Hello, YieldAlley readers! In this issue:

• The 5+5 Portfolio For Simple Dividend Investing

• U.S. Markets Rally Amid Strong Economic Data

• What salary would it take for you to feel "financially successful”?

• And more!

NEWS

Standout Stories

💰 Gen Z Answers: What salary would it take for you to feel "financially successful”? (Sherwood)

⚠️ His $763,094 Retirement Fund Is in Limbo (WSJ)

✈️ Delta plans sharper focus on premium travelers (Chicago Tribune)

🏖️ More than half of non-retired US adults expect to rely on Social Security in retirement (CNN)

 💸 Why Young People Are in So Much Debt (Bloomberg)

MARKET THOUGHTS

U.S. Markets Rally Amid Strong Economic Data

• U.S. stocks recorded robust weekly gains:

  • S&P 500 advanced 1.7% for the week

  • Value sectors led Friday's gains, including consumer staples, financials, and industrials

  • Small-caps showed significant strength with Russell 2000 up 4% weekly

  • Global markets mixed with Japan higher but China sharply lower

• Interest rate environment:

  • 10-year Treasury yield steady at 4.4%

  • 2-year Treasury yield edged up to 4.38%

  • Markets pricing 60% probability of December rate cut

• U.S. economic indicators remain strong:

  • November composite PMI reached 31-month high

  • U.S. PMI rose to 55.3, driven by services strength

  • PCE inflation expected to rise to 2.3% from 2.1%

  • Core PCE forecast to increase to 2.8% from 2.7%

• International economic weakness:

  • Eurozone composite PMI fell to 48.1, lowest since January

  • German PMI declined to 47.3, continuing contraction

  • UK entered contraction at 49.9

  • Japan manufacturing remained weak at 49.0

• Inflation outlook:

  • Core CPI at 3.3% annually

  • Three-month annualized core CPI rose to 3.6%

  • Eurozone producer prices remain 30% higher than 2021 levels

• Forward outlook:

  • Fed likely to maintain cautious approach to 2025 rate cuts

  • Recommendation to underweight international developed stocks

  • Favor U.S. large- and mid-cap equities

  • PCE inflation data release expected Wednesday

INCOME BUILDING

The 5+5 Portfolio For Simple Dividend Investing

Many investors get caught up in chasing the highest yields they can find, but there's a very simple way to think about dividend investing - what's known as the 5+5 portfolio approach.

The concept is refreshingly straightforward: aim for stocks that combine a roughly 5% dividend yield with 5% annual dividend growth. While this matches the stock market's historical return of about 10%, here's the key difference - you're getting half your return in cold, hard cash. And in today's market, steady cash flow looks pretty appealing.

Finding these opportunities takes some digging. Companies generally fall into two camps. On one end, you've got mature businesses like telecom companies that pay hefty dividends of 6-8% but grow them slowly, maybe 2-4% per year. Think AT&T or Verizon. On the other end are companies like consumer staples businesses that might pay a lower 3-4% yield but can grow their dividends at a peppy 6-8% clip annually.

The magic happens when you blend these together. But here's the catch - you can't just buy high yields without growth potential (that's basically buying a bond), and you can't rely too heavily on future dividend growth while accepting tiny yields today. You need both elements working together.

This approach is particularly clever because it helps you tune out market noise. When half your return comes from regular dividend payments rather than stock price movements, you can worry less about daily market swings. You don't need to obsess over quarterly earnings reports or analyst upgrades and downgrades. As legendary investor Benjamin Graham said, investors do better when they "forget about the stock market and pay attention to dividend returns and operating results."

The strategy also comes with built-in warning signals. If a stock's yield suddenly spikes to 8-9%, that's usually not good news - it often means the stock price has crashed, and a dividend cut might be coming. Similarly, if a traditionally high-yield stock sees its yield drop too low (like when REITs yielded under 5% in the mid-2000s), that's a sign the market might have gotten too excited.

For today's investors, particularly those nearing retirement, the 5+5 approach offers something valuable - predictability. With the S&P 500's yield near historic lows and traditional bonds still recovering from their 2022 slump, a portfolio generating 5% income with growth potential provides an attractive alternative to the traditional 4% withdrawal rule in retirement.

The bottom line? While it might not be as exciting as chasing the hottest tech stocks or trying to time market swings, the 5+5 portfolio approach offers a practical way to invest for growing income. It won't make you rich overnight, but it might help you sleep better knowing that half your returns are coming from actual cash payments rather than hoping the market moves in your favor.

INCOME BUILDING

Cash Rates

Government Money Market Funds (7-Day Yields)

• SNVXX (Schwab Government Money Fund - Investor Shares): 4.32%

• SPAXX (Fidelity Government Money Market Fund): 4.47%

• TTTXX (BlackRock Liquidity Funds: Treasury Trust - Institutional Class): 4.52%

• VMFXX (Federal Money Market Fund): 4.58%

Brokered CD Rates (6-Month Rate)

• Charles Schwab: 4.40%

• E*Trade: 4.40%

• Fidelity: 4.50%

• Merrill Edge and Merrill Lynch: —

• Vanguard: 4.50%

ETFs

• SGOV (iShares 0-3 Month Treasury Bond ETF): 4.69%

• BIL (SPDR Bloomberg 1-3 Month T-Bill ETF): 4.50%

• USFR (WisdomTree Floating Rate Treasury Fund): 4.58%

• TFLO (iShares Treasury Floating Rate Bond ETF): 4.61%

BONUSES

Brokerage, Bank and Credit Card Bonuses

Brokerage Bonuses

• E*Trade (still active): Up to $4,000 in bonuses for deposits made within 60 days of enrollment. The lower deposit bonuses are also excellent, with E*Trade offering a bonus of $100 for a deposit of just $50. Offer here.

  • Use promo code PROMO24.

    • $50+ will receive $100

    • $1,000-$24,999 will receive $150

    • $25,000-$49,999 will receive $150

• tastytrade (still active): Offering up to $5,000 in bonuses. Lower deposit bonuses are attractive, with a $100 bonus for a deposit of $5,000 (2% return). Offer here.

• Robinhood (still active): Offering a 1% bonus for transferring any table brokerage holdings. No maximum, but deposits must be held for two years after account opening. Offer here.

Bank Bonuses

• BMO Harris (active) — Earn up to a $560 bonus when you open a new Smart Advantage or BMO Harris Premier checking account. Offer here.

  • Availability: Nationwide

  • Soft credit inquiry

Credit Card Bonuses

• Chase Ink Preferred (active) — Get 120,000 Ultimate Rewards bonus points when you spend $8,000 in the first three months after account opening. Offer here.

• American Express Hilton Surpass Card (active) — 150,000 points Hilton Honors points after spending $2,000 in 3 months. Get an additional 50,000 points after spending a total of $10,000 within the first 6 months. Offer here.

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