Well, that didn't take long.
With the Dow Jones Industrial Average closing at 24,719 on the last trading day of 2017, it seemed likely that 2018 would see the venerable market average pierce through 25,000 for the first time. Sure enough, it took only a few days to reach that milestone.
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After cruising past five 1,000-point marks last year, we've already crossed through another in just the first week of 2018. Any bets on whether the Dow breaks the 30,000 level by the end of the year? A repeat of last year's 25% return would be more than enough to push it over the threshold.
Unlikely, but certainly not out of the question.
To be sure, the bulls are well-armed with plenty of supportive arguments in favor of further gains. There's the simple fact that many more people are on the payroll and earning steady wages. Unemployment had already fallen to a 17-year low even before the latest ADP report showed 250,000 jobs were created last month, 60,000 more than expected.
Many of those hires come from the resurgent manufacturing sector, reaffirming what a recent poll told us. A survey of 14,000 manufacturers found that 95% have a positive outlook (most plan to invest and expand), the highest optimism in the 20-year history of the survey. And since this sector contributes over $2 trillion annually to the national economy, the repercussions will be far-reaching.
Elsewhere, new home construction has surged another 16% over the past year and is now running at the strongest pace since 2007. With order backlogs (and median sales prices) on the rise, homebuilder sentiment is at the highest levels in 18 years.
Overall, the New York Federal Reserve now calculates that U.S. GDP is expanding at a solid 4.0% clip, up from a previous estimate of 3.9%. Last quarter marked the longest sustained stretch of 3.0% or better growth since 2004. And that robust tailwind continues to make an impact where it counts: on the bottom line of U.S. businesses.
According to FactSet Research, the S&P 500 is projected to report average earnings growth of 11.8% in 2018, led by the energy (41.5%), materials (18.3%), and financial sectors (16.7%). If it holds, this will be fastest earnings growth since 2011 -- bolstered by the highest expected net profit margins in a decade.
But aren't stock valuations getting stretched? Not as much as you might think. Interest rates (which greatly influence cost of capital and thus equity values) are still historically low. Furthermore, recent tax reform legislation is lowering corporate tax rates to 21% from 35%.
The value of any asset (be it stocks, bonds or rental properties) is tied to the cash flows it can generate. Since lower taxes means higher profits, all else equal, the shares of U.S. companies are automatically worth more now than they were a few weeks ago before the bill was signed.
After crunching the numbers, renowned hedge fund manager David Tepper recently told a CNBC audience that the market is "almost as cheap" entering 2018 as it was entering 2017. That's saying something, especially considering the S&P is up more than 20% since then.
What does all this mean for us? Well, for starters I'd say double-digit earnings growth and the long-awaited opportunity to finally repatriate trillions in retained overseas cash means that 2018 is shaping up to be a banner year for dividend hikes.
That means my subscribers and I will have a busy stretch ahead as I realign my High-Yield Investing portfolio to take full advantage.
The Stock I'm Buying First This Year
My first addition to the portfolio this year is one that's already raised its dividend following a stellar 2017. And it's no small adjustment either -- the recent 10% boost put the total yield at 8.7%.
Add in strengthening cash flows and a supportive regulatory environment, and this ever-reliable infrastructure stock is headed for an equally impressive 2018. And who knows, another dividend hike like that and we might be talking about a double-digit yielder.
Now, to reveal the name of this rock-solid winner here just wouldn't be fair to my High-Yield Investing subscribers. I know that's a letdown, but why settle for one high-yielder when you can get access to an entire portfolio of them paying out 6.6% on average? And there's no reason to settle for 8.7% when my portfolio has five holdings yielding double digits, including one currently paying a ludicrous 20.3%.
My mission in High-Yield Investing is to find top-notch income streams for my premium subscribers wherever I can find them. And if 2018 shapes up as expected, you'll definitely want to be along for the ride.
To access to today's recommendation -- in addition to my entire portfolio -- simply go here.
This article originally appeared on StreetAuthority.