Aston Martin DB5, James Bond

Editor’s note: Thank you for reading Dividends Roundtable!

Volatility is the one constant in global stock markets. Sometimes, it’s the result of business developments and price changes are permanent. But more often, it’s ephemeral factors like sentiment triggering big moves. And investors who focus on the big picture issues rather than the health and growth of the investments they own can lose big.

One of the surest antidotes to excessive macro-thinking is just focusing on getting paid. Dividends are cash on the barrel. Payments show up in your account, regardless of the latest inflation numbers or developments in geopolitics.

I like dividend stocks for another reason: Sustaining a generous and growing payout has historically been the surest sign of a company’s inner strength. And stocks of healthy, growing enterprises always appreciate in the long-term. Your money grows and you get paid while you wait.

Monthly dividends go one better, especially for those of us living off our portfolios. And they’re the subject of this week’s post.

Got a question or comment? Join the discussion at forums I host 24-7 for full Dividends Roundtable members on the Substack and Discord applications. Coming very soon: The Dividends Roundtable application, with an exclusive chat forum and stock databank. Here’s to a profitable summer!—RC

With just two trading days left in first half 2026, the average year-to-date return for Dividends Premium stocks is a robust 18%. The portfolio itself sits near its high-water mark, up 104% plus since inception.

We’re getting paid am annualized yield of 4.5%, based on the weightings of the 19 positions. And that includes a 13.6% position in my favorite cash alternative Vanguard Federal Money Market Fund (VMFXX), which has a 7-Day SEC yield of 3.57%.

It’s a fair bet most investors aren’t aware of how competitive dividend stocks have been generally with the big market averages. The iShares Trust Dividend Select Dividend ETF (DVY) is too heavily weighted in a small number of big capitalization names for my taste. And the yield is paltry at 3.3%, largely because the ETF’s sponsors churn the portfolio to chase capital gains.

But the DVY is ahead 13.8% so far in 2026. And that beats the S&P 500 by 6.3 percentage points, or almost a 2-to-1 margin.

Dividend stocks’ solid performance comes despite rising inflation, which no matter how you measure is running at its hottest in three years. It’s despite spiking oil prices and global supply chains disrupted by wars, geopolitics, tariffs and other trade barriers. And it’s despite the Federal Reserve pivoting more hawkishly than many investors expected.

Dividend stocks are also outperforming at a time of breathless hype for anything to do with artificial intelligence, especially the seven biggest technology stocks that still comprise more than one-third of the S&P 500. And they’re on top at the same time the Elon Musk’s Space Exploration Technologies (NSDQ: SPCX) just launched what was arguably the most expensive IPO in history.

On June 16—the stock’s third day of trading—SpaceX shares soared as high as $225. As of Friday’s close, they’re back in the low 150s. But the stock is still one of the priciest in history with an enterprise value 105X annual sales and at nearly 26X book value. Their $2 trillion plus market capitalization—over 80% owned by Mr. Musk—is roughly 55X its sales for FY2026 and 766X forecast earnings for FY2027, which appear based on wildly optimistic assumptions.

That’s not to say SpaceX won’t succeed. And the same is true of the so-called “Magnificent 7” big technology stocks that are still a return-shaping 34% of the S&P 500.

Their products are household names. And their stocks are the rock stars of the current market. But like freshly minted SpaceX shares, they’re more expensive relative to any sane measure of business value than even the Nasdaq 100 was circa late 1999, on the eve of the Great Tech Wreck. And they’re all stratospherically priced on the very same currently popular investment theme: Artificial intelligence as a primary driver of global economic growth and investment.

You might recall that the Information Technology (IT) stock market leaders of the 1990s did go on to change the world. But prices in the late 1990s rose too far too fast. Business kept booming. But the stocks were priced for much better and faster. And as a result, the stocks busted. And the Nasdaq didn’t best its 2000 high for another 15 years.

It’s Time for Dividends

If your retirement money is passively invested in some generic “stock” option, your portfolio’s fortunes are inexorably tied to the fate of this so-called “Magnificent 7.” And unless you want to meet the same fate as those who stayed too long in Tech a quarter century ago—basically a “lost decade for returns”—it’s time to do three things:

· Take control of your portfolio. If you’re passively invested, at least find out what’s inside the funds you own. If you’re locked into a retirement plan, there may still be options available that aren’t historically heavily weighted to a handful of stratospherically priced stocks. Making your own investment decisions is always best. But if your choices are limited, balance and diversification is always best—and arguably now more than ever

· Stop mono-focusing on the macro. Big media are in the business of getting your attention. Investment media is no different. And those who pontificate about big picture issues like geopolitics and inflation are always going to command the largest audiences. But the macro is only important insofar as it impacts the actual investments we own. And 99% plus of what you’re going to see on television or the Internet simply does not. The micro is where the real action is. And it’s where our attention needs to be, especially now.

· Build a diversified and balanced portfolio of high-quality dividend stocks. I’ll never chase a high yielding stock unless it’s backed by a growing company. And you’ll never have income without growth for very long. But there are plenty of great, growing high yielding stocks to choose from now.

Even dividend stocks can become overvalued and overextended. And there are more than a few in my coverage universes. But there are also dozens of companies that have raised dividends at least once already this year yielding at least 4 to 5 percent. That includes 27 of the REITs I track in Dividends Premium, as well as 42 companies in my utilities and essential service company coverage.

That’s remarkable value at a time when the stock market is arguably well overdue for another correction of at least 20%, and possibly worse.

Historically, nothing much outside of cash is fully spared from a major market selloff. And it’s likely even the highest quality dividend stocks will see some near-term red ink the next time Wall Street really rolls over.

But low valuations, high yields and business resiliency are ultimately powerful backstops for stocks in falling markets. And so long as companies stay healthy on the inside, their stocks will be among the first to bounce back in the recovery.

After Big Tech topped out in 2000, there was a great rotation to the rest of the stock market. Dividend paying stocks from real estate investment trusts to Big Oil shares were major beneficiaries. Even utilities—many of which were caught up in the wreck of Enron—were huge winners by mid-decade.

We’ve yet to see Tech Wreck II. And in fact, SpaceX’s IPO still looks like it will be the first of many we’ll see in the sector this year. But dividend stocks are already consistently outperforming. And the longer the bull market continues, the more gains they’ll likely pile up this year.

When the Macro Matters

It’s fair to ask what macro issues in the news now could affect the all-important micro—meaning the financial health, growth and investment ability of the stocks we own. And the big one is inflation.

If you’ve filled up your tank lately, you’ve no doubt noticed the spring spikes in the price of a gallon of gasoline have moderated a bit. That’s the result of global oil prices backing off, with the North American benchmark WTI price sliding under $70 a barrel as of Friday’s close.

Falling crude in turn is presumably the result of growing optimism that global energy flows will return to something resembling normalcy, now that the US and Iran have signed a “memorandum of understanding” to end their conflict and keep the Strait of Hormuz open.

On the other hand, inflation was rising long before Operation Epic Fury was launched. And the Federal Reserve’s preferred inflation gauge—the Personal Consumption Expenditures Index—rose by 4.1% in May, up from a 3.8% year-over-year rate in April. That’s the largest increase in more than three years. And it’s more than twice the central bank’s official inflation target of 2%.

Excluding food and energy, PCE inflation was 3.4%, the highest level since October 2023. The so-called “Trimmed Mean PCE”—excluding components with the biggest movements in either direction—was only 2.4%. But alarmingly, it’s the “a-cyclical” elements that are increasing driving core PCE inflation, rather than “cyclical” factors that tend to be less permanent.

Interestingly, peak inflation earlier this decade was primarily driven by cyclical factors that only peaked in mid-2023. By then, the a-cyclical factors—which include the cost of healthcare, financial services, technology and telecom, transportation, clothing and motor vehicles—were declining sharply.

One reason a-cyclical inflation declined earlier this decade was global supply chains were unfreezing from pandemic restrictions. Now tariffs, trade barriers and geopolitics are disrupting them again. And the result is risk inflation may remain higher for longer.

Inflation affects the micro in several ways. The price of materials and cost of labor rises. Customers’ budgets are more stretched, potentially threatening sales volumes and companies’ ability to pass on costs in prices. Borrowing costs tend to stay higher for longer, raising interest expense when maturing debt must be refinancing. And a higher cost of capital raises the bar on new investment, which all else equal means less opportunity to grow.

Two key strengths are necessary for companies to thrive during inflationary times: Strong balance sheets and pricing power. And it’s essential any stocks you own feature both, whether they pay generous dividends or not.

Both strengths are hallmarks of the stocks in my Dividends Premium portfolio. And they’re one big reason why I’m comfortable owning them now with inflation risk elevated.

Dividends = Constant Returns

Another good reason: Held together in my recommended allocations, their diversification and balance combined with the cash component minimizes near-term volatility and risk. And we realize high and consistent monthly income.

That’s mainly a function of payment dates in different months. Four holdings, for example, distribute dividends in January, April, July and October. Three pay in February, May, August and November. And five pay quarterly in March, June, September and December. I also hold three positions that make larger payments twice a year.

Each week, I highlight links to the Dividends Premium Portfolio and Dividends Premium Dream Buy tables. This week, I’ve put together a third: The Dividends Premium Dividend Chart, also accessible by clicking on the link in this post.

In it, I highlight the dividends investors following our model portfolio stock weightings would receive each month of the year—shown both by position and total for the month. Monthly amounts don’t match up exactly. But even in the lighter months, there’s consistent income.

What about buying stocks that pay dividends on a monthly basis?

I currently hold just one monthly payer in the Dividends Premium portfolio, in addition to my favored money market fund. But the “First Rate REIT” list in every monthly Dividends Premium REITs post features five, which I highlight in this post. And there are 20 companies in the broader REIT Sheet Rater coverage universe.

Unfortunately, utilities and essential services companies have largely abandoned the practice of paying monthly. So aside from a pair of Brazilian stocks that make irregular payments throughout the year, your choices are mainly closed-end funds and ETFs.

That includes one Dividends Premium recommendation:

Read more

Editor’s Note: Thank you for reading Dividends Roundtable special REITs report!

Inflation is rising again. That induced the Federal Reserve last week to eliminate its prior bias to lower interest rates. And the Federal Open Market Committee decided unanimously to leave the Fed Funds rate unchanged, in a range of 3.5% to 3.75%.

The implication monetary policy will stay tighter for longer has since triggered knee jerk selling of most dividend stocks, including REITs. That’s hardly surprising. But the Select Real Estate SPDR ETF and my First Rate REIT list nonetheless closed the week up about 7% year to date, just a couple percentage points behind the Big Tech-leveraged S&P 500.

REITs have made money so far in 2026 in part because of rock bottom investor expectations. But best-in-class companies across property sectors outperformed business guidance in Q1. And there’s every indication they will with Q2 results, which start showing up in mid-July.

REITs continue to be priced as bond alternatives, rather than the inflation beneficiaries they’ve been historically. That too should change with property markets tightening across sectors, and as companies like W.P. Carey (NYSE: WPC) are increasingly able to peg rent increases to inflation.

Carey is one of my top five REIT fresh money picks for this month, highlighted later in this report along with five sector stocks to sell now. And see my REIT Rater for buy/hold/sell advice, business analysis, payout ratios and “Quality Grades” for 81 individual REITs.

Got a question or comment? I host a webchat 24-7 on the Substack application as well as Discord. And look for the Dividends Roundtable application coming soon!

To your wealth!--RC

Follow the headlines! That’s what algorithms now controlling trillions of passively invested dollars are trained to do. And with a 24-7 Internet news cycle, the result is a great deal of sound and fury in the US stock market.

Last week featured two blockbuster headlines: The president’s peace deal with Iran and the Federal Reserve’s move to a more neutral stance on monetary policy. And the resulting volatility made for some exciting day trading.

Big investment media have been breathlessly suggesting big moves afoot—and that viewers had better stay glued to their screens to find out what’s to come. But if you don’t mind my paraphrasing Shakespeare, what we saw last week for stocks really didn’t signify much of anything for investors who want to boost income and build wealth, while keeping liquid for a rainy day.

The point of this report is to help you build positions in top quality real estate investment trusts, when their stocks sell at good entry points. Secondarily, I highlight when a particular REIT has reached a price where it makes sense to take a partial profit. And to accomplish these objectives I follow the following four rules:

· Own only REITs with underlying businesses that are growing and getting stronger. Q2 results will start to flow in about a month. For now, the best clue of what we’ll see then is in my analysis of Q1 earnings and guidance updates, found in the “Commentary” column of the REIT Rater databank. For more information on this comprehensive table of 81 REITs, see the “Key Points and Ground Rules” discussion at the end of this report. I also now feature my A (safest) to F (riskiest) Quality Grades, to give readers a more comprehensive assessment of risk.

· 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. This is basic dollar cost averaging. Follow this rule and you’ll always buy more shares at the lowest price.

· Take profits in big winners when they trade above “Profit Taking” prices in the REIT Rater table. These stocks are trading at price levels that have not held historically. It’s time to take at least some of the money and run!

· Never load up on any one REIT. Always balance and diversify your portfolio. The corollary is I never double down on a falling stock to reduce cost basis.

I follow this rule not because I don’t trust my analysis. In fact, I’ll frequently stick with a fallen REIT, provided the business still looks solid.

But we’ll never have perfect knowledge of what’s going on at any company. And doubling down on a position often introduces emotion into decision making. Mainly, it gets harder to pull the plug if I’m wrong.

Most important, if one of your stocks has dropped sharply, chances are other high-quality REITs have as well. You’ll maximize your chances of riding a recovery by spreading your cash around. And doing so cuts risk to your portfolio from stocks that ultimately don’t work out.

Focus on the Micro

So-called “big picture” issues affecting the economy—including geopolitics and war—are only important to us in how they affect the “micro.” That’s the health and growth prospects of the companies we own. And the situation is often a lot different if you’re looking at it on the ground, rather than from 30,000 feet up.

Macro issues are important for REITs. Stronger growth is always better for commercial property occupancy and rent growth, as well as collection rates. And the direction of interest rates affects funding costs. Higher rates, for example, raise the bar for investment returns. And they raise the cost of refinancing maturing debt as well.

All else equal, lower interest rates/borrowing costs mean more investments make sense. And because the property business uses a fair amount of debt, lower rates keep a lid on debt interest expense when it’s time to refinance.

All else, however, is not always equal in the commercial property business. And some REITs are dealing with higher for longer interest rates better than others.

Since last month’s REIT report, for example, 10 companies in the REIT Rater coverage universe have announced and executed bond sales. That includes several issuances that were ultimately upsized.

Data center owner Iron Mountain (NYSE: IRM), for example, was able to increase a $1 billion offering of 6.25% bonds maturing in 2035 to $1.5 billion. Retail REIT Kimco Realty (NYSE: KIM) boosted a sale of 3.5% exchangeable notes due 2031 to $525 million from $500 million. That’s very low-cost money. And with the notes carrying an initial exchange price of $32.36 per share, they’ll only be converted if Kimco shares appreciate at least 33% from their current level.

No doubt, these REITs and the other 8 issuing debt would have preferred a lower benchmark 10-year Treasury note yield by this time. And selling bonds now could be fairly interpreted as tacit acknowledgement this is the best they’re going to do for a while.

Some of the issuance, for example, is to refinance maturing debt that has a lower interest rate. Innovative Investment Properties (NYSE: IIPR) was able to upsize an offering of convertible debt from $250 to $350 million. And like Kimco’s convertible sale, the “initial exchange price” of $69.39 is well above the REIT’s current price. But the private offering’s interest rate is 6%, versus the 5.5% the REIT was paying on the senior notes that matured in May.

That means Innovative is likely to see debt interest expense rise going forward, putting a further strain on its $1.90 per share quarterly dividend. So will Outfront Media (NYSE: OUT), which has issued $500 million of senior notes due 2034 with an interest rate of 6% to pay off bonds maturing in 2028 with a rate of just 5%. And Starwood Property Trust (NYSE: STWD) sold $600 million of notes due 2031 paying 6.125%, using $400 million of proceeds to pay off notes maturing this year paying just 3.625%.

Starwood’s debt interest expense rose by 12.6% in Q1 from last year. And it’s a safe bet that earnings will be further pressured by higher costs going forward. That will further reduce the margin for paying a dividend that was 123.1% of Q1 distributable earnings.

Nonetheless, these bond issues are the most we’ve seen sector wide in some time. And they’re a clear sign that, whatever the Fed is doing, investors are still willing to buy REIT debt at reasonable prices.

That’s good reason to expect more REITs to raise investment targets for 2026, and by extension guidance for adjusted FFO. Several already have, including W.P. Carey (NYSE: WPC).

Simply, there’s no magic level of interest rates that’s bullish across the board for property companies. Neither is there a level that’s universally bearish.

What matters is how the individual REIT is positioned. And a growing number are finding investments that can earn strong returns at the current level of interest rates—including with acquisitions, mergers, new development of properties and redevelopment of existing stock.

LTC Properties (NYSE: LTC), for example, projects annual internal rates of return in the “low to mid-teens” percentages for its aggressive SHOP (senior housing) investments. That compares to the cost of the REIT’s current senior debt, which has coupon interest rates between 3.66% and 4.5% and maturities between 2026 and 2033.

LTC is almost surely going to have to refinance a good chunk of that debt at higher interest rates in coming years. And in fact, Q1 debt interest expense was already 36.3% higher than a year ago, though that mainly reflects cost of debt to fund SHOP acquisitions. But even at coupon rates twice current levels, returns on SHOP investments will be strongly accretive to the bottom line.

Not every REIT sector is handling higher for longer interest rates well. High dividend yields offered by mortgage/financial REITs should be considered especially at risk in the current environment.

KKR Real Estate (NYSE: KREF) enjoys the backing of giant, diversified private capital firm KKR (NYSE: KKR), which also owns 14% of the company. And from all indications, portfolio restructuring is laying the groundwork for stronger future returns. But the REIT nonetheless cut its quarterly dividend by -60% to 10 cents per share, effective with next month’s payment.

The reason: A need to re-set the payout to where it’s supported by the current spread between the REIT’s cost of capital and available returns on investment with acceptable risk. That’s the same imperative that forced Franklin BSP Realty Trust’s (NYSE: FBRT) -43.7% dividend cut earlier this year, despite the support of a solid parent in Franklin Resources’ Benefit Street Partners.

Interest rate pressure is also good reason to be wary of other financial REITs that have yet to cut. That includes Redwood Trust (NYSE: RWT), which just sold $125 million of bonds maturing in 2031 with a coupon interest rate of 9.75%. The REIT’s dividend is currently just 53% the pre-2020 pandemic rate. But coverage is thin. And both economic returns and book value per share have relentlessly fallen over the past year.

It’s fair to say the current yields on mortgage/financial REITs already reflect severe dividend cut risk. But consider KKR Real Estate shares dropped sharply following the dividend cut and are lower by -14% year-to-date. Franklin BSP is down -16%. So it’s reasonable to expect other M-REIT cutters will get sold if they have to cut payouts in coming months.

There are no financial REITs currently on the First Rate REIT list for this reason. And my preference is to avoid this group while their shakeout/dividend re-sets continue.

But the larger point here is higher for longer interest rates are not necessarily an earnings and dividends killer for REITs. Some are learning to thrive while others are still adjusting.

REIT Mergers Heat Up

Also in the past month, we’ve seen our second mega-REIT sector merger, between leading residential property owners AvalonBay Communities (NYSE: AVB) and Equity Residential (NYSE: EQR).

Based on this merger-of-equals’ exchange ratio of 2.793 EQT per AVB share, our AvalonBay will get an effective dividend increase of about 10% at the close. That’s expected to happen “in the second half of 2026,” following a shareholder vote at both REITs.

The deal’s real benefits are long-term. Roughly 95% of the REITs’ markets overlap. And management has identified $125 million of “net synergies after real estate tax reassessments” it can realize within 18 months. That should flow right to the bottom line, as the combined company deploys a projected $2 billion of “annual cash flow and self-funding capacity.”

Then two REITs currently have a total of 10,800 apartments under construction ($4.4 billion), as well as a $4.2 billion “development pipeline.” They start out with 180,000 premium properties, A3 (Moody’s)/A- (S&P) credit ratings and plans to self-fund development CAPEX. And during the merger announcement call, management cited numerous opportunities to deploy technology to lift margins and boost occupancy.

The combination should also take advantage of improving business conditions. The residential REIT sector has faced headwinds the past couple years from a flood of new supply, initiated when development costs including interest rates were at meaningfully lower levels. Now supply is tightening.

Presenting at NaREIT’s 2026 Investor Conference, executives of Mid-America Apartment Communities (NYSE: MAA) noted new supply coming into its key SunBelt markets was -40% less than a year ago. That means tighter supply on the way, with rising occupancy and eventually a return to rent growth.

At roughly 2.5X the size of the next largest residential REIT, AvalonBay/Equity Residential will be able to take full advantage of this emerging tailwind. And their example is likely to spur further sector consolidation, as other residential property owners find ways to profitably bulk up. And I’ve identified several good candidates for M&A in the REIT Rater.

The other ongoing mega-deal in the REIT space now is between self-storage owners National Storage Affiliates Trust (NYSE: NSA) and Public Storage (NYSE: PSA).

As with residential property, self-storage REITs have dealt with a supply glut that now appears to be contracting, with far fewer new facilities coming on the market now than in the past few years. That’s good news for this combination, which will be number one in the sector after a projected Q3 close.

At the exchange rate of 0.14 share NSA per PSA, there’s an implied dividend cut of -26.3% for National Storage shareholders. But that’s more than made up for by the hefty premium Public Storage has offered.

If this deal should come apart for any reason, National Storage shares will likely drop back towards where they traded before the offer, which was high 20s/low 30s. Based on Public Storage’s closing price this week, its offer is worth $44.54 per National Storage share. That’s just pennies higher than the current price for NSA shares ($44.45). And at the same time PSA is trading above my highest recommended entry point of 300.

I like this deal. And I expect it to create a much larger and stronger REIT than even PSA is currently. The storage segment is also likely to do quite well in the next several years as the market tightens. But given the limited upside to the close and the potential downside of highly unlikely deal failure, it makes sense to take the profit on NSA and move onto better values in the storage space, as I identify later in this report.

Six Good Reasons to Buy REITs Now

Bottom line, despite the cloudy macro picture, high quality REITs should add to their gains the rest of the year for these reasons:

· Continuing business momentum that should lead to more earnings beats and guidance increases this summer and into the fall, with occupancy and rents advancing and REIT investment plans expanding.

· More REITs will demonstrate their ability to raise debt capital on favorable terms relative to prospective investment returns. That’s even if benchmark interest rates remain higher for longer and Federal Reserve monetary policy becomes more restrictive to fight inflation.

· More REITs will decide to merge, as management looks for ways to boost margins by cutting costs and growing investment.

· REIT shares are still historically under-owned in the major stock market ETFs that dominate passive investors’ portfolios. The sector, for example, is only about 1% of the Big Tech-focused S&P 500. That makes REITs increasingly attractive as alternative investments that are less exposed to a long overdue 20% correction in the big market averages.

· Share prices relative to business value remain historically low, with many REITs trading near book value and yields several times the S&P 500. The average yield for the 81 REIT Rater companies is 5.5%, First Rate REITs are 5% on average.

I also believe REITs will be increasingly attractive going forward for property investments’ ability to keep up and beat inflation.

Both Producer Price (wholesale) and Consumer Price inflation are already running at their highest levels since 2022. The Personal Consumption Expenditures Index—the Fed’s preferred inflation gauge—was at a 3.8% year-over-year rate in April with May numbers due out June 25.

PCE was just 3.3% excluding food and energy. But even that’s well above the central bank’s often stated long-term target of 2% inflation. And in an environment where spiking gasoline and food prices are demonstrably starting to affect the elements of so-called “core” inflation—shelter, transportation etc—it’s likely that PCE will remain elevated this summer, as will CPI and PPI.

More than a few investors been betting that a US/Iran agreement to open the Strait of Hormuz will send oil prices plunging back under $60 a barrel, where they started the year. And they’re banking the resulting lower gasoline and jet fuel prices will bring overall inflation back under control, allowing the Federal Reserve to resume cutting the Fed Funds rate.

We can only hope they’re right. But even after dropping last week on the news of a deal, oil prices are still hanging around in the upper 70s. And the Fed’s removal of rate cut bias language from last week’s policy statement demonstrates clearly that having a new chairman doesn’t necessarily mean lower rates.

The central bank knows full well that cutting Fed Funds won’t bring down real borrowing costs, unless lenders and bond buyers are confident inflation is under control. Conversely, cutting rates with inflation rising is a prescription for even higher borrowing costs. And it now looks like they won’t cut until inflation comes lower, regardless of the president’s wishes.

Will inflation drop later this year? Maybe. But energy prices were headed higher on tightening global supply, long before Operation Epic Fury was launched and Iran’s asymmetric warfare tactics bottled up 15% of global oil and gas. And tariff-related supply chain disruption was already driving up core inflation.

That suggests inflation won’t be so easily quelled. But again, that’s not necessarily bad for the REIT sector, provided companies can handle volatility in the capital markets. And that means the lower share prices resulting from recent selling of top-quality REITs are an opportunity to build positions, not to sell and move to cash.

Top 5 Fresh Money Buys and Sells

What are the top buys in the REIT sector now? With Q2 results and guidance updates more than a month away, I favor REITs that have provided updates in the past month that affirm their investment plans and guidance are on track. And these five REITs have done so:

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Editor’s Note: Thank you for reading Dividends Roundtable!

Producer or “wholesale” price inflation is now running at the highest rate since 2022. And consumer prices are close behind.

Dividend stocks, however, are still beating the Big Tech-heavy market averages by a wide margin. And the 18 positions in our Dividends Premium model portfolio are at a new high-water mark for 2026 so far, with an average year-to-date total return of 20.67%.

The key is pricing power. Simply, companies able to push on rising costs to customers always keep up with inflation. And that means shareholder returns—capital appreciation and dividends—will as well.

Pricing power and strong balance sheets are the hallmarks of the stocks in this portfolio. With a little less than three weeks left in Q2 2026, there’s every sign they’re going to continue keeping pace this year with rising inflation and the resulting higher for longer interest rates. Two on the bargain counter are this month’s best fresh money buys: Altria Group (NYSE: MO) and Newmont Corp (NYSE: NEM).

As an added feature to the service, I’m now rating each portfolio position on my Quality Grade system from A (safest) to F (riskiest). See the portfolio discussion in this report for an explanation of the five criteria I use.

Have a question? Then check out the Dividends Roundtable investor forums I host 24-7 on Substack and Discord. And keep an eye out for the Dividends Roundtable application I’ll be launching in the near future, exclusively for readers.

Here’s to your wealth!--RC

It’s official: Producer or “wholesale” price inflation is now running at its fastest rate since November 2022.

The Bureau of Labor Statistics’ Producer Price Index for May accelerated 1.1% from April, and 6.5% from the year ago month. “Goods” prices were up 2.8% sequentially and 7.4% from a year ago. The cost of “services” increased 0.3% and 5.5%, respectively. And even stripping out a 22.7% increase in energy prices as well as food and trade services costs, PPI inflation was up 0.8% sequentially from April, and 5.1% from last year.

Consumer price inflation for May was up 0.5% sequentially and 4.2% year-over-year. Stripping out a 3.9% lift in energy costs from April and 3.1% higher food prices, the year-over-year increase in the so-called “core” CPI for May was 2.9%, up from 2.8% in April.

The Federal Reserve under former Chairman Jerome Powell used the “Personal Consumption Expenditures Index” (PCE) as its primary inflation gauge. It won’t be updated for May numbers under June 25. But it’s a safe bet PCE will highlight the same trends, following a 3.8% year-over-year increase for April or 3.3% excluding food and energy.

Rising Inflation and Dividend Stock Returns

During his confirmation hearings, new Chairman Kevin Warsh promised “regime change” at the central bank, including a recalculation of inflation that would strip out the highest and lowest components of indexes. Such a change would moderate the official numbers we’re seeing. And no doubt incumbent politicians would love the chance to take credit for successful inflation fighting, with November mid-term elections approaching.

But as dividend stock investors, we need to consider the following:

· Inflation is driving up companies’ costs across industries. That’s clear from a quick look at income statements. And the longer it remains at these elevated levels, the more those costs will rise, pressuring margins and earnings unless offset.

· Higher for longer inflation also means higher for longer borrowing costs. That means companies with debt as a meaningful percentage of capitalization will continue to see higher interest expense when they refinance maturing debt or borrow to finance expansion. And that in turn will pressure earnings unless it’s offset.

· Elevated operating and financing costs raise the bar meaningfully for corporate investment decisions. That’s slowed expansion moves in many industries, and therefore earnings and dividend growth.

Recalculating inflation to a lower level may provide cover for a Fed Funds rate cut. And that in turn could reduce near-term borrowing costs, such as for credit lines. But if such a move is perceived by lenders as going soft on inflation, it would result in higher longer-term borrowing costs.

I’ve commented on the fact that longer-term borrowing costs are little changed over the past few years. And that includes the now roughly three-and-a-half months since the Strait of Hormuz has been closed, further fracturing supply chains already strained by tariffs and other barriers to trade.

My graph of the 10-Year Treasury Note Yield makes the point clearly. Mainly, we haven’t yet seen that big drop in longer-term interest rates that would have given dividend stocks a powerful lift. But neither have rates entered a 1970s-style stagflation spiral.

Instead, they’re holding steady. And at the same time, gold prices have backed off, with the spot price of an ounce of the yellow metal retreating to the $4,100 to $4,200 range from over $5,600 earlier this year.

That’s still about $1,500 an ounce higher than the January 2025 price. But as with the 10-year Treasury yield, this moderating action is hardly what one would expect with the onset of hyper-inflation or stagflation. Rather, it indicates a broad investor expectation that recent jumps in PPI, CPI and PCE inflation will moderate in coming months.

It’s fair to ask what happens if the center doesn’t hold, as investors seem to be assuming. And with so many are expecting a benign outcome to current market stress, we have good reason to maintain positions in gold-related investments, particularly mining stocks.

But the fact remains that despite the cataclysmic financial headlines—and the trillions of investor dollars governed by algorithms trained to respond to them—shareholder returns from dividend stocks have generally increased so far in 2026.

The only real exceptions have been companies with earnings and dividends negatively impacted by inflation. And that means they either had too much debt to manage, or they lacked pricing power.

Pricing power comes in many forms and varies across many sectors. The common element is companies sell a product or service that customers have little choice but to pay up for and therefore will absorb a price increase.

Electricity, for example, is not only more essential than ever to a functioning modern world. But regulated electric utilities are allowed to push through to customer rates the added expense of everything from higher borrowing costs to rising fuel prices and employee wages.

Earnings for producers of energy and other commodities tend to follow long-term price cycles. But in years when underlying supply is lagging demand—as is the case now with oil and copper, for example—producers can raise prices to more than compensate for the higher cost of extraction.

Real estate investment trusts operating in many property sectors are negatively affected by a supply glut. That includes most office. And even traditionally recession resistant property types like residential have seen pressure on occupancy and rents in some areas of the country.

But when supply and demand are loosely balanced—as is usually the case—real estate rents have generally kept up with inflation. And real estate property values have a strong record of reliable and robust appreciation in inflationary times.

Outside those industries, pricing power basically comes down to having some unique strength. Most often, that’s an unassailable market position for a particular product or service, or a unique niche. But it could also be a company coming off a cyclical bottom for its business and/or sector, with a recovery in progress that will continue regardless of macro factors like inflation.

It’s fair to say I hold these companies’ quarterly operating results to a higher standard than I would if they were in an industry with a clear history of maintaining pricing power in inflationary times. That is to say, I’ll cut their stocks loose faster, if the numbers and guidance indicate pricing power isn’t what it once was.

The likelihood of higher for longer inflation also makes me less attracted to most companies advertising a value proposition based on cost cutting. Expense reduction is the key selling point for a lot of M&A, for example. And it’s a popular Wall Street theme as well, with companies across a wide swath of industries touting deployment of artificial intelligence as a game changer for margins and earnings.

AI does have massive potential for efficiencies in industries that operate large systems—where faster and more effective data collection, processing and analysis can mean meaningful efficiency gains. One of those is electricity, where intelligent AI could potentially greatly improve wildfire response. Another might be communications, which is not currently represented in this portfolio.

But as far as I’m concerned, most industries’ ability to use AI to improve profitability without losing business is strictly TBD. And it’s a fair bet that for many, results are going to fall far short of the current hype.

That means—so long as higher for longer inflation is a factor in the US economy—pricing power is where we need to keep our focus when it comes to picking the right dividend stocks.

Even companies that have pricing power aren’t immune to real stock market corrections. And in my view, we’re overdue for a drop of -20% or more in the big market averages, which are currently loaded up with extremely expensive Big Tech stocks trading on price momentum.

But companies with pricing power will continue to generate solid returns in coming years. And those that lack it will be at rising risk to falling behind and at worst cutting dividends.

Building positions in dividend paying stocks of companies with pricing power is how we’ll realize this portfolio main objectives. That’s to build a rising stream of income and grow capital, while maintaining enough stability of value so investors never have to sacrifice those core objectives if they need to harvest cash.

To control near-term risk—such as from a meaningful stock market drop—I follow four basic strategy rules:

· 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.

· 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.

· 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.

· 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.

Since inception, the portfolio has a total return of 106.05%, a new high-water mark. That calculation assumes harvesting rather than reinvesting dividends, which for would have produced a higher return for all 18 current holdings.

I calculate returns based on harvesting because a rising stream of current income is a key priority. Similarly, this portfolio also holds a sizeable portion of cash in part because it still provides a competitive yield. And it provides a ready source of funds for anyone who needs cash, which won’t require sacrificing future returns by selling a position prematurely.

The other reason to hold cash is it will maintain value in a market-wide selloff. And therefore, it will be a ready source of funds to buy top quality stocks that fall to good entry points.

Action Plan

Over the past month, most of the stocks in the portfolio have moved higher.

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Dragon 2 hover test. Space X Photos.

Editor’s note: Thank you for reading Dividends Roundtable! This week’s edition as always includes an update of my Dividends Premium portfolio, with an average gain of 18% year to date. Premium subscribers are cordially invited to check out the webchats I host 24-7 on the Substack and Discord applications. Here’s to your wealth!—RC

For all too many investors, the coming week will be simply a countdown to the main event: The initial public offering of Elon Musk’s SpaceX.

The hype is already flowing fast. Expect it to gain intensity as the big day arrives.

The enigmatic CEO of EV manufacturer Tesla Inc (NSDQ: TSLA) and social media forum X has reportedly bypassed Wall Street’s usual process for setting IPO prices. And that move has apparently convinced more than a few large institutions to stand aside.

Instead, Mr. Musk appears to be counting on his panache with retail investors to raise a target $75 billion, which would imply an astronomical total market value of $1.75 trillion for the company.

SpaceX has made the news regularly in recent years with its exploits in outer space, though some were less than successful. And it made another huge splash acquiring wireless spectrum from Echostar (NSDQ: SATS), which the Federal Communications Commission signed off on last month.

SpaceX appears to be a long way from real earnings, posting a $4.4 billion loss in 2025 and losing almost that much in Q1. And at $1.75 trillion, the stock would be selling at 100 times annual sales, an extreme initial valuation that in the past has ensured a sizeable post-IPO drop.

All that may not make any difference for what happens Friday. For one thing, Musk always thinks big, at least in public. And announced plans to literally build a space fleet have obviously captured many investors’ imaginations.

It’s undeniable that Tesla made electric vehicles cool, though it’s Chinese companies like BYD that now dominate the market. Love it or hate it, X is arguably a more dynamic forum for sharing opinion than ever. And though Musk’s rooftop solar company SolarCity never panned out, his forecasts of solar’s growth have if anything proven to be too conservative.

The International Energy Agency estimates global installed photovoltaic (PV) capacity rose from around 759 gigawatts in late 2020 to nearly 2,400 GW by the end of 2025. And the pace of new installs has picked up every year, from 130 GW in 2020 to 800 GW last year with even more expected in 2026.

The levelized cost of electricity (LCOE) for utility scale solar has dropped to just 4.3 cents per kilowatt hour, making it cheaper than any other universally deployable energy source. A flood of new production capacity has driven down solar module prices by 50%, while increasing panel efficiency from 19-20% to 22-24% over the last five years. And the cost of solar-plus-battery storage systems—which Tesla does sell—has dropped by as much as -45%.

That didn’t prevent Tesla’s energy, generation and storage revenue from dropping by -11.8% in Q1, as competitors in that business did even better. But lower costs did improve margins greatly: The company’s Q1 cost of energy storage revenue dropped to 60.5%, down from 71.2% a year. And it’s likely headed even lower this year.

As for Tesla overall, the company like all EV manufacturers was counted out by many when the President Trump’s OB3 fast tracked elimination of federal tax credits. But even as US behemoths like Ford Motor (NYSE: F) predictably tacked and wrote off billions, Tesla’s Q1 revenue increased by 15.8%, while income from operations surged 135.8%. And that’s in a year when sales from regulatory credits—basically a pass through to earnings—plunged by -36.1% to just 8.1% of gross profit, versus 18.9% a year ago.

Bottom line: Over the past 5 to 10 years, Tesla has gone from hype machine to an enterprise with real sales and earnings. And with sales of China-made EVs rising 39.4% in May—in part a global response to spiking gasoline prices with the Strait of Hormuz still shut—the company looks like it’s here to stay.

Great Company, Un-Investable Stock

Of course, whether Tesla is an investable stock for long-term wealth building is a totally different question. Anyone who bought it in the previous decade is up huge. But the stock is down about -13% year-to-date and has made no real headway the past couple years.

Tesla is also the eighth most heavily weighted stock in the S&P 500 at nearly 2%, meaning it’s very much tied to the stratospheric expectations of the artificial intelligence theme—a fact further confirmed by sky-high valuation of 180X “normalized” earnings.

The bigger they come, the harder they fall. And for anyone tempted to chase the SpaceX IPO this week, that’s food for thought.

I don’t share the view that SpaceX isn’t a real business. And the company also has multiple friends in high places, who for one reason or another seem to be pulling out all the stops for a successful launch.

Last week, for example, the company won tax incentives for its chip manufacturing project in Texas. FCC Chairman Brendan Carr last month reflected the pro-Musk sentiment in the Trump Administration with this extraordinary admonition to opponents of Echostar’s sale of wireless spectrum to SpaceX:

“I would be very hesitant betting against Elon Musk. A lot of people have tried to do so and have lost a lot of money along the way.” He also went on to opine “To see this level of investment by SpaceX/Starlink in spectrum I think speaks to the amount of diligence they’ve done and the confidence that they have either in direct-to-cell or whatever innovative use cases they may have.”

That’s an extraordinary endorsement of a company Mr. Carr is regulating. And while there’s “no public evidence” the Chairman has a financial stake in SpaceX ahead of the IPO, Trump Administration officials do have at least $44 million in the company and its AI affiliate xAI.

Does that mean the fix is in? Maybe, maybe not.

One other IPO fact is that Mr. Musk will still own 82.4% of the combined company after the IPO. That should mean his interests are conjoined with the minority shareholders. But that level of ownership also means SpaceX can be classified as a “controlled company,” with everyone else the equivalent of a limited partner as far as decision making and access to information.

None this will likely matter to Musk fans, who are already convinced he’s their ticket to riches. And maybe they’ll be proven right. But in my view, post-IPO SpaceX is basically in the same category as Tesla—an interesting company with a stock that trades purely on momentum fueled by investor sentiment.

Buyers on Friday may make money if they’re nimble. Those privileged to get in before the IPO—like those Trump Administration insiders—have a better shot at getting their beaks wet. And Mr. Musk will clean up, almost no matter what happens.

There will be at least two potential major market moving events before the IPO. That’s Wednesday’s release of Consumer Price Index data for May, followed by the Producer Price Index on Thursday.

On Friday, a sliding bond market pulled the Big Tech leaders lower, following a solid employment report that seemed to portend more inflation. Another round of CPI and PPI numbers like what we saw for April will only further stir those worries. And by extension it will boost bets that—new Fed Chairman or no—the central bank’s next move will be to raise rather than lower the Fed Funds rate.

Anything too dramatic could theoretically weigh on the SpaceX IPO. It seems unlikely Musk will cut the price from the planned $135 per share. But the price of publicly traded shares may sell off in a hurry after the IPO. Buyer be wary!

These Stocks Held Their Own

Concerns about rising inflation and interest rates did fall hard on some dividend paying stocks as well. But damage was hardly universal.

In fact, 17 of the 20 real estate investments trusts on my Dividends Roundtable First Rate REITs list posted gains on Friday, two of them close to 4%! So were more than half the utilities and essential services stocks I’ve tracked the past four decades. And so were half the Dividends Premium Portfolio positions.

Another group in the green on a day when the S&P 500 and Nasdaq 100 were shedding -2.6% and almost 5% of their value, respectively: The Big US 3 Telecom stocks.

This group has been a mixed bag this year. And a good portion of blame can be laid at the feet of SpaceX hype, as expressed in FCC Chairman Carr’s extraordinary tacit endorsement of the upcoming IPO.

As rumor had it, Echostar CEO Charlie Ergen last summer called in a favor from the White House. And the FCC dropped its threat to seize company wireless spectrum for violating investment pledges. The former DISH Network had made those pledges during the first Trump Administration, as a condition for buying spectrum assets from T-Mobile (NSDQ: TMUS) when it merged with Sprint. Dropping the investigation allowed Ergen to sell the valuable spectrum to AT&T Inc (NYSE: T) and SpaceX.

Echostar had long been an ineffective fourth national wireless competitor. But as I wrote in the September issue of Conrad’s Utility Investor, the spectrum sale officially launched a “Big 3” world for US communications, with three rather than four national wireless networks.

That’s been China’s model for more than a decade. The result has been consistent industry margins and robust investment—with the result the country is now a global leader in network quality and innovation including artificial intelligence.

That same positive trend has been unfolding in the US over the past year. And the sector has continued to consolidate, even as Big 3 earnings are the best they’ve been this decade.

Big 3 stocks, however, haven’t felt the love. And one big reason seems to be a persistent belief that SpaceX intends to crater industry margins once again by launching a fourth national wireless network.

Perhaps following on FCC Chairman Carr’s statement about a “direct to cell” business for SpaceX, an Oppenheimer analyst last week forecast “competitive risks from low Earth orbit satellite providers” could “pressure broadband and mobile growth” at the Big 3.

Maybe. But the record of satellite technology going head-to-head with 5G wireless and fiber broadband networks is quite dismal indeed.

Take Echostar, currently the largest player in the space. The company lost another 366,000 of its satellite-based pay television users in Q1. It also shed 58,000 broadband users (7.8% of its base), or nearly twice the number of losses in the year ago quarter. Broadband and satellite service revenue dropped -11.1% from Q1 2025. And earlier this month, the company was forced to delay interest payments on three bond issues.

The company has a 30-day grace period to pay. And by then, it should have closed FCC-approved sales of spectrum for $20.25 billion of proceeds. But Echostar’s operating performance is a clear reminder that satellite technology does not measure up currently to the 5G wireless and fiber broadband networks the Big 3 offer. And now that the Big 3 have formed a joint venture to eliminate wireless broadband “dead zones” in the US, competitive pressures will only increase.

Could SpaceX offer something better to undercut the Big 3? I never say never when it comes to technological possibility, particularly if there’s money, vision and determination behind it. But the Big 3 are also furiously innovating to provide faster, more reliable connections at a lower cost. And they’re increasingly leveraging to the same artificial intelligence tech SpaceX would use.

Pre-SpaceX has pursued partnerships with the Big 3 that build on each other’s expertise for mutual benefit. In my view, there’s every reason to expect post-IPO SpaceX will continue doing the same—rather than make a hugely expensive, highly speculative effort to compete in a business in which it has no experience.

In fact, by offering service and bringing the number of US wireless competitors back to four—as is the case in Canada—Mr. Musk would be undermining the very sector margins that would make SpaceX’ entry profitable. Better to partner with the Big 3 to grab a share of future business than compete for share in a largely mature market.

At the end of the day, only actions and Big 3 earnings growth will disprove the SpaceX as a communications sector disruptor thesis. But in the meantime, we have a golden opportunity to pick up shares of the three companies that are rapidly increasing dominance of their industry and paying a rising stream of dividends as they do.

The cheapest of the three:

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Editor’s note: Thank you for reading Dividends Roundtable! Want to join the discussion with other informed income investors? Check out the live chats I host 24-7 on the Substack and Discord applications. Here’s to a great summer and to your wealth!—RC

What will the much-hyped SpaceX IPO fetch? Will a real truce at last open the Strait of Hormuz? Will oil prices crash in response? Will the surge to 3.8% last month on the Federal Reserve’s key inflation metric force incoming Chairman Kevin Warsh to raise interest rates, rather than cut as President Trump demands?

Will current political polls hold up and a Blue Tsunami reshape power in Washington following November mid-term elections? Have recent global supply chain shocks ensured an economic slowdown? And how high can the stock market climb, led by a handful of historically expensive names all tied to the same investment theme—artificial intelligence?

Those questions are dominating the headlines. And algorithms that control a growing share of Americans’ stock portfolios are trained to respond to them. So they’ll greatly affect where the S&P 500 closes out 2026.

But they’re all really just bets on momentum. And that means none are really investable.

Building real wealth and durable income means taking positions from good entry points in high quality companies that will grow over time. I recommend following my four-part Dividends Roundtable strategy:

· Build positions in dividend paying companies that stack up well on payout sustainability, revenue reliability, regulatory/legal risk, balance sheet strength and operating efficiency. Sell any company you own when it falters on these criteria.

· Always diversify and balance. Own stocks in multiple sectors, rather than load up on just one or two. The greater a stock’s weighting, the more damage even a mild pullback will do to portfolio value. And even the strongest company can stumble unexpectedly. I also never average down a falling stock just to reduce cost basis.

· Take partial profits when share prices reach momentum-led extremes. Sock away the proceeds into a cash reserve, which can be reinvested in lower priced quality stocks or harvested for a rainy day.

· Invest incrementally to put the power of dollar cost averaging to work. For example, plan to take one-third of your position now, one third in six weeks and another third six weeks later.

The so-called “Magnificent 7” Big Tech stocks have gotten a second wind this spring. And they’re again commanding the headlines, with the S&P 500 ETFs they dominate now up 11.2% year to date. But the Dividends Roundtable strategy also continues to work, with the 19 positions up an average of 18.3% so far in 2026.

To be sure, not all of my stocks are ahead this year. Residential real estate investment trusts, for example, continue to lag in an environment of higher for longer borrowing costs and previous years’ overbuilding in many markets.

Energy stocks have been on a roller coaster ride all year. And investors continue to go back and forth on what my friend and colleague Elliott Gue has written in our Substack advisory the Energy Bulletin as “escalation” and “deescalation” assumptions for oil and natural gas prices. Other companies across a spectrum of industries continue to be negatively affected by global supply chain disruption that shows little sign of settling.

But the point is if you spread your bets on high quality stocks across multiple sectors, your winners will more than offset losers, in all but the worst market meltdowns. That will also minimize overall portfolio volatility, even as both the winners and losers in the current environment become more valuable as businesses.

A Current Trend Long-Term Investors CAN Bet On

There is one investment theme now grabbing headlines that’s also worthy of long-term bets from wealth building income seekers like ourselves. That’s M&A, short for “mergers and acquisitions.”

M&A activity has picked up steam over the past year for several reasons:

· Cost of capital. A couple of years ago, it looked like long-term borrowing costs were on the way down, with the Federal Reserve easing up on its rapid tightening of 2022-23. Now with inflation running at 3.8% on the central bank’s preferred gauge, Fed cuts to short-term rates could actually fuel inflation fears, pushing cost of capital higher still. Merging is a proven way to strengthen balance sheets and so doing gain access to lower cost debt and even equity capital.

· Scale advantages. Inflation is rising. And joining forces provides opportunities for companies to meaningfully cut costs by eliminating duplicative operations. Getting larger also increases leverage in procurement negotiations to offset higher prices. And pooling resources means better access to technology, as well as opportunities to tap top talent, further boosting efficiency so companies can do more with less.

· Trump Administration regulators have made it clear they look favorably on M&A in general. Officials have occasionally used the approval process to push unrelated policy objectives, such as eliminating DEI (diversity, equity and inclusion) programs. But most deals have been able to close with few if any real conditions.; And companies across multiple industries are now stepping up to take their shot.

Certainly, not every merger has been a home run historically. Remember AOL and Time Warner in the previous century? That deal was supposed to unite the future of the Internet with the premier media company of the present. And no one was more excited at the time than the late, great Ted Turner, the billionaire who had built a massive media empire including turning MLB’s Atlanta Braves from laughingstock to powerhouse.

Nonetheless 30 years or so later, AOL/Time Warner is considered a classic case of M&A failure taught in business school. And AT&T Inc’s (NYSE: T) deeply discounted acquisition of the combined company some years later ended with a massive writeoff and dividend cut.

The list of reasons deals fail is just as long as the number of companies failing. Those range from too much debt leverage to unforeseen circumstances and management fundamentally misunderstanding their nature of what they were joining together.

There are, however, three industries where M&A has almost always succeeded in creating stronger and more vibrant companies.

One is regulated utilities. Samuel Insull—popularly known as the “Monopoly Man”—was the first to apply Henry Ford’s principles of mass production to the electricity business. Before that, power was a luxury item only the wealthy could afford.

Insull’s focus was building scale to drive down costs and prices. And the key element of his strategy was M&A. His Chicago-based Commonwealth Edison empire consolidated hundreds of small systems to create one large one capable of mass-producing electricity. And since his time, there have been literally thousands of mergers between operating, regulated utilities—not one failing to create a more powerful power provider.

Early in my career as an analyst, I called the proposed merger of two Ohio utilities—the former Centerior Energy and Ohio Edison—a “mindless merger.” And I can admit I’ve since eaten my words. They’re at the core of FirstEnergy Corp (NYSE: FE), a very successful recommendation in my Conrad’s Utility Investor.

Utility mergers have always been successful because they basically join identical businesses. Sometimes there are management egos to contend with. Occasionally too much leverage is used. But at the core, the partners have the same assets, the same employee skillsets and the same regulatory and customer challenges. And by joining forces, they have more resources to deal with the challenges.

Scale in the oil and gas business has similar advantages up and down the value chain. The nuances of drilling, gathering, processing, compression and so on vary by location and the nature of the reserve. But wherever companies operate, they need a roughly similar mix of assets. And large, diversified players can more effectively deploy resources.

Two of the most effective mergers in history were between major oil companies: Chevron and Texaco and Exxon and Mobil. And arguably, BP’s earlier consolidation of the former Amoco and ARCO is the main reason it was able to survive the devastating Macondo oil spill in the Gulf of Mexico.

As with utilities, M&A had picked up for energy companies up and down the value chain the past few years. And the reasons for this urge to merge are roughly similar: To boost efficiency, diversify geographically and by customer and enhance access to capital at a time of higher for longer interest rates.

And that combination of incentives is now starting to drive consolidation in a third sector that’s consistently produced high, safe and growing dividends: Real estate investment trusts.

No one should ever assume REIT dividends are quite as secure a regulated utility’s payout. That much was proven again in 2020, when the pandemic forced dividend cuts at all but a handful of REITs including strongly investment grade indoor mall operator Simon Properties (NYSE: SPG). But the sector’s strongest do have a solid track record sharing profits with investors as lofty dividends.

Like utilities and midstream energy companies, REITs depend on access to low-cost capital to grow. And that’s become a challenge for many the past several years, particularly as lower rate mortgages and bonds have needed to be refinanced.

As I pointed out last week in Dividends Roundtable REITs coverage, multiple property sectors are also dealing with at least temporary oversupply issues in key markets that have depressed occupancy and especially rents on new leases. That’s now extended to the residential REIT sector, which historically has been resilient in even the weakest of economic environments including the pandemic year.

As a result, REITs are turning to boosting scale to keep margins steady by boosting purchasing power and access to capital. And though every property has its unique characteristics, there are also broad similarities in real estate that create opportunities for improved efficiencies.

I expect to see more M&A in these three sectors over the next year. One way to bet is to buy companies that are most likely to attract a high premium takeover offer in the next 12 months. That’s basically speculative. But you can reduce your risk considerably by sticking to companies you’d want to own even if no offer was ever made.

The higher percentage way is to bet on deals already announced, by owning the stock of the target or the acquirer. You obviously won’t realize the initial gains that typically follow the announcement of a generous offer. But in the utility sector especially, regulatory approvals can take time. And stocks of acquired companies can trade at sizeable discounts to offer prices right up to the close, which investors will then pocket as well as any dividends paid during the process.

The real wealth building appeal of a strong merger is long-term. Investors tend to take a “show me” approach. So rarely if ever will the full potential of a deal get priced in right away. Rather, it unfolds over time as strong annual capital appreciation and dividend growth—the surest way to build real wealth and powerful income streams.

Below I highlight an opportunity in each of these three industries that will lock in that kind of growth long-term for investors, whether the stock market booms or busts the rest of this year. And these stocks trade at great entry points.

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Biotech campus for life science R&D. By Arkelin

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

Interest rates and inflation are rising again. But for the first time since the Federal Reserve started raising rates in 2022, top quality real estate investment trusts are outperforming. The Select Real Estate SPDR ETF is ahead 11.18% thus far in 2026, versus 9.64% for S&P 500 ETFs.

The First Rate REIT list is up 8.6% with an average yield of 4.7%. That compares to 3.1% for the REIT SPDR and less than 1% for the S&P 500.

Why are REITs suddenly resurgent? Give some credit to a very low bar of investor expectations after four years of underperformance, which Q1 earnings and guidance updates had no problem beating, despite numerous headwinds in come cases.

I highlight results for my 81 REIT coverage universe in this month’s edition of the REIT Rater, which is attached to this issue. I’ve launched a new feature: Quality Grades from A (most conservative) to F (riskiest). The “Commentary” column shows how each company stacks up on all five of the Quality Grade criteria.

I hope you find Quality Grades useful choosing the most suitable REITs investments. This report also highlights 5 REITs to buy and 5 to sell. And I review each of the First Rate REIT positions individually, and how they stack up following Q1 results and guidance.

Got a question or comment? Then please join the discussion at the chat I host on Substack 24-7..

To your wealth!--RC

The Federal Reserve has a new chairman, Kevin Warsh. In his contentious confirmation hearings, he promised “regime change” at the nation’s central bank, implying a bold, fresh approach from his predecessor Jerome Powell.

Investors should instead expect more of the same.

One of the biggest popular misconceptions seems to be that the Fed operates in something of a vacuum. That is, it’s the central bank’s purview to decide what borrowing costs will be. And the markets will inevitably follow.

Reality is it’s the other way around.

The voting members of the Federal Open Market Committee do directly control several things that greatly influence investment markets. That includes setting a range for the widely watched Fed Funds rate, which directly influences short-term interest rates as well as returns on “cash alternatives” like money market yields.

Under former Chairman Ben Bernanke, the Fed also built a sizeable “balance sheet” buying and selling bonds, including agency debt and mortgage-backed securities. And if executed well, buying bonds (expanding the balance sheet) and selling (contracting) can wield enormous influence on the direction and magnitude of market-based changes in interest rates.

But at the end of the day, even this enormously powerful institution must devise and follow policies that respond to what’s going on with the economy and investment markets. And right now, that’s persistently rising inflation, as cost increases from global supply chain disruption—including a Middle East war now in its 13^th week—are absorbed by some combination of businesses and consumers.

The Fed could theoretically cut Fed Funds as the president has made no secret he desires. And doing so could push shorter-term interest rates lower at least in the near-term.

But anything that smacks of going soft on inflation is likely have the opposite impact on longer-term interest rates and borrowing costs. And that reality showed up last week in market expectations, with investors assigning a 50% probability the Fed will raise rather than lower Fed Funds this summer.

A Fed Funds rate boost wouldn’t immediately or directly offset inflation pressure in economy. But it would almost certainly boost investor confidence that the central bank under Chairman Warsh is still serious about fighting inflation, regardless of politicians’ wants and approaching November mid-term elections. And that could have a powerful positive impact on values of investments now deemed at most risk to inflation and even higher for longer interest rates.

That includes real estate investment trusts. One of the most important takeaways from sector Q1 results and guidance updates is at least the better run REITs are learning to live with borrowing costs that are close to twice what they paid at the beginning of the decade, as by extension most debt maturing this year and last.

My expanded Commentary—which now includes point-by-point coverage of my five criteria Quality Grade system—highlights 12-month changes in debt interest expense. And a quick scan will reveal most REITs are still seeing this cost rising at double-digit rates. The main exceptions are companies deliberately slashing their debt by some combination of asset sales and throttling back on dividends.

Rising interest expense has a direct impact on cash flow needed to pay dividends. It’s the primary reason for the dividend cuts in this sector over the past 2-3 years. And another surge in borrowing costs is the greatest risk to payouts going forward.

Higher interest rates also raise the bar for investment. Mainly, prospective returns for a new development or acquisition must rise to at least keep pace, or else the money will be better spent slashing debt, buying back stock and/or paying a higher dividend.

There are a number of REITs on the First Rate REITs list that have already raised investment targets for 2026, which in turn has enabled them to raise FFO guidance. But at least so far, these boosts are basically bringing expected investments back into line with what they did in 2025.

The abysmal conditions management was preparing for haven’t appeared, at least not yet. As a result, these REITs are handily beating a very low bar of projections baked into their guidance. And they’re topping investor expectations as well, resulting in solid returns so far this year.

Upside Drivers in Stressful Times

Outperforming tepid expectations is pretty much the theme for REITs so far this year. The sector continues to face headwinds from multiple directions.

Higher interest rates and share prices that are heavily discounted to private capital values have kept cost of capital meaningfully higher than in previous years. Past years’ overbuilding has kept supply elevated in many regions across sectors, even including traditionally recession resilient sectors like residential and self-storage. Office is still trying to find a post-2020 pandemic bottom. Hospital chains are still cash strapped and threatening leases and rents for REIT owners.

Financial REITs are now facing double trouble from a combination of volatile interest rates and commercial real estate credit concerns. And now those that have diversified into residential mortgages face a growing risk of default from floating rate mortgages.

It’s a perilous environment. And the five large REIT dividend cuts already this year is a testament that not every company is responding well.

But equally, these weak conditions are a known element—both for the REITs and investors. And investors in the companies that can stay resilient are going to continue to see strong returns.

That’s even if interest rates stay higher for longer. And if the Federal Reserve can do what’s needed to boost investor confidence that inflation will be brought under control, REITs will get a huge boost in both earnings and share prices from a return to lower rates.

A drop in borrowing costs is still the single biggest potential upside catalyst for REITs in the remainder of 2026. And the barometer to keep an eye on is still the 10-year Treasury note yield, shown in the graph.

The spike in official inflation over the past month combined with concerns it could go higher pushed up the 10-year yield over 4.6% for a while last week. But it’s important to note we haven’t yet seen a breakout from the range of the past few years. And at the same time, gold prices have backed off a bit as well to around $4,500 an ounce, after spiking briefly to a point around $1,000 higher earlier this year.

To me, that still indicates an expectation from investors that inflation may remain higher for longer but that it will ultimately be brought under control. An outbreak of peace in the Middle East remains a potential catalyst for bonds to rally and yields to drop.

Even if rates go a bit higher, REITs should still benefit from the closing of the gap with private capital property values is another. The research firm Private Equity Real Estate still puts publicly traded REITs at a “median” discount north of 15% to net asset value, based on the appraised value of their properties. And some properties such as office are at especially wide ones that in the past have always closed over time.

REITs also remain historically unrepresented in S&P 500 ETFs that now dominate most Americans’ portfolios. And restoring them to a more historically normal 5-6% will bring significant buying power the next few years.

Real property remains one of the biggest long-term beneficiaries of inflation. Will Rogers once said famously, “go for the land. They ain’t making any more of it.” Generations of Americans have left real wealth to their heirs through property for decades. And like all hard assets, values will continue to rise.

Last but not least is superior yield. The average for the 81 in the REIT Rater is 5.59%. 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 71.8% based on most current available information. And more than half the First Rate REITs so far in 2026 have raised dividends this year,

The coverage universe has averaged a -0.26% change in dividends this year. That follows a -36% dividend cut by Chiron Real Estate (NYSE: XRN)—formerly Global Medical—which also withdrew 2026 guidance. Management’s statement is the saved cash will “facilitate growth plans.” But Q1 FFO was lower on reduced occupancy as the medical industry continues to struggle with rents.

The good news is the reduced rate should be covered with FFO even under very conservative assumptions. But Chiron’s cut is a continuing demonstration that REIT dividend growth remains restrained, even for the stronger players. And while most payouts are better protected from a downturn, especially after five years of sector-wide cost cutting, debt reduction and “high grading” of property portfolios, there’s still considerable risk.

New Feature: Quality Grades

To better manage this period of greater risk/reward in the REIT sector, I’ve added a new feature to REIT Rater coverage. That’s my five-letter “Quality Grade” system, based on these five criteria:

· Dividend policy sustainability.

· Revenue reliability.

· Regulatory/legal risks.

· Balance sheet strength.

· Operating efficiency.

I’ve used this basic five-part system for dividend stocks for several decades, utilities in particular. It doesn’t guarantee we’ll respond to every danger. And it’s only as effective as the data I feed into it. But it does provide a pretty good framework for understanding companies’ strengths and weaknesses.

One thing I’ve found is 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.

The Quality Grade system replaces the old “Conservative,” “Aggressive” and “Speculative column. But a shorthand way to convert is that “A” is Conservative, “B” and “C” are basically Aggressive and “D” or “F” are Speculative at best.

Again 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.

The Quality Grade system is a straightforward way to assess the risks relative to potential upside. And I’ll be using it in conjunction with my four piece 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 have given us a golden opportunity 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.

Top 5 Fresh Money Buys and Sells

So what am I advising now in the REIT universe—based on Q1 results, management’s guidance updates and my enhanced Quality Grades system?

My chief concern going into Q1 earnings reporting season was how higher for longer interest rates have affected investment plans and dividend sustainability. And what we saw was pretty much a mixed bag.

The good news is the First Rate REITs may not be loving inflation. But they are certainly learning to live with it. And that was my line in the sand for keeping them on that buy list as ripe for building new positions.

In all, 11 of them raised 2026 after just one quarter of results. That’s the best possible confirmation of their underlying health and ability to grow amid the challenging conditions in the property sector. And it’s why we want to continue to hold them.

IWhen a REIT does cut guidance, I need it to have a very good explanation why to give me a comfort level that it won’t do so again. This one did that and I’m going to stick with it.

The five fresh money buys below all raised their guidance following solid Q1 results. The “Commentary” column in the REIT Rater has quite a bit of information. And I recap the highlights briefly in the discussion below. They are:

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Over the past 125 years, America’s electric utility industry has consolidated from literally thousands of operating companies to several dozen majors.

This week has brought the industry’s most audacious deal. And this is one case where the biggest is definitely the best yet.

NextEra Energy (NYSE: NEE) has agreed to buy Dominion Energy (NYSE: D), with every D share exchanged for 0.8138 NEE.

The all-stock deal will create a regulated electric utility serving 10 million customers in four of the five fastest growing US states. The new company will serve the world’s largest concentration of data centers. It will operate 110 gigawatts of electric generating capacity with a 130 GW development pipeline. And it will be the largest producer of renewable energy/storage and natural gas generated electricity, as well as number two in US nuclear power.

The partners expect the deal to be immediately accretive to earnings after the close, which is expected to take 12 to 18 months. And management is guiding to 9% plus annual earnings growth through at least 2032, fueled by 11% annual growth in regulatory capital employed.

The combined company will enjoy enhanced access to capital, with BBB+ (S&P) Dominion getting an immediate boost from A- rated NextEra. Revenue reliability will be firmly anchored in 80% regulated cash flow and the balance fully contracted generation, electric transmission and natural gas pipelines. And it will benefit from some of the most favorable utility regulation in the US—Florida, the Carolinas and Virginia.

Both utilities have long track records of successfully executing energy infrastructure construction. That includes the biggest ongoing project between the two companies—the now 75% plus completed, 2.6 GW Coastal Virginia Offshore Wind facility. And it will have by far the biggest inventory of future data center business, with 51 GW in Virginia alone.

As this deal is all-stock, the offer value for Dominion will fluctuate until the close. And predictably, shares of the acquirer NextEra have sold off a bit on the news. But even at a price of $85 for NEE, the offer is still worth almost 15% more than D’s close Friday. At $90, it’s 20% higher. And long-term, the linkage to high growth NEE’s shares will be worth much bigger gains.

The exchange ratio implies a post-deal dividend of 50.7 cents for Dominion. That’s based on NextEra’s current rate of 62.3 cents times the exchange ratio of 0.8138. That’s a reduction of -24% from the current rate of 66.7 cents.

But Dominion shareholders will also receive a special dividend of $360 million at the close. By the time the deal is done, NextEra will have raised its dividend at least one more time to a rate of at least 66 cents per share based on guidance for 6% annual growth. And within 2-3 years of the close, the regular payout should be higher than what Dominion shareholders now receive.

Regulatory Approvals Highly Likely

Under Florida law, regulators do not need to approve utility mergers, though it’s a fair bet that officials were consulted first. That leaves state regulators in Virginia and the Carolinas, the Federal Energy Regulatory Commission, the Department of Justice (anti-trust) and the Nuclear Regulatory Commission as the key hurdles.

Earlier this year, the Trump Administration forced Dominion to stop work on CVOW. And it’s possible the Interior Department will require the utility to relinquish licenses it holds for additional offshore wind capacity as a condition for merger approval.

NextEra on the other hand has proven adept navigating Trump energy policies, winning a 10 GW contract to develop natural gas generation funded jointly by the US and Japanese governments. Federal regulators have also expeditiously approved extending licenses of its nuclear power plants, the restart of the Duane Arnold nuclear facility and expansion of the Mountain Valley Pipeline (30% owned). And there’s been little or no interference in its expansion of solar, wind and energy storage operations, which pulled in a quarterly record 4 GW of new orders in Q1.

Bottom line: NextEra and Dominion should be able to win fairly speedy federal regulatory approvals for this merger, and with acceptable if not minimal conditions.

I also expect both Carolinas to approve within a year if not sooner. Dominion’s ability to carve together an all-parties rate settlement in its ongoing South Carolina is a clear testament to how much the environment has approved since the 2019 SCANA merger. And the company’s North Carolina presence is small.

That leaves Virginia as the critical path for this deal.

The key issues are almost certain to be affordability and data centers. The northern part of the state is the epicenter of America’s data center boom. Data centers are already 30% of Dominion’s commercial load. And with 51 GW of prospective new demand in various stages of development, they were the primary driver of the company’s 4.3% boost in weather normalized demand for Q1.

Data centers are a key driver of Virginia’s economy. But providing the needed electricity to run them without burdening Dominion’s ratepayers and the state’s environment has become a critical concern for the public, and by extension politicians.

That said, Virginia Governor Spanberger and the Democrat-controlled legislature have laid out ambitious goals for renewable energy expansion. And joining Dominion to NextEra would certainly accelerate that, given the acquirer’s unmatched supply chain for rapid development and deployment of solar, wind and battery storage.

The companies have pledged to keep Dominion’s headquarters in Richmond as an effective regional hub. And CEO Robert Blue would become boss of the combined regulated utilities, as management is combined.

One fundamental difference between utility mergers and M&A in other industries is businesses are so similar they can be easily scaled. And with some $200 billion in investment opportunities, the focus for the new company is expansion and growth, rather than shrinking and cost cutting. The new company will guarantee “18 months of job protection and 24 months of compensation and benefits protection” for Dominion employees after the close.

The companies have also promised $2.25 billion in rate credits for Dominion’s utility customers, over the two years following the close. My view is that figure is likely just an opener and will likely be raised in a final settlement. But it’s also a clear indication of the efficiencies and growth this deal offers all parties.

So what am I recommending now?

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Editor’s Note: Thank you for reading Dividends Roundtable!

Inflation is back with a vengeance. But the high quality, dividend stocks we own in the Dividends Premium portfolio are a proven antidote for income investors.

This month, I highlight Q1 earnings and guidance for each of the positions in this report. And my top takeaway is they continue to demonstrate the balance sheet strength and pricing power in their underlying business to survive and thrive in this increasingly difficult environment.

My top fresh money buys for conservative and aggressive investors are both high yielding, deep value stocks that have affirmed their value with solid Q1 results and updated guidance. I also highlight several companies in this report where I may trim positions in coming weeks. Stay tuned.

Have a question? Then join my Dividends Roundtable web chat discussion on the Substack application, which I host 24-7. And if you’re not yet a subscriber, please check us out by clicking on the link in this email.

Here’s to your wealth!--RC

Parse it out however you want. But there’s no doubt inflation is on the rise in the USA.

Even the so-called “core” Consumer Price Index was up 0.4% in April from March. The CPI itself, which includes food and energy, advanced 0.6% on a “seasonally adjusted basis.” And the Producer Price Index was up a whopping 1.4%.

Put another way, even if you toss out soaring food and gasoline prices, the official annualized rate of consumer price inflation is 4.8%, compared to the Federal Reserve’s official long-term target of just 2%. And with annualized PPI inflation 16.8%, CPI inflation seems likely to go higher still.

Not surprisingly, investor expectations of inflation have followed CPI and PPI numbers higher.

Friday’s action highlighted the stock market’s vulnerability. The only sector closing higher was energy, as even the artificial intelligence-related favorites leading the S&P 500 higher over the last month sold off.

NVIDIA (NSDQ: NVDA), for example, that day lost more than -4.4% of its nearly $5.5 trillion market value—though that’s still greater than the GDP of every country in the world except America, China and Germany.

But as is always the case when inflation becomes an issue, the bond market was where the real action was. The benchmark 10-year Treasury note yield is now back at almost 4.6%, its highest point since last summer. And with the 30-year Treasury yield breaking over 5.1%--and the long-compressed yield curve starting to stretch out—there’s good reason to fear this key interest rate may go quite a bit higher.

This Portfolio is Still Making Money

Time for income investors to go to cash and wait out what’s coming? Not unless you want to sacrifice both high income and the still substantial upside of high quality, reliably growing dividend paying stocks.

It’s been two-and-half months since the launch of currently stalemated Operation Epic Fury, and the resulting scramble of global energy markets. It’s about 13 months since the Trump Administration announced “Liberation Day” tariffs, disrupting global supply chains.

The 10-year Treasury note yield is roughly 60 basis points higher than where it began 2026. And borrowing costs have backed up with them.

To the extent inflation expectations keep rising, we can expect selling by algorithm of certain sectors deemed “interest rate sensitive.” That will touch numerous dividend stock groups such as real estate investment trusts and utilities. And the kind of large capitalization stocks held in ETFs sponsored by mega-corporations like Vanguard will potentially be most affected.

I expect we’ll wind up with another good opportunity to deploy cash in high quality stocks at bargain prices. Some may be companies we already own. Others may be in sectors where stock prices are currently unmoored from business value—and are currently uninvestable except as momentum-based trades.

But for anyone tempted to buy into conventional wisdom that stocks paying dividends are basically bond substitutes, consider this:

Here in mid-May with inflation fears on the rise, our portfolio stocks are up the most they’ve been all year at 18.14%. That’s after an average 2025 gain of nearly 36%, the year inflation started rising and taking the 10-year Treasury yield up with it.

Our stocks’ performance so far is about 10 percentage points better than the S&P 500. And we’ve avoided exposure to the historically expensive and therefore vulnerable Big 7 Tech stocks.

Since inception in late 2018, the portfolio is ahead by 100.61%. That’s close to a new high-water mark. And that’s assuming harvesting cash dividends rather than reinvesting. Our weighted yield is steady at 4.4%, as holdings’ dividend growth has partially kept pace with rising stock prices.

I never enter a year with the primary objective of beating the S&P 500 per se. With a dividends and value approach, we will most likely beat when the big market averages have a bad year. But I certainly never hope for or bet on a debacle. And we’re always going to make a lot more money when the overall stock market is on the rise.

Rather, I want to help readers build a long-term stream of high and rising income from stocks that will boost principal over time. And we use the principles of balance and diversification to limit overall portfolio volatility, so no one following the strategy will ever have to eat their seed corn by accessing funds at a bad time for the stock market.

The four basic strategy rules:

· 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.

· 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 3.54%. 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.

· 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.

· 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.

So, what am I advising now?

First, let’s look at the current environment. The S&P 500—and therefore all those trillions of dollars invested in related ETFs and close cousins—is still an historically high 36.35% weighting in just 7 Big Tech stocks.

In fact, after the AI-excitement run-up, NVIDIA alone is 8.9%. That’s ahead of company earnings on May 20, which while likely to be quite robust will have a tough time meeting Cloud 9-level expectations.

All seven of those stocks currently trade at near historic price multiples to business value. And the only close precedent to where they are now in terms of weighting and price is 2000, just before the Great Tech Wreck took down the then equally revered drivers of the Information Technology revolution.

Certainly, there are plenty of stocks right now selling relatively cheaply to business value. That includes many companies in this portfolio, as my discussion of our positions’ earnings and guidance calls later in this report will readily affirm.

Stocks of companies like these did largely hold their own during the Tech Wreck. Businesses remained solid. They continued to pay a reliable and growing dividends. And when the market recovered, they became leaders over the next several years.

But very few stocks of any variety completely avoided any downside in 2000-02. And it’s been the same in every real bear market that lasted long enough for investors to stop buying the dips.

Bottom line: If this decade’s version of the late 1990s Tech rally ends similarly, even these stocks are likely to give some ground. That means at a minimum not chasing stocks that are trading above my highest recommended entry prices. And it also means being willing to pare back on our bigger winners, even though we continue to believe strongly in their long-term prospects.

It’s far easier to spot the catalyst for a market decline after it’s happened than in advance, when it might do some good. But rising inflation has been a reliable harbinger of doom for previous stock markets that are trading on momentum rather than business value.

How likely is inflation to rise further in 2026? The Trump Administration’s Liberation Day tariffs were eventually struck down by the courts. And its attempt to replace them with a 10% levy on all imports met the same fate. But the 50% tariffs on copper and steel are still in place. So are various levies on other products, particularly from China—still America’s third largest trading partner.

Tariffs are simply taxes on imports. And the cost of Trump Administration levies has either been absorbed by American businesses or passed onto consumers.

So has the cost of supply chain disruption caused by barriers to trade. That’s a lot harder to quantify, in part because the government doesn’t collect data. But it’s a reasonable assumption that the additional expense of dodging unpredictable new tariffs has been at least as much as the actual taxes, again with the entire cost either eaten by business or passed onto customers.

At this point, there’s no way of knowing if/when tariffs will be reduced. The second Trump Administration has frequently used them as a negotiating tool to get some “better” deal. And the Biden Administration largely doubled down on the import taxes held over from the first Trump Administration.

But so long as there are import taxes, they will add to costs and therefore inflation. They will also disrupt supply chains and worse investment flows, threatening production and supply. And that’s in addition to anti-immigration policies, which have choked off the supply of labor to many businesses including agriculture.

It’s within the power of politicians in the US and Iran to end the current Middle East war. Even opening the Strait of Hormuz tomorrow and starting energy infrastructure repairs won’t alleviate supply strains and restore now greatly depleted inventories in Europe and Asia. But it could greatly reduce expectations of future inflation.

That in turn would provide some cover for incoming Federal Reserve Chairman Kevin Warsh to push for further cuts in the Fed Funds rate. The Chairman is only one of 12 votes on the Federal Open Market Committee that sets the central bank’s monetary policy. But like outgoing Chairman Jerome Powell, Warsh comes in with a great deal of influence to push the agenda he called “regime change” during a contentious confirmation process.

The big risk is that what the Warsh Fed does is perceived by the bond market, banks and other lenders to be soft on inflation. If that’s the case, look for inflation expectations to skyrocket, and interest rates/borrowing costs along with them, regardless of what the Fed Funds rate is.

A big boost in borrowing costs is, of course, also a pretty good way to slow the US economy to a crawl, if not push it into outright recession. And if things slow down quickly, it could wind up reducing inflation expectations and ultimately interest rates. But history shows that’s not an environment that would be kind to stocks.

A real reduction in inflation expectations would bring down borrowing costs. That would be very positive for dividend paying stocks, boosting their appeal versus alternatives like cash and by putting the brakes on rising interest expense as an underminer of earnings and growth.

Unfortunately, these are all factors beyond our control as investors. And that alone is a reason not to chase stocks above prices where they’re firmly grounded in underlying business value.

As for going to cash, here’s something else to consider. Inflation expectations always set the tone for longer-term interest rates and borrowing costs. The Fed can only influence the 10-year yield by helping raise or lower those inflation expectations.

The central bank, however, does have a great deal more power when it comes to short-term rates. One potential consequence is we could actually see a decline in short-term rates at the same time longer-term rates are rising. And that means cash yields including for money market funds could fall at the same time rising inflation worries are hitting the stock market.

Cash would still hold its value. And it would be there for buying stocks when prices drop enough. That’s good reason to keep holding a fair portion of it, as we do in the model portfolio at about 14%. But it’s not a panacea for what ails us now.

Action Plan

So what I’m advising now is basically to stay the course—but with a very, very watchful eye.

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Editor’s note: Thanks for reading Dividends Roundtable! Use the link below to receive my investing thoughts on a regular basis. Hope everyone is enjoying a nice Mother’s Day.—RC

Buy Big Tech and sell most everything else. That pretty much sums up last week’s stock market trading.

Energy was by far the worst performing sector. And everything from oil and gas producers and renewable energy companies to utilities to midstream took on water, especially later in the week.

That’s despite the fact crude oil prices remained around $100 a barrel. And every day the Strait of Hormuz isn’t open for business further strains global energy supplies.

Big Tech’s monster rally comes on the heels of very strong earnings for the leaders. And the best numbers may still be yet to come, with NVIDIA (NSDQ: NVDA) reporting on May 20.

This Investment Boom is For Real

Most of us may be still figuring out how artificial intelligence will actually help us. But there’s no doubt the investment boom continues.

The past couple weeks, I’ve combed through Q1 earnings and guidance updates for 170 electric, natural gas, water and communications companies. And I can say with utmost assurance that this is one time the facts on the ground confirm the view from 30,000 feet up.

Northern Virginia remains the epicenter of the data center boom. I reported last week that Dominion Energy (NYSE: D) has raised its new connections queue to a staggering 51 gigawatts. And 11.1 GW of that is already under construction.

This week, multi-state Duke Energy (NYSE: DUK) affirmed it now has 7.6 gigawatts of agreements with data centers, with two thirds of that now under construction. And energy pipelines company Energy Transfer LP (NYSE: ET) raised financial guidance for 2026 after announcing four new connections to power plants in Oklahoma to serve large loads.

When all is said and done, it’s those contracted energy connections—with cash flush Big Tech the ultimate customer—that confirm the AI boom is for real in the US. And the contrast between stable energy prices here and soaring prices in Europe and Asia resulting from Operation Epic Fury has only cemented the advantage of American companies developing electricity-hungry AI “tokens” needed for complex solutions.

What’s not real or sustainable are the prices of leading Big Tech stocks, which are even more unmoored from business value than they were a week ago.

NVIDIA Corp (NSDQ: NVDA) may blow the doors off earnings 10 days from now. And as the S&P 500’s largest holding by weight at 8%, the stock has delivered a year-to-date return of 15%, nearly twice the gain for the index ETFs.

The problem is NVIDIA’s market capitalization is now roughly $5.2 trillion. That’s larger than the GDP of every country in the world except the US, China and Germany. It’s also more than 40X company earnings, 24X sales and 33X book.

True, NVIDIA has (for now) the dominant market position building and selling the GPUs at the heart of AI systems. But there are competitors. And as complex as GPUs are, the history of such products is they eventually become a commodity. And when the sheen of exclusivity wears off, the stocks come down hard.

Shares of Intel Corp (NSDQ: INTC), for example, have been flying high since the chip maker took on the US government as a shareholder. And value investors like me who bought and held have been rewarded for our patience, which might fairly be called stubbornness.

But it’s been a very long time coming for Intel, which was arguably valued like today’s Big Tech when microchips in computers were a relatively new thing. And its long road back is a cautionary tale for anyone tempted to sane-wash today’s Big Tech valuations.

NVIDIA is far from the only insanely valued Big Tech. And in fact it may have one of the better cases for being worth its current price. Super Micro Computer Inc (NSDQ: SMCI), for example, rallied more than 30% last week, despite announcing FYQ3 sales that were down nearly -20% sequentially from FYQ2.

The Bigger They Come….

Can the leading Big Tech stocks go higher this week? Certainly. But when stocks reach this level of valuation, they’re no longer viable wealth builders. They’re bets on momentum and the headlines algorithm traders are trained to follow.

Unfortunately, this type of stock also now dominates big market indexes. After this week, the 7 largest Big Tech stocks are 36% of the SPDR S&P 500 ETF. Throw in everything else with a close connection to the AI investment boom and the number may be closer to 60%.

That’s a lot riding on one investment theme. And not to beat a dead horse, the only historical example that comes close to what’s happening now is the IT investment boom of the late 1990s.

The companies changed the world. But the investors who chased their stocks at the highs never recovered the catastrophic losses, unless they worked very hard and were extremely patient.

Market history never repeats. But the more you invest, the easier it is to see how they often rhyme. And that doesn’t bode well for the highest priced stocks relative to value at least in decades.

If you own an S&P 500 ETF or a close cousin, you’re now well in the black after being underwater for much of 2026. And if you’re invested in any financial instrument with a generic “stock” component—including pretty much every retirement plan—you own one.

That’s all thanks to this past week’s Big Tech rally. Headlines in the financial press credit recent earnings. But price momentum has always been the primary catalyst for any stock trading at the level of valuations this sector is. It may continue this week, especially if there’s any scrap of good news in geopolitics. But those gains may also vanish quickly. Plan accordingly.

The Dividends Premium portfolio focuses on individual stocks drawn from a range of industries with strong business fundamentals—and that trade at reasonable prices relative to the value of the underlying companies.

That strategy doesn’t always preclude owning Big Tech. But at this point, my primary artificial intelligence boom bets fall into two catagories:

· Picks and shovels—What’s needed to run the AI architecture, meaning energy and electricity providers, materials and mining.

· The AI enabled—Companies that stand to benefit the most from adopting AI applications.

The stocks I own don’t make the headlines as the NVIDIAs or Amazons do. And they decidedly do not trade on momentum.

But here’s the thing. Dividends Premium stocks are still up an average of 16.7% year to date, twice the Big Tech heavy S&P 500. And the portfolio overall is still at a high-water mark since inception in autumn 2018. That’s despite a couple stocks taking minor hits last week, especially in energy.

Even in a week when it was all about Big Tech—a sector I have basically no exposure to—the portfolio held its own. Equally important, the companies laid the groundwork for future gains by posting very strong earnings and guidance updates.

A Year of Investing Dangerously

The stock market right now is obviously carrying some heavy geopolitical risks. The news from the Persian Gulf changes daily, even as 20% or so of the world’s oil and gas remains effectively embargoed. Russia and Ukraine are stalemated in their now four-year-old war, with an estimated half million dead and their economies devastated.

China is rumored eying a Taiwan blockade or even an invasion again, even as the PM of Japan has implied that could be cause for war. And though the Trump Administration’s 10% global trade tariff has been struck down, global supply chain disruption remains a fact of life, driving up costs.

The Federal Reserve seems to have little idea where official inflation is going. The central bank’s next move could be to raise or lower interest rates, depending on future data. But anyone who’s filled up their ICE automobile or truck with gasoline lately is feeling the bite of inflation.

Later this week, Kevin Warsh should be confirmed by the US Senate as the new Federal Reserve Chairman. And he’s promised swift “regime change” at the US central bank, including a new way to measure inflation that’s likely to produce lower numbers.

The position of chairman has a lot of power to push policy. So it’s entirely possible President Trump will get his wish of a more compliant central bank and deep cuts in the Fed Funds rate. But the big question for borrowing costs won’t be what the Fed does with Fed Funds. It’s whether the market interprets a more accommodative monetary policy as going soft on inflation. And if the answer is yes, the interest rates that matter will be heading a lot higher.

Finally, there’s the fact that the last real bear market was the Financial Crisis and Great Recession of 2007-09. That’s a long time since the last crisis to really change investor behavior from just buying the dips.

Greed is clearly the dominant driver in the stock market now after the Big Tech-led rally. And that’s precisely the time when investors should be most on their guard.

There are positives, starting with the strength in Q1 earnings. Results I’ve looked at also demonstrate companies are learning to live with higher for longer interest rates and inflation, even if they’d prefer something else. And if there is a decline in inflation expectations due to Fed policy or something else, we could see lower borrowing costs as a major driver of upside for dividend stocks across the board.

The most important thing every investor can do now is remember what we’re doing here and resolve to act accordingly, regardless of the headlines.

That’s building a reliable and rising stream of income in best-in-class companies that over time will grow your capital. And we’ll control risk following these four rules:

· Sell stocks of any companies that are weakening as businesses, even if it means taking a loss.

· Take partial profits on favorites that have run to unsustainable valuations. Use my “Consider Taking Profits” prices as a tool for doing so methodically. Deploy proceeds into a cash reserve.

· Never double down in falling stocks, even if they sell for less than “Dream Buy” prices. And always spread your bets.

· Make fresh money investments incrementally. Decide first how much you want to invest in a company. Then divide the planned purchase into three parts, investing each at roughly six-week intervals.

The best news for the Dividends Premium portfolio coming out of Q1 results and guidance updates is everything we own is on solid ground. And that means we’re going to stick with what we have.

There’s also nothing trading right now at a price above the “Profit Taking” level highlighted in my “Dream Buy Prices” table. So there’s nothing worth a partial sale, though a couple of positions are fairly close.

Best Fresh Money Buys

That leaves fresh money buys. And it shouldn’t come as a surprise that this week’s are in the sectors that performed worst the prior week—mainly energy and utilities.

These sectors are absolutely at the core of the AI investment boom. And though they didn’t get a lot of love last week, their strong results and guidance point to real upside later this year.

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Editor’s note: Thank you for reading Dividends Roundtable! If you like what you’ve been reading here, please consider a trial subscription. This issue includes the updated Dividends Premium portfolio, which has reached a new high-water mark with a year-to-date return of nearly 17%. To your wealth!—RC

The numbers are both compelling and real: After a blockbuster Q1, artificial intelligence-related digital advertising sales are on track to reach $56 billion in 2026. That’s up from $35 billion last year and just $1 billion in 2022.

That’s from consulting firm Madison and Wall, as reported in today’s New York Times. And unlike many forecasts issued from 30,000 feet, this one is strongly backed by the evidence on the ground. That includes Q1 revenue growth of 21.8% at Alphabet Inc (NSDQ: GOOG), the parent of the West’s leading search engine Google.

It’s clearly salad days at Google, with its Gemini AI accelerating long-held sector dominance. And times are good for the “hardware” side as well, as Wall Street waits for leader NVIDIA (NSDQ: NVDA) to report next earnings May 20.

Then there are the data centers running AI.

It’s likely much of the currently planned 780 gigawatts of data center capacity in the US won’t get built. UK-based industry research firm Aurora Energy, for example, estimates 277 GW after removing what it considered more speculative “phantom” projects. And it’s further whittled that number down by removing first-time builders and what it calls “aggressive scalers,” companies with announced plans 10 to 500 times bigger than current operational capacity.

The results is a much more conservative but still massive 81 GW from operators considered “proven” with a “reasonable pipeline” for development. And that number too is more than amply backed on the ground, with Exhibit A the Q1 results and guidance of US electric utilities reporting results so far.

Dominion Energy (NYSE: D) is the utility serving the Northern Virginia epicenter of the boom. And the company actually increased its backlog of potential new data center demand to 51 GW in updated guidance last week, from 48.5 GW three months ago.

Dominion once again provided considerable color on those orders. The majority (29.5 GW) now has a “Substation Engineering Letter of Authorization,” with the company getting paid by the data center owner to develop a “detailed engineering plan.” Another 11.1 GW now has a “Construction Letter of Authorization,” under which construction is under way with the data center owner on the hook for everything the utility spends.

The remaining 10.4 GW has an “Electric Service Agreement,” clearly defining how the customer will take service and laying out a “structure” to recover costs. These deals also have a “revenue requirement” the data center owner must pay, whether it takes service or not.

These arrangements have obviously not discouraged data center development in northern Virginia. And they offer strong protection for customers and shareholders. So does a provision that large load customers (25 megawatts and greater) will be subject to “minimum demand charges” under 4-year contracts.

Also, 76% of the new load is coming from customers that have had a relationship with Dominion for at least 10 years. Only 11% is with data center owners that have been customers for 5 years or less. And 82% have investment grade credit ratings, with Alphabet, Amazon, Microsoft and Meta all major customers.

Bottom line: Nothing is certain. But Dominion’s data center demand numbers look pretty solid. And there’s every indication they’re going to grow even more.

That’s also the message from NextEra Energy’s (NYSE: NEE) results. The leading US producer of electricity from wind, solar, battery storage and natural gas increased its data center “hub pipeline” of projects to 30 GW in its April guidance update, up from 20 GW at the end of 2024. And it’s what we’re seeing from smaller utilities as well, with Alliant Resources (NYSE: LNT) now reporting a 3.4 GW backlog.

It all adds up to a multi-trillion-dollar investment opportunity for a wide swath of industries. And that’s not including the potential productivity gains, as large and small businesses figure out how to leverage AI to make the most of their time and resources.

Utility companies are already front and center in that effort. For example, in California, Edison International (NYSE: EIX) and PG&E Inc (NYSE: PCG) are working with big Tech firms to further harden their systems against ever-worsening wildfires in the state—using AI to make faster decisions based on data collected from an ever-increasing deployment of sensor technology.

The Obvious AI Bets No Longer Work

No doubt about it. Strong Q1 results and guidance have again confirmed the bullish case for the artificial intelligence. In fact, it’s quite possible the potential impact is still being widely under-estimated, as skeptics focus on the notable failures of forerunners like Chat GPT or apocalyptic forecasts rather than on where AI has already proven genuinely useful.

Successfully investing in AI, however, is another matter entirely.

The main headline from the stock market this week was that the S&P 500 and Nasdaq reached new highs after a fifth consecutive weekly gain. But despite all the good news on Big Tech earnings, three of the so-called “Magnificent 7” Big Tech stocks finished the week underwater.

The S&P 500—which has an historic 35.3% weighting in those seven stocks—is still up less than 6% year to date including its meager dividend. Apple Inc (NSDQ: AAPL) is higher by just 3% in 2026, despite blockbuster FYQ2 results.

That’s meaningful underperformance by the former leaders.

By comparison, the long-underperforming Real Estate SPDR ETF (XLRE) is sitting on a year-to-date gain of nearly 11%. That’s despite some notable headwinds facing the property sector, notably office and residential real estate.

The Utilities Select SPDR (XLU) is higher by 9.8%. The Energy SPDR ETF (XLE) is up 33%. And the iShares Select Dividend ETF (DVY) used a benchmark for equity income portfolios is ahead by 10.4%.

The average gain for our Dividends Premium Portfolio is nearly 17% despite a couple of notable losers.

That demonstrates the value of picking your own stocks, particularly in a stock market where the most popular ETFs are heavily overweighted in a handful of extremely expensive stocks. And that advantage will only widen further in coming months.

Simply, there’s no better demonstration that a particular investment theme is running out of gas than what’s happening now: That’s the leading stocks failing to meaningfully outperform even when the business news is probably the best it’s going to get.

All too many investors had to learn that lesson the hard way in the Tech Wreck of 2000-02. The companies leading the doubling of the Nasdaq 100 in 1999 went on to change the world. In fact, if anything, what they did was widely underestimated back then. But by 2000, the stocks already priced everything in and more. Business was still great. But there was nowhere for the stocks to go but down.

To paraphrase at least one great trader, a lot of people who were ultimately proven right on the market went broke first. And that’s already been the case for those shorting the Mag 7 as a bet on a final day of reckoning.

But it’s also been both painless and highly profitable this year to bet on the biggest of Big Tech to underperform—by buying a basket of high-quality stocks plugged into other investment themes. And that should be food for thought for anyone considering plunging into the Mag 7 in coming days, based on last week’s earnings.

4 AI Bets That Still Work

That’s not to say there aren’t still ways to buy into the AI boom, which shows every sign of being at least as transformative as the IT boom a quarter century ago. But to find them, you’re going to have to be willing come out of the ETFs dominated by the Mag 7. And you’re going to have to look in less obvious places.

So, what am I suggesting now? Not surprisingly, the Dividends Premium portfolio has plenty of choices. And despite this year’s gains, they’re trading at reasonable entry points.

US Big Tech has a massive energy advantage over rivals in other countries, including China. That’s a wealth of locally produced natural gas selling at a fraction of the price of equivalent fuel in Europe and Asia.

The AI “tokens” needed for complex business solutions require enormous amounts of energy—mainly electricity—to produce. And with Germany closing its nuclear plants and Middle East supplies shut in, there’s no equivalent sourcing for natural gas in Europe to provide it. Ditto in Asia, where almost all of Japan’s nuclear power plants have been closed since the Fukushima Daiichi disaster.

The rapid pace of US data center development in the US also faces many challenges. Concerned about the potential impact on the local environment and particularly customer rates, politicians in many states are coming out against locating data centers in their districts. Others are pushing new restrictions that have forced project cancellations. And the apparent collapse of the Fermi project in Texas demonstrates even deep pockets and political connections are no guarantee of success.

Even in Virginia, there’s an ongoing debate about data centers “paying their fair share,” including a proposal in the state senate to end a tax exemption. That doesn’t appear to be going anywhere, as the state House and governor are opposed. But it does mean Dominion and its customers will have to walk a fine line to execute their plans in coming years.

That said, the US does have a massive energy advantage over global competition when it comes to business fully realizing the benefits of AI. That means a huge investment opportunity in American natural gas, with the PJM (Pennsylvania, Jersey, Maryland) grid operator projecting 106 GW of new generation under its “reformed interconnection process.”

After spiking up in winter, benchmark natural gas prices have slumped well under $3 per million BTU. And with the Strait of Hormuz still double-blocked, much of the investment attention has understandably shifted to oil.

That’s given investors another opportunity to buy some of the natural gas producers. One of the best plays is a Dividends Premium recommendation.

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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?

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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:

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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?

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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:

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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:

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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.

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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:

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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.”

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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.