{"id":32993,"date":"2023-07-08T07:14:14","date_gmt":"2023-07-08T11:14:14","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/ignore-the-recession-hype-buy-these-6-dividends-now\/"},"modified":"2023-07-08T07:14:16","modified_gmt":"2023-07-08T11:14:16","slug":"ignore-the-recession-hype-buy-these-6-dividends-now","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=32993","title":{"rendered":"Ignore The Recession Hype. Buy These 6%+ Dividends Now"},"content":{"rendered":"
\n

Here\u2019s some great news as we head into the summer market doldrums: we\u2019ve got a terrific<\/em> setup to buy, with stocks rallying, economic data strong\u2014and the S&P 500 (and many high-yielding closed end funds) still cheap.<\/p>\n

These bargains exist because of the media\u2019s constant bleating about a recession. But that, of course, has been completely wrong<\/em>\u2014and I expect it will continue to be.<\/p>\n

The key takeaway is that our buying opportunity in CEFs is as strong as it\u2019s been since this rally started in January\u2014which is why five of the six CEFs in the equity section of our CEF Insider<\/em> portfolio, which boasts an 8.8% average yield as I write this, are buys.<\/p>\n

Let\u2019s talk about the economic data because it, of course, has a direct bearing on our summer buying opportunity, particularly for equity CEFs, like the 6.5%-paying Adams Diversified Equity Fund (ADX),<\/strong> which we\u2019ll break down below.<\/p>\n

Latest Data Proves the Recession Narrative Wrong (Again)<\/h2>\n

In May, durable goods orders rose 1.7% and new home sales soared 12.2%. Consumer confidence rose to 109.7 in June, the highest point in over a year. Those are just three data points Bloomberg pointed to in a recent article headlined: \u201cSurprise, Doomsayers! You\u2019re not in a Recession.\u201d But they\u2019re far from the best or most important facts.<\/p>\n

<\/fbs-ad><\/p>\n

GDP growth on a year-over-year basis accelerated last quarter. This is an important metric because we are comparing to 2022 and, for the first time, it\u2019s clear that the brief weakening of growth in the middle of last year was the result of a COVID-19 hangover\u2014the world was adjusting to a post-pandemic reality.<\/p>\n

There\u2019s more data to delight investors: home prices and sales have beaten expectations, showing that Americans can withstand high interest rates and still buy homes. Durable goods, which tend to be more expensive, and discretionary purchases grew in May, while economists expected them to decline. This again shows that Americans can spend more than they need to, and they\u2019re happy to do so.<\/p>\n

Yahoo! Finance, echoing Bloomberg, reported on this with the headline: \u201cStrong Economic Data Turns Recession Fears Into Recession Doubts\u201d (not to be confused with the \u201cThe US Economy Is a Lot Stronger Than Wall Street Thought\u201d article that ran shortly after this one. I\u2019m happy to see them join the bandwagon\u2014it was over a year ago that I insisted the so-called recession hysteria was just that: hysteria. The data said that no such thing was in the cards.<\/p>\n

But maybe it\u2019s a little late? Sure, a recession will happen eventually, but there\u2019s no indication it\u2019s coming anytime soon. Last-quarter growth was revised sharply to 2% last week, prompting economists to upgrade their expectations for US GDP in 2023\u2014so much so that they\u2019ve now given up on expecting any economic decline at all.<\/p>\n

S&P 500 Shakes Off Last Year<\/h2>\n

That brings us to a big question, though: contrarian dividend investors that we are, should we hold off on purchases\u2014or even pare back our holdings\u2014as the recession narrative fades? The short answer is no. And again the data tells us why.<\/p>\n

Here you can see that the S&P 500\u2019s P\/E ratio, at 22.2, is now back to where it was throughout the 2010s, after the spike caused by the pandemic. That\u2019s a sign that stocks aren\u2019t in a bubble, and they have much more upside from here.<\/p>\n

Equity CEFs Are Smart Buys\u2014Including This 6.5% Payer<\/h2>\n

This is a great environment for equity CEFs like the Adams Diversified Equity Fund (ADX),<\/strong> which sticks with the tried-and-true, including blue chips like Apple (AAPL), UnitedHealth Group (UNH), Visa (V)<\/strong> and JPMorgan Chase & Co. (JPM).<\/strong><\/p>\n

That, along with the fund\u2019s 6.5% trailing-12-month yield, are why we prefer it to index investing for blue-chip exposure. Plus ADX has outrun the S&P 500 in the last decade!<\/p>\n

Bear in mind that this chart shows total returns, including dividends. And we\u2019ll happily take more of our gain in cash, as opposed to the \u201cpaper gains\u201d index investors get, due to the S&P 500\u2019s low 1.6% yield. Note also that ADX pays most of its dividend as a year-end special payout that fluctuates with net asset value (NAV), so it\u2019s essentially converting paper gains to payouts for us.<\/p>\n

The fund\u2019s 15% discount to NAV is persistent, as investors don\u2019t love ADX\u2019s floating dividend, but that\u2019s fine by us. The performance is there, and we can look forward to more NAV\u2014and by extension market-price\u2014gains.<\/p>\n

Michael Foster is the Lead Research Analyst for <\/em>Contrarian Outlook<\/em>. For more great income ideas, click here for our latest report \u201c<\/em>Indestructible Income: 5 Bargain Funds with Steady 10.4% Dividends.<\/em>\u201d<\/em><\/p>\n

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Here\u2019s some great news as we head into the summer market doldrums: we\u2019ve got a terrific setup to buy, with stocks rallying, economic data strong\u2014and the S&P 500 (and many high-yielding closed end funds) still cheap. These bargains exist because of the media\u2019s constant bleating about a recession. But that, of course, has been completely […]<\/p>\n","protected":false},"author":1,"featured_media":32994,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-32993","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"\nIgnore The Recession Hype. 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