Does Yield Go On Sale Here

I've noticed over the last two sessions and especially today that income producing stocks are giving up a bit as the rally progresses.  Bonds are also weaker.   ANGC, NLY, GIS, MCD, PCG all are cheaper today.  Could be an interesting aspect of this rally if it goes on to pick up some yield producing stocks at improved prices.  What are your target yielders?

NLY has fairly low IV, so I picked up some calls expiring around their next two xdates.  We'll see.

MP, let’s step back for a minute. All things being equal, one would rather have a capital gain in a taxable account instead of a dividend, just because you need not pay the tax for the capital gain until you have sold, as opposed to paying it in the year that it is received. It is for this reason (alone) that all during the 80’s-90’s, the high tech stocks got away without paying a dividend. Now that the market has ‘cooled’ for the last 12 years, everybody wants their dividend (“show me the money”). I am starting to get fearful that we might be coming to the end of this phase, because as we all know, once everybody jumps on the bandwagon, it proceeds to drive straight over the cliff. 

So here’s my take. Scanning for the highest yielding…..is a prescription for failure. To receive a 7-8% dividend and take a 20% haircut on the stock price, is no deal at all. It is imperative to first find an industry that you think can do well over time, and then find a company that is doing well compared to that industry. Then there is one more thing. Pick a stock with a track record. Most higher yielding stocks have a fairly cyclical pattern. Buying in when they are on the low side, selling as they reach toward the top of the pattern, is a safer if more boring way of investing. But it is the height of the summer heat, and I can take sitting here with a cool drink, being bored out of my skull (if only the little lady would stop complaining about being bored out of her mind.) 

If the economy is waiting for me to go shopping in order to stimulate the recovery, sell all retail stocks, NOW!!!!!! 

spshapiro said:

So here’s my take. Scanning for the highest yielding…..is a prescription for failure. 

 As always, your advice is wise.  My point here is not to look for high yield.  It seems to me that for those who want to have an opportunity to buy yield, it could be going on sale here.  It's likely to cost more later in the year if and when the rally stalls and reverses.

Secondarily, for those looking for a market tell, even today yield outside of energy and basic materials is getting cheaper.  That combined with the strength in energy and basic materials suggests to me the broader market has more to run in this particular rally.

Beyond this rally, my point ends.

I like TIRTZ, a thinly traded oil trust.  Best part is depletion deductions, so as you collect royalties you write off your investment and get capital gain treatment when you sell.  I'll assume some semblance of sanity prevails in D.C. and capital gains continue to get the lower rates they deserve.  Also I was in ARCC until recently.

Calculator said:

I have to disagree there, on both points. Sanity prevails in DC? HAHAHA HA!

Capital gains deserve lower rates? How can it be fair if I go and work my fingers to the bone ........

...... Anyone, please tell me how that is fair and not going to lead to the destruction of our system?

 Reagan made the same point, he apposed a reduced cap gains tax and wanted it taxed as income.

I find it interesting that Reagan's name is now used as the reason to keep it reduced.

Calculator said:

Patches O'Houlihan said:  I'll assume some semblance of sanity prevails in D.C. and capital gains continue to get the lower rates they deserve. 

 
I have to disagree there, on both points. Sanity prevails in DC? HAHAHA HA!

Capital gains deserve lower rates? How can it be fair if I go and work my fingers to the bone for $ my Govomints take 40-50% (28%fed, 4% state, SS, med, Tax on the gas to drive to work, tax to register the car, toll on the road to get there, ect..)
the money I make sitting at home by doing nothing more than pressing a few buttons is taxed at 15%

Please Patches or Anyone, please tell me how that is fair and not going to lead to the destruction of our system?

First off, I wish you good luck finding your "fair" utopia.  I'll bet a million bucks your ticker gives out before you find it.  Second, what you call "pushing a few buttons" is actually a lot more than that, it's risky, and markets allocate capital to its most efficient uses.  If it was simply "pushing a few buttons" this forum wouldn't have people asking for advice and waxing poetic about their losses.  Third, investment capital has already been taxed at ordinary income rates.  So the whole "Buffett pays a lower rate than his secretary" is political hot air bullshit.  It's the old apples to oranges comparison.  But I get it, the goal is to win an election and if enough people choose ignorance and buy the bullshit. it pays off.

But OK, enough of that, let's do it your way.  Tax capital gains at 40% or whatever you deem the "fair" rate to be.  Maybe shoot for the moon and go all Euro on us and say 70%.  Just be careful what you wish for, and always be thinking about the next "solution" that involves government taking another man's property to give to you.

P.S. - There's a lot of empirical evidence on the effect of higher rates, if you'd like when I get some free time I'll try to find some for you.  If you're going to parrot your tag team partner Incubus and go all "blah blah" on me, call me a Neo-Nazi, etc., I won't bother.

Calculator said: Wow, just wow.
Patches, please calm down.
Who said anything about utopia or looking for it? ....

incubus said:

Calculator said: Wow, just wow.
Patches, please calm down.
Who said anything about utopia or looking for it? ....

Not bad, incubus, a pretty good parroting of your "bribed control" fetish.