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

  • 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.

Even with that caveat, annuities might still deliver a better return than you’d get by investing in fixed-income investments, because the longer you live, the more you receive. That’s because annuities also provide mortality credits, said Harold Evensky, a certified financial planner in Coral Gables, Fla. When you buy an annuity, the insurance company pools your money with that of other investors. Funds from investors who die earlier than expected are paid out to the other annuity holders.

One option if you think interest rates will be headed up is to create an annuities ladder. Instead of investing the entire amount you want to annuitize at once, spread your investments over several years.

For example, if you want to invest $200,000, you would buy an annuity for $50,000 this year and invest another $50,000 every two years until you have spent the entire amount. That way, the payouts will gradually increase as you get older, and if interest rates rise, you’ll be able to take advantage of them.

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If you’re planning for retirement, you may have heard of the 4% rule. It says you can safely withdraw 4% of a retirement portfolio’s balance in the first year of retirement, then adjust the withdrawal for inflation every year after that. The model assumes a steady 50/50 split between stocks and Treasury bonds. Following the 4% rule should mean you’d never fully deplete your portfolio over a 30-year retirement period.


But 2020 might’ve changed all that. Someone retiring today might not be able to expect the same level of returns that the markets provided for the past 150 years. Here’s why.

Unprecedentedly low interest rates

With the economy in distress in March, the Federal Reserve dropped the target Fed funds rate by one percentage point to between 0% and 0.25%. It previously did the same thing during the 2008 financial crisis, and it kept the rate near 0% through 2015. The difference this time is Treasury bill yields were already near their record lows before the Fed’s actions.

Ten-year Treasury bills currently yield about 0.65%. In early February, they yielded 1.5%, a rate previously seen only in the summers of 2012 and 2016. The only other time the 10-year Treasury bill yield fell below 2% was 1941.


Investors and lenders base the price of bonds and debt on Treasury bill yields, which are seen as risk-free since they’re backed by the U.S. government. As a result, interest rates and bond yields have dropped across the board because of the Fed’s decision in


a cat sitting on top of each other: You may be worrying about the wrong things.

© Getty Images/iStockphoto
You may be worrying about the wrong things.

Today’s investment pop quiz focuses on stock market volatility:


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How much does the stock market in a typical year deviate from its long-term average?

I’m willing to bet that your answer was way off, since virtually everyone gets it wrong. And that’s disturbing, since the incorrect answer leads to major retirement portfolio mistakes. Underestimate stocks’ volatility and you most likely will be led to make your retirement portfolio too risky. Overestimate it and you will be scared away from equities.

Read: Half of Americans over 55 may retire poor

To understand the answer to my quiz, consider that in the 123 calendar years since the Dow Jones Industrial Average (DJIA) was created in the late 1800s, it has produced an average price-only gain of 7.7%. On average, each individual year’s Dow return has been 16.3 percentage points above or below this 7.7%.

Last year came close to this, for example. The Dow in 2019 gained 22.3%, which was 14.6 percentage points above the historical mean.

Believe it or not, the typical investor believes stocks’ annual volatility is more than twice as high, according to recent research from the Center for Retirement Research at Boston College. The author, Wenliang Hou, a research economist at the Center, discovered this after analyzing the data contained in the most recent Health and Retirement Study (HRS) from the University of Michigan. The HRS, which is conducted every two years, is perhaps the most comprehensive examination available of attitudes toward retirement; it is based on a survey of around 20,000 Americans over the age of 50.

Read: What are Medicare Advantage plans, and are they worth the risk?

Gallery: Robinhood Has ‘App-ified’ Investing — How To Dive In Without Big Losses

a group of people walking down the street: Ruby Tuesday's restaurant in Times Square in 2016. Mary Altaffer/AP Photo

© Mary Altaffer/AP Photo
Ruby Tuesday’s restaurant in Times Square in 2016. Mary Altaffer/AP Photo

  • In August, retiree Mark Potter suddenly stopped receiving his pension payments from Ruby Tuesday.
  • Documents show that Ruby Tuesday advised its trustee, Regions Bank, to stop paying pensions to at least 112 retirees on July 21, months before declaring insolvency on September 2.
  • But the agreement between Ruby Tuesday and Regions stated the chain had to notify the bank of its insolvency before it could cease pension payments.
  • On September 28, Regions filed a lawsuit against Ruby Tuesday, asking a court to determine whether the chain’s actions were legal.
  • In the meantime, Potter and the other retirees are stuck in pension purgatory, with no idea of when or if their payments will resume.
  • Visit Business Insider’s homepage for more stories.

Mark Potter did everything he was supposed to.


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After 28 years working his way up the ladder at Morrison’s Cafeterias to become a district manager, Potter retired in 1999 with the knowledge that his pension plan was a lifelong one.

Morrison’s Cafeterias had acquired Ruby Tuesday in 1982 before splitting into three companies: Ruby Tuesday, Morrison Healthcare, and Morrison’s Fresh Cooking — a cafeteria company that was later bought by rival chain Piccadilly Restaurants. When Morrison’s split in 1996, the three entities entered a legal agreement to divide their retirees’ pensions, James Holland, a former Morrison’s Cafeterias vice president, told Business Insider.

Holland also explained that if one company filed for bankruptcy, the other companies assume responsibility for its portion of the pension payments. For example, when Piccadilly filed for bankruptcy in 2004, Ruby Tuesday and Morrison’s Healthcare split Piccadilly’s share of the payments.

In August, Potter’s pension payments from Ruby Tuesday suddenly stopped coming. He called Ruby Tuesday repeatedly to ask why,