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The move wasn’t a surprise — Fed Chair Jerome Powell has been pretty clear about the central bank’s “keep-boosting-til-something-breaks” assault on inflation.
And in one of the sessions he holds with reporters after each Fed meeting, Powell’s rhetoric contained enough clarity to tell us that rates could go higher still.
As we talk to you here, there’s a 20% chance the next hike will happen in September.
A 30% chance in November.
And a 28% chance in December.
But no matter what Fed policymakers do next, I don’t trust them.
Nor should you.
What I mean here is that the Fed has traditionally been run mostly by academics and economists who haven’t spent a single day running a real business and have never managed money for clients.
I grant you, there are exceptions.
But the Fed is an imperfect institution — meaning the risks of overshooting or undershooting its targets for the economy and the financial markets are much higher than most investors want to admit.
And that’s the real issue here… the real lesson… the real takeaway: You never want to put your financial future into someone else’s hands.
You don’t want to trust them to take care of you.
Despite the aggressive campaign, the Fed’s target goal of 2% hasn’t been attained. And even the “brain trust” in Washington says that inflation could remain “elevated” until 2025.
So we want to take control.
To tune out what the Fed says about the economy’s health, about jobs, about prices, and about asset classes like stocks…
And find our own true edge by actively seeking income.
Like owning dividend-paying shares.
Now, I realize some investors view dividend stocks as B-O-R-I-N-G.
But thanks to my many decades in this business, I disagree. I know that dividends are an essential element of any winning investing strategy.
That’s especially true in times of rising prices when inflation is eroding your purchasing power day after day. Stocks that regularly increase their dividends beat the market by a wide margin during inflationary periods.
And there’s one easy way to cherry-pick these winning investments.
Profits on the Kitchen TableOne way to find a winner is by turning to “buy-what-you-know stocks.”
These are the investable companies that produce goods and services that you use each day in your own home.
One of my favorites is J.M. Smucker Co. (SJM).
It produces the Jif peanut butter and Smucker’s strawberry jam for the PB&Js in the lunchboxes of schoolchildren across the country.
Its Folgers Coffee has an estimated 35 million drinkers, filling up their coffee cups to start the day or their travel mugs to power through the night shift.
And its Milk-Bone biscuits are the treat of choice for many a beloved dog.
Over the last year, the stock price has held up well — showing SJM’s power in an inflationary environment — climbing 17.6% as of this writing compared to a 13.5% gain for the S&P 500.
Our Health Indicator was created so you can identify investment opportunities at a glance and know if they deserve your hard-earned money.
A stock in our Health Indicator’s Yellow Zone means to “proceed with caution,” a stock in the Red Zone means to “stay away,” and a stock in our Green Zone is like seeing the green light on a traffic signal: “Go.”
SJM is in our Green Zone.
What I also like about SJM is it’s relatively low-risk status as an investment.
Our Volatility Quotient (VQ) — which is another great tool that lets you know if an investment is for you at a glance — classifies SJM as a “Medium Risk” at 16.03%, which is pretty close to being a low-risk investment.
VQ Level Breakdown:
- Up to 15% = Low Risk
- 15%-30% = Medium Risk
- 30%-50% = High Risk
- 50% and above = Sky-High Risk
Now, let’s get to the income payments.
Owning shares of J.M. Smucker Co. is a way to offset the ill effects of inflation eroding your savings.
Americans lost $6.8 trillion in stock-and-housing wealth last year, meaning even with the stock market rally we’ve seen this year, many people are still trying to play catch up from everything they lost in 2022.
Part of that “catch-up plan” is generating consistent income — through dividend payouts.
J.M. Smucker Co. currently has a respectable yield of 2.77%, which equates to dividend payouts — income — of $4.24 per share.
It’s the type of stock that can help you avoid the “Unretirement Crisis” that TradeSmith CEO Keith Kaplan warned readers about earlier this week.
Bottom line: Owning the right dividend stocks to generate income is critical to your investing success. And by knowing the importance of finding income-generating opportunities, you won’t have to be reactive to the Fed. You will have your gameplan in place… prepared for whatever is thrown your way.