I couldn’t breathe… There were bursts of light in my field of vision… And it was all I could do to keep from puking.
My high school coach was in my face yelling at the top of his lungs.
“Zach, I have you in the game to play DEFENSE!” he bellowed.
“If you can’t get back to your position and keep them from scoring, I’ll find someone who WILL!”
His words stung as I sat down on the bench. But I knew he was right.
It didn’t matter how many points our team put on the board. If we couldn’t protect our lead, we didn’t deserve to win!
Today, investors are in the same spot. Defense is critical.
Protecting the capital you’ve worked so hard to save needs to be a high priority. Fortunately, you can do that while still growing your income for retirement…
A Flight to Safety Boosts Income Stocks
2018 has been an interesting year for income stocks.
I’m talking about stocks of solid blue-chip companies that pay reliable dividends.
During the first half of this year, blue-chip dividend stocks have lagged a bit. Most have held their value just fine, and the companies have continued to send generous payments to shareholders.
But investors have been more interested in growth opportunities like consumer technology plays, artificial intelligence and a few key retail stocks. With investors pouring money into more speculative areas of the market, the action for blue-chip dividend stocks has been a bit sleepy.
This week, that’s starting to change.
As the Trump administration turns the heat up on trade negotiations, speculative areas of the market are pulling back. Popular stocks like Netflix (NFLX), Alphabet (GOOG) and Amazon (AMZN) have pulled back sharply over the past week.
But do you know what isn’t pulling back?
Shares of defensive stocks like consumer staples and utilities.
As uncertainty starts to enter the market, shares of these solid blue-chip dividend payers have started moving higher.
Today, you’ve got a great opportunity to jump on this trend and lock in some great retirement income before these stocks become more expensive.
Shifting Trends for Defensive Stocks
Historically, there are a few areas of the market that have been considered “defensive” by nature.
These stocks tend to hold their value over time, and generally pay reliable quarterly dividends that can help retirees with day-to-day life expenses.
The companies are able to deliver consistent results because of their very stable businesses.
Shares of consumer staple companies are reliable businesses because they sell things that consumers need every day. Chances are good that you’ll buy toilet paper, toothpaste, basic food items and laundry detergent regardless of what’s going on in the economy.
That’s why stocks like Procter & Gamble (PG), Colgate-Palmolive (CL) and General Mills (GIS) typically do well even in down markets. Because investors know that these are stable companies and so investors are especially eager to buy shares during times of uncertainty.
Utilities are in a similar position.
During growth periods in the market, investors often move money out of utility stocks because they want to be invested in something more “exciting.” But when the market becomes more volatile, shares of utilities suddenly start looking more attractive.
Companies like Duke Energy (DUK), The Southern Company (SO) and Consolidated Edison (ED) have lagged this year as investors have been focused on more “interesting” stories. But now that the market is becoming more turbulent, shares of these utility companies have been trending higher.
Adding Income at Excellent Prices
Today, blue-chip dividend stocks are cheap thanks to the fact that investors have been paying attention to other areas of the market.
But even though the stocks have become cheap, the underlying businesses of these companies are still very strong. People are still buying all of the staples that they need and paying their electricity bills.
So the lower stock prices give us a chance to buy great businesses at very attractive prices.
Meanwhile, as investors start to worry more and more about a trade conflict, people have started selling some of their more speculative stocks and buying shares of “boring” blue-chip dividend stocks.
This is a trend that I expect to continue for the next several months at the very least.
To be clear, I’m not worried about the overall market or about the U.S. economy growing. We’re still seeing very positive signs for our market.
But the leading areas of our market are shifting. And it’s time for stocks like utilities and consumer staples to shine.
So today, I’m encouraging you to add some solid dividend-paying stocks to your portfolio.
By doing this, you’ll be putting yourself ahead of the newest trend on Wall Street. And more importantly, you’ll be defending the value of your retirement savings, and locking in great income for years to come.
We’ll continue to keep an eye on this new investment theme and let you know which opportunities give you the best income and protection for your capital.
Here’s to growing and protecting your wealth!