- The first is flexibility. Once you give your money to an insurance company you usually can’t get it back (although some will let you take a one-time withdrawal for emergencies). That’s the reason most planners recommend investing no more than 25% to 30% of your savings in an annuity.
- The second is that payments usually aren’t adjusted for inflation. You can buy an annuity with an inflation rider, but it will lower your initial payout by about 28%.
- The third — and most significant — drawback is that low interest rates will depress your payouts, effectively making annuities more expensive now. Payouts are usually tied to rates for 10-year Treasuries, which are at a record low.
This article was coproduced with Dividend Sensei.
At iREIT on Alpha and Dividend Kings, we continue to screen for value, and one sector that is appealing to us these days is the banking sector.
A few days ago we decided to write on Texas-based Cullen/Frost Bankers (CFR) in which we explained that the bank has “the highest yield in the last 20 years despite Treasury bonds trading near all-time lows. From a risk-adjusted perspective, Cullen/Frost is providing investors the best spread over government bonds in at least 25 years.“
Cullen/Frost is now yielding 4.1% with a P/E of 14.1x (normal is 16x).
Today we’re focusing on another deeply-discounted bank with a long track record of reliability and predictability.
As we write this, the market is recovering off its recent pullback. And while many companies are recovering quickly, plenty of great deals remain available.
In that light, we’re highlighting The Bank of Nova Scotia (BNS). It’s a 6.4%-yielding blue-chip with a strong economic recovery expected in 2021 and beyond.
That’s why Dividend Kings just bought into it for a fifth time in our Phoenix Portfolio – and we plan to buy it one final time next week. That will still put us ahead of three major catalysts that should propel it and its stock to impressive levels.
The bank already is a one-stop-shop for companies, governments, institutions, and high-net-worth individuals – from traditional banking services to global market underwriting (equity and bonds) to asset management.
We’re talking about:
- $1.2 trillion in assets
- $768 billion in low-cost deposits
- 95,000 global employees
- 2,905 branches
- 8,793 ATMs.
Scotiabank has proven impressive in the past already, as evidenced by its total returns since 1996, featured below.
(Source: Portfolio Visualizer)
Over the last 24 years, it has delivered 12.5% compound annual growth rate