Buy These 5 High-Yield Blue-Chips And Get A Free House

Nov. 18, 2021 7:00 AM ETABBV, BTI, MMP, SJI, VZ54 Comments


  • Home prices are up 20% in 2021 and Goldman Sachs estimates they'll rise 16% more in 2022.
  • Many people think that soaring home prices make the dream of homeownership impossible for them.
  • Actually, for the prudent save and income investor, it's never been easier to afford your dream home.
  • The world's best high-yield blue-chips, such as BTI, MMP, SJI, VZ, and ABBV, are willing to give you a free house. In fact, they'll pay you for the privilege.
  • These five high-yield blue-chips pay 6.2% dividends, which are 97.8% likely to avoid getting cut even in another Pandemic or Great Recession level economic downturn. They can not only pay your mortgage, but even buy you a free car, and their 4.2% growing dividends could even one day buy you a rental property or fund lavish vacations. The secret of the rich is that they let their assets pay for their lifestyles. It's time to stop thinking like a pauper, and start thinking and living like a prince.
  • This idea was discussed in more depth with members of my private investing community, The Dividend Kings. Learn More »

Young Couple Standing Outside Dream Home

monkeybusinessimages/iStock via Getty Images

Inflation is the #1 concern among Americans according to recent surveys, and it's not hard to understand why.

US Run-up in pricesInflation is soaring at the fastest rate in recorded history, a nearly 4 sigma event, that would be expected to happen just once every 10,000 years.

US Shiller Home Prices vs CPI ShelterUS home prices are up 20% so far this year, and Goldman Sachs estimates they will rise another 16% in 2022.

Average sales price of new homes sold in the US

(Source: Statista)

The average US home now costs nearly $450,000 and the median $360,000.

Share of new homes under $300K

The good news is that there are lots of relatively affordable homes if you have the flexibility to move to a low-cost city, like San Antonio.

But the point is that home prices are rising fast and many people fear having to be renters forever.

Fortunately, the world's highest quality high-yield blue-chips could be the answer to your dream home prayers.

Let High-Yield Blue-Chips Buy You A House

Say you have $500,000 in cash, to buy your dream home (in low-cost San Antonio).

Take a 3,500 square foot home with four bedrooms, 3.5 baths, listed for half a million dollars for example. This is just an example of a very nice home, at what appears to be a very reasonable price.

Now a cash offer might prove useful if you get into a bidding war with other potential home buyers.

But let me ask you something. Wouldn't you rather get a free house?

30-year mortgage rate

The last time inflation was this high, in 1990, 30-year interest rates were 10%. Today they are 3.1%. Granted you need very good credit to get rates this low, but the point is that we've never seen mortgage rates this low when inflation was this high.

  • 3.1% mortgage with 6.2% inflation = -3.1% real interest rate

Bond market rates

Over the next five years, the bond market expects 3.1% inflation. This means, assuming the bond market is correct, that for the first half-decade your home loan is interest-free.

And if the bond market is right, then over 30 years, the effective interest rate on your mortgage is just 0.75%. It's actually less since home mortgage interest is tax-deductible.

2022 federal income tax brackets

(Source: Nerd Wallet)

Say you're in the 35% tax bracket, which means a combined income of $418,000 to $628,300.

  • A potential 30-year effective real interest rate of -0.34%

In that case, the actual mortgage rate for this $500,000 home is potentially negative. And if inflation ends up higher than the bond market expects (like 3% as some economists expect) then the deal is even sweeter.

  • -1.01% to buy a very nice home

In other words, never in history have homeowners (with stable incomes and good credit) had it so good.

It's possible to actually get paid by your bank, in inflation-adjusted terms, to buy your dream home.

Sound like a deal that's too good to be true? There is one major catch of course.

A 30-year mortgage has a lot of fundamental risks baked in.

You're potentially stuck in one spot for decades. And over 30 years you could potentially lose your job several times, or your spouse could. If you can't make your mortgage payments you can potentially be foreclosed on and end up homeless.

But what if I told you that there was a way to get your dream home, for free, or even get paid to own this appreciating asset?

Better yet, what if this strategy could minimize foreclosure risk because you wouldn't have to make a single mortgage payment, ever.

Well, that's what the world's best high-yield blue chips are offering prudent income investors today.

5 High-Yield Blue-Chips That Can Buy You The House Of Your Dreams

5 High-Yield Blue-Chips That Can Buy You The House Of Your Dreams

(Source: Dividend Kings Research Terminal)

The Dividend Kings Research Terminal offers 10 specialty watchlists for virtually any investing goal.

Each watchlist is based on the DK 500 Master List which includes the world's highest quality companies including:

  • All dividend champions

  • All dividend aristocrats

  • All dividend kings

  • All global aristocrats (such as BTI, ENB, and NVS)

  • All 13/13 Ultra Swans (as close to perfect quality as exists on Wall Street)

  • 42 of the world's best growth stocks (on its way to 50)

My personal favorite watchlist is the Phoenix list, which was designed to be 100% blue-chip quality (or higher) and represents the companies most likely to rise from the ashes of any recession and soar to new heights.

Phoenix Watchlist Sorted By Highest Yield

5 High-Yield Blue-Chips That Can Buy You The House Of Your Dreams

(Source: Dividend Kings Research Terminal)

  • green = potentially good buy or better
  • blue = potentially reasonable buy
  • yellow = hold
  • red = potential trim/sell

You can sort any watchlist by 16 fundamental metrics, in this case, maximum safe yield.

This is how we can construct a five high-yield blue-chip portfolio that can buy you your dream home, and with less foreclosure risk than you can generate on your own.

I've linked to articles I've written about each blue-chip outlining its investment thesis, risk profile, valuation, and total return potential.

Company Ticker Sector Country Quality Score (Out Of 100) Safety Score (Out Of 100) Quality Rating (out Of 13)
British American Tobacco (BTI) Consumer Staples UK 82% 82% 13
Magellan Midstream Partners (uses K-1) (MMP) Energy US 82% 82% 13
South Jersey Industries (SJI) Utilities US 75% 75% 10
Verizon (VZ) Communications US 79% 81% 13
AbbVie (ABBV) Healthcare US 78% 77% 12
Average NA 79.20% - Super SWAN 79.40% - safe 12.20 - Super SWAN

(Source: Dividend Kings Research Terminal)

These Super SWANs represent five industry leaders in five sectors, that can be counted on for extremely generous, dependable, inflation adjusting, and recession-resistant income.

The exact kind of income you need to cover 30-years of mortgage payments.

Company Discount To Fair Value Yield FactSet Long-Term Consensus Growth Rate Consensus LT Total Return Potential Risk-Adjusted Expected Return 12-Month Consensus Total Return Potential
British American Tobacco 48.94% 8.4% 4.2% 12.6% 8.8% 53.05%
Magellan Midstream Partners (uses K-1) 32.89% 8.4% 5.4% 13.8% 9.6% 16.55%
South Jersey Industries 36.02% 4.9% 3.6% 8.5% 6.0% 20.30%
Verizon 13.95% 4.9% 3.4% 8.3% 5.8% 18.55%
AbbVie 27.38% 4.8% 4.3% 9.1% 6.4% 14.43%
Average 31.83% 6.29% 4.18% 10.5% 7.3% 24.58%

(Source: Dividend Kings Research Terminal)

These five high-yield Super SWANs are 32% undervalued, and analysts expect them to soar 25% in the next 12 months.

Of course, 12-month returns are 95% luck according to JPMorgan, but what isn't speculative is the 6.3% yield these five blue-chips are currently paying.

Asset Invested Income Mortgage Excess Income
Downpayment $100,000 $0.00 $19,000 $6,146.47
5 High-Yield Super SWANs $400,000 $25,146.47 NA NA

Let's assume you use a standard 20% downpayment and put the remaining $400,000 into these high-yield Super SWANs. This generates over $25,000 in income resulting in $6,150 in excess dividends each year.

What about taxes on those dividends?

Asset Tax Savings (35% Tax Bracket) Dividend Taxes Effective Post Mortgage Income Effective Post-Mortgage, Post-Tax Yield
Downpayment $6,650 $3,771.97 $9,024.50 1.80%
5 High-Yield Super SWANs NA NA NA NA

The mortgage interest tax savings will more than offset those, resulting in $9,000 in excess dividends, resulting in a post-tax, post-mortgage effective yield of 1.8%.

Or to put it another way, these five high-yield Super SWANs won't just get you a free house, they'll pay you effectively $752.04 per month for the privilege of letting them pay for your free house.

How do a free house and a free car sound? To me, it sounds like a great way to beat inflation, retire rich, and stay rich in retirement.

Why You Can Trust This Income

I know what you're thinking. Entrusting your mortgage payments to dividend stocks? Isn't that risky? Actually, it's a lot less risky than you might think.

Company Dependability Score (out Of 100) Dependability Rating (Out Of 5) Long-Term Risk Management Consensus Industry Percentile S&P Credit Rating 30-Year Bankruptcy Risk Dividend Growth Streak (Years)
British American Tobacco 86% 5 82% BBB+ 5.00% 22
Magellan Midstream Partners (uses K-1) 83% 5 40% BBB+ 5.00% 20
South Jersey Industries 74% 4 64% BBB 7.50% 21
Verizon 78% 5 71% BBB+ 5.00% 15
AbbVie 79% 5 83% BBB+ 5.00% 49
Average 80.00%, exceptional dependability 4.8/5 Exceptional Dependability 68.00% (above-average) BBB+ 5.50% 25.4 (Dividend Aristocrat)

(Source: Dividend Kings Research Terminal)

This group of high-yield blue-chips is effectively a BBB+ rated aristocrat with above-average risk management and 30-year bankruptcy risk of 5.5%.

In fact, the chance of all five companies going under in the next 30 years is approximately 1 in 2 million.

How safe are these dividends, even in recessions?

  • 79.4% safety score = approximately 1% risk of a dividend cut in a historically average recession since WWII
  • approximately 2.2% risk of a dividend cut in a pandemic/Great Recession level economic downturn

Now tell me this. If we had another pandemic, or another Great Recession style downturn, do you think the risk of you and your spouse losing your jobs is more or less than 2.2%?

What's actually riskier? Entrusting something as essential as your mortgage payment to your own household income? Or letting five of the world's highest quality companies pay your mortgage for you?

In fact, as I just showed, these five Super SWANs are willing to pay you $752 per month for the privilege of letting them give you a house for free.

And don't forget that due to a significant housing shortage (up to 6.6 million homes according to the National Association of Realtors) home prices, according to Morgan Stanley, are likely to keep rising for the next two decades at least.

But wait, it gets better.

These five high-yield Super SWANs are not only willing to pay you $752 per month, for the privilege of giving you a free home, but over time they'll be paying you a lot more.

Analysts expect earnings, cash flow, and dividend growth of 4.2% from these five high-yield Super SWANs.

Investment Strategy Yield LT Consensus Growth LT Consensus Total Return Potential Long-Term Risk-Adjusted Expected Return

Long-Term Inflation And Risk-Adjusted Expected Returns

5 High-Yield Super SWANs 6.29% 4.18% 10.5% 7.3% 5.0%
Safe Midstream 6.1% 6.2% 12.3% 8.6% 6.3%
Safe Midstream + Growth 3.3% 8.5% 11.8% 8.3% 5.9%
REITs 3.0% 6.9% 9.9% 6.9% 4.6%
High-Yield 2.8% 11.2% 14.0% 9.8% 7.5%
Dividend Aristocrats 2.3% 8.9% 11.2% 7.9% 5.5%
Value 2.1% 11.9% 14.0% 9.8% 7.5%
60/40 Retirement Portfolio 1.9% 5.1% 7.0% 4.9% 2.6%
REITs + Growth 1.8% 8.9% 10.6% 7.4% 5.1%
High-Yield + Growth 1.7% 11.0% 12.7% 8.9% 6.5%
10-Year US Treasury 1.56% 0.0% 1.6% 1.6% -0.8%
S&P 500 1.4% 8.5% 9.9% 7.0% 4.6%
Nasdaq (Growth) 0.7% 10.9% 11.6% 8.1% 5.8%
Chinese Tech 0.3% 12.0% 12.3% 8.6% 6.3%

(Source: Morningstar, FactSet Research, Ycharts)

In other words, analysts expect these five high-yield Super SWANs to outperform the S&P 500 over the long-term.

That's exactly what they've done since 2002.

5 High-Yield Super SWANs Since 2002 (Annual Rebalancing)

5 High-Yield Super SWANs Since 2002

5 High-Yield Super SWANs Since 2002

5 High-Yield Super SWANs Since 2002

(Source: Portfolio Visualizer)

Now over the long-term, these five high-yield Super SWANs aren't expected to deliver consistent 13% to 14% returns, but they are expected to deliver 10.5% returns.

In other words, not only will these five high-yield blue-chips buy you a free house, and pay you $752 per month for the privilege, but they'll likely generate enough income over time to buy you a lot more.

Year Inflation-Adjusted Annual Dividend Income Inflation-Adjusted Post-Tax Dividend Income Mortgage Tax Savings (Adjusted For Inflation)

Total Inflation-Adjusted Excess Income

1 $25,146.47 $21,374.50 $19,000 $6,650 $9,024.50
5 $27,560.19 $23,426.16 $19,000 $5,904.50 $10,330.65
10 $30,205.59 $25,674.75 $19,000 $5,242.57 $11,917.32
15 $33,104.91 $28,139.18 $19,000 $4,654.85 $13,794.02
20 $36,282.54 $30,840.16 $19,000 $4,133.01 $15,973.17
25 $39,765.17 $33,800.39 $19,000 $3,669.68 $18,470.07
30 $43,582.08 $37,044.77 $19,000 $3,258.29 $21,303.05

(Source: Dividend Kings Research Terminal)

In the first year, you get paid $752 per month to let these five high-yield blue-chips buy you a free house.

  • the average US new car payment was $568 in 2020
  • the average used car payment was $397

Even with car prices up significantly in the last year the fact remains that investing $500,000 into these five high-yield blue-chips (including a $100,000 down payment) could not only get you a free house but a brand new car as well.

And over the long-term, it could get you a whole more. By the final year when these companies pay off your mortgage, they'll also give you $21,303 in inflation-adjusted excess income.

That's not just a new car, but a lavish vacation if you want. In fact, it's enough to eventually pay for another mortgage, say on a rental property that will not only appreciate in value over time but also pay steadily rising income as well.

Bottom Line: Why Are The Rich So Rich? Because They Never Pay For Anything

Why are the rich so rich? Because they've learned the simple secret to true wealth. anything.

This is the power of passive income at work. Once you own income-producing assets, let your assets pay for your lifestyle.

This is what many retirees do, but you hardly have to wait to be retired to use this powerful and effective means of funding your financial dreams.

Today British American, Magellan Midstream, South Jersey Industries, Verizon, and AbbVie are willing to give you a free house, and a free car. And over the long-term their inflation-beating dividend growth, which is reliable in all economic and market conditions, can buy you so much more.

  • corporate housing
  • corporate car
  • corporate vacations
  • corporate home remodeling
  • corporate rental properties

Whatever you want, the world's greatest companies are willing to give you.

In fact, they're willing not only to give you everything you can reasonably want but pay you for the privilege of doing so.

This is how to use conservative levels of debt the smart way. Today's ultra-low interest rates, combined with the highest inflation in 31 years, are hurting a lot of people.

  • specifically the 45% of Americans that own no investable assets

But for those with investable savings our current high inflation, low rate environment is a boom time.

There are incredible deals to be had, all you have to do is recognize them.

I know there are many older investors, who perhaps grew up in the Depression, and fear debt above all else. These are people who don't feel comfortable using credit cards, paying them off each month, and pocketing benefits like 1.5% to 2% cashback (or travel rewards).

There is nothing inherently wrong with paying cash for a home, or a car, or anything else. Just realize that today banks are willing to subsidize your lifestyle and literally give you free money for responsible use of debt.

There is also nothing wrong with utilizing the world's best companies to live a rich lifestyle on someone else's dime.

If you own quality high-yield blue-chips like these, then the cash they generate from every corner of the globe is what's used to pay generous, safe, and growing dividends. In all economic, market, and inflationary conditions.

That income is generated by tens of thousands of hard-working employees, serving tens of millions, or even hundreds of millions of customers.

Centuries ago, we had a term for a person who received steady tribute from around the world, by harnessing the productive power of tens of millions of people.


Today we have a new term for such people. Disciplined income investors and rich people.

Are you tired of worrying about the stock market's inevitable short-term gyrations?

Are you sick of worrying about whether or not inflation is going to make it impossible to pay the bills?

Have you had enough of staying up nights worried about being able to pay your mortgage?

Well, my friends, then it's time to stop thinking like a pauper, and start thinking and living like a prince, or even an emperor.

This is the power of disciplined financial science at work.

This is what can happen when you focus on safety and quality first, and prudent valuation and sound risk management always.

This is what happens when you live beneath your means long enough to accrue some of the world's best income-producing assets.

This is how five high-yield blue-chips can get you a free house, a free car, and so much more.


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This article was written by

Dividend Sensei profile picture
Maximize your income with the world’s highest-quality dividend investments

Adam Galas is a co-founder of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 5,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.

The WMR brands include: (1) The Intelligent REIT Investor (newsletter), (2) The Intelligent Dividend Investor (newsletter), (3) iREIT on Alpha (Seeking Alpha), and (4) The Dividend Kings (Seeking Alpha).

I'm a proud Army veteran and have seven years of experience as an analyst/investment writer for Dividend Kings, iREIT, The Intelligent Dividend Investor, The Motley Fool, Simply Safe Dividends, Seeking Alpha, and the Adam Mesh Trading Group. I'm proud to be one of the founders of The Dividend Kings, joining forces with Brad Thomas, Chuck Carnevale, and other leading income writers to offer the best premium service on Seeking Alpha's Market Place.

My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives.

With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and safe and dependable income streams in all economic and market conditions.

Disclosure: I/we have a beneficial long position in the shares of BTI, MMP, SJI, VZ, ABBV either through stock ownership, options, or other derivatives. 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.

Additional disclosure: Dividend Kings own BTI, MMP, SJI, VZ, and ABBV in our portfolios.

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