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Amid Trillions In Stimulus, These Dividend Stocks Are Strong Buys


  • The big stimulus package that recently passed from the House of Representatives to the Senate has many investors worried about inflation.
  • Fear of inflation is fueling the rise in interest rates, which is subsequently pressuring dividend stocks.
  • But wasteful and unproductive government spending does not actually stimulate the economy or inflation in the long run.
  • As with so many government efforts, there are negative unintended consequences that turn out to be disinflationary.
  • A number of high-quality dividend stocks have become very attractive on the pullback.
  • I do much more than just articles at High Yield Landlord: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Investment Thesis

Recently, investors have begun to fear that trillions of dollars of federal stimulus money flooding into the economy will result in strong inflationary pressures, which is one reason why interest rates have risen in the last few months. These rising interest rates have spurred a selloff of high-quality dividend stocks, giving investors a great opportunity to buy temporarily cheap shares.

Image Source: Pixabay

American Rescue Plan

The giant stimulus bill recently passed by the House of Representatives contains a wide variety of spending measures, some clearly relevant to COVID-19 and economic recovery, others less so. Titled the "American Rescue Plan," the bill evinces much of the same immoderate largesse that tends to characterize huge spending packages in Congress. The non-partisan Committee for a Responsible Federal Budget estimates that the bill will add $1.94 trillion in deficit spending from 2021 to 2031.

The CRFB argues that the bill "is much larger than the needs of the economy, much of its spending is poorly targeted," and "it includes a number of measures unrelated to the COVID pandemic and economic crisis."

Here are some examples, in my humble opinion, of the profligate spending laden throughout the "American Rescue Plan":

  • $422 billion for $1,400 stimulus checks for each individual earning less than $75,000 in adjusted gross income, or couples earning less than $150,000 in AGI, plus an additional $1,400 per adult and child dependent.
  • $350 billion for state and local governments that actually ran a collective surplus in 2020 (including a $15 billion surplus in California) and may have even enjoyed slightly higher tax revenue than in 2019, according to the Bureau of Economic Analysis.
  • $54 billion to increase the federal minimum wage to $15 an hour by 2025, a policy which has already been disallowed by the Senate parliamentarian.

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This article was written by

Austin Rogers profile picture

Austin Rogers is an REIT specialist with a professional background in commercial real estate. He writes about high-quality dividend growth stocks with the goal of generating the safest growing passive income stream possible. Since his ideal holding period is "lifelong," his focus is on portfolio income growth rather than total returns.

Austin is a contributing author for the investing group High Yield Landlord, one of the largest real estate investment communities on Seeking Alpha, with thousands of members. It offers exclusive research on the global REIT sector, multiple real money portfolios, an active chat room, and direct access to the analysts. Learn more.

Analyst’s Disclosure: I am/we are long BEP, NEP, CWEN.A, AY, BIP, AQN, PNW, WPC, CCI, DOC, NTST. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (157)

16 Mar. 2021
I wrote a mild post criticizing Dems and SA took it down in about two minutes. So here I am reading about "Trumpalina", etc and, surprise, they have no problems with that post!! Ha ha!! And they wonder why people have no respect for the media...shameful.
@APB , It happens to depend on who the editor is on duty at that particular moment. Don't sweat the small stuff, everything is small stuff.
bizdudes profile picture
It hasn't been that long since VP Dick Cheney generally opined, "The Deficit Doesn't Matter". While this may not be the exact quote, he and Bush ran the deficit up. The economic analysis of the impact of this bill contains quotes that have little meaning. If one person pays down his debt, that simply means that the bank can expand its borrowing to others who will spend the money. The deficit obviously doesn't matter since it has been expanding since 2000 with little inflation. The empty factories are available on the cheap which will make the US more competitive. Economics is impacted by physical capacity and by the money supply. If the intention is to create value-added manufacturing and jobs, Go for the big spending deficit!
@bizdudes "The Deficit Doesn't Matter" only while you can borrow cheap.
As soon $$ will stop to be preferred currency than it will be Matter.
@danirak , Nothing matters but matter itself.
@bizdudes the size of the deficits do matter. The Bush deficits were chump change. See Biden now looking at tax increases.
This article would be a lot more credible if its author wasn't so invested in his recommendations. At least he is honest about it, but I can think of a con for all of his pros--especially in REITs.
Austin Rogers profile picture
@Daphne doesn't believe I have a harder time trusting the recommendations of those who *aren't* invested in the stocks they push. I'm in these stock picks for the long haul, unless something fundamentally alters my investment thesis.
@Cashflow Capitalist , Buy the time you sense something wrong it may be too late.
Austin Rogers profile picture
@kimbillro Yep, that's often the case — that others in the market recognize the gravity of an issue faster than me. I have definitely sold at a loss on some stocks, like ETRN, finally admitting to myself that the risk-reward balance just isn't good. I've also sold for a gain only to watch the stock continue to go up and the company's situation improve. But my strategy overall is working to meet my goal of long-term income growth. And I think I've got my portfolio now in a position where I won't need to sell anything anytime soon.

Of course, I could be wrong about the macro thesis, in which case some hedge positions would provide some protection, but my portfolio would definitely feel some pain.
wouldn't AMT be a more compelling pick than CCI?
Austin Rogers profile picture
@Sheng-Wen Wang AMT offers a lower starting yield but faster dividend growth. CCI offers a higher starting yield but somewhat slower dividend growth. Both are good picks in my opinion.
Fully agree with you. Actually also US 30 year treasury yielding 2,2% has started looking attractive. I dont believe long term inflation will exceed that on aging population in current monetary system.

However, if we happen to transfer into full MMT etc. it would be a different story. Creating stagflation is very easy if governments really start to work towards it.
Great article. But how ugly does it get when Zombie Credit and the Fed Balance are both reduced???
Austin Rogers profile picture
@nowintexas It would definitely be a strong headwind to the stock market in my view.
graovsko profile picture
Approximately 35% of PNWs power sold comes from the company's 29% interest in the nearly 4-gigawatt Palo Verde nuclear plant. Palo Verde is the largest nuclear plant in the U.S. While nuclear plants do not emit significant greenhouse gasses, there is still risk here that gives me pause.
Austin Rogers profile picture
@graovsko There are particular risks with nuclear, but PNW is steadily diversifying its power generation portfolio, which will decrease Palo Verde's share over time.
ephud profile picture
"While nuclear plants do not emit significant greenhouse gasses, there is still risk here that gives me pause"

More people have died falling off roofs installing solar panels than all nuclear accidents in the western world combined over the last 60 years. Same goes for children killed by accidents at daycare centers. More people have died choking on their tooth brush. Do those give you pause? Why don't we ban daycare centers? Superstition, fear, hysteria and ignorance are the main obstacle to going 100% nuclear, not safety issues.
JKB123 profile picture
@ephud the cost and time to build a nuclear plant is so huge and there is no ROI
InvestRite#1 profile picture
Taxation falls on the shareholder with your choices. Could you be a bit more specific
Austin Rogers profile picture
@InvestRite#1 For pass-through companies like REITs, BDCs, MLPs, and some YieldCos (such as BEP), the entity does not pay corporate income tax. Instead, the individual shareholder (or unitholder/limited partner) pays income tax on the entity's taxable income based on the individual shareholder's personal income tax rate.
I could not disagree more with the authors statement that inflation is not occurring. Much of this is due to expansionary spending without a counter balance for new tax revenue. Plus inflation is misleading as many parts of the CPI is no longer tracked by our government. We will be very lucky not to have hyper inflation in a couple of years. Lots of these dividend stock picks will have a hard time keeping up with inflation. That is why many of them have taken a beating in recent market action.
@Swimbrett Quite correct. Author seems not to have been in any grocery stores the last 6-9 months. Inflation is returning as retailers feel more comfortable implementing price increases. Same applies to a number of basic necessity lines in stores like Wal Mart, Target, Family Dollar, etc.
Austin Rogers profile picture
@linkdonald @Swimbrett I came across an interest economic paper that argues that the basket of items people were consuming more of during the COVID crisis were those that experienced the most price increases, such as groceries and necessity items. So the CPI undershoots the actual inflation rate experienced by the average US household because it is still geared toward a normal, non-pandemic world. Here's the link to the study:


My only additional thought is that as households return to their normal basket of spending, the CPI should go back to being a relatively reliable calculation of consumer inflation.
@Swimbrett I disagree with all this stimulus but if you are a Keynesian and believe it is needed, and works, it would be foolish to offset it with tax increases that take back what is being put in to stimulate the economy.
You've made the case for the government not to intervene.
Thanks for the insights. One point to consider... you don't need actual inflation to get higher interest rates. All you need is a huge increase in supply (check) and an increase in the perceived threat of inflation (check). The 40 year bull market in interest rates is over. Demand for fixed income will no longer swamp supply and that factor alone will lead to higher rates. By all means buy dividend stocks. But expect them to go down with everything else, just at a slower pace.
Austin Rogers profile picture
@joemrogers In my view, there's nothing about hitting zero percent interest rates that means rates will necessarily begin to rise now. Look at Japan or Europe. Both have seen rates hover around zero for a decade or more. We have similar debt situations and similar demographics to both of those regions.
Veritas1010 profile picture
Some excellent ideas here, THANK YOU.

I would add in the short course: $TRSWF, and in the UK (no foreign withholdings tax) $SSEZY.
Austin Rogers profile picture
@Veritas1010 Looks like both are only over-the-counter for US investors. Bummer. Doesn't necessarily dissuade me but probably means lower volume. Not that I'm placing huge orders, but it's annoying to have to place limit orders and not know what price I'll get.
Veritas1010 profile picture
@Cashflow Capitalist,

The volumn is not bad on these issues. I own foreign equities that trade a whole lot less.

I use limit orders all the time and 9-10 times get my price met. Also, I have purchased several of these entities before they became rather well known and therefore at a much higher price: example I bought $DNNGY@ $18 about a dollar or so more than the last bid of $15.85. It sat there for a week or more, then bam traded. Look at it now.

I’m not saying these two entities have that potential. Actually not in my opinion. But, they are interesting and sound companies (and therefore opportunities) within this great sector.

disc.: still long $DNNGY (Ørsted A/S).
02 Mar. 2021
Vandooman.. I'm new to div investing and appreciate you naming specific stocks to consider.
The $1400 would be better focused on the unemployed who are having difficulty keeping food on the table and paying rent and utilities. States need funds for vaccination and testing programs and other health related matters. I think the dems ask is too high and not directed where it’s most needed and the republicans just want to whine about the debt that they exploded the last 4 years... same old same old.
InvestRite#1 profile picture
@retbiotech1 The $1400 would be better spent on the same income levels in the Stimulus Bill, but only for those who can demonstrate they have fallen behind in housing payments, that can be verified
@InvestRite#1 Unfortunately that just rewards those who have been less prudent with their saving/spending habits. Lets say all other things equal if I put away money for a rainy day and my neighbor instead bought a jet ski and now only I am able to keep up with my house payments why should they be the only ones who get paid out when we have both fallen under identical hardships.
Vandooman profile picture
Interesting article. I am long NEE, CCI, WPC, and DOC. I was long BIP and BEP but when the stocks took off and yields declined, I took my profits and reinvested. Advice for US investors, hold the Canadian names in an IRA to avoid withhold of 15%, using the tax treaty. You can claim a foreign tax credit but unless you have a lot of Canadian income, you will not get back 100%. Turbotax now does a good job of filling out Form 1116 for you. Choose the general category of foreign income in Turbotax. Or use an IRA and do nothing.

I use closed end funds to diversify and gain access to areas I wouldn't do on a one name basis. Currently I have 13 and after many years my average yield on book is 9%. Unlike an ETF, there are no withdrawing of money from the fund every time there is bad news and no diluting of your equity by new money, so less volatility. My cash cows are diversified among REITs, utilities, closed end funds, and a few MLPs. I use 1 ETF, AMLP, to diversify MLP exposure, with an 11% yield.
@Vandooman Being 60 I am leaning (planning to) toward safe high-yield CEFs, but want to pick those that will withstand (I mean keep the distribution intact) a big economy (and market) downturn. Do you happen to know of such? Thanks for your comment!
Could you explain why "renewables" have turned down when the Dems. are now in power? Seems like they should be skyrocketing.
Vandooman profile picture
@labman106 higher interest rates are not good for dividend stocks
Jstic profile picture
@labman106 They were WAY overbought. Some had values that were Teslaesque.
What stimulus? My wife and I have not received a nickel from any of it, though we qualify. When we go online to see where it is, they don’t seem to know us. I think long term that may just work out for us.
@GreenguyMN Same here. But that's government business for you.
Jstic profile picture
@GreenguyMN If you haven't received stimulus money you qualified for, you can get it in your tax return.

Austin Rogers profile picture
@GreenguyMN I honestly don't know how the IRS became aware of my bank account information. First time I got something like a debit card. Second time went straight into my bank account. Kind of disturbing when I think about it...
OkieNomics profile picture
NUSI yield is superior and offers more downside protection.
OkieNomics profile picture
DG is well positioned to benefit from more stimmy checks, nice profit, growing divvy, a little beaten down of late for no good reason that I can see.
Austin Rogers profile picture
@OkieNomics Yep, totally. But I prefer to own DG's landlords, such as ADC, O, SRC, and VER.
There is inflation already. Food, fuel, housing. That is a devastating tax on the poorest in our country. There are only two ways to reduce the debt. (1) grow the economy which benefits everyone. (2) inflate your way out which taxes the poorest of us most in a most devastating way.
@Dnthink2ice Yes, the poor get screwed while the Fed tells us inflation is under control. Gasoline prices are skyrocketing which doesn't affect me as much as the young guy just starting out or hourly workers in general.
Valleywood profile picture
Author, I got lost in my own blathering on your post. And I have forgotten to give you a warning to wit:

In the dotage of my old age I have started picking up many defensive equities. I am stunned that I hold MOST of the issues you have specified. Perhaps I need to consider NTST.

The intersection of your selections and mine should give you very serious concern. Perhaps even trepidation. Don't say I didn't warn you ! :>)
Austin Rogers profile picture
@Valleywood Haha, I'm rethinking everything now ;)
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