How to Play Real Estate and Stocks for 9.9% Dividends

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This wild economy has given us the opportunity to smartly “sync” the real estate and stock markets and grab a hefty 9.9% dividend along the way.

I’m going to show you a ticker that we can use to do that in a moment. But first, let’s talk about the equities/real estate “double phase” that I propose, starting with the state of the real estate market, which has changed a lot in recent weeks.

House prices appear to be peaking

It won’t surprise anyone that home prices are plummeting these days, averaging $500,000, according to the latest numbers:

When most Americans buy their primary residence, they don’t focus primarily on the list price; their monthly mortgage cost is what they are really looking at. And when rates were low, their mortgages were low, thanks to cheap borrowing. Now, however, that is history.

While the above data has lagged a bit (and with this particular index, the lower the number, the less affordable homes are), in March the National Association of Realtors saw home prices hit their all-time high. low affordability ever – and that was before the Fed’s decision. latest rate hike.

Of course, as mortgage payments rise with the federal funds rate, housing will consume more of Americans’ discretionary income. This, in turn, would weigh on consumer spending. This is one of the main concerns driving the latest stock market slump.

But there are signs that the tides are beginning to turn – and this is where our opportunity presents itself.

Stocks and real estate are places of exchange

Of course, stocks won’t fall forever, house prices can’t inflate forever, and the Fed won’t raise interest rates to obscene levels. Anyone warning you of any of these things is more interested in stoking fear than understanding market conditions.

Instead, we need to look for signs that both trends, namely rising house prices and rising mortgage costs, are fading. And there is good news there.

Almost the beginning of the end

Home prices continue to rise, but the rate of growth began to slow in early 2022 compared to 2021. That may be because supply is finally starting to pick up.

Reduced housing shortage

In February, the total number of active listings of homes for sale in the United States hit its lowest point in history, at just 376,018 (for reference, five years ago it was 1.5 million), but March saw a very slight rise in stocks. If this continues, it could lead to housing prices stabilizing or falling, especially if housing demand falls due to higher interest rates.

Takeaway: Now is the time to move from real estate to stocks

Take-out? Now is the time to sell any property you are considering unloading before demand drops and supply starts to increase in earnest. That’s especially true if you’re one of the millions of Americans who own more than one home.

Similarly, it is also the time to buy in stocks that have been oversold in anticipation of weaker demand on concerns that rising housing costs will affect consumer spending.

This is where a fund like the Royce Value Trust (RVT

Vermont
),
a CEF holding a variety of companies with strong cash flows like KBR

KBR
Inc (KBR), MKS Instruments (MKSI)
and Cirrus Logic

RAW
(RAW)
with a 5.6% net asset value discount that allows us to get its underlying stock portfolio at an even cheaper price while providing us with a 9.9% cash flow from the high yield of RVT.

Think about it for a moment: with a return of 9.9%, you get back just under 10% of your initial investment each year. in dividends only. Even if interest rates continue to rise, it’s almost impossible for Treasuries to pay much above 4.5% (the current Wall Street consensus on when the Fed will stop raising rates ), not to mention the nearly double digits that many CEF dividends can pay out.

The bottom line? By slowly rebalancing a stock portfolio and moving it away from housing, you can play the overpriced real estate market and the undervalued stock market at the same time.

Michael Foster is the Principal Research Analyst for Opposite perspectives. For more revenue ideas, click here for our latest report »Indestructible income: 5 advantageous funds with safe dividends of 8.4%.

Disclosure: none

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