Ep. 93: Buying What Wall Street Abandoned — Dividend Bargains, Monthly Income, and a Media Breakup

You open your broker-jap right now and the top half of the screen is just a sea of green.
I mean, the S&P 500 and NASDAQ are printing all time highs.
Tech is surging.
Yeah.
Tech is absolutely surging.
And on the surface, everything looks like this perfectly engineered bull market.
But you know, if you scroll down, if you look through the market data and the insider reports
we pulled for today's deep dive, a really weird contradiction jumps right off the page.
It really does.
We're looking at this graveyard of abandoned dividend and income stocks just sitting there
completely left behind.
And they're flashing these massive, almost alarming yields.
It is a massive divergence.
You essentially have two completely different markets operating at the exact same time right
now in June, 2026.
You have the momentum market, which is priced for perfection.
And you have this bargain bin of heavily discounted high yield assets that Wall Street has actively,
you know, just walked away from.
And that is exactly our mission today.
We are looking at Wall Street's abandoned bargains.
We need to figure out the difference between a genuine, mispriced opportunity and a catastrophic
value trap.
Because the temptation is huge.
Oh, absolutely.
Because when you see a stock yielding 7, 8 or 9%, human nature kicks in and says, hey, great
free money.
Yeah.
Which is almost never the case.
Right.
So we need to establish a baseline before we even look at a single ticker.
Okay.
Let's unpack this.
You always advocate for this concept of honest math when looking at income stocks.
What does that actually mean mechanically for you listening at home, trying to sift through
this data?
Well, honest math means looking past the flashy headline numbers.
You have to interrogate the mechanics of the payout.
A high dividend yield is not necessarily a safe yield and certainly isn't always a growing
one.
So you have to figure out the mathematical why behind it.
Exactly.
That yielding 7%, because the underlying business is a hemorrhaging cash and is straining
to make the payout.
Because if so, a dividend cut is right around the corner and the stock will create or further.
Right.
Or is it yielding 7% simply because the broader market through a tantrum, the stock price
fell off a cliff.
But the business itself is still generating massive amounts of free cash flow.
Because at the end of the day, yield is just a ratio, right?
The dividend divided by the stock price.
It's just a fraction.
If the denominator shrinks, meaning the stock price goes down, the yield inflates automatically.
It's just a seesaw effect.
The seesaw effect.
And the market often prices fundamentally broken businesses and temporarily out of favor
businesses the exact same way.
And just to be clear to you listening, our goal today isn't to give you buyer sell advice.
No, I don't.
We are just here to frame the trade-offs so you can apply the honest math and judge for
yourself.
Okay, let's test that honest math immediately because the first asset in our stack of sources
is a glaring example.
We are looking at VCI properties, ticker VCI key.
The casino giant.
Yeah, this is a massive experiential rate.
They literally own the dirt in the buildings under Caesar's Palace, the Venetian, the MGM
grand.
Massive real estate footprint.
Huge.
And right now, VCI is trading near the bottom of its 52-week range, sitting at $27.18.
And because of that price drop, it's yield has shot up to 6.55%.
Which looks scary to a lot of algorithms.
Right, because that is incredibly elevated compared to its historical norm of around 5%.
So is this 6.55% yield a distress signal, or just a symptom of the stock price dropping?
If we look closely at their financials, it is almost entirely a pricing symptom.
The distribution itself is not under strain at all.
Wait, really?
It's completely safe.
Actually, VCI's trailing 12-month distributions are up 3.9% year-over-year to $1.80 per share.
They have steadily grown that payout every single year since they went public.
Wow.
Okay.
So why is it priced like a distressed asset?
To understand why the broader market misprices assets like this, we have to look at the accounting
rules.
Wallstreet's algorithms often screen for GAP EPS, that's standard earnings per share.
Right.
The basic benchmark for everything.
But if you judge a reap by its EPS, it will always look like a failing company on paper
because massive non-cash depreciation charges.
Right.
Because if I look at VCI's payout ratio based on standard EPS, it looks like they're
barely scraping by.
But I know you're going to tell me EPS is the wrong lens here.
It's completely wrong lens, and never judge a reap on EPS.
Standard accounting requires companies to amortize the cost of their buildings over decades, pretending
the property is losing value every single year.
Which drags down the official earnings number.
Drastically.
But it's a paper expense, not cash going out the door.
But wait a second.
Back on that.
Because buildings do actually age, roofs cave in, massive Vegas HVAC systems die, carpets
in a casino get destroyed by foot traffic.
You can't just pretend a mega resort doesn't require millions in physical upkeep.
So how is that depreciation entirely a phantom expense?
That is a fantastic point.
And it brings us right to the specific mechanics of how VCI operates.
If VCI actually had to pay for those roofs and HVAC systems, that depreciation would
be a very real cash drain.
But VCI utilizes what are called long dated triple net master leases.
OK, triple net meaning what exactly?
In a triple net lease, the tenant so Caesars or MGM is legally obligated to pay for all of
the property taxes, all of the building insurance, and critically all of the maintenance and capital
expenditures.
Oh, wow.
So Caesars pays for the new roof, not VCI.
Exactly.
VCI just collects the rent check.
They don't pay to fix the carpet.
So for VCI, that gap depreciation really is just a paper phantom.
So what metric should we be using instead of EPS?
To find the honest math, you have to use AFFO or adjusted funds from operations.
That metric adds the paper depreciation back into the equation to show you the actual cash
the business is holding.
OK, so the cash flow is solid.
The maintenance costs are pushed onto the tenant and they are generating enough AFFO to cover
the dividends safely.
Correct.
But I'm looking at this data and it still doesn't totally add up.
The VCI structure is so ironclad, why is Wall Street demanding is 6.6% yield to hold
it?
Especially when a titan-like realty income, ticker O, is sitting right there in our data set
yielding only 5.3%.
The market is clearly penalizing VCI for something.
And this is where we transition from accounting risk to structural risk.
The market isn't afraid of VCI's cash flow, the market is afraid of its tenant concentration.
Because they basically just rent to casinos.
More than that, a massive percentage of VCI's rent comes from just two operators,
Caesars and MGM.
And right now, both of those operators are navigating complex corporate transitions.
Right, they're ongoing rumors about Caesars being sold and MGM is always in various talks.
Exactly.
So Wall Street algorithms see concentration risk combined with corporate uncertainty and
they just start selling the stock.
I see.
The fear is that a new owner comes in by Caesars and tries to tear up the leases or renegotiate
the rent downward.
That's the fear.
But if you look at the mechanics of these specific master leases, they are explicitly designed
to survive corporate tick-overs.
There they are.
Yeah, they transferred directly to the acquirer with built-in inflation escalators.
The risk you actually need to monitor isn't lease cancellation, it's the credit quality of
the acquiring company.
Okay, so if a highly leveraged, financially weak, private equity firm buys a casino, your rent
check gets slightly riskier.
Exactly.
But fundamentally, the 6.6 percent yield is just a sentiment discount.
Which perfectly explains why real-time income is yielding a much lower 5.3 percent because
they have the exact opposite structural setup.
They are the benchmark of this sector for a reason.
They literally trademarked the phrase the monthly dividend company, which is honestly just
a brilliant piece of branding.
It really is.
But it's backed up by over 15,500 single-tenant properties.
They are relying on two Vegas operators.
They are diversified across retail, industrial, and agriculture across the US and Europe.
Supreme diversification.
And because of that scale, their cost of capital is incredibly low.
When real-time income management recently raised their 2026 AFFO guidance to a range of $4.41
to $44 per share, that's a solid bump.
It is.
It signaled an acceleration in their cash generation.
Against their current dividend, their forward payout ratio sits comfortably around 73 percent.
And just for context, in the net lease rate world, the absolute danger zone, the threshold
where you start sweating a dividend cut, is generally around 80 percent right now.
Exactly.
Safely under 80 is what you want to see.
So they have plenty of breathing room.
Plus, they have over 31 consecutive years of dividend increases.
Through the 2008 financial collapse, the 2020 pandemic, the 2022 inflation spike, they never
missed a step.
True aristocrats of the sector.
So let's pivot here.
Because with REITs, the honest math is all about parsing lease structures, AFFO, and tenant
concentration.
They are legally mandated to pay out 90 percent of their income anyway.
Right.
The whole business model is engineered for steady dividends.
But what happens when the underlying asset isn't an ironclad real estate contract, but a global
consumer brand?
Like let's look at Nike.
Ticker in CoE.
Oh, Nike has been brutalized.
Brutalized is the word.
The stock is down 33.3% year-to-date in 2026.
It is sitting in $41.82.
It's a massive fall from grace.
I'm looking at the data on this, and honestly, it feels completely schizophrenic.
Are we looking at a deep value play or are we just trying to catch a falling knife here?
That is the $11 billion question.
And to answer it, we really have to pull apart the mechanics of the macro headwinds facing
Nike right now.
Okay.
Let's start with the bear case.
Why is Wall Street abandoning it?
If you look at the bear case, Wall Street sees a growth engine that has just totally
stalled.
The PE ratio is sitting around 28, which is heavily inflated because their earnings have been depressed.
And China is a huge problem for them right now.
Massive.
Greater China revenue drops 7%.
And crucially, global tariffs and freight costs have crushed their gross margins by roughly
130 basis points.
Wow.
130 basis points is a massive hit to profitability for a physical product company.
That's a bloodbath.
But there is a contrarian bull case in our sources that argues Wall Street is vastly misinterpreting
Nike's current strategy.
How so?
The bills argue this pain is actually a deliberate self-inflicted wound.
Management is actively throttling their inventory shipments.
They are purposely holding back supply to purge old, discounted stock from the market.
Which hurts their short-term cash flow and makes their quarterly earnings look terrible today.
Exactly.
They get to protect the premium status of the brand.
I mean, if Nike sneakers are constantly 40% off at every outlet mall, they lose their pricing
power forever.
Precisely.
It's short-term margin-paying for long-term brand equity.
And even with all that deliberate throttling, Nike still pulled in 11.28 billion dollars
in quarterly revenue.
And they just beat earnings expectations, too, didn't they?
They did.
They posted an EPSB of 24% hitting 35 cents a share.
Plus, they are a newly crowned dividend king with 24 consecutive years of dividend increases.
Yep, the stock is experiencing a 70% drawdown from its five-year highs.
Yeah.
This is exactly what I mean about the data of feeling schizophrenic.
The macro headwinds are real, the tariffs are real, but the core business is still a cash
machine.
It's a paradox, for sure.
So how do you actually price an asset when the market can't agree if the wound is fatal
or just a surgical operation?
You look for the ultimate tie-breaker metric.
You look at what the people inside the building are actually doing with their own personal
money.
Yes.
I saw this in the reports.
The insider buying at Nike right now is just staggering.
We had the CEO, Elliot Hill, buying over 47,000 shares on the open market at $42.27.
That is a massive position.
And it's not just him.
Directors like Tim Cook.
As Apple's Tim Cook and John Rogers are buying heavy volume in that exact same $42 to $43
range.
Which is a huge signal.
But wait, let me play devil's advocate here for the listener.
Executives get massive stock grants all the time as part of their compensation.
Are we absolutely sure this isn't just an automatic vesting schedule kicking in?
No, and that's a really important distinction.
There is a massive mechanical difference between receiving a granted stock option and executing
an open market purchase.
Okay, break that down.
Those are handed options constantly.
It requires zero risk on their part.
But when a CEO takes their own liquid, post-tax cash, logs into their brokerage account and
actively buys 47,000 shares of their own company, while the stock is in a 70% free fall.
That's a different story entirely.
It is a definitive psychological and financial statement.
There's a famous old Wall Street adage.
Insiders will sell their stock for 100 different reasons to buy a yacht, pay a tax bill, diversify.
Right.
They only ever put their own cash on the line to buy their own stock for one single reason.
They genuinely believe the underlying business is mispriced and the stock is going up.
Put your money where your mouth is essentially.
Yeah.
So for you listening, this is a fascinating real-time test.
You have a 24-year dividend grower beaten down 33% this year with the C-suite aggressively
buying right around your potential entry price.
The honest math here means you have to decide if you trust the executive team's turnaround
strategy more than you fear the short-term margin compression.
It's a conviction trait.
But trying to guess if Tim Cook is right about Nike's bottom, or trying to perfectly
time VCI's tenant transitions, that takes iron nerves.
It requires you to be right about very specific, highly concentrated corporate events.
And a lot of income investors just throw their hands up and say, I don't want a single stock
risk.
Just give me the basket.
And that brings us to the passive index approach.
Right.
Of course, it breaks down the mechanics of a really unique ETF strategy.
We're looking at SPYD, the SBDR portfolio, S&P 500, high-divit and ETF.
A very popular fund.
The methodology of this fund is incredibly straightforward.
It literally just scans the S&P 500, finds the 80 stocks with the absolute highest dividend
yield, and equal wakes them.
It just buys them all in exactly equal portions.
Yep.
And because of that, it spits out a 4.4% dividend yield.
But I know this is where the honest math gets tricky.
I look at this and think of it like going to an all-you-can-eat buffet.
Well, if your only rule is, I'm going to eat the absolute heaviest items on the line to
get my money's worth.
You end up with a plate pile high, with mashed potatoes and macad cheese, but absolutely zero
protein.
That is a perfect analogy.
What is the actual sector trade-off when you blindly screen an ETF for yield like this?
The sector skew inside SPYD is massive.
By equal weighting purely for yield, the fund inherently constructs a radically defensive
portfolio.
If you open the hood, 27% of this ETF is locked in real estate.
Wow.
27%.
Yeah.
16% is consumer staples.
13% financials.
12% utilities.
So it's basically entirely mashed potatoes.
Entirely.
And here is the real hidden cost.
Technology makes up roughly 3% of this entire fund.
Only 3%.
In a market that has been completely dominated by tech and AI for the last three years, having
only 3% exposure to technology is a massive active bet against the broader market's growth
engine.
And it's all packaged inside a quote-unquote passive ETF wrapper.
Right.
That's the danger of mistaking rules based for risk-free.
By purely screening for yield, you are actively sacrificing the upside of tech stocks.
You are securing current income, sure.
But you fundamentally alter your portfolio's growth trajectory.
And there's another mechanical danger to these passive ETFs that I think a lot of people
completely gloss over.
You buy a broad fund like SPYD thinking you are insulated from corporate drama.
What?
You're not.
Not at all.
You are absolutely still at the mercy of the boardrooms of the companies inside that basket.
Yeah.
Let's look at the Comcast situation, ticker CMCSA.
Oh, this is a fascinating case study.
It's a huge holding in several dividend funds.
And it's been a brutal laggard, down 50% over five years.
But suddenly, it jumped 17% in a single day.
Because management announced the spin-off.
Right.
They announced they're spinning off their declining legacy cable TV network, so NBC Universal
Sky, into a completely standalone public company.
They want to separate the dying linear TV business from their high growth broadband internet
and peacock streaming segment.
It's a classic maneuver to unlock shareholder value.
Management knows the market is penalizing the entire company because of the cable drag.
Okay.
But if I just own a broad dividend ETF, why do I care about Comcast's internal corporate
restructuring?
Because of the hidden mechanics of how ETFs actually process corporate spin-offs.
This is where the plumbing of the stock market really matters.
Okay.
Walk us through the plumbing.
Comcast is a cornerstone holding in major funds.
It represents about 4.5% of the communication services ETF, XLC.
Right.
It's 3.8% of the dividend-focused fund, RDIB, and 2.9% of FDL.
When Comcast executes the spin-off, the new legacy cable company is going to be issued a brand
new CU-SIP number and a new ticker symbol.
And those ETF portfolio managers at Vanguard or BlackRock are suddenly going to wake up and
find millions of shares of this brand new cable company sitting in their fund accounts.
Exactly.
And they don't get to just casually decide if they want to keep it.
They are legally bound by the rules written in their ETF prospectuses, which creates
a massive chain reaction.
A huge ripple effect.
The central question for income investors is, how will Comcast's lucrative cash dividend
be divided between the new high-growth broadband parent company and the new standalone cable
network?
I see where this is going.
If the high-growth broadband company keeps the entire dividend to reward its shareholders,
the new cable company might launch with zero dividend yield.
And if that new cable company has zero yield, it immediately violates the inclusion rules
for high-dividend ETFs like RDIB or SPYD.
Meaning, the algorithm has no choice.
None.
The ETF manager is contractually forced to liquidate millions of shares of that new cable company
on the open market all at the exact same time, regardless of whether the business is actually
fundamentally sound or not.
You've got it.
It creates immense artificial downward price pressure.
Which funds know this?
So they often front-run the trade, shorting the spin-off before the ETF is forced to sell.
Conversely, if the high-growth broadband business keeps the dividend, funds holding it might suddenly
see massive price appreciation now that the anchor of legacy cable is gone.
The point is, a purely administrative rule in a passive ETF prospectus can trigger a title
wave of buying or selling pressure.
You are never fully insulated from corporate mechanics, even in an index fund.
Exactly.
The idea that a boardroom decision forces a seaship change, which violates a prospectus
rule, which triggers an algorithmic liquidation that crushes a stock price, it just proves
how connected the plumbing of this market really is.
It's all interconnected.
So what does this all mean for you listening?
Let's bring this full circle.
Whether we are analyzing the triple net leases of a casino reat trying to parse the macrohead
ones of a beaten-down sneaker giant or dissecting the hidden sector skews in a passive dividend
basket, the headline yield is never the end of the story.
Never.
The honest math requires you to completely ignore the surface level numbers and dig into the
actual catch flow mechanics.
The headline yield is just your invitation to start investigating.
You always have to answer the fundamental question.
Why did Wall Street walk away?
Right.
Is it a broken business or just bad sentiment?
Exactly.
Understanding the difference between accounting depreciation and real cash flow, understanding
the psychology of an executive buying their own stock and understanding the hidden dangers
of ETF rebalancing.
These are the mechanical tools you need to separate a true bargain from a disastrous value trap.
It really is all about understanding the underlying machinery.
So I want to leave you with a final thought to chew on today on your own, building on exactly
what we've unpacked.
We just talked about how strict, unemotional ETF algorithms can be blindly forced to liquidate
stocks based on arbitrary prospectus rules.
We also saw how highly convicted human corporate insiders are aggressively buying up beaten
down assets with their own cash.
The ultimate standoff.
It is.
So ask yourself, when the broader market finally hits its next major correction and these
blind passive ETF algorithms collide head on with those deeply informed corporate insiders
who is going to win that tug of war.
That's the real question.
When the machine is forced to sell and the insider is waiting to buy, which side of that
trade do you want your portfolio to be on?
Think about the mechanics driving the price, not just the yield on the screen.
Thank you for joining us on this deep dive, we'll catch you next time.