{"id":25999,"date":"2023-06-22T10:57:36","date_gmt":"2023-06-22T14:57:36","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/this-elite-8-4-dividend-is-a-best-buy-for-a-fed-pause\/"},"modified":"2023-06-22T10:57:38","modified_gmt":"2023-06-22T14:57:38","slug":"this-elite-8-4-dividend-is-a-best-buy-for-a-fed-pause","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=25999","title":{"rendered":"This Elite 8.4% Dividend Is A &#8216;Best Buy&#8217; For A Fed Pause"},"content":{"rendered":"<div>\n<p>Let\u2019s talk about <em>legitimate<\/em> financial engineering today. An easy, real and (honestly) <em>no-brainer<\/em> move to boost a timid 2.5% yield into an 8.4% dividend.<\/p>\n<p>Just type this ticker, not that ticker, and we\u2019ve got it. An 8.4% dividend. Pay up, Wall Street\u2014and give us a 5% discount to boot!<\/p>\n<p><em>The Wolf of Wall Street <\/em>would term this type of move <em>fugayzi<\/em>. Slang for BS. The suits ripping off the little guy.<\/p>\n<p>This <em>reverse fugayzi<\/em> is our revenge. The wolves are scavenging for this 2.5% yield. We\u2019ll buy the same stock, at a discount, and boost our dividend to an elite 8.4%.<\/p>\n<p>\n <span>ADVERTISEMENT<\/span><fbs-ad position=\"topx\" batched=\"\" ad-id=\"article-0-topx-1\" data-double-progressive=\"\"><\/fbs-ad>\n<\/p>\n<p>Simply by typing a different three-digit ticker.<\/p>\n<p>The first ticker, admittedly, is no slouch. <strong>NextEra Energy (NEE)<\/strong> is the largest developer of renewable energy in North America. Chief Financial Officer Kirk Crews is a dividend hero of mine because he\u2019s the fastest pay raiser in the utility space.<\/p>\n<p>Most \u201cute\u201d dividends are safe, but their stock prices never move. They are so <em>boring<\/em>. Which would be OK if they paid more.<\/p>\n<p><strong>Southern Company (SO)<\/strong>, for example, yields 4%. If we buy a million dollars\u2019 worth of SO, we\u2019ll collect $40,000 per year in dividend income. That doesn\u2019t <em>quite<\/em> do it for me.<\/p>\n<p>SO raises its payout about 3% per year. Back in the \u201cgood ol\u2019 2010s\u201d we\u2019d have cheered about this. But a stinkin\u2019 three percent doesn\u2019t even keep up with inflation today. Sad, but true. So, we must demand more than SO.<\/p>\n<p>\n <span>ADVERTISEMENT<\/span><fbs-ad position=\"topx\" progressive=\"\" ad-id=\"article-0-topx-2\" data-double-progressive=\"\"><\/fbs-ad>\n<\/p>\n<p>Which is why I prefer NEE. Sure, on the surface, its 2.5% yield isn\u2019t up to our (admittedly lofty) yield standards. But we\u2019re talking <em>10% yearly dividend growth with NEE<\/em>.<\/p>\n<p>With such generous raises, we could imagine that it\u2019s only a matter of time before NEE\u2019s yield climbs to more than 4%. Except we\u2019d be pondering for <em>a while<\/em> asking ourselves why NEE\u2019s yield never seems to move higher. Year after year, it seems to pay between 2% and 3%.<\/p>\n<p>The reason for the yield consistency is that NEE\u2019s price moves higher along with its payout. That\u2019s great for investors who bought the stock ten years ago because they are sitting on 383% total returns, including dividends.<\/p>\n<p>But it\u2019s like the parable about planting the tree. Yeah, the best time to sow the seed was ten years ago. For whatever reason we didn\u2019t, and here we are today, and a 2.5% current yield isn\u2019t going to cut it.<\/p>\n<p>\n <span>ADVERTISEMENT<\/span><fbs-ad position=\"topx\" progressive=\"\" ad-id=\"article-0-topx-3\" data-double-progressive=\"\"><\/fbs-ad>\n<\/p>\n<p>We need income <em>now<\/em>.<\/p>\n<p>Well, my contrarian friend, <strong>Cohen &amp; Steers Infrastructure Fund (UTF)<\/strong> has us covered. UTF is my \u201cgo to\u201d utility play for because, as a closed-end fund (CEF), its mission in life is to dish us a generous dividend.<\/p>\n<p>The fund\u2019s top holding? You guessed it, NEE.<\/p>\n<p>As a CEF, UTF often trades at a <em>discount<\/em> to its net asset value (NAV). Those assets being shares in stocks like NEE. Which doesn\u2019t make much sense, but that\u2019s the benefit of combing CEFland when the markets are as jittery as they are today.<\/p>\n<p>We can either pay full price for NEE, or net shares for just 95 cents on the dollar by buying UTF instead.<\/p>\n<p>But wait, there\u2019s more. As a CEF, UTF is also allowed to use leverage to boost NEE\u2019s payout. The fund yields 8.4%. Now we\u2019re talking.<\/p>\n<p>\n <span>ADVERTISEMENT<\/span><fbs-ad position=\"topx\" progressive=\"\" ad-id=\"article-0-topx-4\" data-double-progressive=\"\"><\/fbs-ad>\n<\/p>\n<p>One reason UTF is so cheap is that its cost of money has increased with every Fed rate boost. But the Fed is just about finished hiking. Which means the bill for UTF\u2019s 30% leverage won\u2019t increase much from here.<\/p>\n<p>And remember, when we officially enter a recession, the Fed will cut rates. UTF\u2019s cost of capital will decline, its price should rise, and vanilla investors will wish they loaded up on UTF <em>right now<\/em>.<\/p>\n<p>\n <span>ADVERTISEMENT<\/span><fbs-ad position=\"topx\" progressive=\"\" ad-id=\"article-0-topx-5\" data-double-progressive=\"\"><\/fbs-ad>\n<\/p>\n<p>And there we have it. A 2.5% dividend turned into an elite 8.4% payout. At a discount to boot. <em>Contrarian income fugayzi<\/em>.<\/p>\n<p><em>Brett Owens is chief investment strategist for <\/em><em data-ga-track=\"ExternalLink:https:\/\/contrarianoutlook.com\/free-monthly-dividend-report-offers\/forbessig?source=MNTHLYFSIGCOREG=&amp;utm_source=forbes&amp;utm_medium=cpc&amp;utm_campaign=signature\">Contrarian Outlook<\/em><em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n<p><em>Disclosure: none<\/em><\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/brettowens\/2023\/06\/22\/this-elite-84-dividend-is-a-best-buy-for-a-fed-pause\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Let\u2019s talk about legitimate financial engineering today. An easy, real and (honestly) no-brainer move to boost a timid 2.5% yield into an 8.4% dividend. Just type this ticker, not that ticker, and we\u2019ve got it. An 8.4% dividend. Pay up, Wall Street\u2014and give us a 5% discount to boot! The Wolf of Wall Street would [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":26000,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-25999","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>This Elite 8.4% Dividend Is A &#039;Best Buy&#039; For A Fed Pause | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Let\u2019s talk about legitimate financial engineering today. 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