If I were a Federal Reserve employee — and I No We are currently investigating a rough February 2020 transaction. I want to “back up the truck” with a major tapered tarm dividend stock.
These obvious payout plays have already skyrocketed by more than 56% year-to-date.However There is still more Their interests are artificially curtailed by the Fed. (Yes, you are reading that right. The Fed’s flood of money Boosting Everything except these delays. At this point. ) If this constraint is lifted or relaxed a bit, profits will skyrocket.
Today, the Fed buys $ 80 billion in government bonds each month. Yes, Chairman Jay Powell wants to kick this addiction, but so far he can only “think about it.”
Ultimately, he tries to reduce this bad habit. This opens the door for us amateurs to benefit.
Treasury yields are based on supply and demand. Supply (bond issuance) is huge, but so is demand, with the Fed intervening for $ 80 billion a month. If this large buyer cuts, the yield on 10-year bonds will rise, which could attract other buyers.
This is already happening. When chatting in early 2021, the 10-year bond was paid only 1%. Since then, it has skyrocketed to 1.6%. This may not sound very good, 60% increase..
As the 10-year yield goes up, so does the profit of the bank. For this reason, my favorite dividend idea for 2021 was a small bank. They benefit directly from higher rates as their loan profits skyrocket.
Value-oriented investors (scream to the few remaining!) May be worried that profits like these are great but unlikely to be repeated.On the contrary, there are two compelling reasons why there may still be small bank stocks paying dividends. Roughly It is underestimated.
First, if the Fed hasn’t bought bonds, 10-year interest rates can trade between 2% and 3%. It has already returned to 1.6% and the taper has not yet begun. In that case, the benchmark rate could challenge more than 2% in 2022.this is another Benefit the bank’s interests.
Second, some bank stocks already have more cash than they know what to do. This may sound strange given that their profits have been artificially depressed, but they say their flash capital ratio is not.
For example, based in Puerto Rico First Ban Corp
The recent 40% dividend increase (no typos!) Has kickstarted winding stocks higher. FBP also bought back (and plans to) 5% of the float because it has enough cash to return to shareholders.
Opportunistic repurchase programs like FBP are a gift to keep giving. With low stocks, everything, including already hot dividends, looks good on a “per share” basis.
CMA still boasts a favorable payout magnet setting. Sure, stock prices were strong in 2021, but payments have only “caught up” now. Almost tripled in the last 5 years!!
Overdue dividend magnets, combined with higher taper-led profits, should quickly spike these stocks.
Brett Owens, Contrarian outlook.. Get his latest special report for free for better income ideas. Your Early Retirement Portfolio: A monthly dividend of 7% will last forever.