WPC - 3 Double-Digit Yields Getting Way Too Risky

2024-01-23 08:15:00 ET

Summary

• High-yield investing is a great way to achieve attractive risk-adjusted returns.
• However, not all high-yield stocks make for good investments.
• We share three double-digit yields where the risks are increasingly outweighing the reward potential.

As our name implies, we love high-yield stocks. We believe that taking advantage of Mr. Market's panic-selling quality dividend stocks ( SCHD ) is one of the surest paths to building wealth over the long term because it gives us a large margin of safety. If we buy stocks that have quality underlying business models and sustainable high yields, not much has to change moving forward for us to generate attractive total returns as the yield generally provides us with a total return that is not that far behind - or even in some cases roughly in line with - the long-term average returns from the S&P 500 ( SPY ). When you combine the yield with the eventual recovery of the stock price as the market realizes that it overreacted in its initial sell-off, we get double-digit annualized total returns without even accounting for any growth that these stocks may generate....

For further details see: