Sweet words from Fed Chairman Jerome Powell assuring us that interest rates wouldn’t be rising much this year, along with assurances from Donald Trump and others that the U.S. and China could avoid a trade war sparked the market's latest upturn, observes income expert Harry Domash, editor of Dividend Detective.
Trees still don’t grow to the sky. This hot market has to cool off. How frosty it gets and when that happens is anybody’s guess. So keep your powder dry. Don’t add cash to the market that you’re going to need back anytime soon.
We’re recommending one new pick in our portfolio of real estate investment trusts. We’re adding New Residential Investment (NRZ), technically a Mortgage REIT, to the portfolio. New Residential derives most of its income from investments related to mortgage servicing rights (MSRs).
Unlike mortgages, the MSR values wouldn’t necessarily decline if prevailing interest rates rise. Besides for MSRs, New Residential also invests in both current and delinquent residential mortgages, and in consumer loans.
New Residential has returned 12.4% over the past 12-months, and averaged 10.3% and 12.9% annually over the past three and five years. The REIT is paying dividends equating to an 11.8% yield. We expect most returns to be from the steady dividend rather than from share price appreciation.
In our "high tech, high dividends" portfolio, we’re adding a new pick with a stronger outlook and and a 4% yield, which is high for a tech stock.
Broadcom (AVGO) makes digital and analog semiconductor chips used in wired and wireless communications and data storage applications. A fast grower, October quarter earnings rose 27% vs. year-ago on 18% higher revenues.
For 2019, analysts are forecasting 10% EPS growth on 17% higher revenues. Currently paying a 4.0% yield, the highest in this portfolio, Broadcom likes raising dividends. In December, it announced a 51% payout hike to $2.65 per share. That was on top of a 72% raise in December 2017.
In Business Development Companies, we’re adding a business development company (BDC) strong prospects and a high dividend.
Hercules Capital (HTGC) offers senior secured venture growth loans to high-growth, innovative venture capital-backed companies in a broad variety of technology, life sciences and sustainable and renewable technology industries. Hercules pays quarterly dividends equating to a 9.4% yield.
