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With the Magnificent Seven and tech stocks on the wane in recent months, many people wonder where they can put their money and still earn big returns. Is it time to return to some of the tried and true market winners?
That's the stance of Savita Subramanian, Global Research Head of U.S. Equity & Quantitative Strategy, who believes that tech is very loved but crowded. In an interview with Bloomberg, she pointed out that sometimes there's nothing wrong with choosing a boring investment. “I think you want to be in safe dividends. And I know this is the most boring call of all time but sometimes boring is good,” she said.
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One reason she sees the move toward dividend stocks is that more people are on fixed incomes and need the steady yields that dividend stocks provide. As interest rates drop, many places, such as money market accounts, where retirees are getting reliable yields, may no longer provide that. “Inflation remains high and retirees need real yield,” she added, “and where we see that is in utilities, financials and real estate in the S&P 500.”
Subramanian noted that while these areas may not seem safe, she believes they are of higher quality than they have been in a long time. This is despite past turmoil in the banking sector and the current problems facing real estate, with some commercial real estate loans in distress. In her opinion, most investors looking for fixed income will steer clear of small-cap stocks because they are too risky.
What makes real estate a place to look right now? One reason is that these companies will have access to capital at lower rates than they have had in the past several years, which could spur acquisitions and new developments. She sees that one unintended consequence of lower rates could be lower housing prices, partly because there has been a low pace of sales. She mentioned the lock-in effect that has kept many people in their homes, stalling out the real estate market.
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There's a tendency to treat each cycle as similar to the ones before it, but Subramanian cautioned that we could be in the opposite of the typical easing pattern. Whether we get a soft landing or not, a flight to safety may not be a bad idea.
Subramanian didn't call out specific stocks, but many fit the category of boring and consistent. One high-yield and relatively safe stock popular with retirees and other dividend chasers is Realty Income (NYSE:O). This real estate investment trust is mostly invested in triple-net lease properties with tenants like Dollar General, Walgreens and Dollar Tree. It has a dividend yield of 5.03% and pays out monthly. Its long track record of steady dividend increases has earned it the Dividend Aristocrat designation.
No matter what the market does next, safety can't really be a bad thing. Reliable stocks that don't cut their dividends and are in recession-resistant businesses may be the perfect fit for retiree portfolios as the market shifts.
Better Yields Than Some REITs?
The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through publicly-traded REITs.
Arrived Homes, the Jeff Bezos-backed investment platform has launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. It paid 8.1% in July. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
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This article Retirees Need Real Yield – BofA Analyst Says It's Time To Load Up On These Stocks originally appeared on Benzinga.com