Ep. 65: REIT Dividend Hikes, 60/40 Rethink & Top Monthly Income ETFs

you know, if I told you to take like your entire life savings and just invest it in the stock market
on the absolute worst possible day in modern financial history, I mean, I'm talking early September
1929, right before the Great Crash, you'd probably think I was sending you up for total, unrecoverable
ruin. Oh, yeah, for sure. I mean, the historical narrative totally backs that up. We're taught that
an entire generation was just wiped out. Right. Total financial devastation. Yeah, devastation that
literally took decades to repair. But looking at the data we've pulled for today's deep dive,
there's this staggering fact that completely flips that narrative on its head. If you invested
at that exact 1929 peak, the very top, and you simply held on for 30 years, your return was 850
percent, which is wild because that averages out to a highly respectable, you know, 8 percent annual
return. And again, that is from the worst starting point imaginable. Exactly. But that 850 percent return
only happened if you understood one simple, often totally ignored mechanic. And well,
that mechanic is exactly what we were hunting for today. Right. As we unpack this massive stack of
financial data market reports and analytics, yeah, we really want to give you a shortcut to being well
informed on building long term wealth in 2026. So welcome to the deep dive. We're breaking down the
supposed death of the traditional 6040 portfolio pulling apart high yield real estate, new ETFs,
and even busting some major tax myths. The mission is simple today. We want to separate the daily
market noise from the actual actionable strategies for your own portfolio. And returning to that 1929
statistic, it really perfectly illustrates our core theme here. It does because right now the market
is completely obsessed with AI headlines, tech valuations, daily fluctuations, but real generational
wealth is actually being quietly built in the background. It's not always flashy. No, not at all.
But the math is undeniable. Okay, let's unpack this because to understand how to build wealth today,
we first have to look at what's currently breaking down. And what is actively breaking is the classic 6040
portfolio. Right. This 60 percent stocks 40 percent bonds model. Yeah. For four decades, this was just
the absolute gold standard of retirement planning. It really was the ultimate set it and forget it
playbook. But if we connect this to the bigger picture, we have to understand why it worked for so
long to understand why it's failing you now. Right. The 6040 model basically relied on two main pillars,
a low inflation environment and a negative correlation between stocks and bonds. Meaning,
historically, when stocks went down, bonds generally went up. Exactly. They acted as your portfolio's
shock absorber. But then 2022 happened. Yeah, 2022. Inflation spiked. And when inflation spikes,
central banks raise interest rates, which is bad news for bonds. Terrible news. When interest rates go up,
the value of existing bonds just plummets. So suddenly, that negative correlation completely shattered,
stocks and bonds both fell at the exact same time. The shock absorber literally fell off the car.
And the traditional financial industry just absolutely scrambled to find a replacement to sell to their
clients. They really did. Which brings up a fascinating piece of analysis from David Aspel at Mount
Lucas Management. The industry's answer to this broken portfolio was often to push everyday investors
into private equity. Right. But treating private equity as some sort of magical diversifier is basically
just an expensive version of the 60% in stocks you've already got. Yeah, it's just equities in a different
wrapper. Aspel makes this brilliant point that in private equity, ill-equity used to be considered a bug.
And now Wall Street is basically repackaging it as a feature. It's a total psychological trick.
I mean, if you can't see the price of your private equity falling on a daily ticker, it just feels safer.
Ignorance is bliss. Exactly. But structurally, it carries the exact same economic risks as public
equities. So, you know, what is a real alternative? The data points to a few innovative approaches
really gaining traction in 2026. Like managed futures? Yes. Managed futures take the Mount Lucas
Managed futures index ETF ticker KMMLM. It's up over 15% year to date. Which is huge. Why is it
doing so well? Because managed future strategies actually thrive on chaos. When market correlations
break down and stocks and bonds are moving in lockstep, managed futures use trend falling algorithms to
go shorter long across entirely different asset classes. Like commodities and currencies and stuff.
Right. So, they naturally just zigzag when everything else sags. They don't even care if the
market is going up or down. They just ride whatever the momentum is. Precisely. Now, another massive pivot
we are seeing is in how investors actually generate income. Standard dividend yields are what,
hovering around 3% right now? Yeah, around there. Which for retirees trying to outpace the real cost
of living, that's just not cutting it at all. No, it's not. So, we're seeing this massive explosion
of options income ETF like yield maxes DDDD, which target total yields of like six to seven percent.
Wait, hold on. Options sound incredibly risky to the average investor. Are you saying these funds
are basically gambling with the base dividend stocks just to juice the yield? I'm really glad
you brought that up because it does sound like gambling. But mechanically, it's a calculated trade-off.
They do this by layering options strategies specifically selling call spreads over a base of
really solid stocks. Okay, how does that work in plain English? Think of it like this.
You own a house and you sell someone a contract that says, if this house doubles in value next month,
you get to buy it from me at a set price. You are essentially capping your explosive upside.
So, you won't get rich if the stock just rockets to the moon. Right, you give up the lottery ticket.
But in exchange for giving up that extreme upside, the buyer pays you cold hard cash today.
Oh, I see. Yeah, these funds generate a steady inflated stream of immediate cash just by
systematically selling off that extreme upside. Okay, that makes a lot more sense. But before we get
totally lost in the mechanics of shiny new ETFs, the underlying research makes a major pivot here,
and it brings us right back to that 1929 statistic. Right, the mindset piece. Yeah, none of these
strategies matter if your fundamental mindset is wrong. There's this fantastic interview with
financial analyst Ben Carlson about the concept of time horizons that really hits this home.
This raises such an important question that every single person listening needs to ask themselves
today. What is my actual time horizon? So easy to get wrong. It is a massive trap for retail investors.
They are investing with a 20 year financial goal, but they are reacting to the market with a 24 hour
mindset. I love Carlson's stock market casino analogy for this. He points out that on any given day,
the stock market is up about 53% of the time, which is basically a coin flip. Exactly. A coin flip.
If you check your portfolio every single day, you are going to feel the emotional whiplash of being
at a blackjack table in Las Vegas. But the longer you stay in VEFTA, the better your odds get.
It's the exact inverse of a real casino. Right. In a real casino, the longer you sit at the table,
the closer your chances of losing everything approach 100%. But in the market, time is your biggest advantage.
And that psychological discipline brings us to, honestly, the most mind-blowing statistic from
the Carlson interview. This is the secret sauce behind that 1929 recovery we talked about at the start.
Okay. Lay it on me. From 1928 to 2024, if you only looked at the price appreciation of the stock market,
just the value of the shares going up, the return was about 39,000%.
Which, I mean, sounds amazing on its own. It really does. But if you took the dividends
paid out by those companies and automatically reinvested them back into the market using the cash
to buy fractional shares, which then paid more dividends, creating this huge snowball effect.
Yeah. The return over that same period wasn't 39,000%. It was 982,000%.
982,000. That is, I mean, that isn't just a comfortable retirement. That is the difference between
surviving and creating a literal multi-generational financial dynasty. It's the power of compounding.
But okay, here's my pushback on this. That is fantastic in a sterile spreadsheet.
But human nature makes us tinker, right? When the market drops, people panic. They shut off their
reinvestments and they pull their money out to, quote unquote, wait for things to calm down.
You're totally right. And the data absolutely backs you up on that human flaw.
The average brokerage account currently holds about 20% in cash.
Wow, 20%. Yeah. Why? Because people are constantly trying to time the market waiting for the
perfect dip to buy in. Carlson argues that this is the exact reason why 401k plans have been so
wildly successful for the middle class because you can't touch them easily. Exactly. They enforce
emotional automation. You don't think about it. The money just comes out of your paycheck. It goes in
and the dividends automatically reinvest month after month regardless of whatever the new cycle says.
Okay. So if we accept the dividends and reinvestment are the core engine of wealth building,
where are the actual opportunities right now? Because I mean, the market seems entirely focused on
artificial intelligence and literally nothing else. It's an AI frenzy. It is. But looking closely
at the financial analytics, that AI obsession is actually creating some massive accidental value
place. What's fascinating here is the sheer contrast between the tech giants and the companies,
the market fears will be replaced by that tech. Let's look at recent dividend hikes.
You have NASDAQ, which is completely transformed itself from a traditional stock exchange
into a recurring revenue software machine. And they just hiked their dividend by 15%.
Incredible. And then you have Apple. Right. Apple hiked its dividend by 3.8%. But the real story
there is the buybacks. They announce a hundred billion dollar buyback. I was like to think a stock
buybacks like a pizza. Imagine a pizza cut into 23 slices and you own one slice. If Apple buys back
and destroys eight of those slices, the whole pizza is now only 15 slices. A much smaller pie.
Right. So you one slice just represents a much bigger percentage of the total pie and you didn't
have to lift a finger. Over the last decade, Apple has shrunk their total outstanding shares from 23
billion down to under 15 billion. It's a complete master class in returning value to shareholders.
But you know, you pay a premium for it. Apple is currently trading at a price to earnings ratio of
35 just to make sure we're all on the same page here. The PE ratio is essentially what you're paying
for every dollar of the company's profit. Right. So at a PE of 35, you have to pay $35 today
to own one dollar of Apple's annual earnings spot on the market loves Apple. So the cover charge
to get in is high. But what about the companies the market is terrified of the presumed AI casualties.
This is where things get really interesting. Take paychecks and fax set. Both of these companies
just hike their dividends. But their stock prices are down 40 to 50% over last year.
Massive drops. Yeah. Because the market is terrified that AI is going to destroy their
software margins. But I have to challenge this narrative. Aren't the AI fears totally justified
for a company like fax set. Well, they charge thousands of dollars for seats at financial terminals
so analysts can access data. If an AI can just instantly read a 10k filing, summarize it in three seconds
and build a financial model for literally pennies, do major financial firms really need to pay for
all these expensive fax set seats. Look, it's the existential question for that entire sector right now.
But let's look at the underlying mechanics. Because of those massive fears, fax sets PE ratio has
plummeted from a five year average of 27 down to just 12. Oh wow. So you're only paying $12 for
a dollar of profit now. Exactly. They are on massive sale. And are they just sitting there waiting
to be replaced? No. They are rolling out their own AI enabled tools to 85,000 users. So they're adapting.
Right. Because here's the catch. Raw AI models hallucinate. They need proprietary,
strictly verified, trusted financial data to function accurately in a professional setting.
fax set owns that data. The market has priced them as if they are already dead, which creates
this classic value proposition. Okay. So if fax set is a value play hidden by AI fears,
how do you actually capture that without betting the farm on a single stock? There has to be a broader
vehicle for this kind of environment. There is. And that brings us to a relatively new ETF in the data.
CEGVV, the capital group, US large value ETF. It launched in mid 2025. And it holds a highly
concentrated portfolio of growth oriented value stocks. Think Amazon, JP Morgan, companies that have
growth potential, but aren't trading at absurd multiples. Exactly. And year to date, it has
absolutely crushed the S&P 500. It's up 13% compared to the broader market 6%. Though it's worth
noting, CEGVV only has a tiny .51% dividend yield. It's built for total return, meaning price
appreciation, not really an immediate income stream. Right. But tech and software aren't the only
sectors finding their footing. If we look at real estate, the narrative is shifting dramatically.
In return of the REITs, real estate investment trusts. For two years, they were getting
battered by high interest rates, borrowing money was expensive, so growth stalled. But with lower
rates staking hold now in 2026, the rebound is massive. Yeah, we're seeing farmland rates and
data center rates up over 20%, which makes total sense when you think about it. AI doesn't live in
the clouds. It lives in massive, heavily air conditioned warehouses full of servers. Data centers are
the physical picks and shovels of the digital AI gold rush. And by law, REITs have to pay out at least
90% of their taxable income as dividends, which is great for income investors. Exactly. So when
their businesses do well or their real estate appreciates and they collect more rent, you get paid
directly. Look at Simon Property Group right now, ticker SPG. They're the largest US retail REIT.
They just hiked their dividend by a massive 7.1%. And look at the why behind it. They have 96%
occupancy in their properties. The rents they charge are rising and they just authorize a $2 billion
stock buyback. Yet, despite all those healthy metrics, they are trading at a forward PE of just
15.1, which is literally half the real estate sector average of 30. It's a perfect example of
looking beyond the prevailing narrative. I mean, the loud narratives is retail is dead. Amazon
killed the mall. Right. Everyone thinks malls are over. But premium high-end experiential retail,
which is exactly what Simon owns, is actually thriving. The market just hasn't fully priced it in yet.
Okay. So CGVV is great for value growth. And Simon Property is solid for traditional real estate
income. But what if you're sitting there thinking, growth is great. But I have bills to pay this month.
I need immediate high cash flow. That brings us to the wild world of monthly paying ETFs. Yeah.
And looking at the analytics, some of these funds are absolutely crushing total returns in 2026.
What's fascinating here is the sheer variety of complex strategies now available to everyday retail
investors. The top performer on the list is SOXY, which is up nearly 56%. 56%. That's insane.
It targets a 12% annual yield by using those call spreads we talked about earlier,
specifically on semiconductor companies. But there is a massive warning here that we cannot skip over.
Chasing pure yield without looking at the total return is a deadly trap. I like to think of it like
getting a 15% discount on a cruise ship ticket, but on a ship that is actively sinking.
That's a great way to put it. Sure. You save money upfront. And the yield looks amazing. But you are
still going underwater. If you buy a fund yielding 15%, but the underlying stock price decays by 20%
a year, you are losing money. The yield is just an illusion hiding your capital destruction. Exactly.
That is exactly right. Total return, which is the dividend cash, plus the stock price movement,
is the only metric that truly matters. That's why the analysis favors a fund like EGY. EGY. Yeah.
It yields roughly 10%, but crucially, it also had 10% underlying capital growth.
It uses a concentrated covered call strategy for income, but it actively pays for a put option
shield to protect against downside risk. So it prioritizes balance over maximum yield.
Exactly. Now, if you prefer individual stocks over ETFs for high yield, Raymond James Analysts
highlighted two very specific picks yielding over 7% with double digit upside. The first is
delect logistics, ticker DKL. They are an energy midstream company at the Permian base and yielding
8.7%. They basically run the pipelines and distribution terminals. Right.
Midstream companies are fascinating because they operate like the toll booths of the energy sector.
They get paid based on the physical volume of oil or gas moving through their pipes.
So they don't necessarily care about the daily spot price of the commodity itself.
Right. Whether oil is at $60 a barrel or $90, they collect their toll, which offers
serious insulation from energy market volatility. And the second pick is easterly government properties,
ticker DEA. This is an office read yielding 7.8%. Now commercial office space has been pretty
toxic lately with the work from home shift, but their tenant list is what makes them entirely unique.
Who are they renting to? They lease almost exclusively to US government agencies. We're talking
the FBI, the BEA, the IRS. As a landlord, getting your rent check from the literal printing press
of the federal government is a pretty secure place to be. It certainly lowers your collection risk.
You really don't have to worry about the IRS defaulting on their lease. Definitely not.
But as we build this portfolio, generating all this income, we have to address the elephant in the room,
taxes. Oh, yes, I can hear you thinking, wait, aren't the taxman and the IRS going to destroy
all these massive dividend gains? There's a huge myth out there that dividends are inherently tax
inefficient and should be avoided in taxable accounts. It's one of the most persistent misunderstandings
in retail investing. Many investors assume their dividend income is taxed at their ordinary income
rate. You know, the exact same high rate as the W2 salary from their day job. But for most S&P 500
companies, they pay what are called qualified dividends. Right. And qualified dividends are taxed
at the long-term capital gains rate, which is a completely different significantly lower scale.
Exactly. Depending on your overall income bracket, the tax rate on qualified dividends is usually
15%. And for some lower income brackets, the federal tax rate on those dividends is literally
0%. It's vital to note that this doesn't apply to everything, though. Reads like Simon property or
Easterly generally pay non-qualified dividends because they avoid corporate taxes at the company level.
Right. So those are taxed as ordinary income. But there are some strategic shelters you can use for
high yield assets. For instance, some of these newer income ETFs, like the NEO's family of funds,
actively use a tax classification called return of capital or ROC. How does that actually work in
practice? If we connect this to the bigger picture of tax planning, return of capital is an incredibly
powerful tool. It's exactly what it sounds like. Instead of classifying your monthly pay-out as
taxable income, the fund classifies it as returning a portion of your original investment back to you.
They'll live it like getting your security deposit back on a rental apartment. Yes, exactly.
It's your money, so it's not taxable income. So you don't pay any taxes on it in the year you
receive the cash. It just lowers your official cost basis on the investment. Right. You only pay the tax
when you finally sell the shares. Hopefully decades down the line when you're retired and in a much
lower tax bracket. Precisely. It is a massive structural tax deferral strategy. And, of course,
the ultimate unbeatable tax shelter remains the Roth IRA. Oh, absolutely. If you hold these high
yield monthly payers or aggressive dividend growth stocks inside a Roth, this entire tax conversation
is moot. The compounding, the dividends, the eventual withdrawals, it is all entirely tax-free
because you already pay taxes on the seed money. Geography matters, too, right. If you are planning
to live off dividend income and retirement, states like Florida, Texas, and Nevada have zero state
income tax. They act as massive geographical tax shelters completely legally for dividend investors.
Okay, let's unpack this. We have covered a massive amount of ground today on this deep dive.
We've gone from the failure of the 60-40 portfolio to finding value in AI fears, high yield
rates, managed futures, and the mechanics of tax efficiency. It's a lot to take in.
So, what does this all mean for you? If I'm distilling this entire stack of research into a single
takeaway for your portfolio, it's this. Well, building in 2026 isn't about picking the one
perfect lottery ticket tech stock. Definitely not. It is about defining your personal time horizon,
ignoring the daily casino of the financial news, and recognizing when the market is overreacting
in fear, like it is with certain software companies in real estate right now.
And optimizing your strategy for total return. Not just a flashy sinking ship yield.
Exactly. And that brings me to a final slightly provocative thought to leave you with today.
In that interview with Ben Carlson, he quoted an analogy from wealth manager Josh Brown that
I think is essential for this exact moment in history. He said a good investor has to act like a
bouncer at an exclusive club. Standing behind the velvet rope with a clipboard. Exactly. Every single
year, Wall Street launches thousands of new, hyper-news, incredibly complex ETFs. You can buy
funds that give you two times leveraged exposure to wheat futures, or synthetic covered calls on single
tech stocks. So much noise. The most important skill you can develop as an investor in 2026 isn't
figuring out what to buy. It's ruthlessly defining what you won't invest in. It's turning away the
gimmicks. So, the question for you to ask yourself as you look at your own portfolio today is this.
Are you acting as the bouncer of your own wealth, carefully letting in only the high quality assets
that build compounding returns over decades? Wait, no. I mean, are you carefully vetting them
or are you just letting the riff raff in? Because as we learn from the folks who invested at the peak
of 1929, if you keep the riff raff out, automate your discipline and let the dividends compound,
the math will do the heavy lifting for you. It's all about surviving the casino. Thanks for joining us on
this deep dive.