Looking For Solid Dividend Payers? What Should We Expect In 2019?

When the Fed bailed out the banks at the expense of seniors and savers, interest rates tanked while investors sought out solid dividend-paying stocks.

Interest rates are now rising, and the Fed remains hell-bent with continuing their aggressive monetary policies. Many pundits predict the market is due for a major correction. With a new Congress, there is much uncertainty on the horizon for 2019.

I contacted Tim Plaehn, a member of our panel of experts, to get his insights.

Tim is a terrific analyst. He’s in the trenches every day looking for opportunities and is very close with his readers.

DENNIS: Tim, let’s get right to it.

With the recent tax cuts, many companies are using the windfall to not only pay dividends but also buy back their stock – hoping to drive stock prices higher – as opposed to investing in their company to generate additional profits. I’d imagine that presents a real challenge for true dividend hunters.

How are you sorting through these issues to find good opportunities for your subscribers?

TIM: I am not against stock buy-backs when they make sense for the long-term health of dividend payments and dividend growth. In the high-yield stock universe, I follow several companies where management believes the share price is undervalued and using free cash to buy shares enhances the future value for shareholders. Reducing the outstanding share count mathematically increases the free cash flow per share and improves dividend stability.

I would not be a fan of any company that borrows money to buy back shares. That’s taking on a long-term debt, for a short-term benefit. Bad business in my book.

DENNIS: With the Fed hell-bent on raising rates, some of the Real Estate Investment Trusts (REIT) and Master Limited Partnerships (MLP) might be affected as they are highly leveraged. Can you tell our readers how you decide which to buy, sell or hold? My guess is that takes a lot of heavy research.

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