This Amazon trade pays out every year

Investors sometimes ask for my opinion of a company's stock, based purely ... This Amazon trade pays out every year There's no easier way to make money than trading a stock that makes the same move each year-year after year. Here's how we've made $1,200 with this secret, each time- and how you could do the same. When It's Okay to Chase Yields By Robert Rapier Investors sometimes ask for my opinion of a company's stock, based purely on the yield. I always caution them that a high yield could pose red flags that require further investigation. That said, there are stocks that yield 6%, 8%, or even more that are reasonably safe. Today, let's discuss why yields generally skyrocket and which warning signs you should heed. MPLX Case Study A company generally ends up with a high yield because the price has fallen. Consider MPLX LP (NYSE: MPLX). This master limited partnership (MLP) was formed by Marathon Petroleum (NYSE: MPC) to provide midstream services that include the gathering, processing and transportation of natural gas, natural gas liquids (NGLs), and crude oil and refined petroleum products. In 2018, MPLX was trading at about $35.00 and paid an annual distribution of $2.45 for a yield of about 7%. In 2019, with oil and natural gas prices under pressure, and with an activist investor seeking to break up MPLX, units fell to $26.00. But the company was still raising the distribution each quarter. By year end 2019, the annual distribution had risen to $2.67, which pushed the yield up to 10.3%. In March 2020, the collapse of oil demand due to the COVID-19 pandemic caused energy companies to collapse across the board. At its low, MPLX units fell all the way to $10.85, which pushed the yield to an astronomical 24.6%. A yield that high means that the company is undervalued, that the yield is unsustainable, or both. When I see a yield that high, I either expect the stock to rally or a distribution cut. Or both could happen. Check the Warning Signs How is an investor to know? While there are no guarantees, you can look for signs. One is whether the company is generating enough cash flow to cover the dividend and continue to operate its business. Continued strong cash flow is a sign that the company doesn't need to cut the dividend, regardless of how high the yield has gone. I would caution that companies have taken advantage of a high yield to make a cut, but they typically won't if cash flow still supports distribution. The second sign is to listen to public comments from the company, and to earnings calls. During the market plunge, energy bellwether Chevron's (NYSE: CVX) yield spiked up to 9.5%. But Chevron CEO Michael Wirth went on CNBC and said: "Our dividend is our number one priority and it's very secure. We're taking actions to preserve cash. It will have some impact on production in the near term, but we've stayed with our financial priorities, which include protecting the dividend." That's a strong assurance that, despite the high yield, Chevron wasn't about to make a cut. North Carolina Woman Makes $3,564 a day on THIS "boring" stock? Thanks to a Supreme Court ruling a small number of companies are showering their investors with cash. One in North Carolina is paying 60-year-old Lisa Gibbons $3,564 a day -- from this one company. That's $25k a month. And she's not the only one who's raking it in... The same company is sending 60-year-old Sam Yates $975 a day… and 55-year-old Jane Joiner $269 a day. Get in on this yourself right here. Likewise, MPLX CEO Michael J. Hennigan said on the company's first quarter earnings call that management had decided to leave the distribution flat, while waiting to see how the pandemic played out. That's not a ringing endorsement, but investors could take further comfort in the fact that MPLX's distributable cash flow (DCF), an important metric for MLPs, had grown from $757 million in Q1 2019 to $1.3 billion in Q1 2020. Coverage for the quarter was 1.44x, which still allowed the company to retain $319 million of DCF. Investors could conclude that the high yields reported by MPLX and Chevron were at least reasonably safe, pending of course on how long the pandemic impacted earnings. There was risk, but it wasn't the kind of risk that would have been inherent if cash flow was falling and CEOs were making highly ambiguous comments on the dividend. MPLX Rallies What has happened with MPLX since then? Units have rallied by 123% since the March lows. Remember, that's one of the things that can happen when yields get really high. It means the company is undervalued and will likely rally. That sky-high yield of 24.6% has been cut to 14.7%, which is still a very high yield. I personally know investors who bought MPLX in March that have doubled their money and are getting yields on their investment of more than 20%. They bought knowing that the underlying fundamentals of the company were still pretty good, even though the risk profile due to the pandemic has increased. Yet, it is still possible that MPLX may cut its distribution. There is still risk due to challenges in the energy sector. But it represents a good case in which chasing yield presented an attractive risk/reward profile. More often than not, a company yielding more than 20% will cut its distribution, but MPLX's fundamentals, as well as comments by management, provided reasonable comfort that they could maintain the distribution. While it's important not to blindly chase yields, it's also important not to dismiss high yields without a deeper investigation. In the case of MPLX, it's been very profitable for investors who chased its 20% yield. Editor's Note: Robert Rapier has just examine ways for investors to reap greater income. But we've only scratched the surface of our team's money-making expertise. Consider our colleague Jim Fink. As chief investment strategist of Options for Income, Jim has developed a proprietary trading system that generates reliable income, regardless of economic cycles or market ups and downs. Whenever you use it, Jim's strategy generates immediate income. Every single Thursday. Week after week. Month after month. Year after year. It's like getting an extra paycheck. The gain is so reliable, you can schedule it on your calendar. Jim made himself a wealthy man with his system. Now he wants to share his secrets with our readers. Click here to learn about Jim's next trade. Trump Paves Way For 5G Gains Of Up To 2,247% President Trump sent this warning to U.S. telcoms: "Step up your 5G efforts, or get left behind." Right now, Verizon, T-Mobile, AT&T, and others are racing to rollout their 5G networks. And one $5 stock is at the center of it all. Today, you have an opportunity to turn a small $5,000 stake into $117,385… but only if you act before Wall Street releases its hounds. Click here for details. You are receiving this email at indra21poetra@gmail.com as part of your subscription to Investing Daily. To ensure delivery directly to your inbox, please add postoffice@investingdaily.com to your address book today. Preferences | About Us | Contact Us | Privacy Policy Copyright September 1, 2020 Investing Daily. All rights reserved. Investing Daily, a division of Capitol Information Group, Inc. 7600A Leesburg Pike West Building, Suite 300 Falls Church, VA 22043-2004 U.S.A.