1. Uncertain strugglers
2. Ambitious risk-takers
3. Cautious preparers
4. Optimistic dreamers
5. Purposeful plannersKeep Calm And Collect Dividends
Dec. 23, 2020 8:35 AM ET
Includes: AY, CEQP.PR, ECC, ECCB, ECCX, ECCY, NEWT, NEWTI, NEWTL, RLJ, RLJ.PA, SAF, SAK, SAR
Rida MorwaHigh Dividend Opportunities
The #1 Service on www.seekingalpha.com
for Income Investors and Retirees, 9-10% dividend yield.Summary
- We hate being pigeonholed, yet we love to categorize things.
- There are five major types of savers.
- All five can find success in the market if they are wise.
Co-produced with Treading Softly
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People, I've learned, often hate to be pigeonholed. They don't want to be categorized, yet we often love to categorize things, don't we? Sometimes those categories help us know how best to interact with people of different walks of life.A recent study
has shown there are five major types of retirement savers. The group behind the study is one that actively promotes annuities as a retirement plan. While I disagree with them there, in my opinion most retirees do not have sufficient capital to get an annuity that's paying a halfway decent income yield. What we can learn from this study is how these varied types of savers can all benefit from good old-fashioned dividend income investing. The Income Method is not limited to one type of saver or investor! Let's jump in.Dazed and Confused - The Largest Group
In the study, they discovered the largest group and titled them "uncertain strugglers". This group expects to survive off of Social Security and the goodwill of their family members or children. They have no firm financial plan and their retirement planning is just as foggy.
Unfortunately, this group made up 29% of the study. Women disproportionately made up this grouping as well - 61% of it to be exact. These individuals have little to no immediate savings to draw off of and need to get their plan in action and house in order.
We see these individuals joining High Dividend Opportunities on a regular basis, they come in, start learning, and get to work. Why? They're driven by the reality of an uncomfortable and challenging retirement and want to change the path they are on.
These individuals would be best benefited from maintaining a healthy 40% allocation to fixed income. Focused more on preferred stocks, bonds, and baby bonds as those often offer a higher yield for a much lower risk if you are a conservative income investor. If you are an income investor like me, you need to get your hands on RLJ Lodging Trust, $1.95 Series A Cumulative Convertible Preferred Shares (RLJ.PA) which yields 7.5%, and Crestwood Equity Partners LP, 9.25% Preferred Partnership Units (CEQP.PR) which yields 11%. Both of these preferreds have a high degree of coverage but both also offer higher yields due to being part of unloved sectors – hotels and energy (note: CEPQ.PR issues a K-1).
Now, these two picks alone should not make up their portfolio, but they should be present to help maximize the income your money can make without outsized risk being present. If you don't have a plan for retirement, I strongly encourage you to get started on creating one, get money into the market to start working for you - even if only a little at a time – and learn more about how wealth is really made.The "I've Got This"-ers - Dreamers and Risk Takers
The second group we'll address is a pairing of two of the five groups identified in the study. These groups were titled "Optimistic Dreamers" and "Ambitious risk-takers." Both of these groups are made up of mostly younger men and women. The dreamers are over half women (57%) while the risk-takers are 54% men, 43% of whom rely on an advisor. These groups feel confident in their retirement plans, while both do not show a high level of knowledge regarding retirement topics or financial planning. The Dreamers go on their gut instinct and expect to have active healthy retirements, while risk-takers feel they are retirement experts but also heavily rely on their advisors.
When moving to become an income investor, these savers will likely have a smattering of random holdings that will need to be trimmed or adjusted over time vs. immediately. Risk takers will love to learn how to use options to maximize their income potential from lower-yielding holdings while dreamers will enjoy knowing their holdings are leading to a better tomorrow.
Consider picking up Atlantica Sustainable Infrastructure (AY) which yields 4.5% for example. This company is working to grow and develop renewable energy and sustainable infrastructure around the world. Its dividend yield is growing, meaning younger investors buying it now can see a growing income stream without any additional steps. Likewise, AY makes a good target for learning options trading. If you get the shares called away or put to you, it's easy to jump back in or well worth keeping!Prepared For Action - Cautious and Purposeful
The last two groups are the most conservative of the bunch. They are the "Cautious Preparers" and "Purposeful Planners." These two groups have planned and calculated retirement needs and in the case of the Purposeful Planners have ample retirement savings. Cautious Preparers stick to the tried and true retirement advice and as such some find themselves below their desired targets.
For income investing, these two groups can unlock large sums of income by moving their highly-conservative portfolios to a more income-oriented direction. The Cautious Preparers would be most comfortable holding high-quality baby bonds – they yield much more than "blue chip" stocks but also provide the security blanket they enjoy. Purposeful Planners may not need the added income, and often are the target of annuity companies, but could still see their income easily grown via buying debt from smaller firms. These two groups could easily allocate large sums - upwards of 80% of their portfolio to fixed income, and while lower yielding still see strong income that would likely never waiver.
Eagle Point Capital 6.6875% Notes (ECCX) yielding 6.7%, Saratoga Investment Corp., 6.25 % Notes (SAF) yielding 6.2%, or even Newtek Business Services Corp., 5.75% Notes (NEWTL) yielding 5.7% all offer prime opportunities to see yields above the market with risk lower than most high yielding choices offer.
Taking funds and adding to these various fixed-income securities can turn a low-income portfolio into a higher one with little effort and no less conservatism.Conclusion
As we all make our way through the market on our journey to retirement. Studies show that five types of savers exist, all of which could benefit from an immediate income, high-yield approach. The Income Method that High Dividend Opportunities follows can enable all types of saver and investors to see more income from their portfolios without dialing up the risk.
As we looked over them, fixed income securities play an important role in anchoring your portfolio while other companies and investments flesh it out. If you have more saved and need less yield from your holdings, shifting that money into baby bonds, bonds, and mostly preferred stocks to provide an easy way to get more income from your portfolio without additional risk. Our Model Portfolio is the best resource for preferred investors. Why? Because my own retirement portfolio is composed 40% in preferred stocks. I only recommend what I buy!
Take a moment and consider how well you've planned for your retirement, how much you have saved, and how much you'll need your portfolio to generate. Re-read the types of savers and use the guidance attached to help you get your portfolio in order.