Investment Trust Dividends

Category: Uncategorized (Page 19 of 293)

Dow Jones

Should You Buy the 3 Highest-Paying Dividend Stocks in the Dow Jones?

James Brumley, The Motley Fool

Wed, August 6, 2025

Key Points

  • A handful of the 30 stocks that make up the Dow Jones have lagged, inflating their dividend yields.
  • This poor performance points to the market’s credible concerns about each company’s foreseeable future.
  • Merck, Chevron, and Verizon each need to be considered carefully based on their prospects ahead.

The premise makes enough sense on the surface. Not only does a higher dividend yield mean more income per invested dollar, it may also mean the stock in question is undervalued and ripe for a rebound.

That’s particularly true when you’re talking about the blue chip stocks found within the Dow Jones Industrial Average. There’s even a stock-picking strategy called the “Dogs of the Dow” based on this very idea.

But before plowing into the Dow’s three highest-yielding stocks just because their yields are big, remember that every one of your stock picks should first and foremost be based on the quality of the company in question.

With that as the backdrop, here’s a closer look at the Dow Jones’ three highest-yielding tickers right now. You may end up liking all three of them enough to add them to your portfolio. Or, maybe not.

Why so high?

The highest-paying dividend stocks in the Dow Jones Industrial Average right now are Verizon Communications (NYSE: VZ), Chevron (NYSE: CVX), and Merck (NYSE: MRK), sporting trailing yields of 6.4%, 4.5%, and 4% (respectively). But even if your primary goal is income, these big yields don’t inherently make the stocks worth owning.

Take Verizon as an example. Investors would struggle to find a higher-yielding ticker of this caliber. But the market’s allowed this stock to remain at relatively low levels mostly because investors know there’s little to no growth in store because the mobile phone market is so saturated.

Numbers from Pew Research indicate that 98% of all adults living in the U.S. already own and use a mobile phone. Any growth that’s going to be achieved by Verizon will mostly be driven by U.S. population growth, which has been and remains rather tepid.

Energy giant Chevron’s situation is different although not necessarily better. The world still needs oil and gas, but doesn’t need more and more of it. Goldman Sachs says “peak oil” — the point at which average daily usage starts to decline — is coming in 2035, but it’s only going to grow at a pace of less than 1% per year every year between now and then. Again, investors will want at least a little something more to build on.

As for Merck, a year ago you wouldn’t have been able to plug in at a yield anywhere near its current trailing yield of 4%. Shares have fallen more than 30% since then, starting with weakening sales of its HPV (human papillomavirus) vaccine in China, but more recently due to uncertainty linked to tariffs and the possibility that it will soon be forced to offer better drug prices to Medicare.

These sellers, however, have arguably overshot their target. For perspective, Merck stock’s trailing price-to-earnings ratio is now only a rock-bottom 12 versus the industry’s large-cap average of 22.6 (according to data from StockAnalysis), underscoring the extreme degree of concern that investors have priced in.

To buy, or not to buy?

But the question remains: Are these high-yielding Dow stocks a buy? As a group? No. Individually? It depends.

Rules-based investing certainly has its advantages. Chief among them is the removal of often-misleading emotions and assumptions from the decision-making progress. And purchasing the highest-yielding names from a relatively small universe of stocks is most definitely a rules-based approach to stock-picking.

Except, maybe this particular premise isn’t one you want to blindly embrace. While it’s a solid starting point, as was noted, selecting stocks is still done best on a case-by-case basis to meet specific portfolio needs.

Consider Verizon. With a trailing yield of 6.4% based on a quarterly dividend payment that’s not only been paid like clockwork but raised every year for the past 18 years, it’s one heck of an income investment. Investment-grade bonds aren’t paying as much. Just don’t count on any meaningful capital appreciation.

There’s a reason Verizon shares are currently priced where they were over 25 years ago, and it’s not just the company’s high level of debt.

Chevron shares have fared far better, at least until 2022’s peak. They’ve only drifted lower since then, more or less in step with the continued proliferation of alternative energy sources and the outright explosion of electric vehicle sales.

Notably, crude oil prices have also drifted lower during this stretch despite a couple of major supply disruptions stemming from political tensions in the Middle East. This may be the new norm for the industry that’s likely nearing a peak and subsequent pivot point. In this vein, the United States’ Energy Information Administration believes Brent crude prices are set to fall from an average of $81 per barrel last year to $66 this year to $59 per barrel in 2026.

There’s still plenty of money to be made drilling for oil, to be clear, simply because the world will still need it for years to come. Chevron’s also now upped its dividend for an incredible 38 consecutive years. It’s going to become increasingly challenging for the company to maintain this streak indefinitely, though, given that roughly half of its usual — but now pressured — annual earnings are used to fund its dividend payments.

As for Merck, there’s certainly plenty of value here. There’s also plenty of cause for concern. Even if Medicare’s pricing-pushback efforts don’t end up turning into a serious problem for its bottom line this time around, this political undertow isn’t simply going away.

Middle-aged man sitting down while reading a business newspaper and using a tablet.
Image source: Getty Images.

Just don’t lose perspective on the matter. Pharmaceutical companies have been facing these sorts of legislative and policy headwinds for decades. The industry has survived them just fine.

Merck is no exception, and it’s not apt to become one anytime soon. Its cancer-fighting Keytruda remains a powerful profit center, for instance, accounting for half of its revenue thanks to last quarter’s 9% year-over-year sales growth. And while Keytruda’s patent protection doesn’t start expiring in earnest until 2028, the drugmaker’s got a robust developmental pipeline set to replace much of the revenue that will be lost once Keytruda’s sales start to wane.

There’s always more to the story

The bigger point is, Merck’s got ways of evolving itself as needed. It always has. This discounted price and beefed-up dividend yield is a great buying opportunity. Just be sure you’re committed for the long haul. It will take a while for the market to remember this about the pharma company and reprice the stock appropriately.

The more philosophical takeaway here, of course, is that a high yield alone isn’t enough of a reason to buy a stock even if that stock is a part of the Dow Jones Industrial Average. The underlying business must also be one worth owning, and you must also actually want and need dividend income. Just keep the bigger picture in mind.

Across the pond

The Secret to 10.9% Dividends (Paid Monthly!)

Brett Owens, Chief Investment Strategist
Updated: August 6, 2025

Monthly bills are no problem for careful contrarian readers banking 8.8% yields in monthly divvies. Let’s discuss this rare but excellent dividend breed, the company or fund that pays monthly instead of quarterly.

Only 6% of dividend payers dish monthly. The rest are quarterly or annually, which will likely not be in time to cover your upcoming cell phone bill.

My monthly email from carrier Verizon arrives in a day or two. Another $267.26 will be debited from my account automatically on the 20th of August.

Fortunately, Verizon notes that there is “nothing I need to do” thanks to AutoPay. As if the automatic payment implies it costs any less money!

On the bright side of the phone ledger, we have no landline. The cell bill is it. But don’t fall asleep, bank account. All the other cord cutting exacts its pound of flesh!

For example, we “cut the cable cord” years ago. And replaced it with an equally pricey version, albeit a wireless one!

YouTube TV has a base plan of $82.99. However, my August 29 tab will be $131.95 plus tax.

How’d I manage a 50%+ premium? By demanding sports in 4K (+$9.99/month). And refusing to live a Sunday in the fall without NFL RedZone and its 6+ hours of live look ins across football games (+$10.99/month).

Oh, and the WNBA season ticket that I watch with my daughters during the summer.

Speaking of which, A/C is a must-have here in Sacramento! I paid the power company $187.76 two days ago and that’s a light month for our summers.

But the big one, the mortgage payment, dwarfs all. And oh yes,  automatically deducted from our account on the first of August.

“Just” eleven years to go on the mortgage! We shortened to 15-years when we refi’d in 2021. My “basketball dad” car is paid off (2019 Acura MDX) and, while motivated to drive it “into the ground,” the odds are this car won’t be my last.

So the big monthly payment wheel keeps on spinning. I am sure you can relate to a few of these regular drains in your own life.

For which we have a solution: plug these monthly drains with monthly dividends.

Income Calendar

But you observe, “Brett! You said only 6% pay monthly. How can I find them?”

Glad you asked! Our Contrarian Income Report has a “virtual monopoly” on the sector. We have 18 monthly payers yielding an average 8.8%. Think about that. A million bucks in the CIR monthly payer lineup generates $7,333.33 per month in passive income.

Plus, the original million invested in these “elite 18” stays intact. Or better yet, grinds higher! Since inception 10 years ago, our entire CIR portfolio has generated 10.7% in annual returns. And that’s mostly paid in cash dividends, with the majority dishing monthly.

Our CIR monthly dividend GOAT (greatest of all time) is DoubleLine Income Solutions Fund (DSL). In April 2016, we added DSL to the CIR portfolio at a price of $16.99 per share.

Since then we have collected 111 monthly dividends that have totaled $15.27. That’s 90% of our initial buy price in payouts. It’s almost house money now!

Imagine investing in a simple fund that trades just like any blue-chip stock—and earning your entire investment back within 10 years via monthly dividends. With the regular payout stream still rolling strong!

And DSL is not a mere annuity. It’s way better. DSL is a bond fund run by the “bond god” himself Jeffrey Gundlach. The modern-day deity of fixed-income investing scours the globe to collect deals that power DSL’s monthly 11-cent divvie.

11 Cents on the Month, Every Month

Source: Income Calendar

DSL yields 10.9% today. Investors with $100,000 invested in DSL shares enjoy $10,900 per year in passive dividend income. That’s $908.33 in monthly deposits and—oh!—that’s right: it’s autopay, but to you!

Enough to pay Verizon, YouTube TV and internet while air conditioning the house—with extra cash left over for a nice dinner!

And a $50,000 stake in DSL delivers $454.17 in monthly payouts. That’s still meaningful income to cover those every-30-day expenses.

Now, I wouldn’t pile everything into DSL today, when savvy investors can spread risk among 17 more solid monthly payers that deliver a green cash river too. This is diversification without di-worseification (thank you, Peter Lynch!). We want to retire on dividends, and the best way is to bulletproof our payout streams across asset classes, sectors and national borders.

And that’s our elite 18!

We are not hanging on the Federal Reserve’s next word. Nor are we glued to policymaker decisions. We are insulated from this noise by assembling an elite 8.8% paying portfolio of monthly dividend payers.

If this monthly dividend discussion sparked an “ah ha!” moment for you, well, welcome! Wall Street has been feeding you the equivalent of “junk food” financial advice your entire life.

The 4% withdrawal rule? C’mon man.

None of the vanilla maxims generate passive income. Annually, monthly or quarterly!

It’s time to clean up the financial diet. Trim down the “buy and hope” desperation and beef up the dividends.

NESF

NextEnergy Solar Fund Limited

(“NESF” or the “Company”)

First Interim Dividend Declaration

NextEnergy Solar Fund, a leading specialist investor in solar energy and energy storage, is pleased to announce its first interim dividend of 2.10p per Ordinary Share for the quarter ended 30 June 2025, in line with its previously stated target of paying dividends of 8.43p per Ordinary Share for the year ending 31 March 2026.

The first interim dividend of 2.10p per Ordinary Share will be paid on 30 September 2025 to Ordinary Shareholders on the register as at the close of business on 15 August 2025. The ex-dividend date is 14 August 2025.

UKW

Posted by Zaven Boyrazian, CFA

Published 6 August

UKW

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

The higher interest rate environment is putting a lot of pressure on these debt-ridden businesses. But with rates steadily falling, and many continuing to generate stable cash flows, dividends are still being put in investor pockets.

The combination of dividends with lower share prices has steadily pushed yields higher over the last couple of years. As such, some yields are now starting to climb beyond 8% !

Greencoat UK Wind‘s (LSE:UKW) a prime example of this, with its payout now stretching beyond 8.5%. That’s a little lower than a few months ago, but it’s still the highest level seen in over a decade. And based on current guidance, dividends, even at this massive yield, are set to grow even further in the coming years.

Greencoat manages a portfolio of onshore and offshore wind farms throughout Britain. Instead of collecting rent, it sells clean electricity to the national grid. And since energy’s in constant demand, it enjoys a relatively stable cash flow to fund shareholder payouts.

However, with so much profit being paid out, these businesses are often almost entirely dependent on external financing. As such, they tend to be highly leveraged enterprises. That was fine for most of the last 15 years. But when interest rates started climbing again, high debt burdens proved quite troublesome.

REITO

REITs: a once-in-a-decade passive income opportunity?

As dividend yields approach their highest point in over a decade, Zaven Boyrazian thinks REITs could be a highly lucrative income investment in 2025.

Posted by

Zaven Boyrazian, CFA❯

Published 6 August

House models and one with REIT - standing for real estate investment trust - written on it.
Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Real estate investment trusts (REITs) aren’t very fashionable right now. The higher interest rate environment is putting a lot of pressure on these debt-ridden businesses. But with rates steadily falling, and many continuing to generate stable cash flows, dividends are still being put in investor pockets.

The combination of dividends with lower share prices has steadily pushed yields higher over the last couple of years. As such, some yields are now starting to climb beyond 8%!

Investing in REITs

Generally speaking, most REITs own and lease rental property to tenants. Providing that 90% of net profits are redistributed to shareholders, they don’t have to pay any tax, making them highly lucrative dividend investing vehicles. However, despite the name, REITs don’t have to exclusively focus on real estate.

However, with so much profit being paid out, these businesses are often almost entirely dependent on external financing. As such, they tend to be highly leveraged enterprises. That was fine for most of the last 15 years. But when interest rates started climbing again, high debt burdens proved quite troublesome for many REITs, increasing investment risk.

Since interest rates are still relatively high, REITs remain unpopular in 2025. Yet not all of these businesses are in jeopardy, potentially giving smart investors a rare chance to lock in enormous yields.

Top 10 most-purchased ETFs in July 2025

Gold fell in popularity last month, with tech, US and UK shares rising up the rankings.

4th August 2025

by Sam Benstead from interactive investor

Most-popular ETFs 600

Vanguard’s S&P 500 tracker funds reclaimed first and second place in our most-bought exchange-traded funds (ETF) list last month, knocking iShares Physical Gold ETC GBP  SGLN

off the top spot.

The dividend distribution version (Vanguard S&P 500 UCITS ETF GBP  VUSA

was in first place, while the accumulation version (Vanguard S&P 500 ETF USD Acc GBP  VUAG

was in second place. These ETFs charge just 0.07% a year to track the largest shares in America, nearly doubling investors’ money over the past five years.

Measured in pounds sterling, the US market is about 4% off its all-time high, with a weaker dollar hurting returns this year.

July was a good month for the US stock market, with the index rising 2% in US dollar terms and 7% in sterling terms, with dollar strength against the pound providing a boost to British investors.

This helped boost other popular ETFs last month, withVanguard FTSE All-World UCITS ETF GBP  VWRL

 (distributing) rising one place to eighth and Invesco EQQQ NASDAQ-100 ETF GBP  EQQQ

 rising two places to sixth. Both funds are heavily invested in US shares, with the Vanguard tracker allocating 60.5% to the US and the Nasdaq 100 allocating 96.8% to US shares.

Meanwhile, Vanguard FTSE All-World ETF USD Acc GBP 

VWRP 0.99%

 (accumulating) held on to fifth place and

 iShares Core MSCI World ETF USD Acc GBP  SWDA

 fell one place to seventh.

SWDA owns around 1,400 global developed market shares and is a popular core holding for stock market exposure. The fee is 0.2% a year.

The Vanguard global trackers are “all world” funds, which means they own emerging market shares as well as developed world shares – they therefore have less invested in the US.

While gold fell in popularity last month, the

 iShares Physical Silver ETC GBP  SSLN

held on to 10th place.

Over July, the gold price was relatively flat, starting the month at $3,352 an ounce and ending it at $3,295. Silver, however, rose from $36 to $37 an ounce.

Gold is seen as a safe-haven asset but also a hedge against inflation, as the supply of the metal is relatively fixed, but governments are issuing more debt and increasing the money supply.

Both metals are volatile, but silver is a much bumpier ride than gold due to its wider industrial use. This means it has greater cyclical characteristics compared to gold.

There was one new entry last month: 

VanEck Crypto&Blckchan Innovtr ETF A USD GBP  DAGB

in fourth.

This ETF owns companies involved in cryptocurrency and blockchain technology, such as 

Coinbase Global Inc Ordinary Shares – Class A COIN

 Strategy Class A MSTR and Block Inc Class A XYZ

It is viewed by many as a way of getting exposure to bitcoin inside an ISA wrapper, as the UK finance watchdog currently does not allow ETFs that track the price of cryptocurrencies.

Be warned though, this ETF is extremely volatile, and often moves more than the bitcoin price itself.

WisdomTree Europe Defence ETF EUR Acc GBP  WDEP

 dropped off the list, while 

VanEck Defense ETF A USD Acc GBP  DFNG

 fell to ninth from fourth in June.

Top 10 most-bought ETFs in July 2025

PositionETFChange on last monthOne-year return (%)Three-year return (%)
1Vanguard S&P 500 UCITS ETF GBP VUSAUp one12.646.4
2Vanguard S&P 500 ETF USD Acc GBP VUAGUp one12.646.4
3iShares Physical Gold ETC GBP SGLNDown two31.571.9
4VanEck Crypto&Blckchan Innovtr ETF A USD GBP DAGBNew entry40.2150.5
5Vanguard FTSE All-World ETF USD Acc GBP VWRPNo change12.540.7
6Invesco EQQQ NASDAQ-100 ETF GBP EQQQUp two16.967.2
7iShares Core MSCI World ETF USD Acc GBP SWDADown one12.443.2
8Vanguard FTSE All-World UCITS ETF GBP VWRLUp one12.540.7
9VanEck Defense ETF A USD Acc GBP DFNGDown five72.7n/a
10iShares Physical Silver ETC GBP SSLN0No change28.172

Source: interactive investor, FE Analytics as of 1 August 2025. Note: the top 10 is based on the number of “buys” during the month of July. Past performance is not a guide to future performance.

Top 10 most-popular investment trusts: July 2025

Equity investment trusts rose up the rankings last month, as markets jumped higher, writes Sam Benstead.

1st August 2025

by Sam Benstead from interactive investor

Background of charts, numbers and stock market data

There were four new entries on our top-10 most-bought trusts list in July: Henderson Far East Income Ord 

All invest in equities, indicative of rising investor confidence as stock markets around the world jumped higher in July.  

The best performer of the new entries over the past 12 months is Polar Capital Technology Trust, returning 30.1% and entering the list in fifth place. Managed by Ben Rogoff, it owns tech firms from around the world.

Unlike Scottish Mortgage Ord  SMT, which was the most popular trust in July, it does not own unlisted technology stocks, instead taking a “benchmark-aware” approach and owning most of the largest names in the sector.  

On the other hand, top-ranked Scottish Mortgage has a quarter invested in unlisted shares, such as SpaceX and TikTok-owner ByteDance.  

In ninth place last month, F&C Investment Trust is also a big backer of technology stocks, with around two-thirds invested in North American shares. It is a global stocks trust, owning more than 350 companies across 35 countries, including 9.1% in emerging markets and 10% in the UK.  

Seventh-placed Temple Bar follows a value investment approach, with 70% invested in UK equities and the remainder overseas, including in Asian and North American shares. Run by Ian Lance and Nick Purves, shares have risen 22.4% over the past 12 months and 72.4% over the past three years, making it one  of the top-performing UK-focused funds.  

The final new entry, in sixth, was Henderson Far East Income, which yields 11% by investing in Asian equities. Its biggest allocation (40%) is to financial stocks, such as banks in China. The next biggest sector is technology, where it counts Taiwanese computer chip giant TSMC among its largest positions. While the yield is appealing, total returns (capital and income) are more subdued, at 13.1% over 12 months and 14.4% over three years. 

UK equity income trust City of London Ord  CTY

 was the other riser last month, jumping one place to third. It owns UK shares with above-average dividend yields, and has a more than 50-year record of increasing its annual dividend. 

JPMorgan Global Growth & Income Ord  JGGI

 was unchanged in fourth place.  It is “style neutral”, meaning it does not favour value or growth, for example. It holds 50 “best idea” stocks, and looks to trim its winners and recycle the money into underperformers that it still has conviction in. The trust makes quarterly distributions with the intention of paying dividends totalling at least 4% a year. 

Finally, the trusts that fell in popularity but maintained a place on the most-bought list were 3i Group Ord III

 Greencoat UK Wind  UKW

and NextEnergy Solar Ord NESF.

The latter two trusts own renewable energy assets, selling power to the grid and returning profits to shareholders via dividends. The yields are 8.4% and 11.3% respectively. 

The trusts that fell off the list were SDCL Efficiency Income Trust plc.  SEIT

 Alliance Witan Ord  ALW

 and Fidelity Special Values Ord  FSV0.  

Top 10 most-popular trusts in July 2025

PositionTrust Change from JuneOne-year return to 30 July 2025Three-year return to 30 July 2025
1Scottish Mortgage Ord SMT0.7Up one29.428.4
2Greencoat UK Wind UKW0Down one-9.3-4.2
3City of London Ord CTY0.4Up one16.337.2
4JPMorgan Global Growth & Income Ord JGGI0.Up one6.643.7
5Polar Capital Technology Ord PCT0.2New entry30.183.6
6Henderson Far East Income Ord HFEL0.New entry13.114.4
7Temple Bar Ord TMPL0.New entry22.472.4
8NextEnergy Solar Ord NESF1.Down two-2.6-13.8
9F&C Investment Trust Ord FCIT0.1New entry13.739.1
103i Group Ord III0.44Down three35.2252.2

Source: interactive investor, FE Analytics to 30 July 2025. Note: the top 10 is based on the number of “buys” during the month of July. Past performance is not a guide to future performance.

XD Dates this week

Thursday 7 August


Aberforth Geared Value & Income Trust PLC ex-dividend date
Aberforth Smaller Cos Trust PLC ex-dividend date
Baronsmead Second Venture Trust PLC ex-dividend date
Baronsmead Venture Trust PLC ex-dividend date
Chenavari Toro Income Fund Ltd ex-dividend date
CVC Income & Growth EUR Ltd ex-dividend date
CVC Income & Growth GBP Ltd ex-dividend date
Dunedin Income Growth Investment Trust PLC ex-dividend date
GCP Infrastructure Investments Ltd ex-dividend date
Marwyn Value Investors Ltd ex-dividend date
Monks Investment Trust PLC ex-dividend date
Northern Venture Trust PLC ex-dividend date
Picton Property Income Ltd ex-dividend date
Polar Capital Global Financials Trust PLC ex-dividend date
Polar Capital Global Healthcare Trust PLC ex-dividend date
Residential Secure Income PLC ex-dividend date
Taylor Maritime Ltd ex-dividend date
UIL Ltd ex-dividend date

The Snowball

Current variable income fcast.

August £638

September £1,056

October £570

Total for the year £9,056.00

You need to add on income earned from dividends to be re-invested for the remainder of this calendar year. Income of around another £300.

Current earned dividends £7,393 plus income for this year, around 4k, although dividends that should be paid in December sometimes slip into January.

Dividend Re-investment.

Steven Bavaria Takes Investors Inside The Income Factory

Summary

  • Steven Bavaria discusses his investing strategy, focusing on generating income through high-yield assets like closed-end funds and credit markets.
  • He emphasizes the importance of sticking with a strategy that aligns with one’s risk tolerance and long-term goals, whether it’s traditional equity investing or an income factory approach.
  • Bavaria recommends considering credit investments, like BDCs and CLO funds, as a favourable option in the current economic and political climate.
3D Rendering concept of investment. Big and small piggy banks with coins on background for commercial design. 3D Render.
Hoowy/iStock via Getty Images

Listen here or on the go via Apple Podcasts and Spotify

Steven Bavaria takes us inside the Income Factory

Transcript

Rena Sherbill: Steven Bavaria, really nice to have you on one of our podcasts. Really nice to have you on Seeking Alpha. It’s been a long time coming. Appreciate you coming on the show.

Steven Bavaria: It’s a pleasure. Thank you.

RS: It’s a pleasure to have you. Like I said, you’ve been writing on Seeking Alpha for a long time. So, good to have you on finally. You now run an investing group called Inside the Income Factory.

I’d love it if we got started with how you’re approaching the markets. You’ve also written a book about it. So if you could synthesize your strategy and how you approach investing, I think, that’s a nice place to start.

SB: Sure. I guess we could start with the name of the book, The Income Factory and the service Inside the Income Factory. I started out investing like most other people, trying to make an equity return of 8%, 9%, 10%, which has been the average for the last 100 years.

And I realized over time, and this was 12, 15 years ago, that that meant you collect a dividend of 1% or 2% per annum. That would be the typical S&P 500 yield, 1% or 2%.

And you’d be counting on capital gains on average of another 7% or 8% every year. Now not always each year, but on average, every year, to get your 8%, 9%, 10% return. And that’s kind of tricky and angst-ridden for many investors because some years you’re not going to be getting it. You might even be losing money on paper. So you’d only be getting your 1% or 2%.

And since I spent my life in the credit markets as a banker and working for Standard & Poor’s and introducing ratings to the whole bank loan business, I realized that you can make interest rates in the high-yield credit market of 7%, 8%, 9%, 10% per annum.

And if you can get an interest rate of 8%, 9%, 10% per annum, even if you don’t have any growth, you’ve still got the same total return, that 8%, 9%, 10% return that equity investors are seeking to get. Many are trying to get more, but Nobel Prizes have been written by people showing that the typical person over a lifetime is lucky to make the average of 8% or 9%, 10%.

So anyway, I began to experiment and realized that I could invest in high-yield closed-end funds, all kinds of different assets that pay a steady 8%, 9%, 10%, sometimes more in markets like we’ve been in recently in interest. And if you then just get your principal back, you’ve still got your equity return, which you can compound and reinvest just like any other equity investor.

So I began to do that, and I began to write about it 10 or 12 years ago. And people called me a heretic. I’d have people say, oh no, you have to have growth stocks. You can’t grow your wealth without growth stocks. And I would show that, well, math is math. And if you can earn 8%, 9%, 10% in cash and 0% in capital gains, that’s the same 8%, 9%, 10% return as somebody who makes 8% in capital gains and 0% in cash or any combination in between.

So after a while I was – I had more and more followers who tried this and realized that, hey, from an emotional standpoint, you’re not going to make any more money or less with either approach, traditional index investing or dividend growth investing, or – and what I came to call an income factory approach, where you’re just focusing on the income and trying to make most of your total return in the form of income.

You’re not going to do better or worse than either – with either one, probably, but some people are going to be emotionally able to stick with it.

If you’re getting 8%, 9%, 10% in cash that you’re reinvesting and creating your own growth, as I would put it in a lot of my writings, then even in a down market, when you’re having paper losses or equity investors are having losses, paper or real, depending on whether they sell out or not, you’re still reinvesting and compounding your income if you’re getting it in cash.

And that can make you feel – and that can help you sleep at night, which thousands of people have told me since they sleep a lot better at night, knowing their money’s compounding and reinvesting and compounding through all kinds of markets.

And as I wrote about it more and more, and my shtick, as a writer, is basically taking complicated stuff and writing about it in plain English. I came up with this name, The Income Factory, thinking that Ford Motor, when they build a factory, a week after it’s built, the only people at Ford who worry about what its market value is as a factory are the green eye shade accountants in the back room.

But everyone else at Ford thinks more about how do you – what’s the output of that factory? How do we – and how do we grow the output of that factory on a regular basis? How do we buy more machines for the factory, make it grow as a factory in terms of its output? And I realized, hey, that’s really what I want my portfolio to do if I’m in it for the long term.

I see it as a factory whose job is to grow its income. And if it does that steadily by investing in high-yield assets, even though there’s no capital gain, I just keep on collecting that output, reinvesting it. And then later on, if you do this for enough years, hopefully, then you’ll, at some point, be able to retire.

And here again, having a portfolio that’s an income factory, as I call it, where you’re creating your output, your 8%, 9%, 10% cash output without having to sell any of your capital each year, that’s a real advantage once you become a retiree and want to live on some or all of that output, some of that income.

Because if you’re a typical equity investor collecting 1% or 2% cash each year in dividends and counting on another 7% or 8% in capital gains each year, you’re dependent on selling off some of the capital whether or not you’ve got the gains.

If you need 5% or 6% to live on, say as a retiree, and you’re only getting 2% in cash, then you’re going to have to sell, even when the market’s down, some of your capital to get what you need to – for your retirement income.

With an income factory where you’re getting 7%, 8%, 9%, 10% recently in cash every year regardless of what the price of the factory is doing, regardless of what your portfolios, paper losses or profits are, you’re not going to have to sell any capital. You’re going to get it all in cash regardless of what the market’s doing. So that, in a nutshell, is my income factory philosophy.

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