Medley Capital Corp (MCC), Enterprise Products Partners L.P. (EPD): The ‘New Normal’ For High-Yield Stocks — And What It Means For You

That means 12,422 stocks don’t make the 9% cutoff. If I restrict myself to that criterion, then I’m automatically eliminating 99% of the pool of potential investment candidates. Needless to say, that includes the overwhelming majority of the market’s biggest winners.

All of this is to say that while I strive to hunt down and recommend attractive securities with double-digit yields — and own a few, like Medley Capital Corp (NYSE:MCC) — they are the exception in this environment, not the rule.

Even Warren Buffett, the greatest investor of our time, has counseled investors to tone down unrealistic expectations. Here’s what he had to say:

“The economy, as measured by gross domestic product, can be expected to grow at an annual rate of about 3 percent over the long term, and inflation of 2 percent would push nominal GDP growth to 5 percent. Stocks will probably rise at about that rate and dividend payments will boost total returns to 6 percent to 7 percent.”

Translation: We need to learn to be happy with a 9% annual total return, not expect it as a minimum yield.

And remember, I don’t just invest in a stock based on a snapshot of what it looks like today. I look at its long-term earnings potential. If you had to choose between a new job that paid a $75,000 fixed annual salary with little chance of a pay raise or one that starts at $60,000, but with a 10% pay hike each year, which would you prefer?

Most of us would go with option B, knowing that our paychecks would rise to $66,000 in year two, hit $72,600 in year three, and then jump to nearly $80,000 the following year.

Investors must typically make the same choice, which is why High-Yield Investing is dedicated to stocks like Enterprise Products Partners L.P. (NYSE:EPD) — which trades with a current 4.6% yield but has raised its dividend 37 times in a row and 48 times since first paying a dividend in 1998.

And when the right 9%-yielder DOES come my way, rest assured that I’ll be here to report on it.

P.S. — Have you heard about the wealth-crushing American Retirement Betrayal? In a just released report, I predict a possibly devasting “October Surprise” for a key area of of the U.S. economy… and it’s all Ben Bernanke’s fault. This collapse could happen as soon as next month, and anyone not prepared for it could have their savings wiped out. To learn how I plan to ride out the storm, click here.

– Nathan Slaughter

Warren Buffett’s Top 5 Stocks

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