24/7 Wall Street Insights

• Retirees and near retirees face particular risks from inflation, since many are on fixed incomes that have no COLA increase factor.
• Although retirees often cannot return to the workplace, a portion of their investable assets can potentially be shifted over towards higher yielding dividend stocks vs. inflation value-eroded Treasury Bonds or other fixed income investments with interest rate risk exposure.
• Dividend stocks come from a wide variety of industrial sectors and trade Beta (volatility) ranges to suit a wide breadth of investor risk tolerance levels.
• Over one third of S&P 500 stocks carry a dividend.
• For investors seeking dividends, access this free report on two high yield dividend stocks. 

Retiree Inflation Shocks

While the entire nation suffers under inflation and elevated prices from high interest rates, retirees and near retirees are especially vulnerable. Those retirees still of sound mind and body and inclined to return to work have found limited opportunities, with some working at minimum wage jobs normally occupied by students. A great majority are no longer participating in the workforce, and a sizable demographic is incapable, due to age related infirmity. Therefore, these people, who have worked all their lives to put away savings for retirement, have little recourse available to them if their fixed income levels are outpaced by inflation and they have no Cost Of Living Adjustment increase (COLA) to depend upon. 

The Center for Retirement Research published a paper on May 15, 2024 titled, “What Risks Do Near Retirees and Retirees Face From Inflation?” The CRR noted the following: “when recent inflation started to put pressure on household budgets, many responded by reducing new saving and increasing withdrawals from existing saving.  Incorporating these behaviors into the scenario analysis shows that households largely offset the immediate loss of real income, but substantially reduce their wealth available to fund future consumption.”

The reason these households had to liquidate savings was because their investments were generating insufficient income to keep up with inflation. Essentials like housing, food and medicine had become too expensive to afford on their current budgets. 

Why Dividend Stocks?

Dividend stocks have a number of attributes that make them attractive for retirees that can help them achieve double digit annual yields. The difference of a few hundred basis points can equate to several thousand dollars annually, which may be sufficient to at least help, if not to bridge the budget gap experienced by many households. 

Liquidity: A stock can be sold with liquid funds available for the next day, in cases of emergencies or a desire to switch to another investment.

Diversification: A portfolio of dividend stocks can comprise a range of industries to suit individual preferences. This will also hedge the portfolio if there is a sudden downturn in a particular sector. 

Risk Tolerance: Investors have a variety of risk tolerances. Dividend stocks make up over a third of S&P 500 stocks, and also come in a range of closed-end mutual funds, limited partnerships, and other configurations. Some of these have very little volatility, while others have a greater Beta, but also corresponding upside potential for capital appreciation.

24/7 Wall Street has a massive database of dividend stocks and has published numerous articles that highlight different dividend stocks for investor consideration. Given the fact that most retirees already have investable assets, the below five stock suggestions would generate over 10% APY on a portfolio with $20,000 invested in each, based on market prices at the time of this writing. 

New York Mortgage Trust, Inc.

Stock #1 : New York Mortgage Trust, Inc. (NASDAQ: NYMT)

Yield: 13.56%

Shares for $20,000: 3,389.8

Annual Dividend Income: ~$2,712.00

With its offices located only a few blocks away from the Morgan Library, New York Mortgage Trust is a Real Estate Investment Trust (REIT) that is registered with the SEC. As such, REITs are required to remit 90% of all profits to shareholders for tax purposes. 

Founded in 2003, New York Mortgage manages a $5.4 billion portfolio of real estate related debt paper. The company does direct mortgage lending and equity investment to multifamily and individual housing owners and developers. Additionally, the portfolio acquires and manages third party mezzanine loans, agency (i.e. FNMA) and non-agency mortgage backed securities, rental property loans, and other real estate related credit assets.  

As of April, 2024, 40% of the portfolio is in residential loans, 25% is in structured multi family home loans, 17% is in agency mortgage backed securities, like Freddie Mac and Fannie Mae, 8% is in non-agency MBS, and the remaining 10% are in miscellaneous real estate credit assets.

Institutions seem to feel comfortable with New York Mortgage Trust, Inc., even though the company missed its earnings targets last quarter.. Charles Schwab recently acquired another 130,000+ shares to add to over 1.4 million shares held previously. 

Allied Resource Partners, L.P.

Stock #2  : Allied Resource Partners, L.P. (NASDAQ: ARLP)

Yield: 12.01%

Shares for $20,000: 836.5

Annual Dividend Income: ~$2,402.00

Based in Tulsa, OK, and founded in 1971, Allied Resource Partners is one of the largest thermal and metallurgical coal producers in the United States. Its activities include mining production, sales, energy royalties, and technological mining services and products divisions. 

Presently, the company operates underground mines in Illinois, Indiana, West Virginia, Maryland, and Pennsylvania and also owns 1.5 million oil and gas producing acres of land in the Anadarko, Permian and Williston Basins. Other Allied Resources Partners services and products include:  collision avoidance, proximity detection, data communication, tracking, products, services and analytical software.

The coal industry has seen some past downturn due to politically motivated green energy initiatives and ESG protocols. However, the inconsistencies and failures of green energy to meet increasing demand from a grid already unable to handle EVs and AI power needs are now a harsh reality. Domestic coal demand is trending back up, and increasing demand from Europe, which ordinarily relies on coal from presently embargoed Russia, is also renewing the export market, which should benefit companies like Alliance Resource Partners.

TXO Partners, L.P.

Stock #3 : TXO Partners, L.P. (NYSE: TXO)

Yield: 11.71% 

Shares for $20,000: 904.5

Annual Dividend Income: ~$2,352.00

Until alternative energy sources can demonstrate the efficiencies and reliability required from a modern society for its energy needs, oil and gas will remain its mainstays. TXO Partners, L.P. is an oil and gas company headquartered in Fort Worth, TX. Founded in 2012, its focus is in acquiring, developing, and managing oil and natural gas producing properties, primarily in the Permian Basin (NM and TX) and San Juan Basin (NM and CO). 

The company has a Strong Buy rating from Zacks and several other analysts. The consensus is that TXO Partners is an undervalued stock, and its earnings trends could justify a 40-50% gain in share price over the next 12 months. Insider buying indications may lend credence to this forecast.  TXO Partners CEO Bob Simpson reportedly purchased $4.9 million worth of TXO shares over the past few months. Other insider buying accounted for an additional $8.4 million in shares during the same period.

Kayne Anderson Energy Infrastructure Fund, Inc.

Stock #4 : Kayne Anderson Energy Infrastructure Fund, Inc. (NYSE:KYN)

Yield: 9.02%

Shares for $20,000: 2,036.6

Annual Dividend Income: ~$1,804.00

Mutual funds that are closed-end funds are traded on a public exchange with a market determined bid/ask price. This differs from open end mutual funds, which are bought based on Net Asset Value (NAV) price, usually through a financial institution or through direct subscription. Mutual funds, by design, pool managed funds into various asset purchases for the benefit of its shareholders, and remit a prorated return via the adjusted sell price. Mutual funds can be specialized in particular sectors, such as in emerging market nations, telecommunications, healthcare, or other sectors.  

Kayne Anderson Energy Infrastructure Fund, Inc. is a closed end mutual fund that is mandated to invest at least 80% of its AUM on publicly traded North American energy infrastructure companies. The company defines “energy infrastructure” to include utilities, midstream oil and LNG infrastructure companies, and renewable energy companies. Based out of Houston, TX, Kayne Anderson Energy Infrastructure Fund, Inc. has $2.64 billion AUM. 

As of the beginning of May, 2024, 92% of the portfolio was dedicated to midstream companies. Utility companies made up 3%, while other energy companies rounded out the remaining 5%. The top three largest portfolio positions were: 1) Energy Transfer, LP (NYSE: ET): 10.9%; 2) Enterprise Products Partners, L.P. (NYSE: EPD): 10.3%, and 3) MPLX LP (NYSE: MPLX): 9.9%. 

Civitas Resources, Inc.

Stock #5 : Civitas Resources, Inc. (NYSE: CIVI)

Yield: 8.34%

Shares for $20,000: 273.4

Annual Dividend Income: ~$1,668.00

While some energy companies slowed down as a result of ESG policies, others, like Civitas Resources, Inc., embraced them and managed to incorporate some of the tenets of those policies into a workable compromise within the fossil fuels sector. 

Civitas Resources, Inc. drills for and produces oil and gas in the Rocky Mountain region. The company’s primary business is in the Denver, CO Julesburg Basin’s Wattenberg Field. Civitas has also acquired premium positions in the Permian Basin through assets in the Midland and Delaware Basins in Texas and New Mexico. It prides itself as being a leading sustainable energy operator in the industry, and was the first carbon neutral oil and gas company in CO. 

Civitas has exhibited sufficiently strong earnings trends to warrant “buy” recommendations from Mizuho and Truist Securities, “outperform” ratings from RBC Capital, and an “overweight” recommendation from Keybanc.

As with any other stock portfolio, prudent attention towards regular monitoring is advised. Market and news events can have an effect on dividend yields comparable to those of bonds or annuities, but sometimes even more so. 

Name:	Yield:	Annual Dividend Income:
New York Mortgage Trust, Inc. (NASDAQ: NYMT)	13.56%	~$2,712.00
Allied Resource Partners, L.P. (NASDAQ: ARLP)	12.01%	~$2,402.00
TXO Partners, L.P. (NYSE: TXO)	11.71%	~$2,352.00
Kayne Anderson Energy Infrastructure Fund, Inc. (NYSE:KYN)	9.02%	~$1,804.00
Civitas Resources, Inc. (NYSE: CIVI)	8.34%	~$1,668.00
Total Annual Dividend Income		$10,938

 

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