Editor’s Note: Thank you for reading Dividends Roundtable REITs.

At 30X earnings, 35% concentrated in 7 AI stocks completely unmoored from business value with daily trading dominated by algorithms trained to respond to headlines: That sums up the S&P 500 and related ETFs that comprise most Americans’ stock portfolios. And market history is clear this won’t end well.

REITs are an antidote. Real property stocks’ current weighing in the S&P 500 is insignificant, effectively de-coupling them from the index. And the sector has started to outperform: Year-to-date, the Real Estate SPDR ETF (XLRE) is up 9.3% and my First Rate REITs are up 6.5%, versus the S&P 500 SPDR ETF (SPY) at 4.98%.

REITs are also still cheap relative both to other stocks and private capital property portfolios. And the average yield for the 81 REITs I track in the REIT Rater is 5.88%, almost six times the S&P 500 yield and competitive with higher quality bond funds.

There are risks, particularly to dividends as borrowing costs stay higher for longer. But best in class REITs are learning to thrive despite that headwind, as demonstrated by Prologis Inc’s (NYSE: PLD) guidance boost earlier this month.

The industrial REIT is one of my five “Best Fresh Money Buys” this month. I feature the investment case for this quintet later in this report, along with five REITs worth taking advantage of current prices to sell.

Got a question? Join the discussion at my live chat on the Substack application, which I host 24-7. Join in and start a thread!

To your wealth!--RC

What does the Strait of Hormuz have to do with real property values in the US? In the long run, not much.

But trillions of the passively invested dollars in stocks are controlled by algorithms trained to respond to headlines. And with those changing intraday on Persian Gulf developments, even REITs are getting caught up in Wall Street’s alternating risk-on/risk-off betting war.

At some point, most passive investors will realize handing off their money to an algo-managed S&P 500 fund sponsored by Mega Corp will always leave them wanting. But until then, we have a compelling investment opportunity to “fade” the algos—building positions in the high-quality stocks headline chasers are selling and taking profits on what’s been bid up.

REITs are a sector with more than its share of bargains these days. The 81 I track in my REIT Rater table cover quite a bit more territory than your grandfather’s traditional sectors like apartments, office and retail.

What “new” sectors like self-storage, data centers and the like have in common with the “old” is they generate steady income from rents. And under the REIT structure, they can distribute that income to shareholders tax-efficiently, which results in high and tax-exempt yields.

Why are REITs cheap now? For one thing, many of them have basically been left out of the stock market’s upward push since 2022, when the Federal Reserve began raising the Fed Funds rate.

The sector caught its breath a couple years after that, when the Fed pivoted to cutting rates. But it came under pressure again last year as disrupted supply chains began to push up inflation. And despite outperforming year-to-date, REIT yields are the highest and valuations the lowest in many years.

The average yield for the 81 in the REIT Rater is nearly 6%. And dividends are well-covered by earnings—specifically funds from operations (FFO) and funds available for distribution (FAD). The average FFO payout ratio is just 69.9% based on most current available information.

More than half the First Rate REITs so far in 2026 have raised dividends this year, with the coverage universe increasing 0.2%. That’s a more restrained rate of growth than in past years. But it also means companies’ payouts are better protected in case there is a downturn, especially after five years of sector-wide cost cutting, debt reduction and “high grading” of property portfolios.

As I pointed out last month, REITs are still trading at a discount to privately held property. According to Private Equity Real Estate, publicly traded REITs are trading at a “median” discount of 15% to 19.3% below net asset value, based on the appraised value of their properties.

That’s a massive discount. There is a meaningful variance between sectors, with out-of-favor sectors like office properties selling for much bigger discounts than relatively in-favor senior housing (SHOP). But in the past, such wide discounts have narrowed, providing a big boost to REITs. And in the meantime, REITs effectively provide investors the opportunity to buy properties at substantial discounts to market value. That’s solid downside protection in case property values do decline.

In my view, one of the biggest attractions of REITs now is the fact they’re historically under-represented in the S&P 500 index at less than 2%, and therefore related ETFs and close cousins. And with more money passively invested in stocks than actively managed that means REITs are historically under-owned by investors as well.

The largest by weighting—Welltower Inc (NYSE: WELL)—actually saw its weighting shrink last month to 0.24% from 0.25% of the index. That means REITs’ longer-term returns are effectively decoupled from S&P 500 performance.

That won’t prevent REITs from taking on water in a real bear market. The last one of those we had was back in 2007-09. And even regulated monopoly utilities took on water then, despite the fact they were able to increase dividends while banks were failing.

REITs that stumble have no assurance they’ll get back up. But top-quality property companies that have protected balance sheets and focused on quality expansion are among the more reliable ports in market wide storms. And they’ll also be among the first to recover at the bottom.

In any case, when REITs have traded at such low weightings and high yields in the past, they’ve rallied strongly the next several years. And there’s every reason to expect the same this time around.

What are the best REITs to buy now?

Every issue, I feature five top-quality REITs trading at attractive prices to start building positions in now. And I highlight a quintet that’s especially ripe for taking some money off the table.

The REIT Rater table is a complete databank for all 81 real estate investment trusts in the broader coverage universe. There’s a full description of what’s provided there in the section at the end of this report.

This month’s “Commentary” has earnings analysis for the 11 REITs that have reported Q1 results and updated guidance to date. I use five basic criteria to determine the “Risk Level” of every REIT:

· Dividend policy sustainability.

· Revenue reliability.

· Regulatory/legal risks.

· Balance sheet strength.

· Operating efficiency.

This quintet is self-reinforcing. A company with reliable revenue in all economic environments, for example, will have a strong balance sheet and a sustainable dividend. And conversely, a REIT that’s run inefficiently will have a tough time holding down debt and/or maintaining a reliable payout.

This is an especially important time to keep an eye on risk. Mainly, there’s no shortage of REITs with high yields and low prices relative to earnings and business value. And the long-term drivers for a sector boom are in place.

Since interest rates began rising in 2022, new builds have fallen off a cliff in multiple sectors, from office properties to residential and self-storage. New supply is still depressing rent growth and occupancy in some sectors, SunBelt apartments and life science campuses being two good examples.

Combined with elevated borrowing costs, that continues to depress new development. And that means very little new supply is set to come on stream for 2027 and later, setting the stage for eventual outright shortages of multiple property types across several regions.

Real estate is also one of a handful of asset classes that tends to perform well in times of elevated inflation. The fog of war has descended on economic data, with the Federal Reserve putting Fed Funds rate changes on hold for the time being. But inflation does appear to be on the rise, with the central bank’s preferred measure running well over 3% versus a target of 2%.

For his part, President Trump continues to pressure the Fed to cut interest rates anyway. This week, Congress held a hearing on Kevin Warsh, his nominee to replace Jerome Powell as Fed Chairman when his term ends in May. Warsh issued a call for “regime change” at the Fed, pledging again to dramatically shrink the central bank’s balance sheet with asset sales.

Warsh’s nomination has been held up in committee by Senator Thom Tillis (R-NC). That may end soon now that the Trump Administration has dropped its criminal probe of Powell over alleged mismanagement of building renovations.

But assuming he does ultimately win confirmation, Warsh’s most important challenge is going to be convincing investors of his independence from politicians. To the extent he does, the currently hot inflation expectations will diminish and borrowing costs may finally start to fall. If he doesn’t, we could see borrowing costs go even higher.

The risk inflation expectations start climbing again is a good reason to own gold stocks, despite their gains of the past year. And it’s a great reason to build positions in selected REITs, provided they can continue to fund growth and dividends at higher interest rates.

Higher Borrowing Costs = Risk to REIT Dividends

Not all of them can. Since mid-2025, we’ve seen several REITs retrench, cutting dividend to hold in more cash. So doing, they’ve shored up balance sheets by increasing their ability to self-fund investment in growth, without turning to capital markets. But their stocks have also taken hits. And arguably, they’ve suffered reputational damage with investors, which may keep their shares depressed for some time.

The REIT Rater shows year-to-date dividend changes for all 81 companies I currently track. So far in 2026, there have been four cuts: Alexandria REIT (NYSE: ARE), Allied Properties (TSX: AP-U, OTC: APYRF), Franklin BSP Realty Trust (NYSE: FBRT) and SL Green Realty (NYSE: SLG).

Alexandria, Allied and SL Green are all owners of office properties. Franklin specializes in collateralized, floating rate mortgages. Both sectors’ REITs have been under earnings pressure the past few years. And most are underwater year-to-date, with shareholders of the now bankrupt and no longer tracked Office Properties Income Trust (OTC: OPITQ) completely wiped out.

So far, SL Green is the only one of the four dividend cutters—as well as the only major office REIT—to report Q1 results. And while the New York City REIT now pays a dividend just 23% of the pre-pandemic rate, there are signs of a return to growth, the fruits of a major strategic overhaul that cut debt and expenses and boosted portfolio quality.

That’s a formula the best in class will repeat. That’s even as the less adept continue to fall by the wayside like Office Properties Income has. And a solid assessment of risks of each REIT is the key difference maker for investors.

Multifamily residential or apartment real estate is another REIT sector coming under intense selling pressure this year.

My candidate for least useful stock market indicator is still the 12-month price projections issued by major investment banks. The changes in the average target price set by the analysts covering companies invariably follow the actual share price action, rather than forecast it. So, increases basically amount to getting on the bandwagon, while decreases are simply piling onto what’s already happened.

Nonetheless, changes in target prices do still influence buying and selling. So when a sector comes under selling pressure, analysts’ target price cuts tend to beget more selling.

That’s what’s happened in the residential property sector since the second half of 2025. And the result is apartment REITs that have consistently raised dividends even during the pandemic year like AvalonBay (NYSE: AVB) are underwater this year, even as popular sector ETFs like the Real Estate SPDR are still in the black.

Residential REITs’ own guidance has played into the bearish narrative, with even the strongest companies in the sector forecasting relatively flat occupancy and rent growth. And many have fed it further by restraining dividend growth to hold in more cash.

Given the pressures on the broad economy this year including uncertain inflation, it’s likely 2026 will be another trough year for at least some residential REITs, tacking onto what was a largely lackluster 2025. And the longer there’s pressure on rents and net operating income, the greater the risk we could see a residential REIT cut its dividend.

We are also seeing some REITs leaving the residential property sector. The former Amerada Hoffler has changed its name to AH Realty Trust (NYSE: AHRT) and has now either sold or has agreements in place to divest 13 of the 14 residential properties it owned last year.

The former Washington REIT, now Elme Communities (NYSE: ELME), expects to completely divest its remaining assets by the end of Q2, all residential properties. And apartment REIT Centerspace (NYSE: CSR) has shaken up its Board during a strategic review management has said could end in the sale of the company.

Starting next week, we’ll get a better read on how leading residential REITs are stacking up in the current environment. Like the office REITs, the best in class are cheap. But neither are they regulated utilities. Some that stumble this year may not get back up. And while the sector holds great promise, we also need to navigate the risks.

My overall strategy for building positions in cheap REITs and controlling risk remains the same:

· Sell any REIT where the underlying businesses is weakening. Q1 earnings releases and guidance updates are the ideal time to assess those risks, along with balance sheet health and investment/dividend policy sustainability.

· Do not chase REITs above my highest recommended entry points. And take new positions in increments of three, rather than all at once—even if stocks are at Dream Buy prices.

· Take profits in big winners when they trade above profit taking prices in the REIT Rater table included with this issue.

· Never load up on any one REIT. Always balance and diversify positions.

In contrast to residential and office, other REIT sectors have managed to maintain upside momentum so far in 2026.

Last year, industrial and logistics property REITs were under selling pressure, as investors worried about potential oversupply at a time when global trade being affected by supply chain disruption. Now the group is back in favor, as it’s clear their major clients need the services they provide more than ever.

Seniors housing continues to enjoy a surge in occupancy and rents, powering REITs’ net operating income. The reputational damage from the pandemic has proven short-lived and demand is surging at a time when larger players with scale are ramping up market share.

Data center REIT shares have spiked up since Operation Epic Fury scrambled global energy markets. US-based facilities especially have gained an advantage over global competitors thanks to access to cheap local natural gas for generating electricity. And the group seems to be getting more traction from the fact that major US tech companies are pushing their AI energy advantage.

Finally, retail REITs are getting some recognition from investors that their sector is far stronger than it was in 2019-20, the last time the US economy weakened. Much greater scale and rapid debt reduction are two reasons. But still-climbing occupancy rates—despite some notable retail failures—are an unmistakable sign that top quality sites are currently in high demand.

There are bargains in each of these sectors. But investors do face a growing challenge in that many of the leaders now pay yields that resemble technology stocks with far different business and growth profiles. They’re now effectively momentum stocks, rather than income investments.

That doesn’t mean they can’t go higher in coming months. But it doesn’t make any sense for long-term investors to build positions, even if dividends aren’t your first priority. And unless you’re prepared to wake up tomorrow seeing them down -20% or more, it makes sense to take some money off the table by selling at least some of your shares.

Top 5 Fresh Money Buys and Sells

So what am I advising now?

Read more

Editor’s Note: Thank you for subscribing to Dividends Roundtable!

Will Operation Epic Fury fallout bring doom or boom for stocks? Or will it ultimately be revealed as just a headline grabber that distracted investors from where they should have been paying attention?

I’m inclined to believe the latter. It’s patently absurd to buy or sell an S&P 500 ETF—with an historically high 35% weighting in just 7 super-expensive Big Tech stocks—based on whether the Strait of Hormuz is really open for business. But that’s exactly what trillions of dollars in algorithmic trades have done over the past month, with the ironic result of little real change in actual stock prices.

Don’t get me wrong. Odds are OEF fallout will be with us for months and potentially years—with favorable and unfavorable impacts for investors. But rather than make big market bets, it’s far better to target specific investments that will fare well regardless of how OEF comes out.

That’s what this month’s two top fresh money buys are all about. We’ll build wealth from their powerful value propositions regardless of how ongoing events in the Middle East are or aren’t resolved.

Have a question? Then join my Dividends Roundtable forum, which I host 24-7 on the Substack application. Join an existing thread or start a new one!

Here’s to your wealth!--RC

Algorithmic trading churning trillions of dollars in and out of stocks, based on headlines that are changing intra-day. That about sums up the recent action in the S&P 500 index, related ETFs and close cousins.

Last week closed out on a rally ignited by a statement from Iran’s Foreign Minister that the Strait of Hormuz is open for business again. And there was knee-jerk selling of oil and energy stocks.

The Saturday news, however, was the Strait is closed again—if it was ever truly open. And that means the headline-following algorithms have already lined up the opposite trade for Monday morning, though they could well reverse again depending on the “news.”

The S&P 500 is supposed to represent a broad swath of the US economy. And ETFs based on it dominate Americans’ portfolios, especially those who’ve abdicated their decision making to some form of “passive” investing.

But the sad fact is the US stock market’s premier index is no longer investable, at least for anyone who’s not an inveterate day trader.

S&P 500 performance now is basically tied to just seven Big Tech stocks, all connected to artificial intelligence. Listed in order by percentage of the index:

NVIDA Corp (NSDQ: NVDA)—7.99% of index ETF, 8.15% 2026 return.

Apple Inc (NSDQ: AAPL)—6.41% index, -0.51% return.

Alphabet (NSDQ: GOOG/GOOGL)—5.82% index, 8.74% return.

Microsoft (NSDQ: MSFT)—5.17% index, -12.38% return.

Amazon (NSDQ: AMZN)—4.04% index, 8.55% return.

Broadcom (NSDQ: AVGO)—3.13% index, 17.71% return.

Meta Platforms (NSDQ: META)—2.45% index, 4.40% return.

These have been the market leaders since 2022. And they’re as a direct result historically expensive. So, it’s no wonder the S&P 500 is also historically pricey at 30X times earnings with a yield of less than 1%.

These seven companies are the leaders of an industry still in its nascent stages of changing the world. But that has little or nothing to do with what’s moving around their stock prices now. In fact, they’re unmoored from any recognizable metric of underlying business value.

Rather, its algorithmic trading triggered by news flow from Operation Epic Fury fallout.

There’s some logic to this trade. Mainly, the faster the conflict in the Middle East winds up, the less chance ongoing disruption to supply chains—especially commodities and energy—will plunge the global economy into a real recession. And that in turn reduces risk to investment markets.

But as wealth building investments, these stocks have run out of steam. After this week’s rally, the S&P 500 SPDR ETF (SPY) is in the black 4.4% year-to-date. But what the headlines gave last week, they could easily take away this week.

It could be years before the stock market’s new leaders achieve enough balance to make S&P 500 index related ETFs a viable wealth building bet again.

By contrast, investors who pick their own stocks can build positions in the new leaders now, free of the baggage of bloated Big Tech. And that’s what we’ve been doing in this income and growth focused portfolio.

Objectives and Strategy

Our three core objectives never change, no matter what the market season.

That’s number one to build a reliable and rising stream of income. I rarely if ever will chase the highest current yields available, unless there’s an extremely compelling argument to do so. Instead, I draw from companies paying competitive dividends that the underlying business can support and grow year after year, regardless of the economic environment.

Second, I want to grow principal over time by building positions in high quality companies that are set to become more valuable as businesses over time. And third, I want to minimize overall portfolio volatility, so no one following this strategy ever has to “eat their seed corn”—sell good stocks at bad prices because they need to harvest cash.

To accomplish these goals, I follow four basic strategy rules:

· I build and hold onto positions in companies with underlying businesses that are positioned for long-term growth and have healthy balance sheets. I sell when the business numbers tell me a company no longer offers that, even if it means taking a big loss.

· I maintain a cash reserve against the possibility of a broad correction. My favorite parking place for cash is still the Vanguard Federal Money Market (VMFXX), which currently has a 7-day SEC yield of 3.56%. It’s not the only suitable money market investment. But anything you choose should be sponsored by an organization that can protect $1 net asset value. And you should be able to access funds in a timely manner.

· I never overload on any one stock. That’s no matter how attractive a particular company looks or even if it trades below its “Dream Buy” price (see attached table), which are entry points that in the past have ensured windfall gains. Spreading your bets is the surest way to limit risk you’ll be taken down by an unexpected setback with a single company. I can guarantee if you invest for long enough, this will happen to at least one of your stocks. Diversification rather than doubling down also takes the emotion out of decision making.

· I always make fresh investments in increments of two to three, rather than all in one purchase. And I will pare back positions when a stock rises far and fast enough to be out of balance with the rest of the portfolio.

It’s not a perfect strategy. There isn’t one in investing. And in my view, there never will be. Stock market action is essentially the result of hundreds of millions of decisions by human beings with different objectives and preferences.

Every successful system works until it doesn’t. And the same rule applies to the increasingly sophisticated algorithms developed over the past few decades, including when they’re run with artificial intelligence that’s capable of making and executing decisions on its own.

But my strategy is getting the job done so far this year. Portfolio holdings are up 13.55% on average year to date. And since inception, we’re ahead by 97.47%, assuming harvesting cash dividends rather than reinvesting. Our weighted yield is 4.5%.

One reason we’ve outperformed this year is we’re relatively decoupled from the S&P 500. My largest holding in the index has a weighting of just 0.26%. The other stocks I hold don’t even register, including my largest financial stock—a regional bank which despite a 63.6% return over the last 12 months still has a market capitalization of just over $600 million.

Shunning exposure to the S&P 500’s biggest names has been a big plus for portfolio performance this year, as it was in 2025. And it figures to be a winning strategy for the next 3 to 5 years, as the market’s premier index rebalances toward the emerging leaders and away from the old and increasingly weary.

The Bullish Side of OEF Fallout

How likely is a major correction this year that would take down everything? The investment media and therefore probably most investors expect the outcome of Operation Epic Fury to determine that. And despite Friday’s relief rally, it’s a fair bet that if the situation eventually spins out of control, a major selloff will follow.

We’re Americans. We don’t expect to lose. And for 250 years, we never have when it’s really counted in geopolitics—though few would count the military actions this century in Afghanistan and Iraq as real victories, or what happened in Southeast Asia in the previous century.

Could something truly catastrophic come out of the current conflict in the Middle East? It doesn’t seem likely to me, though the fog of war is still hanging over everything.

There’s even a good case that Operation Epic Fury fallout is hyper-bullish for the US longer-term, particularly concerning energy.

US oil and natural gas exports now command a safety premium. So does the output of our Australian and Canadian allies. And that’s likely to be the case for years. Even if there’s no further damage to Gulf states’ energy infrastructure—and what is out of commission is repaired quickly—the force majeure on contracts declared by regional producers lives on as reputational damage.

Second, there’s the cost of generating electricity as AI competition heats up. Power is increasingly the critical factor for supporting artificial intelligence’s potential to revolutionize efficiency and capability throughout the global economy.

The US and Canada have cheap natural gas that’s critical to meet incremental electricity demand for AI at a low enough price. The rest of the world does not, including Europe where AI “tokens” needed to run high level solutions are widely unaffordable.

Much about AI’s real potential is still unknown. And it’s a safe bet many of the benefits currently trumpeted by proponents are overblown. But it’s also fair to say the world is only now scratching the surface on what is possible, what’s worthwhile and what could really provide breakthroughs.

Now the pace of development is speeding up. And the countries able to afford the energy to get at these solutions—especially the US—have the potential to vault years ahead of the rest of the world in a relatively short period of time.

That’s bullish for the US. And a real AI revolution represents a great deal of business for the 7 Big Tech companies that dominate the S&P 500. But at these prices, their stocks are wholly unmoored from any reasonable measure of business value. And that makes them and the S&P 500 they dominate uninvestable.

Like the Big Tech companies in 2000 that drove the information technology revolution, today’s leaders trade on price momentum alone. And the primary reason for buying these stocks is not undiscovered value but the firm belief someone else will come along to pay more later.

That’s not a way to make money investing, at least with any consistency. But there are still very real ways to bet profitably on America’s growing energy advantage developing AI. That includes utilities, renewable energy power producers, pipeline companies and oil gas producers, all of which are well represented in this portfolio.

Gold is Flashing Green Again

Ironically, these are the stocks many investors sold on Friday, as the countertrade to the rest of the stock market. And as a result, there’s another opportunity to build positions in the companies highlighted later in this report.

Even top-quality energy-related stocks would be vulnerable to a real 2007-09 style bear market. So, if Big Tech does wind up giving up the ghost here—on an ultimately less than savory outcome for OEF or some other reason—it’s likely they’ll see some selling. But these stocks are nonetheless worth building positions in when they trade at good entry points.

So are best in class gold stocks.

There are many reasons to own gold in spring 2026. Geopolitical turmoil has been and remains one of them. OEF fallout has been at the top of the list. But there are other potential hot spots as well.

The Trump Administration’s never openly acknowledged weak dollar policy is another reason. Since the president took office, the US Dollar Index (DXY)—a basket of currencies—has slumped from over 110 to 98. Meanwhile, the Euro has risen from around parity over $1.18. And the British pound has moved from $1.20 to $1.40.

It’s hard to argue that a sharp rise in the pound and Euro has anything to do with economic strength in the home countries. And in fact, it’s arguably hurting foreign tourism there, always a key driver of growth.

But the impact has made US products and services cheaper in Europe than they were during the Biden Administration. That appears to be a key Trump Administration goal, fixated as it is on the trade deficit as a barometer of US economic strength. And so long as that’s the policy, it’s a plus for gold.

Then there’s inflation and the Federal Reserve. OEF has chased the Trump Administration’s pressure campaign on the central bank out of the headlines. But it hasn’t let up by any means.

Last week, the president threatened to fire Chairman Jerome Powell if he stays on when his term running the central bank officially ends in May. That’s a reasonable possibility, as Senator Tillis (R-NC) has blocked consideration of Kevin Warsh as Powell’s replacement until the White House ends its investigation of alleged mismanagement of Fed building renovations.

The president’s beef with Powell has of course been the chairman’s refusal to cut the Fed Funds rate as much as he’d like. The target rate remains between 3.5% and 3.75%, following the resumption of incremental decreases last year. But the central bank has put future cuts on hold, following the release of data showing an uptick in underlying inflation.

The Fed’s long-term goal is for its preferred measure of inflation—the Personal Consumption Expenditures Index (PCE)—to maintain an annualized rate of increase of 2%. It’s been willing to cut Fed Funds even with PCE above that level, on the belief that inflation was heading lower.

But recently, OEF fallout combined with tariffs and other global supply chain disruption has increased uncertainty. And that’s clearly raised the level of caution among the voting members of the Federal Open Market Committee (FOMC), which decides when to cut or raise Fed Funds—and by how much.

Notably, last week Fed governor Stephen Miran—in the past a supporter of more aggressive Fed Funds rate cuts than the majority of FOMC—stated the “inflation backdrop has deteriorated” since late 2025. And he didn’t chiefly blame OEF fallout but rather noted “a broader set of sectors contributing to price pressures,” suggesting inflation has become “more entrenched.”

That suggests Powell’s pending exit as chairman won’t necessarily usher in a Fed that’s more compliant with the president’s wishes. Neither does his prospective replacement Kevin Warsh, historically an inflation hawk who was likely picked in part to quell fears about future Fed credibility.

But any perception that the Fed is acting as adjunct to the White House would be extremely positive for gold prices going forward—as it was last year. And combined with persistent inflation, that could easily take the yellow metal to $6,000 an ounce and possibly higher, particularly if combined with increased geopolitical uncertainty.

Gold’s rally on Friday—the day Iran’s opening of the Strait of Hormuz was prematurely announced—is a crystal clear sign there are other factors spurring the metal higher. And they appear to be strong as ever.

I prefer gold stocks to the metal itself because the price of gold doesn’t have to rally for investors to reap a windfall the rest of this year. That’s in part because leading miners are arguably still more priced for gold in a range of $3,500 to $4,000 an ounce, rather than the current $4,500 to $5,000 level—let alone $6,000.

Here are the ones to watch:

Read more

Editor’s note: Happy Easter for those celebrating today. This weekend, I’m presenting at MoneyShow’s Investment Masters Symposium in Hollywood Florida, along with my friend and fellow Substacker Elliott Gue. Thanks for reading Dividends Roundtable!--RC

Has Operation Epic Fury entered a de-escalation phase? Are oil prices headed back to the $75 range, where the forward curve is now?

Those questions are understandably front and center in investors’ minds. But we’re going to be better off not trying to answer them and instead focusing on what’s going to benefit regardless of events in the Middle East. And that means nuclear power.

First, let’s look at where we stand now. This is an age of spin maestros. And what used to be viewed as dry economic data is now fodder for political diatribes. But there’s no sugar coating the fact inflation spiked in March to a sequential rate of 0.9%, largely because of a jump in gasoline prices to over $4 a gallon nationally.

So-called “core” inflation was considerably lower at 0.2%, by “virtue” of excluding food and energy. But it’s fair to say the Federal Reserve is now putting further monetary easing on hold, as it waits to see what the impact of a potential energy price shock will have on the broad economy. And that’s kept companies’ borrowing costs higher for longer, even though the Fed Chairman recently declared there was “zero” job creation in the private sector.

All things considered, the US stock market is proving resilient so far. S&P 500 ETFs, the bedrock of most Americans’ portfolios, have been up and down all year but are currently sitting at about breakeven. And despite concerns about inflation and interest rates, the top-quality dividend stocks I recommend in Dividends Roundtable are market leaders.

The SPDR S&P 500 ETF is still slightly underwater even after last week’s rally. But the iShares Select Dividend ETF (DVY) is up 8.83% year-to-date, after bouncing back from a late March low point. The Utilities SPDR ETF (XLU) is ahead 10.8%, also following a late month recovery. And even real estate investment trusts are showing signs of life, with the Real Estate SPDR ETF (XLRE) ahead about 6.8% for the year.

The Dividends Premium Portfolio is up solidly over the past week and is ahead 15.2% for 2026 so far. That’s adding onto one of the best performances for the first three months of the year since the portfolio’s inception back in 2018.

I expect dividend stocks to continue outperforming in coming months. For one thing, they remain historically under owned. Just 7 Big Tech stocks continue to make up more than 35% of the S&P 500 ETFs that dominate Americans’ portfolios. And whole sectors like utilities and REITs remain a low single digit percentage of that index.

We’ve just lived through a period of market history where—like the late 1990s—investors have prized promises of future growth. Dividends in contrast have largely been an afterthought if they’ve been a consideration at all.

Now the shift is on. But it’s going to take months if not years to restore any semblance of balance to the S&P 500. And since more money is invested passively in US stocks through ETFs than actively managed, that means dividend stocks are going to be catching up for a long time to come.

Historically, few if any stocks emerge from a real bear market wholly unscathed. In 2007-09, for example, utility stocks held up well until the collapse of Lehman Brothers in September. That was the event that turned a year-and-a-half long retreat into a full-scale market rout.

Best in class utilities kept paying dividends even as the banks failed. But the stocks took a huge hit. And it took a couple years after the March 2009 bottom for the group to fully recover what it lost over a roughly six-month period.

Buy and hold after the selloff began was the right call. But taking a little money off the table in summer 2008--when sector stock prices were still rising in a falling stock market—was also a great idea. Gains have nasty habit of disappearing if you aren’t willing to sell a little from time to time.

Now is such a time for harvesting some gains. And we’ve done so in the Dividends Premium portfolio this year on more than one occasion.

But there are also still opportunities for buying good stocks on the cheap. And one area to look is nuclear power.

There’s no doubt how Operation Epic Fury comes out will have a major near-term impact on the stock market. And the bets are lining up on one side or the other.

I think it’s likely import-dependent China will eventually convince Iran to open the Strait of Hormuz and get the oil and LNG flowing the Asia again. But before that happens there could still be considerably more destruction from bombing, drone attacks and sub-sea mines.

And here’s more food for thought. When oil prices spiked in mid-2008, it was the last straw for a US economy that was already teetering on a debt crisis. Inflation adjusted oil prices are still well below the $150 a barrel reached then. But is there a similar pain point this time around?

Going Nuclear, Again

Bottom line, there are many unknowns in the current environment that can and will affect your portfolio the rest of 2026. But as important as these questions are, it’s largely a waste of our time trying to guess how the macro picture may change in the next few months as the result of Operation Epic Fury fallout. Instead, we’re going to be best off focusing on what’s likely to keep making money, no matter how this comes out.

Nuclear power is one of those themes. When Qatar declared force majeure on LNG contracts last month, it set off a mad scramble of buyers in Europe and Asia to replace the supply.

Qatar and other producers and exporters of oil and gas had no choice but to declare contracts unfillable with the Strait of Hormuz effectively shut. Damage from Operation Epic Fury fallout will continue hobble their ability to sell energy even after the bombs stop falling, the drone attacks stop and shipping resumes. And perhaps worst of all, the region has suffered reputational damage to go with the physical destruction. Can an Asian or European buyer really count on Persian Gulf energy to flow?

One group of beneficiaries of Qatar’s challenges are energy producers and midstream companies in the US and Canada. After Epic Fury, North American energy has earned a safety premium, for no other reason than it’s produced and shipped from a region far from the Middle East. And as safe suppliers, companies up and down the energy value chain are going to get a multi-year boost, signing on contracts as soon as they can fill them.

Nuclear power is another option global energy importers are likely to turn to. Facilities take years to build even in countries with supply chains to execute on construction like China. But once built, they not only replace the imported natural gas needed to generate electricity. They provide the power at scale to enable electrification of industry and transportation, further reducing import needs.

There are challenges. The accident at the Fukushima Daiichi facility in Japan arguably did more reputational damage to the nuclear power sector than Chernobyl in a previous decade.

On February 9, Japan finally restarted one of the nuclear power plants shut since the accident, unit 6 of the Kashiwazaki-Kariwa facility. But the rest of the fleet is still shuttered, despite the energy crisis triggered by Qatar’s force majeure.

I expect more Japanese nuclear plants to reopen the next few years. Germany’s, however, remain closed. And there’s little sign anyone is interested in reopening them, despite soaring energy prices that have already undermined the country’s industrial base.

In America, political fallout the Three Mile Island accident in 1979 did not escalate to the point where nuclear plants were shuttered around the country. That was in part thanks to then President Jimmy Carter being a nuclear engineer and resisting pressure for such drastic action.

But the price to the industry was dramatically stepped up regulation that pushed up costs and extended construction times to the point where it undermined economics of plants then under construction. And the resulting writeoffs, dividend cuts and bankruptcies basically ended what had been a building boom.

Ownership of US nuclear power plants consolidated dramatically in the 1990s, as deregulation in 15 states forced regulated utilities to divest ownership. The chief aggregator was Exelon Corp (NYSE: EXC), which earlier this decade spun off the operation as Constellation Energy (NYSE: CEG).

Scale economics enabled US operators to apply lessons from one reactor to others. The result was dramatically shortened outage times for refueling and maintenance. And annual operating rates at US reactors rose from the 60-70% range to 90-95% and higher.

Despite these greatly improved economics, however, no US company ventured to build a new reactor until the 00s. At that point, a half dozen large utilities submitted plans with state regulators to build reactors based on Toshiba Westinghouse’s AP-1000 model.

The new reactors relied on a self-cooling technology eliminating the risk of a Chernobyl style meltdown. And Westinghouse was so confident in its ability to execute on construction it signed fixed price contracts with two companies: Southern Company (NYSE: SO) to build two new reactors at the Vogtle site in Georgia, and the former SCANA to build two reactors at the Summer site in South Carolina.

The projects were enthusiastically embraced by regulators in both states. And as a further inducement, the utilities were allowed to recover costs in customer rates as incurred, rather than ask for one major boost when the reactors came online.

As it turned out, that proved to be the utilities’ saving grace. The self-cooling feature of the AP-1000s meant there was no possibility of a Fukushima-style accident, where the combination of an earthquake and tsunami prevented the facility from pumping in water at the crucial moment. But in the fearful days following the accident, plans were shelved anyway, as would-be builders rightly feared political pressure would still push up costs and condemn their stocks to perpetual underperformance until these decade-plus projects were finished.

They weren’t wrong. Southern and SCANA pushed ahead. But after a few years, it was clear Westinghouse could not fulfill its contracts. And shortly after that company filed bankruptcy, SCANA cancelled the Summer project. Only Southern kept going. And after absorbing billions of dollars in additional costs, it finally brought Vogtle reactors 3 and 4 on stream in July 2023 and April 2024, respectively.

Vogtle is now a key contributor to Southern’s power mix. And the stock has been restored to its historical premium valuation as a best in class utility. But following the plant’s entering service, the utility’s executives left little doubt they were not considering another nuclear project, instead emphasizing a strategy of building natural gas, solar and storage to meet the Southeast’s surging electricity demand.

Then last year, two unknowns trounced two veterans in statewide elections for the Georgia Public Service Commission. The key issue in the campaign was affordability, with the challengers blaming increased utility rates on the Vogtle project.

Republicans retained their 3-2 majority on the PSC. And the final rate cases regarding Vogtle are now well in the rear-view mirror for Southern. But the project remains a cautionary tale for utilities, regulators and investors alike.

So where does nuclear power stand in the US now and how should we invest in it?

Read more

Editor’s note: Happy Easter Weekend and Happy Passover. May we all prosper in these interesting times!--RC

“Do I believe the war is going to be lasting a long time? No. Do I believe oil is going to be reverting back to where it was? Maybe even lower.”

That a quote by Blackrock CEO Larry Fink during a Fox interview last month. And it’s arguably been the consensus view since.

Sure, Iran will wreak havoc on the global economy near-term by shutting off the estimated 20% of global oil and LNG trade passing through the Strait of Hormuz. But ultimately, the crisis will be resolved. Oil prices will plunge. Prosperity will return. And investors fleeing the stock market now will regret it.

That would be the best outcome for Fink and Blackrock. The world’s largest asset manager needs Americans to passively invest in its giant algorithm-controlled index funds to keep growing its $14 trillion asset base. But neither is Fink a one-armed economist. So, he laid out an “on the other hand” scenario during that interview as well: $150 plus oil and a “stark and steep global recession.”

That’s a less favorable outcome for investors. And as Operation Epic Fury fallout has increased, the doomsday argument has gained adherents, who are betting the situation will escalate.

There’s reason for pessimism. 17% of Qatari LNG production infrastructure has been destroyed and could take up to five years to rebuild. The same attack also eliminated 14% of global helium supply, a lesser known but still vital commodity for semiconductor manufacturing, as well as cryogenic cooling, shielding gas, pressurizing rockets and cooling superconducting magnets.

Subsequent attacks throughout the region show Iran can still hit back hard. That includes destruction of Gulf States and Israeli infrastructure, the downing of an American warplane and a drone hit on a Kuwaiti supertanker. And despite the Trump Administration’s alternating string of assurances and ultimatums, there’s no sign yet Iran will stop striking, let alone allow shipping traffic to resume through the Strait of Hormuz.

Limited Damage to Investors So Far

The longer and further Operation Epic Fury fallout spreads, the higher the stakes become for investors. But so far, there really hasn’t been that much damage to most stocks.

The S&P 500 hit an all-time high of 7,000 plus in late January. After bouncing last week, it’s still only 6-7% below that level. Even the Nasdaq is off just 8-9% from the high it reached around that time. That’s despite a -22% decline in major component Microsoft (NSDQ: MSFT).

Neither has the bond market reacted as though one of Fink’s two extreme scenarios is inevitable. The 10-year Treasury note yield is still elevated at 4.3% plus. But it’s backed off from the 4.5% of a week earlier. And the Federal Reserve is standing pat. That’s despite Chairman Powell’s response to employment data last week that “effectively, there’s zero job creation in the private sector.”

As for dividend paying stocks, the iShares Select Dividend ETF (DVY) is up more than 8% year-to-date, after bouncing back from a late March low point. The Utilities SPDR ETF (XLU) is ahead 9.3%, also following a late month recovery. And even real estate investment trusts are showing signs of life, with the Real Estate SPDR ETF (XLRE) advancing about 4% for the year.

The Dividends Premium Portfolio has given back some of its earlier gains. But we’re still comfortably ahead 13.16% for 2026 so far. That’s one of the best performances for the first three months of the year since the portfolio’s inception back in 2018.

Dodging Fallout to Keep the Good Times Rolling

Bottom line: A lot has happened in the world over the past month plus. And the risk of global entropy getting further out of control is elevated. But it’s been a good year to be an income investor so far, especially if you’ve been willing to own a broad mix of high-quality stocks drawn across sectors.

The question now is what we can do to stay on top at a time when many investors are increasingly ready to bet on extreme scenarios. So here’s what may seem a novel approach:

Don’t try to guess how the macro picture may change in the next few months as the result of Operation Epic Fury fallout. Focus instead on what’s likely to keep making money, no matter how this comes out.

One place to look: Selected renewable energy stocks.

When the Trump Administration was first getting organized, I responded to a highly negative post on wind and solar power prospects by Doomberg, a leading Substack publication that focuses on energy issues. As it turned out, my contention that the incoming government would be relatively benign for the sector was dead wrong. But from an investment perspective, it didn’t matter.

Mainly, since Inauguation Day 2025, renewable energy stocks have been among the stock market’s best performers, reversing a crushing four-year bear market under the previous president.

The Invesco Solar ETF (TAN) dropped roughly -75% from January 2021 through January 2025. But since then, it’s up over 80%, including 11.7% year-to-date. That’s despite a -25% decline this year in First Solar (NSDQ: FSLR), the largest holding and ironically a continuing beneficiary of Trump’s tariffs and trade barriers.

Why the Trump Turnaround for renewable energy? It certainly had nothing whatsoever to do with policy.

From the start, this administration has done whatever it could to impede development and deployment of wind and solar power. Popular tax credits were reversed and phased out, despite the objections of prominent Republicans. Trump’s Interior Secretary has halted new project permitting on federal lands, just as Biden’s did for oil and gas drilling.

Last year, Interior took the unprecedented step of trying to stop six fully permitted and nearly completed offshore wind projects from entering service. The orders were later rejected by the courts. And three of the facilities are now generating electricity for the grid. But the administration’s actions nonetheless drove up project costs.

Dominion Energy (NYSE: D), for example, increased the projected cost of its now operating Coastal Virginia Offshore Wind facility to $11.5 billion from the previous estimate of $10.8 billion—citing a combination of construction delays and eleventh-hour tariffs on key components.

The Trump Administration even agreed to pay Total Energies (Paris: TTE, NYSE: TTE) nearly $1 billion, just to abandon an offshore wind lease it had shown no sign whatsoever of building on!

Tariff policy and local content rules remain key weapons in the Administration’s war on wind and solar. So are IRS rules regarding what wind and solar projects now in development will qualify for tax credits as they’re phased out.

In my view, the Trump Administration has inadvertently but effectively demolished any guardrails for a new government that’s determined to accelerate a phaseout of fossil fuels. And that may not be long in coming, with Democrats increasingly favored to capture both houses of Congress in November.

But just like oil and gas’ surge during the Biden years, renewable energy’s favorable reversal of fortune is fueled by powerful economic factors. And these far outweigh any negative impact from government policy.

According to the US Energy Information Administration, wind and solar together generated a record 17% of America’s electricity in 2025. Output was 34% higher than in 2024. And it’s set to take a huge leap ahead this year as well, with 43 gigawatts of new name plate capacity entering service last year.

Name plate capacity is not the same thing as actual generation. The sun does not shine at night. And wind conditions are notoriously variable even in the most blustery areas, just as hydro flows vary depending on rain and snowfall even in the wetter spaces of the Pacific Northwest.

But solar has now led all energy sources for new capacity additions for 27 consecutive months. That period includes the startup of two new AP 1000 nuclear reactors in Georgia by Southern Company (NYSE: SO). And combined with rapidly expanding battery storage, wind and solar generated 19% of total US electricity in 2025.

That’s a staggering rate of growth, particularly when you consider how large the US power system already is. And it’s also taking place in the context of the fastest growth in US electricity demand since at least the 1960s, as the artificial intelligence race had triggered record building of data centers—especially at the Virginia hub and in Texas.

Wind and solar energy’s detractors—including the Trump Administration—deride them as “intermittent” and therefore fundamentally unreliable sources of electricity. Advocates, meanwhile, assert that disadvantage is being rapidly overcome by paring renewables with battery storage and more effective grid management, utilizing advanced data science and artificial intelligence.

The truth is both “sides” are both right to some extent. Renewable energy is hardly unreliable. But neither is it in any position to fully replace baseload sources of energy like natural gas and nuclear. In fact, states that have moved in that direction like California have eventually had to allow gas plants like Clearway Energy’s (NYSE: CWEN) to re-open to keep the lights on.

But lost in the increasingly shrill rhetoric is the most important point about renewable energy’s US expansion: It’s being “layered on” to systems. And so doing, utilities are both increasing grid reliability and reducing costs, as wind and solar have zero fuel needs and relatively little maintenance expense.

Natural Gas for Coal

Yes, this nation’s rapidly aging fleet of coal power plants is shutting down. And with apologies to coal miners and all due respect to Department of Energy luminaries: Good riddance.

For over a decade, utilities and other power producers have been replacing old coal with new natural gas. And so doing, they’ve eliminated hazardous particulate matter in the air, as well as acid rain gasses that erode monuments and automobiles, mercury in the water and tons of future coal ash that must be hauled off and stored in giant pits. And as Duke Energy (NYSE: DUK) learned in the previous decade with the Dan River leak, those pits are a multi billion-dollar lawsuit waiting to happen.

If you visit a part of the world that still relies heavily on coal-fired power, you’ll notice right away the unwelcome contrast with the relatively clean air in US cities. And that’s thanks to America’s switching out coal for gas.

Replacing old coal with new natural gas also reduces costs. That’s why utilities and power producers are suing the US government for damages resulting from an order to keep coal plants running this year that had been slated for closure—many for gas switching.

Layering on renewables reduces the long-term risk for utilities that swap historically stable priced coal for more volatile natural gas. US natural gas prices have been well behaved since Operation Epic Fury began, with the benchmark price of North American gas slipping under $3 per million BTU last week.

The market for oil is global. West Texas Intermediate crude oil, for example, sold for $111 plus last week. That was more than Brent’s $108 at the time.

Growing LNG exports including from Canada could eventually erase some of the local natural gas discount Americans now enjoy. But if and when we get there, it’s still unlikely we’d see anything close to the price spikes in WTI oil. That’s because there’s a bonanza of shale gas in North America that would be extremely profitable to drill at a $5 per million BTU price.

On the other hand, there’s a good deal less that’s profitable at sub- $3 prices. And while we’re there, gas producers and energy midstream companies are going to tailor investment to long-term deals with LNG exporter and data center supply.

That’s still a very good business. And shale discipline means companies are going to reward shareholders with dividends and stock buybacks even at these prices, The days of producing for its own sake are long gone.

Investment Discipline Comes to Renewables

The same is happening with the renewable energy companies that survived the 2021-24 bear market.

Read more

Editor’s Note: Thank you for reading Dividends Roundtable REITs.

Fallout from Operation Epic Fury continues to scramble investment markets. And top-quality real estate investment trusts—despite being historically undervalued and under-owned—have taken meaningful hits this month.

Lower prices mean better bargains. But if what’s happening now does lead to further stock market downside, it’s likely what’s cheap now will get cheaper still. And REITs are not regulated utilities: There can never be a guarantee what goes down will ultimately rise again.

How to scoop up bargains without getting burned? That’s what this month’s report is all about. And I’m introducing a new feature—“Five Best Fresh Money Buys and Sells”—which you’ll find following my market analysis and strategy.

Got a question? Join the discussion at my Dividends Roundtable Substack webchat. I host it 24-7 on the Substack application.

To your wealth!--RC

It’s been only five weeks since my last report on real estate investment trusts. But that’s been plenty of time for the ground to shift under investors’ feet.

The primary catalyst is continuing fallout from Operation Epic Fury. And as is always the case when war breaks out in the Middle East, energy prices are ground zero.

The Brent price of a barrel of oil is now nearly twice where it began the year. At Friday’s close, North American natural gas prices had dropped with seasonal weakness to around $3 per million BTU. But with Qatar declaring force majeure on LNG contracts, global gas prices are tracking oil higher as buyers in Asia and Europe scramble for alternative supplies.

Even in the energy self-sufficient US, gasoline prices have surged. And with at least 17% of Qatari LNG production facilities destroyed, it’s likely global oil and gas supply disruption will continue even when the bombs stop falling and the Strait of Hormuz opens again to shipping.

Energy prices along with food are not included in measures of so-called “core” inflation. But they do affect real estate.

That starts with interest rates. Before Epic Fury, the 10-year Treasury note yield appeared to at last be breaking below 4%. Friday, it spiked up to close around 4.5%. Mortgage rates have followed the benchmark rate higher, with their fastest three-week climb since second half 2024 according to Freddie Mac data.

REITs in general have been pulling back on debt issuance the past several years, adjusting to higher for longer rates. And what bond sales we’ve seen have been primarily on the shorter end of the maturity spectrum, where borrowing rates have generally remained lower.

Just after Epic Fury began, for example, data center REIT Equinix Inc (NSDQ: EQIX) sold $1.5 billion of bonds. That included $700 million due 2031 with a coupon interest rate of 4.4% and $800 million maturing in 2033 at a rate of 4.7%.

Equinix is among the highest rated REITs. Both Fitch and S&P rate the REIT BBB+ with a stable rating. And earlier this month, Moody’s lifted it to Baa1 with a stable outlook, citing the company’s “established position in the global digital infrastructure market.”

Rates that low aren’t available to most. Just before Epic Fury, BBB- rated Gaming and Leisure Properties (NYSE: GLPI) issued $800 million of bonds due 2036 at a coupon interest rate of 5.625%. A week after Equinix’ bond sale, BB-rated Ryman Hospitality Properties (NYSE: RHP) sold $700 mil notes due 2034 at coupon interest rate of 5.75%.

Lower Debt Equals Less Risk

Both REITs would have paid considerably more had they waited longer to sell. Going forward, some companies won’t have any choice but to take what the market will give them. But those with the flexibility to pull back on investment, offset the cost with asset sale proceeds and/or partner with private capital will do that instead of issuing bonds.

That’s clearly the direction most are taking. All 80 REITs in the REIT Rater databank have now at last reported Q4 results and updated 2026 guidance. My analysis of the results is in the attached table, along with updates for REITs reporting earlier.

BXP Inc (NYSE: BXP), for example, reported on the progress of its multi-year strategic plan earlier this month at its annual “Investor Day.” Highlights included an update of its target of $1.9 billion in proceeds from “strategic sales of raw land, residential and “non-strategic office assets.” The REIT now forecasts it will have completed $1.25 billion of that in 2026. That compares to one acquisition announced so far this year of $55 million.

Focus on cost containment and debt reduction are a huge plus for BXP’s ability to meet its 2026 FFO guidance of $6.88 to $7.04 per share. That’s even if its target of being 91% leased by end-year falls short. Management’s leased target by the end of 2027 is 93%.

Realty Income (NYSE: O) is leaning on its strategic partnership with private capital firm Apollo to help fund its $8 billion investment program for 2026. Apollo’s initial $1 billion investment will buy it a 49% ownership interest in the partnership, with the REIT contributing 500 retail assets.

Realty Income will own the other 51% and continue to operate the assets under a long-term management contract. The REIT also retains the right to buy out Apollo’s interest “after year 7 and through year 15 of the joint venture” at “a future call price calculated to ensure a capped internal rate of return (IRR) of 6.875%.” But the expectation now is this will be an entity both partners will continue to invest in, pooling resources to accelerate growth at a time of higher for longer interest rates.

Will it succeed? In the past few weeks, there have been reports that over $100 billion in private capital firm assets are experiencing some form of financial stress. And at least one fund investing in real estate has suspended making redemptions.

That’s hardly surprising when you consider this more lightly regulated financial sector has up to now been enjoying a much lower cost of capital than rivals. That includes REITs, which have been challenged to issue new debt and equity at economic rates since the Fed began raising interest rates in early 2022.

Most recent National REIT Association (NaREIT) data reveal a “valuation gap” between public (REITs) and privately owned real estate since the Federal Reserve of around 130 basis points, based on capitalization or “cap rates.”

Cap rates are a shorthand measure of the rate of return on commercial investment property. The simple calculation is to divide net operating income—basically rents and other revenue after subtracting out operating costs—by the current market value of the property.

As I pointed out last month, elevated spreads have usually been followed by several years of REIT outperformance in the stock market. But what if the spread narrows by a private capital implosion, also triggered by a sudden rise in the cost of capital at a time of over confidence and over-leveraging?

New at REIT Rater

Last month, I highlighted the fact that REIT sector stocks were still cheap on a relative and absolute basis, even after a solid start to the year. That’s even more the case now, with Epic Fury fallout wiping out the sector’s year-to-date gains and then some.

The REIT SPDR ETF (XLRE) is now underwater for 2026 including dividends paid. The First Rate REITs have gone from a 7.6% gain to a barely breakeven 0.1%. And the full REIT Rater coverage universe of 80 REITs is down -2.2%.

I’ve initiated two new columns in the REIT Rater table: Year-To-Date Total Return and Year-To-Date Dividend Growth.

The link to the table follows my newly launched “Top 5 Fresh Money Buys and Sells” feature.

Looking down the list, there are still a handful of meaningful winners this year. The biggest is National Storage Affiliates (NYSE: NSA), which received a high premium takeover offer from larger rival Public Storage (NYSE: PSA) in mid-March.

Most REITs, however, have given up the bulk of this year’s gains. And many are now in the red, some substantially.

As for dividend growth, there’s one notable standout: Farmland Partners (NYSE: FPI) boosted its payout by 50% for shareholders of record April 1. Five others raised payouts by at least 10%. And nine more managed a mid-to-upper single digit percentage boost.

Most REITs, however, throttled back on increases, including almost every residential property owner. And we’ve already seen some sizeable cuts, especially in the office sector. The latest of these was at prime New York City building operator SL Green (NYSE: SLG), which has gone to a quarterly rate that’s about -20% below the previous level.

Headwinds and Tailwinds

During the most recent round of REIT guidance calls, more than one executive commented that properties were healthy but that higher for longer interest rates were squeezing margins and ability to grow. That was the primary reason for quite conservative guidance for 2026. And Epic Fury fallout seems likely to trigger even more retrenchment when Q1 reporting season begins in mid-April.

So what’s the big picture here for REIT investors, five weeks into Epic Fury fallout?

First, there are still some substantial positives. Following the selloff and the latest round of dividend increases, REIT yields are generous. The REIT SPDR ETF pays just 3.5%. But the average for my First Rate REITs is 5%. And the REIT Rater coverage universe as a whole is 6.3%, a high point for this decade so far. First Rate REITs so far have raised dividends 1.76% on average, with the coverage universe increasing 0.14% despite several big cuts.

REITs are still trading at a discount to privately held property. And as a sector, they’re still less than 2% of the S&P 500.

The largest by weighting—Welltower Inc (NYSE: WELL)—is still just 0.25% of the index. The second largest is Prologis Inc (NYSE: PLD) at 0.22%, followed by Equinix (NSDQ: EQIX) at 0.17%, American Tower (NYSE: AMT) at 0.14%, Simon Properties (NYSE: SPG) at 0.11% and nothing else over 0.1%.

Historically, when REITs have traded at such low weightings and high yields, they’ve rallied strongly the next several years. And there’s no reason to expect that won’t happen this time around.

Real estate is among the handful of “hard” assets that tends to perform well in times of elevated inflation. And the gains could be larger than usual the next few years.

That’s because new development in multiple sectors—especially residential and self-storage—has been curtailed for several years by a combination of higher for longer interest rates and previous overbuilding. And other sectors including data centers, senior living/housing and industrial/logistics are seeing historic booms due to generational demographic and economic changes.

Also bullish is the fact the REIT sector in general is learning to live with a higher cost of capital. And the lessons of the historic pandemic year collapse (2020) are still fresh in mind for management. That’s especially true in the retail sector, which took the biggest hit then.

Those are the positives. The chief negative is higher for longer interest rates that have slowed growth and are forcing even stronger REITs to hold in cash. And the longer Epic Fury fallout continues, the more likely rates will go higher and companies will retrench further.

Again, it’s worth pointing out that just a month ago, it looked like interest rates were little by little becoming a tailwind for the sector. But at this point, it’s hard to envision the Federal Reserve cutting interest rates with energy prices soaring and supply chain disruption still elevated from an uncertain Trump Administration tariff policy. And inflation could well go higher the next few months, pushing up borrowing costs even more.

But if recent weeks have shown us anything, it’s that geopolitical events can shift the picture in a hurry. And if the US economy starts to show signs of slowing this spring, the Fed may indeed change course to prevent something worse than an inflation spike.

Lower interest rates/borrowing costs are still the single most bullish potential development for REITs this year. So long as rates remain elevated, the sector isn’t likely to make much headway—other than the occasional takeover beneficiary and possibly the sectors that have been hot like industrial properties, seniors housing and data centers.

But when it becomes clear the worst is over, a safe, growing 5-6% plus yield paid reliably by a best-in-class REIT is going to be quite attractive. And from current prices, it’s easy to envision gains of 30%, 40% even 50% in a relatively short period of time.

Here’s What I’m Advising Now

The most important thing is to stick to the strategy. Remember, the goal here is to continue building positions in high quality, dividend-paying REITs when they trade at low prices.

As of Friday’s close, the S&P 500 was down about -10% from the all-time high set earlier this year. The Nasdaq is off by a like amount, which stands to reason as it’s dominated by the same Big 7 Tech stocks.

That magnitude of losses is usually called a “correction” rather than a real “bear market.” Unfortunately, the global fallout from Operation Epic Fury still appears to be spreading. So, we could see stocks slide a lot further, as more investors move to the safety of cash.

The history of big stock market declines is that they hit pretty much everything.

REITs are arguably historically cheap and under-owned. But the sector-wide selloff this month makes it clear that even stronger performers will take a big hit if the broad market continues to fall. In fact, private capital’s emerging vulnerabilities could worsen the situation for commercial real estate in the near-term—even as the demise of rival bidders for properties eventually boosts opportunity for REIT buyers.

Bottom line: High quality REITs are cheap after a multi-year under-performance, capped off by the past month’s declines. But they could still get a good bit cheaper. And the worse Epic Fury fallout becomes, the more likely some will fall and not get back up.

So my strong advice is to ignore the temptation for heroics, such as “backing up the truck” on bargains. Instead, continue to follow our four-part REIT investment strategy:

Read more

Editor’s note: Operation Epic Fury fallout roiled global investment markets again last week. And with the fog of war descended, all that’s certain about the eventual outcome is a great deal of vital energy infrastructure is at least temporarily out of commission.

Stocks of energy companies operating outside the Middle East have been big winners. But share prices have now come a long way in a hurry. And if Epic Fury brings on a global recession, they’ll also be vulnerable.

For times like these, portfolio balance is vital. And keeping yours as the bombs continue to fall is what this week’s post is all about. Dividends Premium members are cordially invited to join my Dividends Roundtable chat, which I host 24-7 on Substack. Happy Spring everyone!—RC

Super major oil companies like Chevron Corp (NYSE: CVX), ExxonMobil (NYSE: XOM) and TotalEnergies SE (Paris: TTE, NYSE: TTE) boast stronger balance sheets than most sovereign nations. And as fallout from Operation Epic Fury has shown us once again, the industry they dominate is critical as ever to a healthy global economy.

Super majors are also among the surest long-term money-makers in the stock market. The first stock I ever purchased for my own account was Texaco. I held through the Chevron merger, automatically reinvesting dividends every quarter. Today, my position is worth almost 45X the initial investment. And my annual dividends have “lapped” what I put in originally more than twice over.

But once you start harvesting instead of just saving, even super major oil companies are worth pruning back occasionally. The reason is balance.

A balanced portfolio is never at risk of being sunk by an unexpected disaster at a single stock. And paring back a position that’s become large enough to be dangerous also frees up cash to invest in cheaper, higher yielding alternatives.

What Could Take Energy Down

To be sure, I’ve rarely been this happy to own energy stocks. They continue to be that rare island of green in a sea of red.

S&P 500’s Operation Epic Fury slide is still a long way from bear market territory—defined as a decline of 20% or more from the late January high of 7,000 and change.

And so far, the roughly -7% retreat has been relatively orderly. Several leading Big Tech stocks are now well under water for the year. That includes artificial intelligence leader NVIDIA Corp (NSDQ: NVDA), which is still almost 8% of the S&P 500 index by weight. Microsoft Corp (NSDQ: MSFT) at 5% of the index is down more than -20%.

But energy is still making money hand over fist, preserving portfolio value while almost everything else is dropping. And these stocks will move a lot higher in coming years, as the long-term energy super cycle continues to unfold.

But that said, it’s fair to ask what happens to this narrow group of winners if Operation Epic Fury fallout triggers something worse. And market history isn’t particularly encouraging.

When the overall stock market goes, pretty much everything sells off with it—even sectors that hold up in the early stages of the meltdown. And there are now a multitude of potential catalysts that could turn this so-far orderly stock market retreat into a full-scale rout.

Opening the Strait of Hormuz this week would likely trigger at least some relief by reducing upward pressure on oil and gas prices. But last week, QatarEnergy reported 17% of its LNG export capacity has already been destroyed by Epic Fury fallout. And with energy infrastructure squarely on the target list of both sides, disruption in the global energy trade will likely continue for months, even in a best case.

Qatar’s force majeure on its LNG sales contracts has set off a scramble in Asia and Europe to secure sufficient supplies elsewhere. That will come at the price of higher inflation and slower growth. And we’re seeing the fallout already in global stock markets, with South Korea down -15% from all-time highs reached in late February.

US producer prices in February rose 0.7% even before Epic Fury fallout. Resulting inflation worries prevented the Federal Reserve from cutting the Fed Funds rate again, despite White House pressure to do so. And bond yields are rising rapidly again, with the 10-year Treasury yield nearing 4.4% at last week’s close.

Higher for longer interest rates were already pressuring investment before Epic Fury. The exception has been artificial intelligence and data center-related plans, including for generating needed electricity. And while utilities’ most recently announced CAPEX plans showed no evidence of a slowdown, even these companies’ ability to absorb higher borrowing costs without making adjustments is not infinite.

Restrained investment means slower economic growth and less employment. At least one major Wall Street research firm is now forecasting odds of a US recession this year as above 50%. And the stock market will react long before actual GDP goes into reverse for two consecutive quarters.

There are also good reasons why the Epic Fury selloff could reverse suddenly and with a vengeance, including an outbreak of peace for whatever reason. And it’s important to remember we’re just a few weeks removed from the strong Q4 results and 2026 guidance updates our companies reported.

The near-term challenges from soaring energy prices, rising interest rates and a weakening economy are very real. But these companies’ strong balance sheets and pricing power are solid insurance they’ll persevere. And their long-term prospects are still bright. We’re going to want to own them on the other side of this.

What To Do Now

So what to do with our big winners in the energy sector?

First and foremost, we need to be deliberate. That means managing positions by moving incrementally, rather than precipitously.

Last week, I advised making the following four trades in the Dividends Premium model portfolio. They were to:

Read more

Editor’s Note: Thank you for reading this week’s edition of Dividends Roundtable!

The fog of war has descended on investment markets. But stocks of best-in-class companies are holding their own, as they always do in times of trouble and uncertainty. And though there are many possible outcomes from the ongoing turmoil in the Middle East, the one certainty is solid underlying businesses will be building wealth for investors on the other side.

One silver lining of what’s going on now is most portfolio stocks are back at prices where they’re worth buying, or very close to it. I’m taking advantage to add to several positions. And I’veraised buy-in targets for several others, following what were very robust calendar Q4 results and guidance updates.

Have a question? Then join my Dividends Roundtable live chat on Substack, which I host 24-7.

Here’s to your wealth!--RC

Fog of war: Confusion caused by the chaos of war or battle.

War is the realm of uncertainty. When battle begins, change is a constant and unexpected consequences are the rule. Everyone’s situational awareness is limited. You can’t see everywhere at once. The only thing that’s sure is you’re going to overlook something, and it will probably be important.

Investing in wartime boils down to two simple rules: If you’re going to move, do so deliberately. And if you’re going to buy, focus on top quality dividend stocks that will shine through the fog of war.

It’s fair to say “Operation Epic Fury” has at least so far failed to rally Americans around the flag, as previous US military actions have. The Trump Administration may have a clear ultimate objective and end game for strategic bombing in Iran. But it’s yet to communicate what it is to investors. And until/unless they do, we can only speculate how long this action will last, and how it will ultimately impact investment markets.

That hasn’t stopped investors from making some big bets on ultimate winners, keeping markets volatile. For example, the long-feared closing of the Strait of Hormuz in the Persian Gulf—and effective shut-in of energy exports from several key Middle Eastern producers—pushed oil to over $100 a barrel last week.

That’s a significant jump from the $60 to $70 range of late February. And it’s already having a widespread impact, from surging gasoline prices even in the largely self-sufficient US to providing a big advantage to chemicals companies like LyondellBasell Industries (NYSE: LYB) that rely primarily on natural gas feedstocks.

We’re also seeing a backup in long-term interest rates. The 10-year US Treasury bond yield finished last week around 4.3% after briefly dipping under 4% earlier this month.

Short-term rates have so far been less affected, with the Vanguard Federal Money Market Fund (VMFXX) still yielding 3.58%. But even before Epic Fury, companies were rolling out 2026 guidance under the implicit assumption that borrowing costs were going to stay higher for longer.

It’s a fair bet what’s happening now will only increase conservatism, especially when it comes to raising debt capital. Industrial REIT WP Carey (NYSE: WPC), for example, has issued initial investment guidance for 2026 that’s one-third less than the $2.1 billion achieved last year. Management plans to fund roughly half of that with proceeds of asset sales, the rest mainly with internally generated cash flow.

Electric utilities are not slowing CAPEX, as opportunities to serve data centers continue to increase. Dominion Energy (NYSE: D), for example, last month announced a $65 billion investment plan for the five years ending in 2030. That’s a 30% increase from what management had planned for 2025-29. And it’s part and parcel of 48.5 gigawatts of prospective incremental demand from data centers, all of which is now under some arrangement that guarantees payment to the Virginia utility.

Dominion, however, does not plan to raise its dividend this year or next. And it’s hardly the only company announcing plans to throttle back payout increases, despite strong earnings growth. The reason: Higher for longer interest rates make holding in additional cash a far better opportunity for financing, than issuing more debt.

Epic Fury and the Economy

The last report on inflation before Epic Fury showed price pressures lessening in the US after increasing in late 2025. The ongoing spike in the price of gasoline, jet fuel and related commodity and product costs may prove ephemeral if the action ends reasonably soon. If so, inflation gauges may resume falling. And borrowing costs would likely follow it down.

But so long as geopolitics is keeping interest rates elevated—or pushing them higher still—companies are going to stay conservative when it comes to dividends. And we’re also likely to see more cuts at companies where revenue is under pressure, like Lyondell’s reduction in its quarterly rate from $1.37 to 69 cents a share last month.

Will Epic Fury fallout also pressure economic growth? Food and energy prices don’t count in measures of so-called “core” inflation used by policymakers like the Federal Reserve. But when they rise, Americans do have less money to spend on other things, at least without racking up more debt.

Last week, my friend Elliott Gue posted “The Great Labor Catch Down” in his Substack “The Free Market Speculator.” A key point in his discussion of employment was the massive recent revisions in Bureau of Labor statistics data, which have undermined their ability to accurately gauge current conditions, let alone predict anything. And in any case, employment data is basically a lagging indicator, with economic weakness showing up there only after it already has elsewhere.

Epic Fury could make things worse than they are now if it further depresses investment, which is ultimately the driver of employment conditions. And the extent it does or doesn’t will also likely depend in large part on how long it lasts—and how much it increases concern about inflation and therefore borrowing costs.

There are already signs that the Gulf States may be pulling back on their global investment plans, as they cope with what they can only hope is a temporary interruption of oil and LNG export revenue. That comes at a time when private capital markets are showing some signs of strain, and most publicly traded companies’ share prices get punished when they announce meaningful equity issuance.

Sufficient turbulence would slow the pace of mergers and acquisitions globally, as private capital and sovereign wealth funds have been major players the past couple years. The consortium currently offering $15 a share in cash for AES Corp (NYSE: AES), for example, includes the Qatar Investment Authority—a country hit hard by Epic Fury fallout.

There’s an argument to be made that the Trump Administration will do a Middle East policy U-Turn, if the economic fallout in the US gets too severe in the next few weeks. November brings Mid-Term elections for Congress, 39 governors’ mansions and 88 of the nation’s 99 state legislative chambers.

Republicans are clearly on the defensive, having lost 28 state offices since November 2024 versus zero gains. That tally now includes one race following the launch of Epic Fury: A New Hampshire legislative vote that saw a 17-percentage point swing in favor of the same Democrat who ran in 2024.

Some kind of declaration of victory by the Trump Administration before moving on—regardless of whether Epic Fury succeeds or fails—still seems likely to me. But it’s a pretty flimsy rationale to base an investment strategy on in the fog of war.

What I’m Doing Now

A month ago, the average year-to-date return for this portfolio was about 14%. The return since inception in September 2018 was 98.05%, just below a high-water mark of roughly 100% reached earlier in February.

Returns continued to rise in late February and into early March. But have given back some ground since Epic Fury began. We’re now up 9% year to date and 92.52% since inception, assuming harvesting of dividends rather than reinvesting. The average weighted yield of the positions is 4.4%.

Performance this month is basically in line with what we’ve seen for the S&P 500 SPDR ETF (SPY), which is down -2.9% year to date with a dividend yield of 1.1%. And it’s in line with the iShares Dividend ETF (DVY), which is still up 6.7% so far in 2026 with a yield of 3.4%.

At this point, I’m not seeing a lot of conviction in the stock market in any direction. Big moves by a particular stock or sector on one day—up or down—are frequently reversed with a vengeance the next. And so long as so much is unknown, that’s what we can expect to continue, as some investors will continue to react to every news flash.

In times like these when so much is unknown, it helps to reflect on what our core objectives are. In this portfolio, that’s building a reliable and rising stream of income, growing principal by investing in growing businesses and minimizing overall portfolio volatility where possible. And we do it by following a simple four step strategy:

· We build and hold onto positions in companies with underlying businesses that are positioned for long-term growth and have healthy balance sheets. We sell when the business numbers tell us that’s no longer true, even if it means taking a big loss.

· We maintain a cash reserve against the possibility of a broad correction. My favorite parking place for cash is still the Vanguard Federal Money Market (VMFXX), which currently has a 7-day SEC yield of 3.58%. If you choose something else, make sure principal is protected and that you can access funds in a timely manner.

· We never overload on any one stock. That’s no matter how attractive a particular company looks or even if it trades below its “Dream Buy” price (see attached table). Spreading your bets is the surest way to limit risk you’ll be taken down by an unexpected setback with a single company.

· We make fresh investments in increments of two to three, rather than all in one purchase. And we’re willing to pare back positions when upside targets are reached, or when it makes sense from a tax perspective.

Are your primary investment objectives still to generate reliable and rising income, build portfolio value over time and limit near-term volatility? If yes, Epic Fury has changed nothing for you. And your best course is to stick with this approach.

But that doesn’t mean doing nothing in the current market.

Last month, only a handful of portfolio stocks were trading at or below my highest recommended entry points. The rest were effectively holds until further notice. Now almost everything we hold is at a price where those without positions should start building them.

That’s partly because stock prices have moved down a bit. But it’s also because more than a few companies have earned a higher entry point on the merits of positive developments, which showed up in calendar Q4 results and bullish guidance updates.

So, here’s what I’m advising this month.

Read more

Editor’s note: This issue of Dividends Roundtable includes actionable investment advice for Dividends Premium readers. Members are also welcome to join my Dividends Roundtable live chat on Substack. To your wealth and an early Spring!—RC

Slow and steady wins the race in investing, as in life. And no stock sector has done that better for investors than utilities—the companies that bring us electricity, natural gas, water and communications service.

On September 4, 1882, Thomas Edison threw the first switch on America’s first power plant in New York City. And in the nearly 144 years since, not one regulated utility has ever gone out of business.

There have been plenty of stumbles. In the early 2000s, a dozen companies including CMS Energy (NYSE: CMS) came within a false step of Chapter 11 bankruptcy, as they reaped the whirlwind from copying Enron’s unsustainable business model in the 1990s.

Large powerful utilities like Southern Company (NYSE: SO) were dragged down by the unexpected costs of building large nuclear and coal power plants in the 1970s. And in the 1980s, survivors of the building boom like NextEra Energy’s (NYSE: NEE) predecessor company FPL Group made disastrous investments in businesses management knew nothing about, including banks, insurance companies and drug stores.

General Public Utilities skidded under $1 on the news of the Three Mile Island nuclear incident. And in the past decade, wildfire damages forced California’s PG&E Corp (NYSE: PCG) into bankruptcy and nearly pushed Hawaiian Electric (NYSE: HE) there as well.

But every time utilities seemed about to come undone, they bounced back. And investors willing to bet their recovery have reaped windfall gains just for buying and holding.

No other sector can match that track record of coming back from any disaster. And utilities are also the only industry that can say there’s never been an unsuccessful merger. That is, none of the literally thousands of unions since Edison’s day has failed to create a financially stronger, scaled up and more resilient company.

Tortoises or Hares?

Utilities are the ultimate tortoise stocks. Year after year, companies expand earnings by investing in the “rate base” of their systems. No one is posting 73 percent revenue expansion and 98 percent earnings growth, as artificial intelligence leader NVIDIA (NSDQ: NVDA) did in Q4. But by growing rate base 6,7 even 9 percent a year, best in class sector companies are reliably growing their earnings a like amount. And that’s the fuel for matching higher dividends and share price appreciation in the long haul.

To a utility, the long-term is a tortoise-appropriate 5 to 10 years. But lately, many sector stocks have been impersonating hares.

It’s no real surprise that electricity industry leader NextEra Energy is out to a nearly 15 percent total return this year, while the S&P 500 is so far underwater. The Florida utility and leading producer of power from wind, solar, natural gas and nuclear energy posted a tortoise-like 15 percent return in 2025. But long-time laggards like Verizon Communications (NYSE: VZ) are up nearly 30 percent in 2026 after lagging the market for years.

What’s pushing these gains? In large part it’s the fact investors are looking for bets on artificial intelligence that aren’t the Big 7 Tech stocks, which still make up 35.5 percent of S&P 500 ETFs despite recent weakness.

The Utilities SPDR ETF (XLU) is sitting on a 9.5 percent year-to-date return, nearly 11 percentage points better than the S&P. And my hand-picked Aggressive, Conservative and Dividend Reinvestment portfolios are up 11.8, 12.9 and 15.7 percent, respectively.

So what am I complaining about? In a nutshell, I love the reality of artificial intelligence. But I hate the hype.

Or to put this another way, natural gas, water, communications and especially electricity companies can look forward to robust growth for years to come, as AI applications grow and consume more services. But long before that materializes—and possibly in the very near future—a “rationalization” of AI hype may have this tortoise sector back hiding under its shell.

Don’t get me wrong. I’m not forecasting AI’s draw on utility services will prove to be a bust. To be sure, there’s always overbuilding in every boom. And not every data center owner signing a contract now would have staying power if eventual demand is less than hype would suggest.

But utilities right now are protected from an AI earnings bust. Management and the state regulators who oversee the real business of utilities are inherently conservative. And they’re even more so now with inflation rising and affordability a major issue in ongoing campaigns for the US Congress, as well as state legislatures and governors’ mansions.

Utilities are only building when data center owners are willing to sign contracts of at least 10 to 15 years with minimum purchase commitments, as well as to pay development costs. And even if some of these data centers “go dark,” the generating capacity and related transmission they’re building now could be repurposed for other customers.

What does worry me is what a cooling of AI hype could do to utility stock prices in the next 12 to 18 months--especially in an environment where the economy is slowing, inflation is rising and borrowing costs are still higher for longer. The fact utility stocks are still relatively underowned in the S&P 500 at around 2 percent is of some comfort. And so is the fact that they’re locking in all the business they can handle.

But we’re already seeing many companies slow or even suspend dividend increases as well as stock buybacks—so they can hold in more cash with capital markets uncertain. And with so many companies now yielding less than 3 percent, there’s not a lot to hold them up.

What We Can Do

So what can we do now to let our profits run in this tortoise-like sector that continues to behave like a hare, without putting recent gains at risk? Here’s what I’ve learned from 40 plus years investing in and advising others in this unique group of stocks:

Read more

I hope you find the new features useful. Here’s to your wealth—and an early Spring!—RC

Inflation is the silent killer of all income portfolios—relentlessly chipping away at principal and purchasing power.

Some years, the damage the swift and devastating. In others, it’s less noticeable. But even at the sub-2% inflation rate targeted by the Federal Reserve, a “safe” portfolio of cash and fixed income will steadily erode.

That’s an inconvenient truth for the universe of “Target Date” funds that dominate most corporate-sponsored retirement accounts. Each fund has a designated “Target” date, by which time it’s supposed to have achieved the investor’s target return to be ready for retirement.

It’s allocation by calendar. As target dates approach, funds automatically allocate a greater percentage of assets to fixed income ETFs. That’s supposed to lock in value against stock market volatility. But it also increases exposure to inflation. And if interest rates and inflation happen to be rising around the target date, investors may find considerably less money in their account than they were expecting.

Just ask anyone who cashed out a Target Date fund following the Federal Reserve’s tightening of monetary policy in 2022-23. That first year wasn’t great for the S&P 500 and related ETFs either. But the stock portion of Target Date funds did recover in 2023, while bond values continued to erode.

So much for safety! But Target Date funds remain the staple of the passive investing options that are many retirement plans’ only choice. Another boondoggle is only a matter of time.

S&P 500 index-related ETFs dominate the stock portion of Target funds. And right now, the State Street S&P 500 SPDR ETF (SPY) has 35.8% of its assets in just 7 very expensive Big Tech stocks—all riding momentum from the single theme of artificial intelligence investment.

I’m a believer in the possibilities of AI, just as I was in information technology a quarter century ago. But the lesson of 1999-02—when the Nasdaq doubled and then cratered in the Tech Wreck of 2000-02—is the stock prices during a boom will outrun companies’ actual growth by years. And when the market inevitably rebalances, it can for the underweighted new leaders’ gains to offset the former leaders’ slide.

Fortunately, investors can avoid the damage from creeping inflation and the risk of a meltdown in the heretofore Magnificent 7 Big Tech stocks.

The first step is to take control of your investments. If your portfolio is a corporate sponsored retirement plan, find out what your options are. An “unweighted” S&P 500 ETF, for example, would not suffer nearly as much damage from a new Tech Wreck as a weighted ETF.

If you already have control, you have considerably more options. And for the record, I have nothing against bonds. But if you want to avoid the scourge of inflation, you’re going to have to manage what you own, just as you would stocks.

My colleague Elliott Gue does precisely that in his “Smart Bonds” advisory, which he also publishes on Substack. And he does it with ETFs, so his members never have a problem buying and selling on his signals.

Beating Inflation with Utility Bonds

I have also recommended buying individual bonds of regulated utilities over the years. My focus: Bonds of maturing in 5 years or less that are issued by companies with sub-investment grade or “junk” credit ratings.

“Maturing” or paying off at par value in 5 years or less means these bonds have only minimal risk of erosion to inflation. In contrast, inflation can greatly impact the value of the payoff from a bond maturing in 20 years.

Bonds rated BB+/Ba1 or less trade at price discounts to bonds rated BBB or higher because they’re perceived as riskier. And they pay higher annualized yields-to-maturity (YTM) as well. YTM is the annual return you receive from owning a bond until it pays off or matures.

Usually, those price discounts are justified. A company with lower rated bonds, by definition, carries more credit risk. So its bonds will have to offer a higher prospective return to compensate.

Regulated utilities, however, are a special case. Uniquely among industries, no sector company has ever gone out of business.

Sometimes companies file for Chapter 11 bankruptcy protection. In the previous decade, for example, PG&E Corp (NYSE: PCG) did so to buy time to resolve billions of dollars of liabilities resulting from the Camp Fire.

The stock price fell to low single digits at one point. But the utility was ultimately able to work with California regulators to resolve its situation. And it’s since emerged from bankruptcy and resumed paying dividends, with the stock price rising more than six-fold. PG&E bonds’ interest payments were temporarily halted. But bondholders were made completely whole—both on principal and back interest—when the company came out of Chapter 11. Investors who ignored the media storm and bought got a windfall.

Utilities have been able to fully financially recover from every catastrophe thrown their way because they’re dominant providers of essential services. At the end of the day, their product is vital. So effectively stopping the bleeding from the catastrophic event, maintaining/restoring good relations with state regulators and cutting costs and debt has always eventually led to full recovery.

That means junk-rated utility bonds throughout history have invariably become investment grade again. As ratings have increased, perceived risks have dropped and the bonds’ prices have increased.

At this point, PG&E’s bonds are still rated below investment grade. That means they still have some upside as the utility continues to strengthen. Earlier this month, the company raised its guidance range for 2026 core earnings to $1.64 to $1.66 per share. That’s not only a sign of growing strength, paired with projected 9% plus growth through 2030. But it’s an extraordinarily tight range, demonstrating how few factors can upset the company’s steady strengthening.

The biggest drawback buying individual corporate bonds is they tend to trade by appointment. Unlike when you buy a stock, there’s no guarantee the specific issue you want will be available when you place an order. That’s because even the biggest issuances of large companies are only a few billion dollars. And most of those who buy are going to be large institutions that plan to hold until maturity.

That includes everything issued by PG&E. And it means you’re going to be most effective working with a broker who has a handle on what’s available.

The good news is all of a company’s bonds are likely to trade at similar prices and yields to maturity, because they have basically the same credit risk. So, you can pretty much get the same results buying a PG&E bond maturing in 2032 as one paying off in 2031 or even 2035.

Bottom line: Buying junk-rated debt of regulated utilities that matures in five years or less offers the prospect of a generous yield and capital gains with very little credit or inflation risk.

Stocks of utilities with unfolding “rags to riches” stories offer even more upside. The caveat is companies with the most potential reward, by definition, are going to be less far along in their recoveries. Some may not even pay current yields. And patience is essential, as is willingness to live with some volatility in the near term.

Beating Inflation

How much inflation should we worry about this year? My view since the now cancelled “Liberation Day” tariffs were announced last April has been that import taxes were as likely to slow the economy as boost prices. And that appears to be the case, with companies not connected to the AI boom cutting back investment and Q4 GDP growth slowing sharply to just 1.4 percent.

On the other hand, Federal Reserve Governor Christopher Waller commented last week that “continued improvement in the labor market” and higher inflation would tilt his decision in favor of not cutting rates next month. And the Fed’s preferred gauge of inflation at last count ticked up to 3 percent, versus the often stated 2 percent long-term target.

Not every commodity’s price has moved higher. But oil has continued to strength, while copper prices have surged. And after dropping sharply in late January on the news the president will appoint Kevin Warsh as Fed Chairman, gold prices moved over $5,200 an ounce last week.

Gold has been described as the only financial asset that’s not simultaneously someone else’s liability. And since then-President Richard Nixon ended the gold standard in 1971, it’s been a reliable barometer of investors’ inflation worries.

That doesn’t mean an actual burst of inflation has inevitably followed a surge in gold. But one certainly can’t be ruled out.

A little over a week after losing at the Supreme Court, the government appears determined as ever to find some way to tax imports heavily. To date, companies have been mostly eating them, unless they enjoy pricing power like utilities and electricity producers. And we’ve seen our first lawsuit attempting to claw back the illegal Liberation Day tariffs. But it’s a safe bet higher copper and steel prices are starting to have an impact. And if the newly announced import taxes stand, they’re likely to be passed on as well.

That’s why we need to be prepared for inflation. Better, income investors should bolster portfolios with stocks especially that make this enemy our friend.

We’ve done well on that score over the past year in the Dividends Premium portfolio. The updated version is in the attached table “Dividends Premium Income Portfolio.”

Read more

Last week, the US Supreme Court ruled presidents can’t use the 1977 International Emergency Powers Act to impose tariffs on imports by fiat—at least not without approval from Congress.

Now the administration is on to Plan B: A new 15 percent tariff on imports from all countries, claiming authority under Section 122 of trade legislation passed in 1974. The new tax expires in 150 days. But it gives the president’s team time to target new levies on individual industries and companies for “national security” and “fair trade” concerns.

Theoretically, the Administration could also ask Congress to pass its now scrapped “Liberation Day” tariffs into law. That seems highly unlikely, with recent polls showing roughly two thirds of Americans opposed to President Trump’s tariff policies.

The Supreme Court, however, issued no real guidance for what comes next, including refunds of the tariffs it struck down. So, the executive branch will likely keep acting unilaterally, even if its actions will be struck down later.

In the interest of full disclosure, I believe the Trump/Biden trade tariffs of the past nine years are bad policy. They destabilize supply chains, increase inefficiency, raise prices and discourage investment. And at the end of the day, they hurt the industries they’re supposed to help.

But the big question is if we investors can expect anything different from the Plan B era of tariffs?

The Commerce Department reports US economic growth slowed to an anemic 1.4 percent in Q4, while the Federal Reserve’s preferred gauge of inflation rose to 3 percent in December. All else equal, refunding the $134 billion collected in Liberation Day tariffs would give the economy a boost. But with Plan B tariffs already in effect, inflation relief is unlikely. Private sector investment will remain cautious. And the federal budget deficit at best will remain close to 6 percent of GDP, considered a “crisis level” in the past.

The market reaction to Plan B tariffs has so far been benign. That’s a stark contrast to the aftermath of the Liberation Day tariffs last April, when the S&P 500 cratered nearly 20%.

Investors remember the stock market’s relatively fast recovery last year. Even businesses that appeared hard hit initially like Stanley Black & Decker (NYSE: SWK) learned to adapt. And most of the big tariffs announced were later modified lower.

Trade tariffs, however, are still having a very real impact on multiple industries. For example, there are still 50% tariffs in effect for imports of steel and copper, essential materials for construction and all things electric. We import nearly half our copper and 25% of steel. And domestic producers have raised prices to take advantage of the import tax.

Higher raw material costs may be slowing the once rapid pace of reshoring of manufacturing to the US. Electric utility American Electric Power (NYSE: AEP), for example, reported a -1.5% decline in Q4 industrial sales across its Midwest and Southwest US territory. Exelon Corp’s (NYSE: EXC) large commercial and industrial plunged -5.4% throughout its Midwest and Middle Atlantic operating region.

Even in the Southeast, Southern Company’s (NYSE: SO) Q4 industrial growth barely registered at 0.7%. And Entergy Corp (NYSE: ETR), which serves the energy sector on the US Gulf Coast, saw Q4 industrial sales growth slow to just 1.8%, a sharp deceleration from the full-year average of 6.7%.

From the utilities’ perspective, slowing industrial demand may actually be a blessing, as companies invest heavily to meet surging demand from data centers. Last week, for example, Southern Company raised its annual projections for electricity sales growth by 2 percentage points to 10% through 2030.

The catalyst: The utility’s “large load” pipeline of expected demand rose to 75 gigawatts for its Georgia, Alabama and Mississippi territory. In response, management increased five-year capital spending to $81 billion. And it raised annual earnings growth guidance to 8%, from a previous 5-7% yearly rate.

For utilities, capital investment plus regulatory approval equals earnings and dividend growth—and robust returns for income investors. In fact, the biggest challenge for the best in class stocks has become finding good entry points.

Utilities have felt tariffs’ impact. Monday morning, Dominion Energy (NYSE: D) will report Q4 results and update guidance, including progress at its Coastal Virginia Offshore Wind (CVOW) facility. And I’ll be very interested in the prospect for relief on the $400 million in Liberation Day tariffs for a critical component.

But for the most part, utilities pass on tariff related costs such as higher steel prices directly to customers, without earnings impact. That’s thanks to having investments in regulated rate base. But even unregulated power producers like Clearway Energy (NYSE: CWEN) can pass on costs because electricity demand is so robust.

That’s called pricing power. Electric companies have it. And it’s one of two key strengths needed for companies to weather this still highly uncertain global trade environment.

The other is balance sheet strength. Soon-to-be-outgoing Fed Chairman Jerome Powell blames tariffs as a major reason inflation stopped falling last year, and remains above the central bank’s 2% long-term target. Call that what you will. But inflation expectations are still clearly elevated with gold back over $5,100 an ounce again. And corporate America’s borrowing costs remain higher for longer.

The Wall Street consensus is uncertainty on the rules of trade will inhibit CAPEX this year, excepting Big Tech’s AI spending boom. The earnings and guidance research I highlighted for Dividends Premium REITs readers last week indicates interest rate concerns are stunting property companies’ investment plans for 2026.

Both worries would arguably be washed away if the Trump Administration abandoned tariffs as a policy. But until either they or a future government does, we need to stick with companies that have strong enough balance sheets to handle higher for longer interest rates, and can pass on tariff related costs.

In a April 2025 Dividends Roundtable post, I highlighted pricing power and strong balance sheets as essential for companies to shake off Liberation Day tariffs. Nothing’s changed with Plan B. But the good news is success means to just keep doing what we’re doing.

Editor’s Note: Thank you for reading Dividends Premium REITs.

54 companies in the REIT Rater coverage universe have released Q4 results and issued 2026 guidance. That includes 15 of the 21 on the First-Rate REIT list. I highlight the results in the “Commentary” column in the REIT Rater table.

The rest will report in the next few weeks. But I’ve already seen enough to make a few moves, which I highlight in this report.

My number one objective here is to get us through the REITs’ muddled near-term to the wealth building boom beyond. We’re building positions in top quality REITs selling on the cheap, like this month’s top fresh money buys. And I’m making a couple of sales as well.

Though the S&P 500 so far has been directionless and volatile, we are off to a good start this year with a 7.5 percent average year-to-date gain with the First Rate REITs. I highlight our strategy and my property sector outlook below.

Got a question? Join the discussion at my Dividends Roundtable, which I currently host 24-7 on the Discord application—and is soon coming to Substack. All Dividends Premium members welcome! To your wealth!--RC

REITs: Making Moves in a Year of Danger and Opportunity

Why own REITs in 2026? For one thing, they’re running well ahead of what’s been a flat-lined S&P 500.

The REIT SPDR ETF is ahead 7.4 percent this year. The average for the First Rate REITs is slightly ahead of that at 7.5 percent, with twice the dividend yield.

Will the good times keep rolling? I see several reasons the answer will be yes.

First, REITs are the rare low-priced stock sector in a market that’s unmoored from business value.

Higher for longer interest rates have restrained REITs’ growth the past few years. And they’ve made dividend stocks generally less attractive, particularly relative to the Big Tech-led S&P 500.

The silver lining is REITs are very cheap on a relative basis to the rest of the stock market. The average dividend yield for the 81 companies tracked in the REIT Rater is well over 6 percent. That’s roughly six times what S&P 500 ETFs currently pay. It’s almost twice the yield for the iShares Dividend ETF (DVY), a commonly used benchmark for income equity portfolios.

REITs are also cheap on an absolute basis: With the exceptions of the Pandemic (2020) and the Financial Crisis (2007-09) market bottom, dividend yields are the highest we’ve seen in a quarter century. And many REITs are selling for less than the worth of their properties, inducing management to use spare cash to buy back stock rather than invest.

National REIT Association (NaREIT) data reveal a “valuation gap” between public (REITs) and privately owned real estate since the Federal Reserve started raising interest rates in early 2022.

Capitalization or “cap” rates are a shorthand measure of the rate of return on commercial investment property. The simple calculation is to divide net operating income—basically rents and other revenue collected less operating costs—by the current market value of the property.

According to NaREIT, the spread between cap rates for REITs and private equity is currently hovering around 130 basis points in favor of the private market. That’s the result of the underperformance of REIT shares the past few years. And historically, when the spread has been this elevated, REITs have outperformed in subsequent years.

Continuing sector rotation would also fuel further gains. All REITs together are less than 2 percent of S&P 500 ETFs. That compares to 34 percent for just seven Big Tech stocks, all supported by the single theme of artificial intelligence investment.

So far this year, Big Tech’s share of the S&P 500 has already declined from 38 percent. But there’s a long way to go before the index that dominates Americans’ portfolios has any semblance of sector balance.

That means a lot of potential money yet to come into REITs. And it’s worth noting that the property sector was also a reliable, high yielding wealth builder during the ‘00s, following the Great Tech Wreck of 2000-02—the last time a handful of giant, extremely high-priced technology stocks dominated the S&P 500 for this long.

A third reason for REITs to continue this year’s rally is the potential for a big decline in borrowing costs. That would increase the relative appeal of REITs and other dividend stocks versus cash alternatives and bonds. And more important, it would provide a powerful spur to REIT earnings and investment, which was tepid in 2025.

Admittedly, I’ve been looking for this to happen for some time. And it won’t, so long as inflation expectations are elevated, as rising gold prices, a falling dollar and stubbornly high 10-year Treasury bond yields have indicated over the past year. But that may be changing now.

It’s no coincidence that gold prices’ runaway rally suddenly stalled and then reversed in late January, when President Trump announced he would appoint Kevin Warsh as Federal Reserve Chairman. Fed Watchers had been speculating for months that the candidate would not be someone considered an inflation hawk.

December numbers announced the same day indicated inflation was accelerating. But the fear level nonetheless dropped. And since then, we’ve seen January numbers indicating moderating inflation, with the benchmark 10-year Treasury yield sliding again towards 4 percent.

Bullish But Headwinds Persist

The two big questions now are (1) Will rates continue to fall and (2) Will they drop enough to spur REITs to invest more to spur earnings and dividend growth, as well as to increase REITs’ relative attraction as investments versus cash alternatives, bonds and other stocks.

Until rates do fall, higher for longer borrowing costs will remain a major headwind for REITs, just as was the case last year. And judging from what we’ve heard from REITs in Q4 results and earnings calls, management isn’t laying plans based on any expectation of relief.

As of this post, almost 75 percent of the 81 REIT Rater companies have released Q4 results and updated their 2026 guidance. Several reported robust levels of investment with opportunities accelerating in second half 2025. And a handful—including seniors home REIT Ventas Inc (NYSE: VTS) and industrial/single purpose property landlord WP Carey (NYSE: WPC)—confirmed substantial volumes already this year.

Even those REITs, however, were cautious about what they projected for the rest of the year. Ventas, for example, expects 2026 investment to come in flat with 2025. W.P. Carey’s official target for this year is almost one-third less than what it did last year.

A meaningful drop in borrowing costs would likely convince both of these REITs to accelerate their expansion. And the same is likely true for the rest of the coverage universe. But at this point, REIT investment if anything is widely expected by the industry to be less this year than last. And that in turn is restraining guidance for FFO growth and plans to dividend increases.

As of my January post, only Prologis Inc (NYSE: PLD) had reported Q4 results and updated 2026 guidance. And I highlighted three key takeaways from the news and numbers:

· Management was able to beat guidance it issued earlier this year for both profits (FFO) and investment.

· The REIT made solid progress minimizing risk from higher for longer interest rates to its balance sheet and long-term investment plans.

· Despite exiting 2025 with clear business momentum, the world’s leading industrial and logistics REIT issued decidedly conservative guidance for 2026.

Those have also been my key takeaways from the news and numbers of the 58 REITs reporting since, including 14 more companies on my First Rate REITs list.

You can read my analysis of what’s important in the “Commentary” column in the “REIT Rater” table, which is attached to this report.

The rest of the coverage universe will be reporting its results over the next three weeks. And I’ll have full analysis of that in the March post, or sooner if action is needed for any of the First Rate REITs.

But it’s already clear that most REITs are expecting another challenging year operationally and financially in 2026. Management teams’ guidance is conservative.

If 2025 is any guide, many companies will beat it. And many will increase their projections at least once this year. But there are also risks that could derail some REITs. And I fully expect to see more dividend cuts and losses.

For example, despite most REIT stocks in the coverage universe being in the black year-to-date, five are already sitting at double-digit percentage losses.

The biggest loser so far is Canada’s Allied Properties (TSX: AP-U, OTC: APYRF), which started the year cutting its dividend by -60 percent and has dropped by almost -30 percent. The others are financial/mortgage REITs Franklin BSP Realty (NYSE: FBRT) and KKR Real Estate (NYSE: KREF), and New York office property owners SL Green (NYSE: SLG) and Vornado Realty (NYSE: VNO).

I’ve been wary of most financial REITs for some time, mainly because their customers are often on the lower end of the credit spectrum. The yields are attractive. And several reported solid Q4 results with increased book value, increased returns on investment and generous net interest income spreads. But should the economy weaken, default rates could rise quickly. And a drop in long-term borrowing costs could flatten net interest spreads.

Weakness in office properties has been part of the real estate landscape since the pandemic. A year of pressure to return to the office in some industries has kept the market reasonably solid for “premium” properties, leveling off occupancy declines for BXP Inc (NYSE: BXP) and a handful of others. But net operating income is dropping sector-wide, as expiring leases are still proving difficult to impossible to renew at comparable rates. And debt is more toxic than ever, tempting management to slash dividends to speed up deleveraging plans.

Where there’s been new development in office this decade, it’s upgrading properties in key locations to “premium” or “Class A.” That’s still left many markets at chronic levels of oversupply for non-Class A properties. And the bankruptcy of Office Properties Income Trust may not be the last in the sector.

But we are starting to see some markets tighten for Class A. And with little or no construction below that in the US, there’s reason to believe the office market is headed for a real bottom in the next couple years, possibly sooner in places like New York City.

Overbuilding, however, remains a drag on several property sectors. One of those is life science, hit by the perfect storm of a five-year downturn in the Biotech business and 180-degree changes in federal regulation and research funding.

At the epicenter is leading life science landlord Alexandria REIT (NYSE: ARE), which issued 2026 guidance including a big first half drop in occupancy. And as a result, management’s guidance range for FFO is well below 2025 levels, still covering the reduced dividend comfortably but a clear indication the bottom for this business is still not in.

Residential REITs have traditionally been safe havens for investors even during more severe recessions. But a building boom earlier this decade, particularly in the SunBelt, will keep rent growth negative on new leases this year. And means low single digit percentage growth at best for NOI and FFO, and negative growth for most SunBelt-focused property owners.

On the plus side, residential REITs are still raising dividends. That includes all three on my First-Rate REIT list, which announced boosts in the past couple weeks along with guidance-meeting Q4 results.

These increases are an unmistakable vote of confidence by management that the sector is working through current oversupply. And it’s gearing up for a boom later this decade, as and new development starts remain at multi-year lows.

I’m very bullish on residential REITs long-term. But it’s fair to say these stocks aren’t going to jump until there’s flattening of the decline in rents on new leases. And that’s only going to happen as oversupply is absorbed.

Residential REITs are going to require some patience this year. And the same is likely to be true of self-storage REITs, a sector that’s also demonstrated ability to weather economic downturns but is also absorbing oversupply.

Retail REITs have started out 2026 better than they finished 2025. Shares of grocery anchored shopping mall owner Kimco Realty (NYSE: KIM), for example, are already up by a double-digit percentage this year, after losing almost -10 percent in 2025. NNN (NYSE: NNN) is also up double-digits after being underwater before dividends last year.

Retail REITs are up because they keep posting strong operating numbers. If the economy does slip this year, there will be pressure on retailers. But after five years of sector consolidation, cutting debt and reducing risk, the best in class will weather it far more easily than they did in 2020. And barring a real calamity, it’s unlikely retail landlords will be forced to close spaces as they did that year.

Bottom line: These are not the retail REITs of five years ago. And there’s far less risk in this group than meets the eye. But their shares will likely take on water just the same.

Three property sectors not seeing overbuilding concerns at the moment are senior housing, industrial/logistics and data centers. They’re getting all the business they can handle. FFO is rising and investment is robust.

But there is a concern here as well for investors—mainly, high valuations that may or may not be sustainable. Seniors home leader Welltower Inc (NYSE: WELL), for example, has a dividend yield of just 1.4 percent. And it’s up another 12 percent year to date, 40 percent in the last 12 months.

Welltower is a great company. But there’s a lot of great news baked into that price. And the same is true for data center leader Equinix Inc (NSDQ: EQIX) at its current price, as well as most industrial REITs.

I still think the best in class of these sectors have a lot more left in the tank over the long-term. But a look at the recent price history of Equinix highlights some major declines in relatively short periods of time. And the $200 per share gain since early December may not last long.

Eyes on the Prize and Sticking to Strategy

So what am I advising to take advantage of REITs’ low valuations and long-term potential now, without taking on too much risk from the cloudier near-term picture I’ve highlighted here?

First, keep your eyes on the prize. Our primary goal here is to build positions in high quality REITs when they trade at low prices. And we certainly have a great opportunity to do that now, after nearly four years of sector-wide underperformance.

Second, control risk by sticking to this four-part REIT investment strategy:

Read more

Editor’s note: Thanks for reading my weekly Dividends Roundtable post! I hope everyone is enjoying the President’s Day weekend.—RC

Is cash once again trash for investors?

Just 18 months ago, the Vanguard Federal Money Market Fund (VMFXX) offered a robust current yield of 5.3%. Now my favorite cash investment is paying out just 3.64%. Rates on bank CDs and savings accounts have dropped a like amount. And the next time the Federal Reserve cuts the Fed Funds rate, cash yields will fall closer toward 3%.

At the same time, FOMO—fear of missing out—is justifiably on the rise in the stock market. The S&P 500 and related ETFs haven’t been much of a dividend staple for years yielding barely 1 percent. And the blue-chip benchmark index is having a volatile and directionless 2026 so far—finishing Friday trading slightly underwater.

High quality dividend paying stocks, however, are off to a great start after finishing 2025 strong. The the iShares Select Dividend ETF (DVY) is ahead by nearly 12 percent. And the average year-to-date gain for the 17 Dividends Premium stocks is up another percentage point since yesterday’s post (15 percent), with the portfolio at a new high-water mark.

Utility stocks have been heating up since early February. The Select Utilities Sector SPDR ETF (XLU) has a year-to-date gain of nearly 9%. And that’s in advance of its first quarterly dividend next month. Even long-suffering—and very cheap—real estate investment trusts are getting in on the act.

The 21 “First Rate REITs” I currently feature in Dividends Premium REITs are up nearly 8% in advance of their first dividends. That’s slightly better than the REIT ETF (XLRE), an extremely top-heavy ETF that yields about two percentage points less than the First Rate REITs’ 5%.

Readers can expect the next issue of Dividends Premium REITs to post Thursday. And despite their gains so far this year, now is still a good time to buy almost all of the First Rate REITs.

Stocks paying 4% or better are currently only a very small piece of the S&P 500. Even after sliding this month, the 7 Big Tech stocks are more than 35% of the blue-chip index and related ETFs. Dividends are a mere afterthought in most Americans’ portfolios and retirement accounts.

The stock market has been due some time for re-balancing. And though Big Tech finished last year at new highs, we may finally be seeing a “Great Rotation” that will catapult dividend stocks higher over the next few years.

There are also signs that company borrowing costs may finally be ready to follow short-term benchmark rates lower.

Gold’s push back over $5,000 an ounce last week is a pretty clear sign investors haven’t forgotten about inflation. But January Consumer Price inflation numbers released last week were more benign than many expected. And in response, the yield on 10-year Treasury bonds dipped to its lowest level in 2026 at just 4.05%.

If rates keep falling, dividend stocks benefit two ways. First, yields will be more attractive relative to bonds and cash. Second, debt-related pressure on earnings and dividends will decline sharply.

The surest way to make money with dividend stocks is picking companies that are healthy and growing. Reliable dividend increases will boost your income. Their underlying businesses will become more valuable, generating capital gains. And high-quality companies hold their value in bad markets, so your portfolio’s overall value will never take an unrecoverable hit.

Many stocks that were ripe for purchase last year are now what I’d call “fully priced.” Most are still worth holding. But they’re too expensive to make new purchases worthwhile. And some stocks have risen far and fast enough to merit selling a part of your position. But there are still many high-quality companies worthy of purchase, especially in sectors like REITs that have been unpopular.

Is now the time to take your low yielding cash and load up on high paying, top quality stocks? After all this discussion of stock bargains, my answer may surprise you:

Absolutely not, unless you’re dead certain you won’t need to withdraw funds for at least 2 to 3 years.

Don’t get me wrong. Anyone planning to live off their investments for any length of time should be stock-centric. But your money’s not going to grow in a straight line. There’s going to be volatility.

There are reasons to be bullish on the market this year. But there’s also good cause for caution.

That starts with investor inflation expectations that are still elevated and have kept interest rates higher for longer. Q4 earnings and guidance are still coming in. But we’ve already seen dividend increases frozen to hold in more cash.

Even companies not planning big debt-funded investments are seeing their interest costs creep up every time they refinance a maturing bond. And in more cyclical businesses where revenue is also under pressure, management teams are eying dividend cuts so they can control debt.

To say ongoing developments in national politics and geopolitics are posing more risk than usual may be the understatement of the year. Politics-based investment strategies are notorious for getting it wrong—the 18% year-to-date gain in the Invesco Solar ETF (TAN) on top of a double last year in the face of a deeply hostile Trump Administration being a great example. But government actions such as last April’s “Liberation Day” tariffs have caused several major market rifts in the past year.

It also seems unlikely the stock market will be able to rotate from Big Tech overweight without at least some carnage. And market history is full of examples where almost everything took on some water when the leaders suffered a big hit.

So how to cope with lower cash yields?

First, make sure you’re getting the best yield you can, without tying up your money or risking principal. I strongly advice keeping your money in reliable organizations, rather than chasing offers of higher payouts that are likely too good to be true.

I’m comfortable Vanguard with $11.6 trillion of assets under management will be able to make good on its Federal Money Market Fund—which focuses on government agency debt maturing in 90 days or less. But probably more important, the published yield of 3.64% is in line with the securities it purports to own.

Any fund or cash investment offering substantially more than that is carrying more risk. That may be because getting the yield is conditional on not being able to get at the money for a specified time, as is the case with CDs. And even a 1-year CD should not be considered a cash alternative.

Second, don’t think of your portfolio cash as static. If there’s a stock you want to own, don’t be afraid to dip into your stash. Portfolio cash is also a great source of funds if there’s an unexpected bill or need to otherwise reduce debt—which I guarantee is costing you more in interest than you’re getting in yield.

The Dividends Premium portfolio about 15% in cash now—mainly the Vanguard Federal Money Market Fund. That’s an amount I’m generally comfortable with, though I do intend to put more cash to work in stocks this year.

Editor’s Note: Thank you for reading the February 2026 Dividends Premium.

So far, 2026 has been mostly volatile and directionless for the S&P 500, and the related ETFs that dominate most Americans’ portfolios. The S&P 500 SPDR ETF is in the black, but only just barely with a gain of 1.47 percent.

Dividend stocks in contrast are tearing up the track. The 17 stocks in our Dividends Premium model portfolio have an average gain of 14 percent in barely six weeks. And most have yet to pay their first dividend in 2026.

There’s a lot more where that came from. But that’s only if we choose our targets and entry points carefully. And a fast start likely means we’re going to need to harvest gains in the coming weeks.

This month, I’m taking an initial position in a high yielding big pharmaceutical company. February’s other top fresh money buy is high yielding natural gas royalty company.

Have a question? I host Dividends Roundtable 24-7 on the Discord channel for all Dividends Premium members. Check it out.

Here’s to your wealth!--RC

Income Portfolio: Starting Strong But Staying Conservative

So far, our dividends and growth portfolio is starting off 2026 the way it ended 2025. The average year-to-date gain of 14 percent is the best beginning since inception in late 2018. And as of the close on Wednesday February 11, returns are at a new high-water mark of 98.05 percent.

The posted return assumes harvesting rather than re-investing dividends. And as my table “Portfolio Dream Buy Prices” highlights, it includes some rather extraordinary gains that aren’t usually associated with steady-as-she-goes dividend paying stocks.

But these returns are proof positive that high yielding stocks can produce outsized capital gains too. That’s provided we buy big dividend companies with strong, growing underlying businesses when they’re cheap. We don’t chase stocks that get away from us. And we have patience to wait for the market to recognize value.

High-quality stocks can languish at low prices for months or even years. And the Big Tech rally this decade has made it especially hard to wait around in underperformers, just as a Tech rally a quarter century ago convinced many to sell their dividend stocks.

But value recognition is happening right now for most of the 17 current portfolio positions. In fact, we now have an entirely different challenge:

Arrow Financial (NSDQ: AROW), Black Stone Minerals (NYSE: BSM), Dominion Energy (NYSE: D), Honda Motor (NYSE: HMC) and Mid-America Apartment (NYSE: MAA) are the only recommendations still selling for less than their highest recommended buy prices.

The other dozen positions are effectively holds, pending a drop in price or an increase to where they merit taking a profit.

Newmont Corp (NYSE: NEM) is still the stock I’m mostly likely to pare back on sometime in the next few weeks. The price of gold has been on a wild ride this year. And the world’s leading gold miner has followed along, as investor worries about inflation and the US dollar’s value have waxed and waned.

Read more

Editor’s note: Thanks for reading Dividends Roundtable! Hope everyone is enjoying Super Bowl Sunday.—RC

The good times have kept rolling for income investors in 2026—with dividend and value stocks piling onto gains from 2025.

Dividends Premium Portfolio positions are up an average of more than 11% year to date—with just two dividends paid so far. That’s on top of 36% average gains last year. And it’s happening in a year when the S&P 500 SPDR ETF (SPY) is ahead only 1.28%.

Many income investors focus mainly on current yield. That’s understandable: Fixed income investments like bonds and CDs quote you a yield. And that’s what your return will be holding on until you get your money back.

But stocks are different. A big current yield is a powerful lure. But only a well-run company will increase its dividend over time. A less adept business will always be at risk to cutting its payout, especially this year with borrowing costs likely to stay higher for longer.

A strong company’s share price will also move higher, as its underlying business becomes progressively more valuable. So, your principal grows over time. That doesn’t happen with a CD. And unless you manage your bond investments—as my friend Elliott Gue does in his Smart Bonds and Free Market Speculator on Substack—you won’t see much capital growth from them either.

My dividends strategy is stock-centric. And nothing is more important in my selection process than companies’ underlying business strength, which I regularly monitor and assess using the following five criteria:

· Dividend policy sustainability—The level of dividend and growth rate can a company’s business reasonably sustain in different environments.

· Revenue reliability—All businesses are cyclical. But can a company manage its ups and downs to become a more valuable business?

· Regulatory/Legal—Government regulation and lawsuits are the cost of doing business. But is management navigating the challenges successfully?

· Financial strength—With borrowing costs higher for longer and segments of the economy weakening, over-leverage is the single biggest risk to dividends now.

· Operating efficiency—The best dividend paying companies are always those constantly looking for ways to do more with less.

You can reasonably forecast when you’ll receive dividends. And if you’re willing to do a little research, you can also estimate with accuracy what a company will pay, for some even as far as 3 to 5 years in the future.

I provide that service for Dividends Premium portfolio stocks.

What’s more difficult is timing capital gains—when a top-quality stock’s price will reflect the value of its healthy, growing business. And a position will often languish unloved for a while, and then suddenly shoot higher.

The two biggest winners in the Dividends Premium portfolio for 2025 were CVS Inc (NYSE: CVS) and Newmont Mining (NYSE: NEM). And it’s fair to say both were hated by investors the year before.

More money is passively invested in the stock market than actively managed. That means share price momentum now runs longer in one direction than ever before. High-quality value stocks stay cheap, while hot companies become ever-more unmoored from business worth.

Best-in-class dividends and value stocks have a lot further to run the next few years.

It’s too soon to declare a great rotation from the 7 Big Tech stocks. They were still 35.9% of the S&P 500 SPDR ETF as of Friday’s close. 2025 underperformance last year was erased by a furious Q4 rally. And though Microsoft (NSDQ: MSFT) at 5% of the S&P 500 has dropped -17% since the start of the year, three of the Big 7 are still in the black this year. The largest—still Nvidia (NSDQ: NVDA) at 7.19%--is flat.

But just a little money coming out of those seven stocks will turbocharge buying power for the rest of the market. And dividend and value stocks are already catching it—just as they did a quarter century ago during the great Tech Wreck.

The question is which dividend stocks have the most upside in early 2026—and which may be already reaching their limit.

High-quality real estate investment trusts I feature monthly in Dividends Premium REITs are also off to solid start in 2026. But they’re also starting from a low point after underperforming the last three years. And pessimism is still heavy around certain property types like apartments and office.

There are still headwinds facing the sector. But the best in class have adapted. And that sets the stage for powerful capital gains the next few years, in addition to generous yields.

What about gold? Four months ago, I posted “Does Gold Still Glitter?” making the case for sticking with gold stocks but focusing fresh money on midstream energy stocks—which had been treading water since late 2024.

That was the bottom for midstream energy. The Alerian MLP Index has returned better than 20% since. And there’s still considerable value, with the energy upcycle ramping up again.

But gold has done even better. Starting from a mid-October all time high of around $3,900 an ounce, the yellow metal almost hit $5,600 in late January, before settling just under $5,000 at Friday’s close. And gold stocks have largely followed it up.

Gold’s peak and subsequent plunge back under $5,000 coincided with the release of consumer and producer price inflation data for December showing a sharp acceleration. But the same day, President Trump announced he would nominate Kevin Warsh to be Federal Reserve Chairman when Jerome Powell’s term end.

For those who aren’t Fed watchers, Warsh is Wall Street. And he has a history of being an inflation hawk and fierce critic of quantitative easing—central bank bond purchases to drive down interest rates.

It’s reasonable to blame gold’s plunge on the nomination news—Warsh still must be confirmed by the US Senate—as a sign the Fed will continue to be serious about fighting inflation. But that may also be premature, as the White House still appears to be expecting rate cuts. And key commodities are showing signs of entering a new super-upcycle.

The unknowns will keep gold prices volatile. But despite big 2025 gains extending into 2026, gold stocks are arguably only just beginning to see the benefits of $3,000 gold, let alone $4,000 or $5,000!

So, I’m staying with my mining stocks, just as I did four months ago. No guarantees. But the best just might still be ahead.

Editor’s note: Strong companies build wealth. Financial results assess strength. Here are my four takeaways from Q4 results and guidance updates so far. Thanks for reading Dividends Roundtable!--RC

Every three months, Wall Street and investment media play a game of “expectations.”

Those “in the know” make a projection, usually for earnings per share. Stocks of companies that beat their numbers attract buyers. Those that disappoint get sold off.

If you’re serious about building wealth, you’ll do best ignoring this action. But earnings reports and guidance updates are critical information in one huge respect.

Viewed in perspective, they assess our companies’ underlying health and ability to grow. And so doing, they answer the question of whether we want to continue owning them, or to move onto something else.

Sometimes, though not often, a “beat” of expectations illuminates strengths investors had largely overlooked. That was the case for Verizon Communications (NYSE: VZ) last week.

The self-proclaimed “turnaround story” posted 2025 earnings at the high end of expectations, on the strength of the most customer additions since 2019. And management guided to free cash flow growth of 7% and 4-5% earnings growth for 2026, versus an average rate of -1% the past five years.

Verizon had been trading for around 8 times earnings—the burden of extremely low expectations. And it’s headed for bigger gains so long as management executes. The stock at 11X earnings is still deeply discounted to rival T-Mobile US (NSDQ: TMUS) at 19X, and the S&P 500 at 29X.

Verizon is also just 0.28% of S&P 500 ETFs. That’s an historically low weighting, comparing to a combined 37% for the seven largest Big Tech stocks. And the company pays a dividend of over 6%, with a 2.5% increase on tap for March.

It won’t take much of a shift in S&P 500 weightings to provide a big lift to Verizon shares. But it’s important to realize that immediate post earnings announcement gains often erode near-term. And that could well be the case for this stock, as media narratives move onto something else.

Verizon’s market share gains are also zero sum to some extent. Many of the fiber broadband and 5G wireless customers it’s winning now came from smaller players in the communications sector, including big cable companies like Comcast Corp (NYSE: CMCSA). AT&T Inc’s (NYSE: T) customer additions reported earlier in the week came the same way. And T-Mobile will report the same with its earnings February 11.

Bottom line: The Big 3 US telecoms are consolidating market share and growing earnings while everyone else in their sector is literally shrinking. And the Q4 results we saw last week are just the latest evidence of this trend.

The gains from AT&T and Verizon last week demonstrate how quickly stocks trading at low valuations—i.e. discounts to their peers and the S&P 500—can move higher. That’s even when Big Tech leaders weaken, as they did late last week.

I expect value and dividend stocks to outperform again in 2026, as they did in 2025. In fact, they’re already off to a great start. Dividends Premium portfolio stocks returned 8% in January, virtually all capital gains. That’s against 1.5% for the S&P 500. The iShares Dividend ETF (DVY) is up 6.6%.

Takeaway two is Q4 results clearly show multiple sectors of the economy are facing headwinds. And that means elevated risk to dividends, particularly with borrowing costs remaining higher for longer and companies reporting increased debt interest expense.

Last week, Comcast became the latest company to announce it will not increase its dividend in 2026, as it deploys more cash to cut debt. It won’t be the last.

Other companies appear to be on track for cuts. The CEO of global chemicals producer Lyondell Bassell (NYSE: LYB) strongly hinted during the Q4 guidance call that his board will consider a dividend cut later this month, as it weathers a cyclical downturn.

Strong earnings from Prologis Inc (NYSE: PLD) testify to the REIT’s business strengths. But they also point to better times ahead for industrial and logistics real estate, as tenants adapt to supply chain disruption.

Seniors housing looks set for another solid year, with rising occupancy and rents. But results from biotech landlord Alexandria REIT (NYSE: ARE) and high-end New York City office owner SL Green (NYSE: SLG) highlight pressures still facing office REITs six years after the pandemic. And residential REITs are weighed down by temporary oversupply, despite plunging new development.

I’ll have a complete recap of how REITs fared later this month in my Dividends Premium REIT Rater. And I expect a positive year overall for the First Rate REITs, which gained 4.3% in January. The iShares REIT ETF (IYR) is up 2.5%.

But there will also be dividend casualties in this sector. Wise selection is critical. And that means exercising a little discretion whenever you spot a yield that looks too attractive to be true.

My third major takeaway from Q4 results is adapting to higher for longer interest rates is critical to stock performance—just as it was in 2025.

Banks that control credit risk, for example, will continue to profit from the gap between short-term and longer-term interest rates. But lenders with less credit worthy borrowers will see gains vanish if there are significant defaults.

Last week’s big news on the macro front was President Trump’s nomination of Kevin Warsh to be the next chairman of the Federal Reserve, when Jerome Powell’s term expires this year.

Last week, gold prices briefly shot up to nearly $5,600 an ounce—a clear sign of inflation expectations surging out of control. Then came the announcement of Warsh, historically an inflation hawk and advocate of a smaller Fed balance sheet. And the result was a sharp one-day plunge in gold to around $4,900 with the US dollar having its best day in a while.

Will inflation expectations continue to deflate? Ironically, the US Bureau of Labor Statistics reported Friday that producer prices rose 0.5% in December, a 6% annualized rate and well above Wall Street projections for a 0.2% rise. That follows a 0.3% boost in the All Urban Consumer Price Index for the month (3.6% annualized).

Excluding food and energy the CPI boost was 0.2%. But that’s still too fast to reach the Fed’s 2% target rate. And at this point, food and energy are arguably driving other prices higher, backing the central bank’s recent decision not to cut Fed Funds again, despite pressure from the Trump White House.

The single most bullish potential event for dividend paying stocks in 2026 would be a meaningful drop in corporate borrowing costs. But that’s only going to happen if inflation expectations decline sharply from here. And even assuming Warsh still acts like an inflation hawk, it could be months before that happens.

So, my final takeaway from last week’s Q4 earnings releases and guidance updates is we need to invest based on the assumption corporate borrowing costs will stay higher for longer. That means seeking out the best of the best and generally ignoring the rest.

So far, Winter Storm Fern has triggered a state of emergency in 18 states. And electric utilities are on the spot: A projected 170 to 200 million Americans are at risk of losing power to record snowfall, wintry mix and sub-zero temperatures.

The most damaging storm in recent memory was Winter Storm Uri in February 2021. That storm struck hardest in Texas, claiming over 200 lives and wreaking $200 billion plus in damages. And a breakdown in natural gas production supplies triggered shortages and price spikes, which utilities have recovered only after several years keeping customer rates elevated.

Utilities’ Fern performance will be measured three ways:

· The number of people who lose power at some point during the storm.

· How long it takes to get at least 90% of outages resolved.

· The cost of system damages above what’s covered by insurance.

The stakes couldn’t be higher. Companies perceived favorably by the public will benefit this year from a grateful state government. But any that falter—even if it’s no real fault of management—could find themselves a campaign issue in a year where 36 states will elect governors and 46 a new legislature.

But despite this risk, best in class utility stocks are set for another strong performance in 2026.

The Big 7 Tech stocks again dominated the US market in 2025. But utilities were right there with them, adding to robust returns from 2024. And the key driver for both sectors was artificial intelligence, as investors “discovered” there will be no AI revolution without a great deal more electricity.

We’re going to hear much more about the AI business opportunity for US electric utilities in guidance calls the next few weeks. And I expect the same from water, natural gas and telecommunications infrastructure providers.

AI excitement’s ability to drive stock returns in 2026, however, may be waning. Shares of America’s leading nuclear power company Constellation Energy (NYSE: CEG), for example, are down nearly 30% since mid-October.

AI-related investment will support electric utilities’ longer-term guidance investment and earnings growth. But as drivers of 2026 stock returns, I see three other factors having a greater impact:

· Investors’ growing desire for safety.

· Improving perceptions of renewable energy exposure.

· Long-term borrowing costs at last follow short interest rates lower.

As of Friday’s close, the Big 7 Tech stocks were 36.4% of the SPDR S&P 500 ETF (SPY). Electric utilities were just 1.45%, Multi-utilities 0.58%, Wireless telecoms 0.15%, Independent power 0.1%, Gas utilities 0.04% and Water utilities 0.04%.

You get the point. Utility stocks even after two solid years of performance are historically under-owned by US investors. And relative valuations aren’t even close. The biggest Big Tech NVIDIA (NSDQ: NVDA), for example, trades at 47 times earnings. The largest utility NextEra Energy (NYSE: NEE) sells for less than half of that.

Just a trickle of outflow from historically high-priced Big Tech to still reasonably valued utilities would have a major positive impact on sector stocks. And utilities are considerably less vulnerable to an overall market decline as well.

Utilities’ most compelling safety appeal in early 2026 is versus other dividend stocks.

The same factors behind dividend cuts in many sectors last year—particularly real estate investment trusts—are still with us in 2026. That’s supply chain disruption, stubbornly high inflation, soft investment, weakening employment and above all higher for longer borrowing costs. And we’re likely to see more companies freeze or reduce payouts to hold in cash.

Utilities will remain the notable exception, with earnings locked in by multi-year, regulator-approved investment plans. And the more dividend cuts elsewhere, the more their appeal will grow.

The Trump Administration is hostile as ever to wind and solar energy. But the Invesco Solar ETF (TAN) has tacked on a double-digit gain so far in calendar 2026. Returns since inauguration day are north of 75%.

Returns have followed proof of resilience—as companies up and down the value chain have shown they can grow rapidly regardless of the political environment. I expect more evidence of that this year, with NextEra’s Q4 earnings this week the opening salvo.

But renewable energy stocks may get a much bigger lift later in the year, ironically from politics. Incoming governors of New Jersey and Virginia have already doubled down on wind and solar development in their states. That’s a strong indication Democrats will revive tax credits and other development incentives if the party wins control of Congress in November.

And any hint of a building Blue Wave will likely trigger a sharp rally for stocks like Clearway Energy (NYSE: CWEN) well in advance of the vote.

But there’s an even bigger potential upside catalyst for utility stocks in 2026: That’s longer-term interest rates and borrowing costs at last following short-term rates lower.

A meaningful drop in borrowing costs would cut utilities’ debt interest expense. That means savings for customers. It would also slash the cost of funding new regulator-approved system investment. And utility dividends would be more attractive relative to falling bond yields.

How likely is this to happen? Cutting interest rates has obviously been a top priority of the Trump Administration for over a year. But arguably what it’s done so far has actually kept them higher for longer. That includes tariffs that have up-ended supply chains, playing hardball with the Federal Reserve, and trying to get mortgage rates lower by having Fannie Mae and Freddie Mac expend reserves to buy mortgage-backed securities.

Long rates have stayed high because of elevated inflation expectations, demonstrated most plainly by gold prices now close to $5,000 an ounce. Borrowing costs won’t go lower until they do.

My view: Appointing a new Fed Chairman with Wall Street bona fides as an inflation fighter would puncture inflation expectations. That would set the stage for meaningfully lower borrowing costs later this year.

That would be a huge plus for utility stocks. But the real surprise may be that companies are now well prepared however things go.

Bottom line: Handle Winter Storm Fern competently and 2026 will be another very good year for utility stock investors.

Editor’s Note: Thank you for reading Dividends Premium REITs for January.

We’re three weeks into calendar year 2026. And so far, despite broad investment market turbulence, REITs are off to a great start.

Some of these gains are a rollback of late 2025 selling. That’s usual for January and is the basis for various “Dogs of the Dow” strategies.

Will REITs’ good start to 2026 continue? Yes, for several reasons. Many best-in-class companies are still quite cheap. Dividend and value stocks are increasingly outperforming as money shifts from bloated Big Tech stocks. And the development slowdown of the past few years is locking in future supply shortages across multiple property types.

A real stock market correction would likely trigger selling of REITs as well. Already elevated borrowing costs are rising again, putting more dividends at risk. And there’s a near-term glut of supply especially in office, residential and self-storage, even as employment has softened and inflation remains stubbornly high.

So, my basic strategy is the same. We still want to buy top quality REITs at low prices, such as this month’s top fresh money buys. But we need to be patient as well as prepared for prices to go lower, if the overall stock market takes a dive.

Got a question? Join the discussion at my Dividends Roundtable forum, which I host 24-7 on the Discord application. To your wealth!--RC

REITs’ 2026 Rally: How to Play It

Will politics end the bull market in stocks?

That question came up more than once last year, starting with the shock of “Liberation Day” tariffs in April. And it has once again, as investor worries percolate about a possible US/European Union trade war and a future Federal Reserve chair who answers to politicians.

Inflation worries are already accelerating. Gold prices are steaming towards $5,000 an ounce. The Japanese bond market broke some key support this week. And the 10-year Treasury bond yield is at its higher level since August, even as the Fed Funds rate is at its lowest level since 2022. Companies that issued debt the past few months are looking prescient, though offerings have refinanced maturing debt at higher rates.

Politics has up-ended markets in the past. President Kennedy’s war with Big Steel in the early 1960s, President Nixon’s resignation in 1974 and Iraq’s short-lived conquest of Kuwait in the early 1990s are instances where there was significant damage. And not many stocks avoided selling.

But without exception, politics-triggered selloffs were eventually followed by furious rallies when the initial concerns faded. More recently, the spring 2025 selloff following the tariffs announcement was erased by mid-June, with the S&P 500 closing out the year near record levels.

As domestic businesses, REITs feel the impact of tariffs and related supply chain disruption this year only indirectly. But the sector also took a hard hit on the tariff news. So it’s likely a future politics-based market selloff would affect them as well.

Nonetheless, I’d view any politics triggered drop as a buying opportunity for the best-in-class companies I recommend here. And the risk of lower prices near-term is not a reason to run for the hills.

Stick to Our Strategy

The best thing we can do to protect ourselves from today’s headwinds while locking in high yields and future growth is to follow this four-part REIT investment strategy:

· Sell any REIT where the underlying businesses is weakening.

· Do not chase REITs above my highest recommended entry points. And take new positions in increments of three, rather than all at once—even if stocks are at Dream Buy prices.

· Take profits in big winners when they trade above profit taking prices in the REIT Rater table included with this issue.

· Never load up on any one REIT. Always balance and diversify positions.

We’ll have our next best opportunity to assess REITs’ health as Q4 results are announced and guidance updated in the next few weeks. And I expect to have analysis for most of the REIT Rater coverage in the February issue, or earlier for any companies on the First Rate REIT list that may require action beforehand.

This issue’s “Commentary” column in the table highlights when to expect Q4 results for each REIT. One of this month’s top fresh money buys Prologis Inc (NYSE: PLD) has already reported in.

Prologis was one of the top performing First Rate REITs in 2025, as its industrial and logistics customers began to ramp up activity after a lull. And momentum appears to be carrying over into 2026, with management announcing record leasing activity in Q4 and issuing solid growth guidance for 2026.

Financing remains conservative. The REIT invested $517 million in acquisitions during Q4, along with $539 million “development stabilizations” and $1.019 billion development starts—more than twice the level of Q3. But total $2.075 billion was largely covered by $1.885 billion in asset sales and contributions from venture partners.

Co-investment ventures closed $3 billion of new debt raises at a weighted interest rate of just 3.1 percent with an average maturity of 7.2 years. The average weighted interest rate on total debt is now 3.3 percent with an average term of 8.2 years. That strength is reflected in the credit rating of A2, raised last year by Moody’s.

Management is guiding to “cash same store NOI growth” of 5.75 to 6.75 percent in 2026. Net promote income is expected to be an expense of $50 million. And the REIT is targeting investment of $2.25 to $2.75 billion in development stabilizations, $3 to $4 billion in development starts and $1 to $1.5 billion of acquisitions, mostly funded by a combination of asset sales, partner contributions and “realized” development gains.

Prologis—like Realty Income (NYSE: O), Simon Properties (NYSE: SPG) and WP Carey (NYSE: WPC)—is a multinational property owner. The US accounts for 85 percent of NOI. But the company also has 9 percent from Europe (12 countries), 5 percent from Mexico and Brazil and 1 percent from Asia (China, India, Japan and Singapore).

Global reach reflects the need of its customers, a who’s who of successful multinationals. And the company hedges currency exposure conservatively, so there’s minimal impact on earnings.

Prologis has proven over the past year that its business is resilient against supply chain disruption from erratic US trade policy. I expect a mid-single digit percentage dividend increase to be announced next month. And I’m raising my highest recommended buy price for this blue chip to 135.

The other top fresh money buy this month is

Read more

Editor’s note: My jetlag-delayed post highlights investment-related thoughts from my past two weeks in the China-sphere. Hope you find them useful. Thanks for reading!—RC

With nearly 40% of combined global GDP, US/China is the world’s indispensable relationship. That remains true despite nearly a decade of attempts to “de-couple” by geo-politicians in both countries, which have created stubbornly high inflation in the US and depressed growth in China.

In the first year of the Trump Administration’s return to power, historically high tariffs, counter-tariffs, trade barriers, embargoes and mutual threats have affected nearly 100% of bilateral trade. Yet even the most casual traveler to the China-sphere will have a hard time not noticing American presence.

That now includes the US casino industry’s biggest profit center: The former Portuguese colony of Macau in southeastern China, now a special administrative region” of the country.

Las Vegas Sands Corp (NYSE: LVS), for example, has five highly profitable properties in Macao, which contributed 58% of its overall revenue in the first nine months of 2025. That figure was over 50% for Wynn (NYSE: WYNN) and more than 20% for MGM Resorts (NYSE: MGM).

Credit rater Fitch reports US gaming companies contribute “around 80%” of Macau’s tax revenues. That’s no doubt a major reason government relations appear constructive for the sector, which continues to execute major plans for “non-gaming” expansion. Facilities last year, for example, hosted NBA basketball games after a six-year league absence from China.

According to igaming.org, Macau casino revenue hit a post-pandemic high in 2025. And anecdotally at least, the big players look set up for an even better year in 2026. That’s even as US operations particularly in Las Vegas deal with worries about expanding competition and a softer economy.

Unfortunately, neither Las Vegas Sands nor Wynn currently pay much in the way of a regular dividend. But Wynn paid four times its current rate as recently as March 2020, while Sands’ payout was 3.2 times higher. And thanks to in large part to growth of Macau operations, those dividends are on the rise again—Sands has raised its quarterly dividend 20% for calendar year 2026.

VICI Properties Inc (NYSE: VICI) is a real estate investment trust with indirect exposure to Macau operators. It yields north of 6%. I track it in Dividends Premium REITs. Look for the January issue later this week.

The first thing I noticed setting foot into Macau casinos is just how much newer and shinier they were than their rivals in Las Vegas. And the same thing is true about basic infrastructure throughout the China-sphere.

If you’ve visited the region recently, I’m not telling you anything new. But as an American there for the first time, I found the contrast with the condition of infrastructure in most of the US and Europe particularly striking, even shocking.

Lines moved rapidly and planes left on time in busy yet comfortable airports. Train and bus systems like Taipei’s were inexpensive, extremely accessible and stuck to schedules. So did the high-speed “turbojet” ferry linking Macau to Hong Kong. And though sometimes congested, keeping roads, tunnels and bridges safe and in good repair is clearly a priority.

Bottom line: Infrastructure spending has been and continues to be top priority in the China-sphere. It provides support to the economy when growth slows. And it boosts basic efficiency and productivity by getting people from one place to another reliably.

China is the world’s largest electric vehicle market. And for the first time, national champion BYD (OTC: BYDIY) outsold Tesla Inc (NSDQ: TSLA) on global markets in Q4 2025, an advantage that may widen with Canada dropping tariffs.

China has massive incentives to promote EVs over ICEs—internal combustion engines. That includes health costs from smog affecting increasingly vertical cities with constrained horizontal space like Hong Kong as well as national security concerns from being the world’s leading oil importer.

Nonetheless, ICEs aren’t going away any time soon, still accounting for nearly half of new vehicle sales and the vast majority of cars on the road. And that means China is going to remain a mainstay of global oil demand for a long time to come.

The country’s EV makers like BYD, however, will continue to innovate and boost global sales and earnings. And advances in battery technology continue to reduce costs and improve efficiency, including prototypes with demonstrated driving ranges of up to 400 miles and charging times of 5minutes or less.

The China-sphere’s efforts to promote “circular” economics get considerably less attention. But they’re potentially a far bigger market in a country with an urbanization rate of over 80% according to the United Nations and nearly 70% as tracked by the Chinese authorities.

Dense populations have to get control of their waste. The idea behind circular economics is to reduce, re-use and recycle what would otherwise wind up in landfill. And the result of 20 plus years putting that into practice in the China-sphere—including Taiwan—is such things as smaller and more efficient packaging and greater division of materials when thrown away to boost recycling efficiency.

As an American visiting Taipei, I was struck by the lack of trash receptacles in public places. And staying at an air B&B, we separated our waste into multiple categories and set it out for collection at designated times.

One notable upside of this added effort is there are far fewer places to attract vermin than in US cities. But the additional time and effort needed to effectively keep track of waste is also arguably a powerful incentive to minimize it in the first place.

Chemicals are a sector where circular economics are just beginning to be a major profit center. That’s both for creating more waste-efficient products and for cutting feedstock costs. And at the center of global development is LyondellBasell Industries (NYSE: LYB).

The benefit to earnings of company investment in circular economics—including opening a second major chemicals recycling facility in Germany—is currently masked by general weakness in the sector. That’s likely to be the case in Q4 results released earlier this month. And the dividend is at some risk. But as the cycle inevitably shifts positive, the company will have a pole position in the fastest growing part of this business.

Editor’s note: Greetings from Hong Kong! Here are my thoughts on big picture trends that emerged from the investment markets first full week in 2026.—RC

It’s dangerous to draw too many conclusions from just one week of stock market trading in January. The S&P 500 has come out of the gate at full speed, only to falter by spring. And conversely, first week selloffs have led to surges by the end of the month.

But I see a handful of trends that at this point look set to gain strength in 2026. And if they do hold, they’ll be difference makers for investment returns this year.

Let’s start with interest rates. It’s no secret the Trump Administration is anxious to bring Americans’ borrowing costs lower in advance of November elections.

A newly appointed Federal Reserve chairman this year will be under immense pressure from day one to cut the Fed Funds rate sharply. And last week, the president opened a new front, declaring on social media that he would “order” Fannie Mae and Freddie Mac to use their entire cash reserve of $200 billion to buy mortgage bonds—for the purpose of bidding up prices and thereby lowering mortgage rates.

Actual borrowing costs, however, remain higher for longer. The 10-year Treasury bond yield is stuck well above 4%, basically where it was in mid-2023. Lofty mortgage rates have kept homes unaffordable in much of the US. And corporations are still refinancing maturing debt by issuing bonds at meaningfully higher rates.

The reason is inflation expectations. But pushing Fed Fund lower, the Fed has decreased banks’ cost of capital, both at its discount window and by pushing down savings and money market rates. But lenders are concerned the voting members of the Federal Open Market Committee will bow to political pressure and stop fighting inflation. And they continue to require a premium for longer term debt.

As a result, corporations are increasingly locking in their cost of debt where they can, paying down credit lines even with longer-term rates still higher for longer.

Earlier this month, for example, T-Mobile US (NSDQ: TMUS) issued $1.15 billion of 5% notes due in 2036 and $850 million of 5.85% due 2056. The purpose: Pay off shorter-term debt with variable interest rates.

Clearway Energy (NYSE: CWEN) was able to upsize it offering of 5.75% notes due 2034 from $500 to $600 million. Those proceeds too will go primarily to pay down credit lines with variable interest rates. And deep junk-rated, small communications until Uniti Group (NSDQ: UNIT) is locking in debt costs by issuing new bonds securitized by its fiber assets.

That only scratches the surface of companies that will issue debt in 2026. But it continues the trend of 2025, with corporate America seemingly becoming resigned to the fact that borrowing costs are going to stay higher for longer—and possibly go up even more if inflation expectations rise further.

That means more companies are likely to allocate cash flow to keep debt lower, either by internally funding more capital spending or paying it off outright. That means reduced dividend increases, and cuts for some.

The flipside of increased expectations for inflation is stronger performance of commodities and materials stocks. NYSE-listed shares of BHP Group (ASX: BHP, NYSE: BHP) have gained strength since second half 2025. Gold miner Newmont Corp (NYSE: NEM) was a huge winner last year and it’s up another 10% so far in 2026.

MDU Resources’ (NYSE: MDU) construction materials spinoff company Knife River (NYSE: KNF) was red hot in 2024 before cooling off last year. But in a little over a week’s trading this year, the stock is up almost 14%.

Will metals and materials stocks stay strong this year? The answer depends on if the global economy stays strong, particularly China—which is by far the most important market. And that currently looks like a great bet.

Our Dividends Premium play on Hong Kong is already up big in the year’s opening days. And while US investors can’t own numerous Chinese companies directly, iShares China ETF is also well in the black this year, after a big gain in 2025.

China and Hong Kong are arguably the only stock markets in the world that could be resilient in the face of a meaningful US correction. That in my opinion is a real possibility this year, with roughly 38% of the S&P 500 ETFs that increasingly dominate investor portfolios in just 7 Big Tech stocks—all historically high priced and leveraged to a single investment theme: AI.

So far in 2026, however, investors are still willing to keep buying Big Tech. The SPDR S&P 500 ETF, for example, is up around 2%. The SPDR Tech Index is up a like amount. That’s despite Apple Inc (NSDQ: AAPL) being down a little less than -5% year to date.

Dividends and value stocks are thus far doing slightly better than the S&P 500. But so far with very few exceptions, the better performers are the companies that led the way last year. Many underperforming real estate investment trusts, for example, have so far added to their losses. Momentum is still a primary driver of returns, if not the most powerful one.

It’s easy to envision much of what the second Trump Administration has done so far being reversed after the next election. But for this year at least, its actions will be a major wildcard for investor returns, with results that will surprise many.

One of those is the fierce production discipline of the US shale oil and gas industry, focusing on reducing costs and debt at a time of soft commodity prices.

Shale discipline prevented a crash in energy company earnings last year. And producers will continue to control output until oil and gas prices move to a higher level. That’s no matter what happens in Venezuela, Iran, Russia or anywhere else.

Editor’s Note: Happy New Year! And thank you for reading the January Dividends Premium.

2025 was the year when dividends and value stocks finally broke out. The average gain for portfolio stocks was almost 36 percent. And as a result, this income and growth portfolio closed the year at a new high-water mark at 84.02 percent.

My primary objective in Dividends Premium is to generate a high and rising stream of income. And despite softer commodity prices reducing the dividends paid by two of my picks—which should reverse this year—the portfolio still managed an average dividend increase that topped inflation for a yield of around 5 percent.

This month’s theme is cheap, high quality dividend paying companies that didn’t catch fire in 2025. They’re our best chance to post another year of great returns. And they carry less risk than the rest of the stock market as well.

January’s top fresh money buys are both in that category as are the six stocks featured in this report. One is a bet on continuing strong growth in China and a resurgent Hong Kong, markets with resilience to weather a downturn in the US. The second is a best-in-class residential REIT that was battered in 2025 by concerns about oversupply of apartments in its key markets—but is already reporting signs of an emerging shortage that should take shares back to the 180s.

Have a question? Then join the conversation in the Dividends Roundtable forum I host 24-7 on the Discord application. To your wealth!--RC

Six Top Picks for Another Big Year

Artificial intelligence excitement drove the S&P 500 to new heights in 2025, with a roughly 17 percent return. But our high quality, dividend paying stocks nonetheless left the premier blue chip index in the dust.

Our average gain of 35.8 percent is by far the biggest one-year return in this portfolio’s history. And despite spending most of the year with a cash balance north of 20 percent, we ended 2025 at a new high-water mark of 84.02 percent, assuming harvesting rather than reinvesting dividends.

Can we possibly expect a repeat performance in 2026? I truly believe the answer is yes. But stock selection will be more important than ever. And we’re going to have to do some selling from time to time.

We can’t count on the big market averages to match their gains in 2025. The Big 7 Tech stocks that have driven the S&P 500 higher—and therefore most Americans’ portfolios—start out 2026 both extremely expensive and historically over-weighted at almost 38 percent of the index.

Big Tech has been expensive and overweighted for some time. And so long as investors are willing to keep paying high prices, these stocks will get even more expensive and over-weighted.

But such a lofty level of market concentration has never ended well for those who stayed too long at the party. And no matter how important these seven companies are to the economy and the future, eventually investor expectations will reach a level they can’t possibly live up to.

So while I’m not predicting or even betting on a repeat of the 2000-02 Tech Wreck, I want to be protected against the possibility of one. And that means focusing on the stocks most likely to weather a Big 7 crash—top quality companies that are selling cheaply relatively to the underlying value of their businesses.

The flip side of our big average gain last year is there are fewer such values to start 2026. But bargains are still available, even in the portfolio.

When a stock lags the broad market—and especially its sector—there’s always a reason. The question is always whether there are catalysts for a recovery.

Mainly, can the company overcome the challenges that have depressed its stock price? If not, I don’t care how low the P/E or how high the dividend yield is. The probability is it’s going even lower. The potential reward is outweighed by the risk.

But if a company can overcome its challenges, then it’s only a matter of time before its stock will recover. And if you buy when market sentiment is gloomiest, chances are very good you’ll reap a windfall, provided you buy low and hold patiently.

Last year, for example, our biggest gains were in two stocks that lagged badly in 2024: Gold and copper miner Newmont Mining (NYSE: NEM) and integrated healthcare company CVS Health (NYSE: CVS). It’s hard to believe now that both stocks were so unpopular back then. But both did face challenges. And it was by overcoming them—and the accompanying investor skepticism—that they wound up producing such monster gains last year.

Seeking The Next CVS

What will be the next CVS or Newmont? Right now, I see six good candidates already in the portfolio:

Read more