Despite the best efforts of Washington politicians, U.S. economic growth grinds along in second gear.
Estimates for first-quarter gross domestic product (GDP) growth are now averaging 1.4%. To be sure, slow growth is better than no growth. (Bonjour, Europe!)
The question is, can you make money with slow or no growth?
Of course you can. Today, I’ll show you how.
First, a picture is worth a thousand words. This is a compilation of GDP growth estimates by The Capital Spectator …
The best guesstimate now is that Q1 will be the third-straight quarter of growth deceleration.
In a previous article, I explained how this growth is too slow to support the ambitious plans of the White House. And earlier this week, I told you how a vast majority of futures traders now expect the Fed to keep its benchmark interest rate steady for the rest of the year. Some are even banking on a cut.
That’s what you expect when economic growth is not only slow, but getting slower. And sure enough, just yesterday, the Fed lowered its 2019 GDP growth forecast to 2.1% from 2.3%.
That’s still too high a forecast. But that’s the Fed for you. A day late and a trillion dollars short.
As I said, it’s still better than Europe, where the European Central Bank just slashed its outlook for growth to 1.1%. The European economy is stalling. I think we all know what comes next.
So, we’ll have slow to no growth on either side of the Atlantic. Where do you invest?
- Invest in an Industry that Will Grow Anyway. Even in times of flat to low growth, some industries still outperform.
- Invest in Stocks or ETFs that Pay Dividends. First of all, I just find it nice to own a stock that pays me. Second, there is a ton of research showing proof of a long-term, historical trend: Dividend stocks beat non-dividend stocks. Period.
To put it in dollar terms: An investor who socks away $10,000 per year and earns 7% on his money ends up with $761,000 after 30 years. But if the same guy earns 9% per year, he ends up with $1,326,000. That extra 2% each year means almost double the wealth!
- Choose Dividend Growth. Again, a picture is worth a thousand words. So here’s a chart from Hartford Funds, based on data from Ned Davis Research. It shows how companies initiating new dividends and raising their dividends year after year beat the market.
Sure, “past performance is no guarantee of future results”. It says that right on the bottom of the chart. Then again, I like playing big trends. And the big trend here is that dividend-growers beat the pants off everybody else.
Speaking of big trends, I can think of a few industries with excellent growth prospects. But let’s look at one industry familiar to everybody: Oil and gas.
Global Demand is Ramping Up. Forecasts vary, but they’re all higher. OPEC, which knows a thing or two about the oil markets, says global oil demand will grow by 1.24 million barrels per day this year to 99.96 million barrels. Per day!
The further out we go, the foggier forecasts get. But most analysts expect oil supplies to remain tight — and the U.S. crude oil benchmark price to remain over $60 per barrel — through at least 2022.
Let me tell you, at $60 per barrel, a lot of companies can make a whole heck of a lot of money.
And further out? Well, analysts at McKinsey say oil producers will need to add another 40 MILLION BARRELS — per day — of oil production.
Good luck with that.
EV Oil Replacement isn’t on the Horizon. But what about electric cars? Surely, they will send oil demand spiraling downward!
No. No they won’t. And stop calling me Shirley.
The math is plain: This year, electric vehicles (EVs) will replace 96,000 barrels per day of oil demand. That’s just 7.7% of the growth in demand. Never mind all the other millions of barrels used every day.
Sure, someday EVs might take a real bite out of oil demand. But long after I’m pushing up daisies. And I plan on sticking around for quite some time.
Oil Stocks are in a Virtuous Dividend Cycle. It wasn’t that long ago that oil prices were crashing. Doomsayers said many oil stocks would go out of business (and some debt-burdened companies did). Companies slashed dividends left and right through most of 2015 and 2016.
Now, the tide has turned. Energy companies are raising dividends. And the more that raise their cash payouts, the more others feel pressured to do so.
Put it all together and this leads me to my pick. An ETF stuffed with dividend-GROWING energy stocks.
My pick is the Vanguard Energy ETF (NYSE: VDE). It has plenty of volume — making for easy trading — and has a net expense ratio of just 0.10%.
A whopping 78.9% of this ETF’s holdings are in oil and gas. Another 10.3% are in oil and gas services, and 9.2% are in pipelines.
The Vanguard Energy ETF holds companies including ExxonMobil, Chevron Corp., ConocoPhillips, Schlumberger, EOG Resources, Occidental Petroleum and more.
It pays a 2.91% dividend. And dividend growth? It has that in spades. Over the next three years, its dividend is projected to grow 8.5% per year.
To be sure, an ETF won’t match the growth or yield of some individual stocks. In fact, I’ve recently recommended two high-growth, high-yield, DIVIDEND-GROWING energy picks to my Supercycle Investor subscribers. This video shows you how we are going for windfall profits, and names more ETFs you should be buying now — BEFORE April 30. Click here to watch it now.
Even though I just made those picks, they’re already outperforming. The biggest gains are yet to come.
If you’re doing this on your own, be sure to do lots of research. But you don’t have to sit and watch your money stagnate. This big trend is beckoning, and the big profits are waiting.
All the best,