sheet efficiency.

Chart courtesy of www.stockcharts.com

SNV Snags Spot Among Four Dividend-paying Bank Investments to Purchase

Synovus Financial Corp. (NYSE: SNV), of Columbus, Georgia, has a $6.3 billion market capitalization and gained a buy rating from BoA in a research report from late February. The investment bank placed a $43 price objective on SNV at the time.

Of course, the banking sector has suffered since then amid high inflation and increased rates, so investors need to be cautious. Risks faced by SNV include potentially slowing economic growth, as well as a possible reduced takeout price compared to $40 price range where the stock had been trading in February.

Outperformance could come from a quicker-than-expected pickup in overall economic activity or the bank becoming an acquisition target above BofA’s price objective for SNV. Overall, the bank’s management expressed cautious optimism for its outlook and indicated to BofA in February that it had not needed to adjust its underwriting guidelines.

Chart courtesy of www.stockcharts.com

CDC Reports Rising Vaccinations Against New Bivalent Variant of COVID-19

The U.S. Centers for Disease Control and Prevention (CDC) reported at least one vaccination against COVID-19 and its bivalent variant has been given to 270,047,396 people, or 81.3%, of the U.S. population, as of April 26. Those who have completed the primary COVID-19 doses totaled 230,533,196 of the U.S. population, or 69.4%, according to the agency.

Also as of April 26, the United States had given a bivalent COVID-19 booster to 52,331,682 people who are age 18 and up, equaling 20.3% of America’s population. Medical studies have shown vaccinations help keep people healthy and reduce the morbidity from contracting COVID, potentially boosting confidence of consumers to shop at stores, travel and otherwise spend money.

The four dividend-paying bank investments to purchase seem poised to survive the current fallout and recover along with the rest of the financial services sector. Despite the possibility of further financial institution failures, these four dividend-paying bank investments appear less vulnerable than industry peers, according to buy ratings and analysis of BofA in its latest publicly distributed research reports.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.

Four dividend-paying investments to ride amid an expected rebound in big bank stocks seem poised to power through risks such as stubbornly high inflation and a potential recession.

The four dividend-paying investments to ride for a likely recovery in big bank stocks should be better positioned than smaller regional banks to withstand current economic headwinds. Relatively high cash levels and expectations for reduced short-term rates, following the Fed’s recent rate hikes, suggests that pessimism is close to levels seen at market lows of the past 20 years, according to BofA Global Research.

That sentiment among investors suggests the 3,800 floor in the S&P will hold for now, but may be followed by a rally to 4,100-4,200, according to BofA. Investors currently prefer large caps over small caps, along with quality trumping junk bonds, as a recent shift of deposits from banks occurred at the fastest pace since Russia’s invasion of Ukraine, BofA added.

Courtesy of www.StockRover.com. Learn about Stock Rover by clicking here.

Four Dividend-paying Investments to Ride When Big Banks Rebound

The broad macroeconomic picture shows signs of weakness, with employment indicators deteriorating on a year-over-year and sequential basis in recent weeks, BofA reported. Despite rate increases, the unemployment rate in March of 3.5% was down 10 basis points, or 0.10%, from February.

As wage growth eases, the Fed will continue to consider relatively strong unemployment levels and the price indices in setting future rate hikes. While there have been signs of prices cooling, BofA Global Research is less optimistic for a soft landing and expects a mild recession to begin in second-half 2023.

Adjusted retail and food sales, along with credit card balances, are up on a year-over-year basis, as consumers keep spending amid high inflation. Plus, the mortgage backdrop has become progressively more difficult, and higher interest rates are leading to lower originations overall amid worsening affordability, BofA wrote.

Federal Reserve’s Supervision and Regulation Must Be Enhanced After Silicon Valley Bank Failure

The Federal Reserve’s supervision and regulation must be strengthened in the wake of the Silicon Valley Bank (SVB) failure on March 10, said Michael Barr, the Federal Reserve System’s vice chairman for supervision. After the Federal Reserve’s review of its supervision and regulation of Silicon Valley Bank, Barr said upon release of the report on April 28 that the failure stemmed from “a textbook case” of mismanagement by the bank, whose senior leadership mismanaged basic interest rate and liquidity risk.

“Its board of directors failed to oversee senior leadership and hold them accountable,” Barr said. “And Federal Reserve supervisors failed to take forceful enough action, as detailed in the report. Our banking system is sound and resilient, with strong capital and liquidity. And in some respects, SVB was an outlier because of the extent of its highly concentrated business.”

This report is meant to serve as a self-assessment that takes an “unflinching look” at the conditions that led to the bank’s failure, including the role of Federal Reserve supervision and regulation, Barr said. Individuals not involved in the Silicon Valley Bank’s supervision conducted the review, which Barr said he oversaw.

Four Dividend-paying Investments to Ride Recovery of Giant Banks

In the Fed’s recent monthly report, the U.S. central bank announced that “loans to commercial banks” jumped to $345.5 billion in March. The Fed’s Discount Window was “wide open,” with the Fed making more short-term loans to banks than it did in the financial crisis of 2008, said Mark Skouen, PhD, who co-heads the Fast Money Alert trading service with seasoned investor Jim Woods.

Mark Skousen co-heads Fast Money Alert.

Bank deposits, which Skousen, a free-market economist, equated to the money supply, fell 2.5% as depositors withdrew billions from their bank accounts. If that trend continues, the United States will be facing a “major credit crunch,” he added.

Skousen wrote in his monthly investment newsletter, Forecasts & Strategies, that he laughed upon reading the headline of the Federal Reserve monthly report: “The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible and stable financial and monetary system.”

Fed policy is anything but stable, Skousen said.

“While the Biden administration continues to spend money like water, the Fed has imposed a tight money policy, which is likely to create an inflationary recession this year,” Skousen wrote to his Forecasts & Strategies subscribers.

Four Dividend-paying Investments to Ride Gain Skousen’s Attention

Even though investing in banks at this time is not free of risks, Skousen notched a profit of nearly 8% in just 43 days during 2021 by recommending shares of New York-based Signature Bank (OTCMKTS: SBNY) in Fast Money Alert. Skousen also has recommended banking stocks and call options in his Home Run Trader advisory service.

In Home Run Trader, Skousen recommended US Bancorp (NYSE: USB) for a 3.22% gain during 2007. The next year, Skousen recommended buying Bank of Montreal (NYSE; BMO), producing a 10.43% profit, before offering another bullish call in 2012 when he recommended Westpac Banking Corp. (NYSE WBK) before it jumped 13.92%.

Jim Woods, who heads the Bullseye Stock Trader advisory service, while also teaming up with Skousen in Fast Money Alert, recommends both stocks and options, and his interests include banking stocks.

Jim Woods heads Bullseye Stock Trader.

Woods wrote in his May 2023 Successful Investing newsletter that banks and the financial sector essentially had free money through minimal interest rates for more than a decade. The Fed then jacked up rates within about 10 months to levels last seen in the 1990s, with the resulting financial stress contributing to the failure of Silicon Valley Bank and others, he added.

Four Dividend-paying Investments to Ride Big Banks’ Bounce, Despite Industry Challenges

Bank of America (NYSE: BAC), of Charlotte, North Carolina, is a stock favored by Michelle Connell, who heads the Dallas-based Portia Capital Management. One of the big incentives to owning shares in the bank is its nearly 3% dividend yield that pays shareholders to stay patient for the financial sector to rebound.

Michelle Connell heads Portia Capital Management.

“Since the mortgage and financial crisis of 2008 and 2009, Bank of America has rebuilt its dividend payment record,” Connell continued. “In the last eight years, Bank of America has continued to increase its dividend.”

Bank of America recently posted strong metrics for its latest quarter, Connell said. As the second-biggest bank in America, behind only JPMorgan, Bank of America beat its earnings expectations, reported record inflows of $37 billion in cash deposits from new and existing clients and attracted 14,500 new clients through its Merrill Lynch brokerage and private bank unit, she added.

Despite speculation among forecasters that further bank failures may occur, Bank of America’s net interest income met expectations and its leaders are offering guidance of meeting analysts’ performance estimates, Connell counseled.

Four Dividend-paying Investments to Ride Big Banks that Aided First Republic Bank

Another sign of strength is that Bank of America was one of 11 financial institutions that contributed to the $30 billion used shore up First Republic Bank, Connell said. BAC’s Chief Executive Officer Brian Moynihan has done an “amazing job” since 2010 when he took the helm, Connell added.

Moynihan knows his client base and understands how to grow and deliver profits during all phases of an economic cycle, Connell said. Despite Bank of America’s share price sliding 15.50% in the past year and 10.93% so far this year, Berkshire Hathaway’s Chairman and Chief Financial Officer Warren Buffett remains “enamored” with the stock, Connell commented.

Bank of America is Buffett’s largest bank holding and his second-biggest overall stock position, Connell continued. As far as Bank of America’s potential upside, Connell estimated its share price could rise about 20% from current levels.

Another reason why Connell said she likes Bank of America is that she views its stock as undervalued, with a price-to-earnings ratio (P/E) ratio of 8.97. The modest P/E gives the bank a “very compelling” price point, Connell said.

“The bank has a solid balance sheet and fundamentals that should help it continue to perform for its clients and stockholders,” Connell said.

Chart courtesy of www.stockcharts.com

JPMorgan Chase Is Among Four Dividend-paying Investments to Ride

Another of the three big banks to buy is New York-based JPMorgan Chase (NYSE: JPM), with a $417.2 billion market capitalization. JPMorgan Chase is recommended as a buy in a recent BofA Global Research report, and it fits the investment bank’s description as a “mega-cap bank” that is preferred to regional banks, given its superior liquidity position, diversified revenue profile and credit defensibility.

For example, JPMorgan Chase produces a significant amount of its revenue internationally and its non-domestic focus is expected to grow, BofA wrote in its research note. JPMorgan continues to invest in China but appears to do so cautiously, BofA added.

The big bank’s management is seeking to grow its business in the Middle East, with Dubai a particular focus, given capital migration into the region. BofA put a $153 price objection on JPMorgan in late February. Positive developments could include better-than-expected credit quality and better interest rate defensibility, BofA wrote.

Chart courtesy of www.stockcharts.com

Citigroup Makes List of Four Dividend-paying Investments to Ride

New York-based Citigroup (NYSE: C), with a market capitalization of nearly $100 billion, is another big bank stock that BofA views as a buy. Citigroup built its own brokerage platform but partnered to enter the insurance business.

The bank’s management continues to hire financial advisers with the goal of adding new clients and funds under management to its business. High net worth individuals with $5-20 million in assets are a coveted niche for growth, BofA wrote.

On the commercial banking side of Citigroup’s business, deposit growth is slowing but its retail deposits are gaining at a quicker rate than the industry, BofA noted. Wealthy customers are moving money into certificates of deposit (CDs) and fixed-income securities, but the bank’s multi-product offerings are helping to limit attrition.

The bank’s management also is eyeing digital marketing to contribute 30% of its deposit growth, according to BofA. Citigroup’s multi-pronged growth strategy impressed BofA bank analysts to assign the stock a price objective of $60.

Chart courtesy of www.stockcharts.com

KBWB Latches onto Four Dividend-paying Investments to Ride

Investors interested in the big banks should consider Invesco KBW Bank (KBWB), said Bob Carlson, who heads the Retirement Watch investment newsletter and serves as a pension fund chairman. The fund tracks the KBW Nasdaq Bank Index, which is designed to mirror the performance of large national U.S. money center and regional banks, as well as thrift institutions.

Bob Carlson, head of Retirement Watch, meets with Paul Dykewicz

It has 22 stocks with 67% of the fund invested in the 10 largest positions. Top holdings recently were JP Morgan Chase, Citigroup, Wells Fargo (NYSE: WFC), Bank of America and US Bancorp (NYSE: UBC) Each of the three largest positions is more than 9% of the fund, and the fourth is slightly less than 9%.

KBWB was up 37.76% in 2021, down 21.70% in 2022, and is down 19.78% so far in 2023. The yield recently was 3.73%.

Chart courtesy of www.stockcharts.com

CDC Sees Rising Vaccinations Against New Bivalent Variant of COVID-19

The U.S. Centers for Disease Control and Prevention (CDC) reported at least one vaccination against COVID-19 and its bivalent variant has been given to 270,047,396 people, or 81.3%, of the U.S. population, as of April 26. Those who have completed the primary COVID-19 doses totaled 230,533,196 of the U.S. population, or 69.4%, according to the CDC.

Also as of April 26, the United States had given a bivalent COVID-19 booster to 52,331,682 people who are age 18 and up, equaling 20.3% of America’s population. Medical studies have shown vaccinations help keep people healthy and reduce the morbidity from contracting COVID, potentially boosting confidence of consumers to shop at stores, travel and otherwise spend money.

The four dividend-paying investments to ride should benefit from big banks positioning themselves to recover along with the financial services industry in general. Further financial institution failures certainly are possible but the big banks face heightened regulation that should keep them among the safest bets in the industry.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.

3 best REITs for 2023 to help investors obtain consistent returns also offer attractive dividend yields.

The real estate market has had a challenging last couple of quarters due to high interest rates, unrelenting inflation and recession fears. Even with these risks, REITs are becoming an enticing  investment because of its exposure to the real estate market without the hassle of owning properties directly. 

If the Federal Reserve can curb this inflationary period and keep the economy from sliding into a recession, REITs should benefit. 

3 Best REITs for 2023: Prologis Inc. (NYSE: PLD)

Annual Dividend Yield: 2.85%

Prologis Incorporated, of San Francisco, California, is the largest REIT in the world and operates in 17-plus countries. Prologis’ main focus is on logistics-centered real estate with high barriers to entry and strong growth potential. Despite increasing inflation and high interest rates, Prologis obtained a 10.8% stock increase from March 2022 to March 2023. The REIT’s presence in logistics properties is relatively risk-averse compared to REITs in general, since delivery services are in high demand after the COVID-19 pandemic.

Prologis tops the list as one of the best REITs for 2023 because it owns high-barrier-to-entry properties and operates in a multitude of different real estate locales. Due to the company’s large portfolio size and its strong debt-to-equity ratio of 0.43, it should be able to weather potential inflation increases or recessionary risks. If investors are looking for substantial and consistent dividend yields that follow the market, Prologis could be the answer. 

Chart courtesy of www.stockcharts.com

3 Best REITs for 2023: National Retail Properties (NYSE: NNN)

Annual Dividend Yield: 5.14%

National Retail Properties, of Orlando, Florida, is a REIT that invests primarily in long-term leases of retail stores in the United States. The company boasts reliable income streams from its multitude of long-term leases. Amid unpredictable interest rates, National Retail Properties offer consistent dividend returns with plenty of investment diversity.

In the real estate market, cash flow is king. National Retail Properties has some of the most stable cash flows in the industry due to its long-term leasing set-up, which should help weather any recessionary period that occurs. 

While National Retail Properties is well positioned, it is not immune to a drop in its share price. The company endured a 5.2% stock decrease from March 2022 to March 2023. But, if investors are looking for relatively high annual dividends, not many REITs are better than National Retail Properties. 

Chart courtesy of www.stockcharts.com

3 Best REITs for 2023: American Tower Corporation (NYSE: AMT)

Annual Dividend Yield: 3.05%

American Tower Corporation, of Boston, Massachusetts, is an owner and operator of more than 181,000 wireless and broadcast communications facilities on a global scale of 20 countries. This REIT, much like National Retail Properties, operates on long-term leases to communications and wireless carriers, which boast strong cash flows and reliable yearly income. The company has a debt-to-equity ratio of 2.54, which suggests low long-term debt and risk of bankruptcy. 

AMT focuses heavily on leasing its communications equipment to large wireless carriers. With the introduction of technology like 5G and ultra-high-speed internet, the management of American Towers will not have to worry about absent tenants. The wireless and broadband industry has an extremely high barrier to entry, and it is unlikely that AMT will stop boosting its dividend each quarter since 2012. The REIT’s current dividend yield of around 3% lets investors be paid for their patience as owners of AMT shares.

3 Best REITs for 2023: Conclusion

Investing in REITs like Prologis, National Retail Properties and American Tower could be financially rewarding for those seeking to benefit from a recovery in the real estate industry in 2023.

The ultimate guide to mortgage REIT investing is intended to help those seeking to profit from a unique kind of equity real estate investment trusts (REIT).

Many investors likely are familiar with REITs but far fewer individuals may be acquainted with their younger cousins: mortgage REITs (mREITs). Indeed, mREITs first emerged in the mid-1980s.

As one may surmise, mREITs are a type of REIT that invests primarily in mortgages and other types of real estate debt. While traditional equity REITs generate income through purchasing, selling and renting physical properties, mREITs achieve returns by investing in mortgage-backed securities (MBS), commercial mortgage loans and other real estate debt instruments.

Investors should keep in mind that mREITs typically are more volatile than equity REITs but can provide higher dividend yields. Like equity REITs, mREITs can be found on major exchanges. 

The Ultimate Guide to Mortgage REIT Investing: Agency vs. Non-Agency

Further, mREITs are split into two categories: agency and non-agency. Agency REITs only invest in federally insured mortgages, typically through government-sponsored entities such as Fannie Mae and Freddie Mac. Non-agency REITs have no such restrictions, opening investors to higher risk and potentially higher returns.

REITs and mREITs offer similar portfolio diversification benefits. REITs possess a low correlation with the stock market, reducing potential losses when equities perform poorly. Plus, REITs are considered safer investments than many other securities, as they have an underlying tangible asset (real estate) as collateral. Finally, by law, REITs must distribute at least 90% of their taxable income to shareholders annually, providing investors with a consistent cash stream.

Despite pursuing two different investment strategies, mREITs are subject to many of the same risks as equity REITs. mREITs have historically provided high dividend yields to investors due to their specialized focus on real estate debt. However, their performance can be heavily affected by interest rate fluctuations and changes in the real estate market.

The Ultimate Guide to Mortgage REIT Investing: Performance

The COVID-19 pandemic initially shattered the real estate market, leading to an 18.8% drop in the FTSE Nareit mREIT index in 2020. However, the mREIT index jumped by 15.7% in 2021 as the real estate market rebounded following the federal government’s efforts to slash interest rates and introduce stimulus packages.

Interest rates play a huge factor in the performance of mREITs. When interest rates rise, the value of mREIT holdings can decrease. Newly issued mortgages offer higher interest payments, causing the value of existing mortgages to fall. Other debt instruments like bonds also experience the same interest rate risk. The opposite is true when interest rates fall.

In 2018, the Federal Reserve raised interest rates four times. The Nareit mREIT index declined by 2.5% in the same year. In contrast, the Federal Reserve slashed interest rates three times a year later, helping the mREIT index skyrocket by 21.3% in 2019. Although mREITs perform the best during periods of low interest rates and volatility, they serve as a better hedge against interest rate risk than equity REITs, typically outperforming them during periods of rising interest.

The Ultimate Guide to Mortgage REIT Investing: Risks

REITs are also subject to credit, prepayment and liquidity risks. Credit risk is the default risk of borrowers. Prepayment risk arises from borrowers paying off their mortgages early, reducing the amount of interest earned by lenders. Liquidity risk is being unable to sell investments quickly enough to meet cash flow needs. Credit, prepayment and liquidity risks are typically less significant than interest rate concerns and real estate fluctuations. However, they can lead to significant issues when they do arise, like in 2008.

Unlike equity REITs, mREITs also possess rollover risk. mREITs, typically residential mREITs, may fund the purchase of their long-term mortgages through short-term debt. If so, trusts must refinance their short-term debt at favorable rates to consistently generate returns.

mREITs are more volatile than equity REITs but can provide higher dividends in return. Investors looking to increase their diversification while maintaining higher returns may benefit from adding mREITs to their portfolios.