The Snowball currently has £373 of cash waiting to be re-invested and £3,143 currently xd, destination is the unknown. Next cash from SUPR tomorrow.

Moody’s Downgrade is Downright Bullish for These Dividends Up to 8.6%

Brett Owens, Chief Investment Strategist
Updated: May 21, 2025

As I’m sure you have heard, Moody’s downgraded US debt last weekend.

The stock market panic that ensued lasted for, oh, about an hour of trading.

Why did this already get shrugged off? It’s a classic empty-calorie headline. The practical impact of the downgrade to top holders of Treasuries—banks and pension funds—is nil.

Treasuries are still classified as top-grade collateral, which means banks can continue to leverage these securities. T-bills are just as good as cash for bank reserves, as they were before the downgrade. No need to scramble for new collateral.

And Treasuries still have investment-grade status, which means pension funds don’t have to make any moves. Current asset allocations are just fine. It is “business as usual” at major financial institutions after the dramatic downgrade news.

Of course, the federal deficit is humungous and unlikely to ever be paid back. In real terms, that is. Nominally, the repayment will happen. An important distinction! Creditors will ultimately receive depreciated dollars due to inflation.

In other words, the $36 trillion owed to Treasury bond holders likely gets repaid in nominal (the actual number that includes inflation) versus real (inflation adjusted) terms. So creditors will receive the number of dollars borrowed plus interest, but those will be depreciated dollars—bucks themselves that due to inflation will be worth less than today.

Which means the key to successful retirement investing will be diversifying away from US dollars and into “hard asset” plays. We’ll discuss two today that will appreciate as the dollar declines. One yields 8.6%!

Why is the debt and path of the dollar an issue now when we’ve been on this debtor path as a country through many administrations for decades? Because we are teetering on the debt tipping point. The Social Security trust fund is projected to go negative by 2030, which will force the government to draw from general revenues.

Think DOGE is going to save the day? No. Most of the federal spending is untouchable. Messing with Social Security, Medicare or Medicaid is political suicide. Same with “other mandatory spending”—these are benefits that have been promised. Voters won’t have it any other way. And older people who receive Social Security and Medicare? They vote at the highest rate of any age group.

The net interest on our debt continues to climb. Defense spending seems “secure” given the current state of the world. Which leaves the modest nondefense discretionary slice, just 8.2% of the federal spending pie for DOGE to slice from:

With such a small austerity target, it’s no wonder that government spending is up 7.4% year-over-year for the first six months of this fiscal year (which began October 1, 2024):

Tax receipts, however, are not up 7.4%. These “revenues” are only up 3%. The US has a highly-indebted balance sheet with expenses growing faster than sales—not good.

If austerity via DOGE is not happening, then what is the alternative? Money printing. Jay Powell’s term is up one year from now. Trump will appoint a friendly face such as Kevin Warsh, Kevin Hassett or Judy Shelton who will work with the administration to (ahem) paper over some of these debt issues.

And by the way, Powell may be insistent on “higher for longer” rates, but he is not acting hawkish across the board. In fact, the market saw right through his “all bark, no bite” rhetoric at the last Fed meeting because his recent actions have spoken louder than his words.

If you’re wondering who is buying Treasuries at 4-some-percent in today’s environment, the answer should be no surprise—the Fed. Yup. Powell & Co. recently “stepped up” their buying an extra $20 billion per month!

With the Fed the new “whale” at the table, foreigners are (believe it or not) once again scrambling to buy Uncle Sam’s bonds. They briefly paused in tariff-laden April but have returned in a big way in May. We saw robust demand at the May 6 auction, with foreign investors buying 71.2% of the $42 billion in 10-year Treasury notes (up from an average of 67.6%).

It takes a village to keep the Treasury yield down! And all hands are on deck. The Fed increasingly supports the Treasury market. Don’t listen to the naysayers who claim the Moody’s downgrade is going to crush the bond market—the administration, Treasury, and Fed are working together to keep the lid on bonds.

The US runs the world’s printing press, and Uncle Sam is using it to buy more of his own debt. This is why gold has glittered year to date, and why the yellow relic’s move higher is likely to continue.

Gold miners themselves have retreated modestly from mid-April levels. VanEck Gold Miners ETF (GDX) sits 8% off its recent all-time highs and is likely to bottom.

The fundamental backdrop for yellow metal miners couldn’t be better. Gold prices are high and oil prices are low—which means maximum profit margins.

That’s why we like GDX even though it yields a mere 1%. Its real potential lies in its price appreciation. While GDX is up 37% year-to-date—even after its recent pullback—investors will realize the only “way out” for the federal government is monetary inflation and they will drive up the price of gold even more.

Let’s close with a discounted way to invest in gold. GAMCO Global Gold, Natural Resources & Income Trust (GGN) is a closed-end fund trading at a 3% discount to net asset value (NAV) as I write. GGN’s “97 cents on the dollar” price tag is attractive.

About half of the fund’s portfolio sits in mining stocks—both gold and non-gold plays like iron miner Rio Tinto (RIO). The miners-at-large have some great earnings reports ahead of them thanks to low energy prices because oil, a key input cost for mining operations, is down 27% year-over-year.

This underfollowed, misunderstood fund should continue to grind higher as the government papers over its pile of debt. GGN will pay us 3 cents per month, every month, as our slow-motion monetary train crash unfolds. And that’s good for 8.6% per year.

3 super small-caps with 6%+ yields to consider for passive income

High yields can come in small packages! Roland Head looks at three niche companies with the potential to provide attractive passive income.

Posted by

Roland Head Published 21 May

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.Read More

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Investors looking for reliable passive income often focus on big FTSE 100 companies. Some of these giants can certainly be a good source of dividends. But the UK market’s also home to a number of smaller companies with a strong reputation for income.

Here, I’ll highlight three small-caps offering dividend yields of 6% or more – including two stocks from my own portfolio.

A recovery story?

Epwin (LSE: EPWN) produces housebuilding products such as doors, windows, cladding and decking. The last couple of years have been tough, due to slower conditions across the UK’s housing market. Fortunately, Epwin has remained profitable and in good financial health through this period, recently reporting increased annual profits.

The risk is that conditions could remain weak or even worsen if the UK suffers a recession. However, I think the picture could be improving. Recent government data showed a 17% increase in shipments from UK brick factories during the first quarter of this year.

Builders may order bricks for a new home before they order doors and windows. But if more bricks are being sold, I reckon there’s a good chance that more doors and windows will be needed over the next 12 months.

Epwin currently trades on eight times forecast earnings, with a 6% dividend yield. I reckon that’s worth considering.

A niche business yielding 8%

Currency management expert Record (LSE: REC) isn’t a household name. Some of its largest customers are Swiss pension funds. In total, the company’s customers trust it to provide currency hedging and related services for more than $100bn of underlying investments.

We can get an idea of the value attached to its services by looking at its accounts. Last year, Record reported a 27% operating margin, generating a return on equity of more than 30%. These excellent figures are fairly typical for this business.

When a company can consistently generate this kind of profitability, my experience is that it usually offers a service its customers value highly.

Perhaps the main risk is that historic growth has often been slow and inconsistent. Recent performance has improved, but there’s no guarantee this will continue. However, Record’s 8% dividend yield looks safe to me. It’s also high enough for me to be relaxed about the risk of slow growth.

A 9.9% yield!

Sabre Insurance (LSE: SBRE) is a niche operator in the UK motor insurance market, focusing on higher-risk drivers and lines such as motorcycle and taxi insurance.

The advantage of this model is that Sabre’s less exposed to competition from price comparison and large brands. The firm’s customers require more skilled underwriting, but profit margins are higher to reflect the extra risk.

As a potential investor, my main concern is that the company’s core market is relatively small. One area currently being targeted for growth is to offer cheaper insurance to less risky drivers, while also accepting slightly lower profit margins. This could work well – but there’s a lot more competition in this area, so careful judgement will be needed.

Broker forecasts for 2025 show Sabre with a dividend yield of 9.9%, covered by earnings. This business looks interesting to me and is on my list for further research. I think it could be worth considering for passive income.

I think this FTSE 250 stock is primed for promotion to the FTSE 100 next month

Jon Smith is thinking ahead to the next reshuffle for the FTSE 250 in June and points to one contender that has been doing well.

Posted by

Jon Smith

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Each quarter, there’s a reshuffle between the major FTSE indexes. The stocks due for promotion from the FTSE 250 to the FTSE 100 will take the jump next month, with an indicative list of potential candidates due out any day. Given the formula is based around the market cap, I can already see one likely contender that could get a lot of attention.

Eyes on the prize

I’m talking about British Land (LSE:BLND). The UK-based real estate investment trust (REIT) specialises in owning, managing, and developing commercial properties.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Over the past year, the stock is only up a modest 2%, with a dividend yield of 5.56%. Yet with a market cap of £4.1bn, it looks set to head to the FTSE 100 next month. Part of this comes from the fact that during the stock market fall in April, British Land didn’t experience a massive fall. I’m not surprised by this, given the nature of the sector — the REIT isn’t exposed to the impact of Trump’s tariffs.

The 11% rise in the past three months has helped to push the stock into contention. Positive soundbites coming out about new deals caused the rise. For example, in late March it got approval to redevelop Euston Tower into a whopping 560,000 square feet of workspaces and hospitality venues.

Looking ahead

Even before we get to the reshuffle, investors will have to negotiate something else. I’m talking about the full-year results that are due out on Thursday (May 22). The half-year results were positive, with a 1% increase in underlying profit. In the period in question, it leased 1.7m square feet of space, 8% ahead of estimated rental values. This demonstrated robust demand for its properties, which investors will be hoping carried forward for the rest of the year.

Assuming the results aren’t a disaster, the promotion to the FTSE 100 could bring a further boost to the share price. This is because index trackers and portfolio managers that have to own FTSE 100 companies will automatically buy the stock. Of course, FTSE 250 trackers will sell it. But the amount of money that’s focused on the FTSE 100 is much larger than on the FTSE 250. So the net impact should be positive for the share price.

Sensitive to demand shifts

The main risk I see for British Land is the section of the portfolio focused on office spaces. I just don’t see high demand going forward, with work-from-home here to stay. Therefore, I think it needs to push into other areas, even potentially residential options, to stay profitable in the long term.

Despite this concern, I think it’s well set for the year ahead. If it does get the tap on the shoulder to head to the main index, this should only benefit the company. Therefore, I think it’s an idea for investors to think about right now.

If your analysis was right but your timing was wrong, you had the dividend/yield to re-invest back into your Snowball.

This dull-and-reliable investment offers stability amid stomach-churning volatility
This company’s stable share price and attractive cash returns make it favourite for top fund managers

Algy Hall

Questor is The Telegraph’s stock-picking column, helping you decode the markets and offering insights on where to invest.

We all crave fun and excitement. In the stock market, that means dull-and-reliable investments often get overlooked. But during periods of stomach-churning volatility, as we have experienced during 2025 so far, the virtues of the dull stuff suddenly become much clearer.

Dull-and-reliable investments tend to make themselves known through two key attributes. One is relatively stable share prices. The other is attractive cash returns; what could be duller after all than a business with nothing more exciting to do with its cash than to dutifully hand it back to its owners.

US employee benefits specialist Unum displays both these characteristics. This may help explain why top investors have been increasing their bets on its shares.

Nine of the world’s best fund managers, all among the top-performing 3pc of over 10,000 equity pros monitored by financial publisher Citywire, hold Unum’s shares. And increased smart money interest has this month seen the company propelled to be among the 74 constituents that make up Citywire’s Global Elite Companies Index, which represents the very best ideas from around 6,000 stocks held across the portfolios of the world’s best money managers.

Unum is an insurance company that specialises in selling a range of work-related financial protection and wellbeing services through employers and also directly to individuals. Its portfolio includes disability, life, accident, critical illness, cancer, dental and vision cover.

Offering such a broad range of policies makes it attractive as a one-stop-shop to clients, especially as employers increasingly look to compete for staff based on the overall benefits they offer as opposed to just salary.

Unum is more profitable than most of its peers. Its leadership in disability insurance is a particular advantage that underpins its competitive position. The complexities of disability insurance limits competition and differentiates Unum to customers. This is reflected a return on equity of over 20pc reported by Unum in 2024. Meanwhile, book value per share has grown at an annualised rate of 9pc over the last ten years.

The company generates large amounts of cash from its business, too, which it returns through share buybacks as well as dividends. Buybacks have more than halved Unum’s share count since 2007.

Buybacks are only a real benefit to shareholders if the shares bought offer the prospect of a good return. Fortunately, in the case of Unum this looks like the case based on its shares’ forecast free cash flow yield of over 10pc and a price equivalent to less than nine times forecast earnings for the year ahead.

Unum has said it will aim to buy back between $500m (£376m) to $1bn of shares this year and is forecast to pay out over $300m in dividends. Taking buybacks at the proposed mid-point, that’s equivalent to a hearty total shareholder yield (buybacks and dividends as proportion of market capitalisation) of 7.3pc.

British buyers of the shares, which are available through all the UK’s main brokerage platforms, need to fill out the correct paperwork to minimise withholding tax on dividends and should also check for any additional overseas dealing charges.

The company looks particularly well set up for cash returns given there is $2.2bn of liquidity at the holding company level, which is expected to rise to $2.5bn by the year end. That’s well above a target level of about $500m.

The strong financial position has been helped by a reinsurance deal covering a $3.4bn chunk of Unum’s closed book of long-term care insurance policies, equating to 20pc of the total.

Closed books are made up of policies that have previously been sold and are still being serviced but are no longer being marketed. The deal reduces risk as well as freeing about $100m of capital.

Business risks have also been reduced over the last several years by moving the investment portfolio into safer assets.

However, taking on risk is what the insurance game is all about, which means the possibility for upsets always exists. One such recent worry for investors has been an uptick in disability claims in Unum’s first quarter. Management believes this is nothing out of the ordinary, though, and consistent with long-term trends.

More generally, sales growth and premiums are both strong and the company believes digital investments will continue to help it attract new customers while nudging up the persistency of policies that have already been taken out.

There’s plenty to take comfort from. During times of uncertainty, that’s a valuable thing, especially when it is accompanied by large cash returns.

Questor says buy

Ticker: NYSE: UNM

Share price: $82.15

From landlord to investor: why buy-to-let owners may be switching to stocks for a second income
Story by Mark Hartley

Housing development near Dunstable, UK

UK landlords may be considering new ways to earn a second income as rising costs and tighter regulations diminish their returns. Instead, some are looking to the stock market as a potentially more lucrative investment, or so a recent report in The Times claimed

Legislative changes also add new layers of complexity and expense, including the abolition of ‘no-fault’ evictions and stricter energy efficiency requirements.

These challenges have hit the buy-to-let market hard, with data revealing only 10% of homes purchased this year were bought by landlords — the lowest since 2007. And nearly half of them may consider selling their properties, citing unmanageable costs and regulatory burdens.

Of course, this doesn’t entirely negate the value of buy-to-let. Falling interest rates or a change in legislation could bring back profitability. Furthermore, the intrinsic value of owning physical real estate is always a bonus.

Searching for new second income avenues

Those who have made the switch cite lower maintenance, greater liquidity and long-term growth potential as key advantages over property ownership.

Everything from gold and government bonds to dividend shares and investment trusts can be placed in an ISA. And property’s not off the table — real estate investment trusts (REITs) offer an inexpensive, maintenance-free way to gain exposure to the UK real estate market.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

UK property stocks

The UK’s home to several top-performing REITs, such as LondonMetric Property, Land Securities Group and British Land. These investment vehicles are popular for their high dividend yields, often exceeding 6%.

It has a smaller yield than most, at only 4.4%, but its growth and reliability make it an attractive option. Since 2014, dividends have increased every year without fail, at an annualised rate of 7.3%.

Sadly, its price action’s less impressive. It’s down 21% in the past five years — a common theme with REITs. Since Covid, the fund’s suffered under a high-interest-rate environment — an ongoing issue. It also faces additional risks from rising vacancy rates and falling rent prices, putting pressure on margins and threatening profits.

Fortunately, things look to be improving. Since 2022, the company’s net margin has increased from -33.7% to 88%, with it turning profitable last year. Earnings per share (EPS) is expected to reach 36p this year, up from 29p in 2022.

With a low price and strong dividends, I think the stock’s worth considering for both value and income investors alike — particularly those looking for exposure to the UK property market.

There is also a payment from VPC for £1,933.10, payable around the 12th June

Those that have been paying attention will know that the Snowball needs to invest in a new Trust to replace VPC as it winds down.

AIRE, can be deleted from the list because of the discount to NAV

SEQI and GCP deleted as they are loan arrangers and the Snowball already has similar positions.

PEYS as I know absolutely nothing about the Trust apart from it invests in Private companies.

On 12 May 2025, the Board of VPC Specialty Lending Investments plc (the “Company“) announced a second distribution to shareholders of £43 million through the issue and redemption of B Shares.

Pursuant to the authority received from shareholders at the General Meeting on 5 April 2024, B Shares of 1 penny each will be issued to all Shareholders on 22 May 2025 by way of a bonus issue at a ratio of 15.45226301 new B shares for each Ordinary Share held at the Record Date of 6:00 p.m. on 21 May 2025. The Redemption Date in respect of this initial return of capital is 29 May 2025. The B Shares will be redeemed at 1 penny per B Share. The Company will not allot any fractions of B Shares and entitlements will be rounded down to the nearest whole B Share. The proceeds from the redemption will be sent to uncertificated Shareholders through CREST or via cheque to certificated Shareholders on or around 12 June 2025.