The large-cap S&P 500 dropped 2.8%. The tech-laden Nasdaq plunged 3.8%.
These bruising losses came after the government’s employment report showed unemployment was lower than expected.
This fueled speculation that the Fed will worry less about a recession… and keep hiking interest rates to combat inflation.
The S&P 500 is now trading 24% below the all-time high it set in January.
And the Nasdaq is 34% off its all-time high last November.
It’s hard not to have your stomach in knots when stocks are plunging like this.
But as you’ll see today, it doesn’t have to be that way. It’s possible to feel secure about your portfolio… and lock in dependable profit streams.
That’s because the bear market in stocks has created a bull market in income.
The Daily Cut is the big ideas e-letter we created for you and your fellow Legacy readers.
It’s the publisher of Teeka Tiwari, Jeff Brown, and Nomi Prins.
It’s thanks to Teeka that in April 2016, we became the first major financial publishing firm to recommend cryptocurrencies to our readers.
(Bitcoin was selling for $428. Ethereum was selling for $11. Today, they’re 4,400% and 11,000% higher, respectively.)
We were also early on the tech boom that’s dominated the headlines the past few years.
In 2015, we brought on former Silicon Valley insider Jeff Brown to spearhead research in the world’s most transformative – and profitable – tech trends.
That’s why longtime readers have read so much in these pages about the electric vehicle revolution… the rollout of 5G… and the god-like powers of CRISPR gene editing.
These are all market megatrends – era-defining shifts that are global in scale and affect nearly every aspect of the economy and society.
We still see life-changing profits coming in these sectors over the next decade and beyond. But we also recognize an important near-term reality.
Bitcoin is down 71% since it’s high last November. And the Nasdaq, as I mentioned above, is down 34%.
This year calls for a different strategy – one that doesn’t rely solely on stocks going up.
That’s why you’ve been hearing so much from me lately about building reliable streams of dividend income.
There are two ways to profit in the stock market…
First, if the price of a stock you own goes up. That’s your capital gain.
Second, you can earn income in the form of dividends. These are regular payments companies make to shareholders out of their earnings.
And many of these dividend payments are rock solid.
At last count, 65 stocks in the S&P 500 count as Dividend Aristocrats. These are stocks that have increased their dividend payments every year for the past 25 years.
And more than 40 stocks qualified as Dividend Kings. They’ve upped their dividend payments every year for 50 years.
The message is clear…
If you invest in dividend aristocrats and kings, you can collect your dividend income checks through every kind of market – from high-flying bull markets to gut-wrenching downturns.
For more on that, we turn back to friend of Legacy Brad Thomas.
If you tuned in last week, you’ll know that Brad started out as a real estate developer. At the height of his career, he was collecting up to 100 rental income checks every month.
But in 2008, he lost it all… and had to start building back his wealth from scratch.
To do that, he began building reliable streams of income… but this time in the stock market.
Brad didn’t just buy any old dividend-paying stocks. He focused on ones that met two important standards.
First, he looked for companies with strong fundamentals and growth.
This not only supports a rising stock price. It also lets a company pay regular dividends to its shareholders.
Second, he looked at companies that consistently raise their dividends, year after year.
The tech giant is among the largest dividend payers in the U.S. It rewards its shareholders with $18 billion in cash a year.
And last month, it raised its quarterly dividend by 10% to 68 cents a share.
More important, Microsoft (MSFT) measures up against Brad’s two yardsticks of strong growth and a consistent record of raising dividends.
As he wrote in the inaugural issue of his new research advisory, Intelligent Income Investor…
Microsoft used to be a boring “old tech” play. But its CEO, Satya Nadella, has morphed the stodgy hardware-focused firm into software-as-a-service leader. This has made Microsoft one of the biggest beneficiaries of the roughly $500 billion a year cloud-computing market.
Microsoft is also a leader in business software solutions, with its Microsoft Office suite of products… in social media, with LinkedIn… and in gaming, with the Xbox.
It’s also positioning itself to be a leader in the metaverse. This is a long-term growth opportunity with a total addressable market large enough to move the company’s $1.8 trillion market cap.
On top of that, Microsoft has raised its dividend, every year, for the past 21 years. That’s not quite Dividend Aristocrat levels. But it’s close enough.
A dividend yield measures how much income a stock pays relative to its share price.
At the start of the year, Microsoft shares traded for $310. You got a 0.8% yield at the price.
Today, they trade for $232… for a yield of 1.17%.
That’s 46% more yield than you’d have gotten at the start of the bear market.
That’s what makes bear markets ideal for building reliable streams of income. They put the world’s best dividend-paying stocks on sale. And because the price is so low, you get more income for less money.
When bear markets strike… as they regularly do… you need to keep a cool head. Don’t panic.
Your job is to buy great assets trading at bargain prices and hold for the long term.
Microsoft fits the bill. As Brad has been showing his readers, its fundamentals are solid… and it has a clear path for growth.
It’s also shown a commitment to rewarding shareholders with steadily rising income payments.
And it’s just one of the more than two dozen dividend payers Brad recommended in model portfolio at Intelligent Income Investor.
If you already took Brad up on his offer to subscribe and get access to these recommendations, you can view the entire model portfolio here.
If you’re not already a subscriber, you can find out more about accessing those recommendations here.
Regards,
Chris Lowe
Editor, The Daily Cut