Lately, the daily parade of headlines in my email inbox is dominated by a single gloomy sentiment — that the world as we know it is coming to an end.
What’s an ordinary investor supposed to do?
Well, for one thing, you can breathe easily. The world will most likely change … but it’s not going to end.
No matter what, there will still be an economy with businesses, consumers and stock markets.
If your approach to investment is speculative — buying stocks in the hope that their prices will increase and you can sell them for profit — then there are plenty of bargains to be had.
But if your goal is to earn income that can grow your wealth and improve your life, there is another option.
It’s an approach that’s made my Endless Income book a bestseller. It’s also helped the Endless Income portion of my Bauman Letter portfolio outperform the markets during tough times.
And today, I’ll give you a free sample.
2022 Is the Year to Be an Investor (NOT a Speculator)
My colleague Charles Mizrahi likes to say that he doesn’t invest in squiggly lines on a chart. He invests in companies.
His point is that buying a stock solely as a bet on future movements in its price isn’t investing. It’s speculation.
Charles has been in the business for decades, starting out as a floor trader on the New York Stock Exchange. According to him, the only speculators who die rich are the ones who die during a lucky patch.
Everybody else who dies rich bought shares in companies that profitably produce things people want and are willing to pay for.
Now, it’s true that under the circumstances a lot of those companies are suffering.
The last few months’ downturn has hurt almost every sector of the economy.
It’s clear now, due to rising interest rates and credit risk, some of the hottest companies of the last few years won’t survive in the long term.
Others will, thanks to low debt, strong management and perennial consumer demand.
Among that group of companies, there are some that are going to continue doing something right throughout this crisis that defines who they are — pay dividends.
Old World Companies That Pay
Lately, all you hear about is how fancy new-world technology companies will leave old-world companies in the dust.
That’s true in many cases. But just because a company has been around for a long time doesn’t mean it’s destined for extinction.
Some of the most profitable and financially sound companies in the United States have been around for a century or more. That includes Wall Street banks, consumer goods conglomerates and energy giants.
These companies don’t usually see explosive share price growth. They aren’t growth companies, after all. Their share prices increase as they become more efficient and grow their market share.
That process takes time. In the meantime, these companies traditionally attract investors by paying them a share of their profits in the form of dividends.
Of course, 2022’s market has been particularly ruthless. So even these safe and solid companies have taken something of a beating. But because they have maintained their dividends at historical levels, their current yields are outstanding.
Companies that have historically paid out around 5% have recently yielded over 10% against projected future earnings.
Buying companies like that right now means that you’ll double your income per dollar invested — not just today, but for as long as you hold on to them.
As they increase their dividends — as they surely will in years to come — your yield on cost will grow.
And the John Hancock Preferred Income Fund (NYSE: HPI) is a great way to position yourself for those future income streams.
HPI is a closed-end mutual fund. It trades on the stock exchange like a company or an exchange-traded fund. Its holdings are concentrated in U.S. utilities and financial stocks. Both are well positioned to weather the current storm.
Today, HPI’s forward dividend yield is 8.45%. That’s almost 30% higher than it was just six months ago.
So if speculation isn’t your game — if you’d prefer a bird in hand to two in the bush — consider investing in HPI now to lock in safe, long-term income!