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3 Highest Yield Dividend Stocks that are Safe from a Crash | Stock Investing - YouTube
Channel: Let's Talk Money! with Joseph Hogue, CFA
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The market just had its worst week of the
year, falling every day last week.
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Does that mean a stock market crash is coming
and what can you do to protect your money?
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In this video, I鈥檓 revealing three of the
highest dividend paying stocks that will not
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only protect your money but KEEP GROWING YOUR
PORTFOLIO.
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I鈥檝e also got an update on our 2019 dividend
stocks challenge and the 11 stocks that are
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doubling the market return.
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We鈥檙e talking dividend stocks for safety
today on Let鈥檚 Talk Money.
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Best debt.
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Make money.
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Make your money work for you.
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Creating the financial future you deserve.
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Let's Talk Money.
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Joseph Hogue with the Let鈥檚 Talk Money channel
here on YouTube.
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I want to send a special shout out to everyone
in the community, thank you for taking a little
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of your time to be here today.
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If you鈥檙e not part of the community yet,
just click that little red subscribe button.
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It鈥檚 free and you鈥檒l never miss an episode.
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Well, I hoped you enjoyed the big bounce because
it looks like stock market volatility is back.
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The S&P 500 was down every day last week for
it鈥檚 worst of the year and in fact, the
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worst week since the mid-December crash.
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We鈥檒l talk about some of the reasons and
how you can invest to not only protect your
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money but grow it in this video.
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I鈥檓 combining this video with our March
review of our 2019 stock market challenge
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of dividend stocks.
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Our stock dividends portfolio is down a little
since the February update but not by much
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and we鈥檙e still at about twice the return
of the market.
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I鈥檒l review the portfolio and a few of the
picks then I鈥檓 going to reveal three high-paying
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dividend stocks that I鈥檝e been looking at
for safety and cash flow as the market moves
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against us.
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I鈥檓 putting this video into our 2019 Stock
Market Challenge playlist so if you haven鈥檛
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seen the other two updates, check those out.
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Along with some of the biggest investing channels
here on YouTube, I created a $1,000 portfolio
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in January and will be tracking it all year
long.
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To track my portfolio of dividend stocks,
I鈥檓 investing $1000 on M1 Finance, a no-fee
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platform that lets you pick your stocks and
automatically invests any new deposits across
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your group.
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Unlike some of the other investing apps, M1
doesn鈥檛 charge a monthly management fee
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which is why I鈥檓 using it for no-cost investing.
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It also has retirement accounts available,
something Robinhood doesn鈥檛 have so that鈥檚
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important anytime you鈥檙e investing in high
yield stocks paying dividends.
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Here's our 2019 dividend stock portfolio at
17.9% through last week that鈥檚 against the
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stock market return at 8.7% and the Vanguard
Dividend Appreciation ETF at an 8.3% return
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on the year.
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So even on that lower return since mid-February,
it鈥檚 hard to be disappointed when you鈥檙e
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doubling the market return.
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When we look into the 11 dividend paying stocks
in the portfolio, we see that all but two
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are beating the market.
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These two, the iShares European Financials
fund which we talked about last month and
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the Alerian MLP fund which I鈥檒l review in
a bit.
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This ConAgra Brands position we added last
month so that 4.7% return is one-month and
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outperforming the broader market over the
period.
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Let鈥檚 look at why the stock market鈥檚 down
and I鈥檒l review a couple of the stocks in
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our portfolio.
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Then I鈥檒l show you how to pick stocks that
will protect your money and keep growing even
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if the market tumbles further.
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So the message since February has been all
about slowing global growth.
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Europe and China have just revised down their
expectations for growth.
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Europe even went so far as to talk up the
need for more government loans to banks.
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China鈥檚 February export numbers were horrendous,
a 20% drop in one month, which some of that
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was because of their New Year but it was still
bad.
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Here in the U.S. we鈥檝e been seeing signs
of slowing growth and last month鈥檚 jobs
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number was the worst since September 2017,
adding just 20,000 jobs compared to over 300,000
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jobs added in January.
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So investors are spooked and probably rightfully
so.
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I still think any U.S.-China trade deal announcement
will help and there are some other points
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I鈥檒l make in how to pick those safety dividend
stocks after we review two stocks from the
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portfolio.
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Before we look at those two stocks though,
remember this 2019 stock market challenge
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is a back-and-forth.
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I鈥檓 doing this to start that conversation
with all of you in the community so be sure
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to use that comment section below the video.
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I want to know, what questions you have about
investing, what scares you just a little and
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how do you plan on reaching your own investing
goals.
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Back to our portfolio, let鈥檚 look at the
Alerian MLP fund, ticker AMLP, because even
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though it鈥檚 one of the laggards in our portfolio
with a 5.6% return, this is probably my favorite
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pick going forward and the best opportunity
for those of you just getting into our dividend
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stocks.
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Now this fund holds 23 companies in the energy
pipeline and storage space, everything you
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see in this midstream section of the graph.
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These are special types of companies that
avoid paying taxes if they pay out most of
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their profits to investors.
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This is why the fund pays that hot 8.25% dividend
yield and the outlook is excellent for the
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group.
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Oil and gas production is hitting record highs
in the U.S., now the world鈥檚 top oil producer
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and I was reading a report last week that
estimated Permian shale production in Texas
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could jump four-fold over the next five years.
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That means constant demand for these pipelines
and storage.
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Since 2014, management at the MLPs have focused
on productivity and costs against those weak
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oil prices so they鈥檙e moving more for less.
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The CEO of Chevron said on Bloomberg last
week that its new break even price for oil
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is closer to $30 a barrel versus fifty or
sixty dollars just a few years ago.
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But the biggest reason though for holding
this energy fund is some research I鈥檝e done
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on the return versus interest rates.
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So what we鈥檙e looking at here is the yield
spread or the dividend return of the AMLP
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minus the rate on the ten-year U.S. treasury
bond.
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That鈥檚 the blue bars.
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That red line is the forward return, the return
over the next year when that difference between
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the AMLP dividend and treasuries when the
difference is at certain points.
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So for example, right now the AMLP pays a
dividend yield of 8.25% while the ten-year
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treasury is just 2.6%.
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That鈥檚 a difference of 5.65%.
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We look along the bottom here for 565 and
see that when the difference has been so high,
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on 20 years of data, that the AMLP has produced
a return around 40% over the next year.
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There鈥檚 a lot that goes into that chart
and a lot of other factors that might drive
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that return higher or lower but I can tell
you that the odds are very good for this investment.
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I want to look at one more dividend name in
our portfolio before revealing how to find
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safety stocks and the three highest paying
dividend stocks I鈥檝e been watching.
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Here we鈥檒l look at Olin Corporation, ticker
OLN, and even though it鈥檚 up almost 16%
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this year I still think it has room to run.
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The chemicals manufacturer blew away earnings
estimates last quarter by almost 20% and I鈥檓
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estimating at least a 6% increase in earnings
over the next year.
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That would put the shares at about 12-times
earnings and way under the industry average.
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I鈥檓 looking at a price target over $26 a
share on top of the 3% plus dividend yield.
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AND if we get any kind of news that the company
is spinning off or selling it鈥檚 firearms
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division, we could get the pop I鈥檝e been
expecting.
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Overall I鈥檓 happy with our dividend income
portfolio.
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We鈥檝e seen some solid returns and it hasn鈥檛
dropped as hard as the market.
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Make sure you check out those earlier videos
in our 2019 challenge and watch for that April
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update.
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So I鈥檝e been looking at a few high-yield
dividend stocks as safety plays that I might
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add to the portfolio and it seemed like perfect
timing for our review.
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With that poor jobs number and slowing global
growth, the Federal Reserve has been stepping
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all over itself lately to talk down the idea
of higher interest rates this year.
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Chair Powell has even said that they鈥檇 be
willing to let inflation overshoot the 2%
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target for quite a while so I think the odds
of any rate hikes are pretty much nil at this
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point.
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That means that some of those traditional
safety sectors like utilities, real estate
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and consumer staples could outperform as an
income alternatives to bonds.
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The idea here is that higher dividend yields
in these sectors pull investors out of bonds
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and the businesses in the sectors are less
exposed to the economy.
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We鈥檒l look in all three of these sectors
but I鈥檇 recommend staying mostly in utilities
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and consumer staples.
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That real estate sector, especially the office
and industrial space, will be more volatile
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around the economy and business spending.
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First here I鈥檓 going to look for stocks
in these sectors and some of those factors
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we talked about in the first video, the quantitative
screen I use to pick stocks.
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Here we鈥檝e got some basic fundamentals like
increasing revenue and cash flow as well as
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lower debt compared to peers.
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From this quick screen, I鈥檒l filter out
for stocks paying a 3% dividend yield or more.
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The broader market pays around 1.8% so we鈥檙e
looking for companies that have made that
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commitment to returning shareholder cash.
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Finally, I鈥檒l apply some of that qualitative
analysis like looking for a competitive advantage
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and a payout ratio that leaves room for growth.
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What we get is a list of three stocks with
some great fundamentals, solid dividend yields
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and the potential for growth even as the market
stumbles.
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First let鈥檚 look at Dominion Energy, ticker
D and a $60 billion energy company that shifted
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from exploration to a more utility and pipeline
focus in 2017.
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This is giving it stronger cash flows and
supporting that four and a half percent dividend.
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Now the big question mark around Dominion
has been it鈥檚 Atlantic Coast Pipeline project
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but management guided to some good news in
the 2018 investor day and expects construction
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to restart this year which would relieve a
big overhang on the shares.
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Next is Kimberly-Clark, ticker KMB, a $40
billion leader in household products including
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the Huggies, Kotex and Kleenex brands.
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Now you don鈥檛 get much more stability in
a stock than diaper sales, OK.
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You鈥檙e either a Huggies family or a Pampers
family and Kimberly Clark controls a third
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of the baby diaper market AND more than half
the adult diapers market鈥 guess we鈥檙e
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supposed to call it the adult undergarments
market.
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Now the entire personal care and household
segment struggled last year against cost inflation
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and sluggish sales but Kimberly Clark managed
to report positive sales growth.
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An efficiency program resulted in $510 million
in profit savings and management expects profitability
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improvement this year.
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The company plans on increasing the dividend
3% and buying back up to $900 million in shares
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which will make the ninth consecutive year
it鈥檚 returned $2 billion or more to investors.
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Now I know I said to focus on utilities and
consumer staples but I also wanted to point
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out Digital Realty Trust, ticker DLR, as a
high-paying dividend REIT that you want to
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watch.
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This $23 billion owner of data centers pays
a 3.8% dividend yield and is in a great space
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if you鈥檙e looking at internet growth and
data traffic.
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The data center segment of real estate investment
trusts is growing at a 12% annual clip, well
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above the other real estate segments we see
here, yet is priced at just 1.4-times its
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funds from operations.
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That鈥檚 less than half the price multiple
we see in the other property markets.
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I think 5G is really going to unlock something
in data centers because it鈥檚 promising those
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ultra-fast speeds but that means you鈥檙e
going to need more local and regional data
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centers rather than the spacing we see in
the industry now.
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That鈥檚 going to mean an opportunity for
Digital Realty and should mean solid returns
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for investors.
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I鈥檓 linking directly below the video to
those first two videos detailing how I set
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up our dividend income portfolio and how you
can set up your own challenge.
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I鈥檒l also leave a link to M1 Finance, the
no-cost investment platform I鈥檓 using for
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the challenge that鈥檚 going to save you all
those fees whenever you rebalance.
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We鈥檙e here Mondays, Wednesdays and Fridays
with the best videos on beating debt, making
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more money and making your money work for
you.
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If you鈥檝e got a question about money, just
subscribe to the channel and ask it in the
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comments and we鈥檒l answer it in a video.
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