My Retirement Portfolio Just Backed Up The Truck On 6 High-Yield Stocks

Summary

• On Tuesday, the Fed did its first emergency interest rate cut since 2008.
• The very thing that sent stocks soaring 4.8% on Monday, sent them crashing 2.8% on Tuesday, with financials melting down.
• On Tuesday, I bought six above-average or better high-yield stocks, UNM, LNC, CMA, OZK, VIAC and FL, a total of 24 times for my retirement portfolio.
• I paid an average PE of 6, for companies yielding 4.5%, that analysts expect to grow at 9.2% CAGR over the long term (PEG ratio 0.64).
• These companies are priced for about -5% CAGR long-term growth. As long as they grow at 0+% over time, I'm very likely to make good to great total returns. I am not a market timer, I'm a risk/time arbitrageur.
• This idea was discussed in more depth with members of my private investing community, The Dividend Kings. Get started today »

(Source: imgflip)

What an interesting few weeks it's been for investors.

Outside of single-day corrections (like Oct 19th, 1987 when S&P fell 20% in a single session), we've seen the fastest correction since the Great Depression.

That included an 11% decline in the S&P 500 and a 13.6% crash in the Dow during the final week of February. That was the worst week since 2008 and the 5th worst of all time.

Then on Monday, global central banks came out and said they would slash rates and provide "ample liquidity" to avert or at least mitigate a recession caused by the COVID-19 virus. That sent stocks up 4.8%, their best one day gain since 2008.

The bad news is that with 94,301 cases in 82 countries, this is now a pandemic that has escaped initial hopes of early containment.

The good news is that, as seen by China's daily new cases falling to a steady 100 per day in the past week, the COVID-19 virus is NOT a doomsday bug that will likely sweep the globe and kill millions.

(Source: Johns Hopkins) orange = China cases

China was the 51st most prepared country in the world for an epidemic according to a study by Johns Hopkins.

Yet even in Wuhan, where this outbreak began, Just 1 in 10,000 people have contracted the virus.

Of course, that doesn't mean that the global economy won't feel a short-term impact from this. Already over 220 S&P 500 companies have warned that supply chain disruption and lower demand from overseas (mostly China itself) will impact Q1 and thus 2020 earnings.

China's efforts at containing the outbreak, which appears to be succeeding, involved quarantining 60 million people and placing travel restrictions on 600 million.

(Source: Bloomberg)

The result of basically shutting down the country for

Analyst’s Disclosure:I am/we are long UNM, LNC, FL, VIAC, CMA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Dividend Kings owns UNM, FL, and VIAC in our portfolios.