The Safest Dividend Payer in a Money-Minting Industry

One industry has minted some of the largest fortunes of our generation…

It might seem boring at first glance, but it’s stuck around for centuries. And it’s not going anywhere.

In today’s issue, Chief Analyst Adam Galas profiles the best Fortress pick in this widespread industry. And lays out the path for how it could lead you to your own fortune, starting today.

It’s yielding 4.7% and could deliver us 100% returns in the coming years.

And be sure to read the Portfolio Update section. Adam gives an in-depth look into every portfolio holding, including our performance, company updates, future growth prospects, and long-term return potential.

Happy SWAN (sleep well at night) investing,

Brad Thomas Editor, Fortress Portfolio

By Adam Galas

Patrick Ryan was born the son of an auto dealer in Milwaukee. He got a degree in finance and literature from a Chicago university. And he was not a man born to luxury or wealth.

But Patrick Ryan just retired at 71, worth $10 billion.

Thomas Hagen went to Penn State and worked for the same company as Patrick for over 40 years. He is now worth $5.4 billion.

William Berkley founded his company in 1967 with $2,500. Today, he’s worth $3.9 billion.

These are just three of nearly two dozen men who have built multibillion-dollar fortunes. Collectively, they are worth over $150 billion.

And they all have one shared key to success… The money-minting power of insurance.

Another person who made his fortune with insurance and who you may have heard of before is… The ninth richest person in the world, Warren Buffett.

In 1965, Buffett bought Berkshire Hathaway at $12 per share. He then pivoted the company from textiles to insurance.

Today, his company’s shares trade for almost $550,000 each.

While Berkshire is a great example of a smart insurance company – as I’ll show below – I’m not here to recommend you buy its shares today.

It may be a world-beating performer, but it doesn’t pay a dividend.

And at Fortress Portfolio, we only select companies that can grow our income and help anyone accelerate their retirement goals. With the power of this portfolio, you can make money while you sleep, reset your financial situation, and withstand all market conditions.

That’s why today, I’m highlighting one of our favorite Fortress companies to do just that.

It’s a 4.7%-yielding insurance company that’s even better than Berkshire. One that’s growing faster with higher quality risk management.

Analysts think it could deliver 60% better annual returns than Buffett for years and possibly decades.

It’s the world's largest, safest, and best-run insurance company.

But before we dive into this company’s fundamentals, let me first show you why insurance is one of the most underappreciated and most lucrative industries in the world… And share how it can make your financial dreams come true.

To make money from it, we need to understand the basics of how insurance works and how it rakes in billions…

Customers pay premiums on a fixed schedule, and the insurance company invests that money. Then, when the customers make claims, the company pays those out.

The money they collect upfront before it’s paid out as insurance claims, is called insurance float. For the insurance companies, this is like an interest-free loan.

But wait, it gets better.

A well-run insurance business, like Berkshire, knows how to harness data and manage risk so well that it prices its policies in a way to earn an average 7% profit.

So, it’s not just a zero-interest loan; it’s a loan that pays the company 7% to take out the loan.

But wait, it gets even better…

Smart insurance companies, again like Berkshire, can take that -7% interest rate insurance float and invest it wisely, generating positive returns for their shareholders.

Usually, the float for most insurance companies is invested in risk-free bonds, like U.S., UK, and EU bonds.

However, when an insurance company has enough risk management data, it can safely invest in higher-return options like corporate bonds, stocks, real estate, and even entire companies.

Berkshire currently has almost $160 billion in cash, $20 billion of which is always set aside for claims.

The rest its free to invest into anything it wants.

But what happens if a major hurricane hits Miami? Or California is hit by a major earthquake at the same time? In other words, what if claims come in a lot higher than $20 billion?

A company like Berkshire – and today’s recommendation – won’t go bankrupt. It won’t have to sell its stocks to pay those claims… even if this happens in a bear market. And here’s why…

When you have a company with a high investment-grade rating, it can borrow tens of billions at low interest rates from the corporate bond market if needed.

This is the key for a well-run insurance company. And it’s how they’ve become some of history’s greatest money-minting machines.

Now, it’s not common to for insurance companies to earn 7% profits on their policies. The industry average is just 2%.

There are two reasons why most insurance companies break even on policies and must make all their money on investment returns to survive.  

First, scale. There is a fixed cost to running any business. If you need $10 million annually to make payroll, you had better sell over $10 million in policies to turn a profit.

But smaller insurance companies can get desperate and sell policies so cheap, they will lose money. They buy time and pray their investment returns save them.

Other medium-sized businesses aren’t as desperate but lack the data to optimize their insurance policies.

Insurance is all risk management and statistics. Whoever has the best data and best risk management wins, case closed.

If you’re a smaller company, you don’t have the risk management data you need to specialize and offer more lucrative kinds of insurance.

And here’s the best part of insurance… When big catastrophes hit, all the minnows who mispriced their policies go bankrupt. Only the best-run and strongest survive. And they can set their own prices after that.  

In other words, insurance has its own kind of moat. Size, scale, data, risk management, and investing skills differentiate between the companies that go broke and those that mint billionaires.

And Berkshire Hathaway isn’t the only company that’s got it figured out.

Today’s Fortress pick falls firmly in the latter category of millionaire-makers. While peers may struggle to break even, it’s got the long history and business know-how to deliver consistent returns.

And that makes it the best, money-minting business we can recommend to readers today.

This month’s Fortress feature is Allianz (ALIZY).

Founded in 1890, the company began with just two business lines: marine and accident insurance.

In its first few decades, Allianz was nearly destroyed by numerous challenges and crises.

Consider the 1906 San Francisco earthquake that wiped out 47 years’ worth of industry profits. This catastrophe bankrupted 14 insurance companies, including Austrian and German rivals.

In 1906, Allianz was just 16 years old and new to the U.S. insurance market. The earthquake itself wasn’t that bad. But it knocked down homes and broke water mains, leading to an out-of-control fire that destroyed 80% of the city.

The catastrophe had widespread repercussions, including triggering the crisis of 1907.

During the Panic of 1907, Allianz managed to keep its portfolio safe while still diversifying and expanding.

That has been the way Allianz built itself over 133 years to become an AA-rated global juggernaut operating in over 70 countries and serving over 100 million customers.

And thanks to that high rating, the chances of it losing your entire investment are less than 1%, according to the top ratings agencies.

(Source: S&P, Fitch, AMBest, Moody's)

Today, Allianz has over $1 trillion in assets and over $2 trillion under management. That’s money others trust Allianz to manage and invest on their behalf, just like they do with Buffett at Berkshire.

The bond market, known as the “smart money” on Wall Street, estimates the risk of Allianz failing in the next five years is just 0.38%.

In the last six months, no matter how scary the stock price moves or headlines, the fundamental risk for Allianz has never been higher than 0.5%.

For context, an AA-credit rating is as strong as Visa, Procter & Gamble, Colgate, and Walmart. It puts Allianz in the same category of other companies we can be confident will last for decades – if not centuries.

Allianz’s historical profit on policies for the last decade is 6%.

Now that the pandemic is over, analysts expect policy profits to stabilize at 7.5%.

That’s higher than Berkshire. And almost 4x better than the industry average.

And if you’re worried about interest rates, you’ve come to the right place…

No industry in the world profits more from higher interest rates than insurance. That’s because its cost of capital is always free or negative.

But now cash and risk-free bonds yield 3X what they were just a few years ago. And when borrowing costs go from -6% to -7.5%, you get an expected growth rate of 11%.

But don’t think Allianz will risk its impressive 133-year history as the world’s leading risk manager to try to boost growth.

Consider its solvency ratio, the measure of assets/liabilities. In this case, the value of the claims people might file against it. 

Regulators require 100% solvency ratios, and management has a policy of 180% minimum but targets 200%-plus. Last quarter, the solvency ratio was 208%. This quarter, it’s 212%.

Plus, management has war-gamed various scenarios to see how it would affect the company’s solvency if its float portfolio crashed. Here are the results…

There is a reason Allianz is one of the few financial companies not to cut its dividend during the Great Financial Crisis.

It’s why S&P rates Allianz’s long-term risk management in the 99th percentile. Not among insurance companies, not among financials, but in the top 1% of risk managers of all companies worldwide.

Among four rating agencies, the consensus is Allianz is the best-run insurance company with the best risk-management in the world.

Allianz has a policy of paying the most generous dividend while remaining safe.

Rating agencies say 50% is a safe payout ratio, providing plenty of cushion in recessions.

Allianz has a policy of paying 50% of earnings, ensuring a maximum safe yield. And in a recession, when earnings decline, it will not cut the dividend unless the company's survival requires it.

Its risk management and highly conservative and diversified insurance float portfolio mean the company’s survival is never at risk.

Management’s long-term plan is to grow the dividend by at least 5% per year, just as it did in 2023.

Historically, Allianz has grown at 6% to 7%. And thanks to much higher expected interest rates, analysts think 10% to 11% growth in the future is likely.

Right now, Allianz is offering a 4.7% yield. That compares to the S&P 500’s 1.5%. And analysts expect the stock to grow 10.7% in the coming years, vs. just 8.5% for the S&P 500.

From these levels, that’s nearly twice the return potential of Buffett himself.

But you don’t have to wait a decade to earn great returns with Allianz.

Here’s the return potential if the company grows as expected and returns to its historical fair value of 12 to 13 times earnings by the end of:

Nearly triple-digit return potential and a solid yield, all from the world’s safest and best-run insurance company.

This is the ultimate example of a rich retirement opportunity, one we’re happy to hold in the Fortress Portfolio.

In this section, let’s address the possible challenges to our outline for Allianz, its growth, and overall return potential.

Since Allianz is a German company, there is a 26.375% dividend withholding tax. U.S. investors can get a tax credit that recoups almost all of this, but only if you own it in a taxable account.

If you own it in a tax-deferred account, the dividend withholding will be removed at the broker level, and you won’t qualify for a tax credit.

So if possible, we recommend owning Allianz in a taxable account.

Also, because Allianz is an ADR (American depository receipt, allowing it to trade on U.S. exchanges) of a German company, the trading volume is very low. So use limit orders to ensure you’re getting a price you’re comfortable with.

Here are the things we want to be aware of when it comes to risks, mostly short-term but some long-term, associated with investing in Allianz.

Contrary to what you may think after reading this list – the biggest medium-term risk to Allianz’s thesis isn’t anything to do with the company itself.

There has been zero indication that other major institutional investors are afraid or unwilling to invest in Allianz funds. The company’s long-term growth outlook has never looked better.

But some economists think that interest rates won’t stay elevated and will return to near zero. If that were to happen, then 5% to 7% growth is likely, not the 10% to 11% that Allianz is capable of in a high-rate world.

Management’s conservative guidance is for “at least” 5% long-term growth including in the dividend.

In that very conservative scenario of 4.7% yield (taxable account to get the tax credit) + 5% growth = 9.7% long-term returns. Similar to what the S&P 500 is expected to deliver.

Even with the risks, here’s what we have with Allianz…

Very little opportunity cost, almost no fundamental risk, and the biggest, safest, and best-run insurance company in the world working hard for you… So one day, you won’t have to.

We’re raising our buy-up-to price on Allianz based on its latest growth projections and return potential.

Action to Take: Buy shares of Allianz (ALIZY) Buy-up-to Price: $28.88 Position Sizing: 4.4% of your Fortress Portfolio. Or up to 15% in an individual portfolio. Risk Management: 30% hard stop loss ($16.20 for our tracking purposes)

In today’s issue we are going to overview all our portfolio holdings, starting with the worst performing assets and ending with the best.

Our worst performing pick, PIMCO 25+ Year Zero Coupon U.S. Treasury ETF, is a bond ETF that is currently down 14% since we launched Fortress Portfolio in January 2023.

The return to normal of bond interest rates from their lowest levels in U.S. history resulted in the worst bond crash in U.S. history.

ZROZ was designed to be the most interest rate-sensitive kind of bond in the world, moving up or down 26% for every 1% the 30-year U.S. treasury yield moved in the opposite direction.

The role of ZROZ in Fortress Portfolio is to hedge against any recessions, the risk of which is now much lower than previously expected.

But this doesn’t mean it’s no longer valuable to own. We always want to keep our portfolio diverse and allocate certain percentages of our portfolio to different asset classes.

ZROZ is designed specifically to give us pure, concentrated hedging power. In recessions, it can soar as much as 150% – better than any other asset class. So holding on to it for that reason alone makes sense.

In periods of good economic growth (like now), it’s expected to earn 4% from today’s current 25-year yield of about 4.25% (historical fair value).

While that might not seem exciting, remember that traditional portfolio insurance strategies, like options, cost about 5% per year.

ZROZ pays approximately a 4% yield, meaning you get paid for your portfolio insurance.

Our current buy-up-to price for ZROZ is $80.

The second biggest bank in Canada, Toronto-Dominion is our second biggest loser in the Fortress Portfolio, down 7% since we added it to the portfolio in January 2023.

But as I mentioned in our latest weekly update video, Toronto-Dominion’s 2023 4% decline in earnings per share was due to a plethora of negative external forces.

For one, we had a banking crisis last year along with rising labor costs due to the tightest North American job market in 54 years.

Toronto-Dominion also had to digest some of its recent acquisitions. One of these included newly acquired credit card portfolios that will pay off handsomely in the future – but resulted in several hefty one-time charges.

After announcing a $13.4 billion acquisition of First Horizon Bank in February 2022, it ended last year. The deal was mutually terminated after the regional banking crisis in 2023.  

It was pure bad luck that the deal was announced before the crisis began. But a wise move on the part of Toronto-Dominion not to move forward. First Horizon Bank’s share price fell 40% the day after the deal termination announcement.

We are confident that Toronto-Dominion management’s U.S. focused growth strategy is on track to deliver 7% to 10% long-term growth (as it has for 20 years).

With a 4.8% safe yield and 8.5% long-term growth guidance, Toronto-Dominion still has attractive 13.3% long-term return potential.

Factoring in the fact that we bought Toronto-Dominion at a 23% historical discount, a reasonable estimate for five-year returns is 18.7% annually or about 136% total after 5 years. That’s a lot better than the S&P’s 38% after 5 years.

Toronto-Dominion is the ultimate example of how it’s always a market of stocks, not a stock market. Even in an overvalued market, you can find world-class bargains.

Our buy-up-to price for Toronto-Dominion is $77.

PIMCO Managed Futures Fund is the most conservative managed futures fund of the last decade. It’s designed to deliver the best hedging power in a crisis, uncorrelated to bonds and stocks – going up when all other assets are falling.

Run by two options trading veterans with over 40 years of experience, this fund invests in almost 1,000 kinds of commodities, currencies, bonds, and equity futures.

It’s a trend-following strategy built to deliver 5% to 6% long-term returns – but most importantly, hedge falling stocks and even bonds.

When everything else fails, PQTAX is designed to be the rock in the storm that helps you ride out market volatility while other investors are pulling their money out of the market in a panic.

Although we are down 5% since January 2023, it’s not a surprise. In fact, it’s a testament to the safety of this fund that we are down only 5%.

In the last year, this trend-following fund has seen some of the wildest swings and reversals in interest rates, bond yields, currencies, and commodity prices in history.

In other words, when there is no trend to follow, trend following funds like PQTAX are expected to trade sideways. And that’s what it’s done.

But during periods of sustained pain for bonds and stocks, managed futures like PQTAX shine brightest. That’s why we own it in our Fortress Portfolio.

Long-term, PQTAX has delivered 5% to 6% annual returns. That’s about 1% to 2% better than bonds and its other peers. And that is what we expect from PQTAX going forward.

Our current buy-up-to price for PQTAX is $11.

Altria is the best-performing stock in history thanks to its wide moat and recession-resistant business model.

It used to be called Philip Morris and is still America’s #1 cigarette company, owning the legendary Marlboro brand.

Although we’re down 4% since we recommended it in May 2023, Altria is facing a unique challenge – decreased demand for its cigarette brands.

The worst inflation in 40 years caused many consumers to trade down to discount cigarettes, resulting in a 10% volume decline. The company’s strong pricing power has kept up with declines, but sales growth stalled. Growth is expected to resume in 2024 and beyond, at 1% to 2% rates.

The company normally increases product prices faster than demand volume declines in cigarettes to grow sales. Then Altria cuts costs and buys back shares to grow earnings and dividends per share.

Morningstar estimates it can do this for 20 more years before cigarette prices reach Australian levels, currently the highest in the world at $26 per pack.

Management plans to pivot to a smoke-free nicotine company by then. Selling reduce-risk products (RRPs) and other smoke-free products.

But even with the decline in sales growth, Altria is still the safest 9.6% yield on Wall Street.

The long-term consensus growth rate from all analysts who cover it is 3.5%. That is less than half its historical rate… but when you have a very safe yield of almost 10%, that 3.5% growth can give you Nasdaq-beating 13% long-term returns.

And that’s even if the price-to-earnings (P/E) ratio never returns to its historical value of 13X earnings.

If Altria does return to historical fair value within five years and grows as expected, a modest 3.5% per year offers 143% return potential or 19.4% per year. That’s still 4X better than the S&P 500.

If it grows at 0% forever? Then all you get is a 9.6% safe yield for the rest of your life.

The only thing management must accomplish to make Altria a winner for long-term investors is to avoid negative growth. And we have confidence in Altria’s ability to do just that.

Right now, our buy-up-to price for Altria is $61.

Since we added TC Energy to our portfolio in January 2023, this pipeline giant is down 1%.

We were excited last year when TC Energy’s management team announced plans to spin off its legacy oil pipeline business into a separate yield-focused company – while the new TC Energy would focus on natural gas and renewable electricity to become a 7% growing pure utility.

TC Energy transports 25% of North America’s natural gas and oil, making it the single largest energy transporter on the continent.

Anticipating Canada’s rising carbon emission tax increase from $40 Canadian Dollars (CAD) per ton today to $170 CAD per ton by 2030 – TC Energy plans to cut emissions 30% by 2030 and achieve carbon-neutral status by 2050.

But these long-term plans were marred in 2023 by a $6 billion cost overrun in the Coast GasLink Project entering service in 2024. These cost overruns were caused largely by the inflation spike, raising wage pressure, and metal prices.

But with this project complete, we are confident TC Energy is now on track to achieve its growth goals over the long term.

Those goals include combining a very safe 6.9% yield with 7% growth to achieve Nasdaq-smashing 13.9% returns. 

Our buy-up-to price for TC Energy is currently $48.

Brookfield Renewable Corp is a fund run by Brookfield Asset Management, the world’s leading global infrastructure manager.

Brookfield Renewable is down 1% since we recommended it in February 2023, and has managed to hold up well in the face of a short seller report that primarily attacked its sister fund, Brookfield Infrastructure. But this report still managed to create uncertainty about how Brookfield Asset Management operates Brookfield Renewable.

Brookfield Renewable is one of the several high-yield focused entities Brookfield Asset Management runs. It has successfully generated incredible 17% annual returns for investors for 23 years.

Management reports that due to the sharp rise in interest rates last year and resulting temporary weakness in the stock price, some growth investments had to be put on hold.

But Brookfield Renewable remains on track for its $150 billion fundraising goal and shows decades of growth opportunities in clean energy.

After its most recent quarterly results, analyst consensus remains at 9.7% long-term growth for Brookfield Renewable.

Combining its safe 4.8% yield, almost 10% long-term growth, and modest 5% discount to fair value, the total annual return potential for Brookfield Renewable is 14% to 15% for the next five years. So you can expect to double your money in a few years.

Brookfield Renewable also estimates that clean energy over the coming decades will be a $150 trillion opportunity, which could power these same kinds of growth and incredible returns for the next 50 to 70 years.

That makes Brookfield Renewable a buy-and-hold forever blue-chip for you, your children, and even your grandchildren.

Right now, our buy-up-to price for Brookfield Renewable is $30.

Pembina Pipeline is a mini-version of Enterprise Products Partners, a fully diversified and integrated midstream operator. That means it has its fingers in every part of the energy transportation supply chain.

When oil or natural gas flows in Canada, Pembina gets a contracted, regulated, or fixed fee six different times.

In December, Pembina announced it was acquiring Enbridge’s stake in three joint venture projects for $3.1 billion Canadian (CAD). While the deal is expected to be immediately profitable and raise the cash flow per share, its valuation seemed to be higher than Wall Street expected for such deals.

This created a temporary sell-off in the stock, which accounts for the 1% decrease since adding it to our portfolio.

But what the market did not factor in, is that this strategic move increases Pembina’s opportunities for growth in liquid natural gas exports (including serving its $4.5 billion CAD contract with Canada Kuwait Petrochemical).

We are confident that Pembina’s management team can achieve its 5% to 7% growth goals, and ensure that Pembina remains a reasonable, safe, high-yield opportunity.

We predict that this 5.7%-yielding sleep well at night (SWAN) blue-chip will grow at about 6% over time. That’s a nearly 12% annual long-term return. So don’t lose sleep over a 1% decrease. We will recoup any losses and profit in the coming years.

Our current buy-up-to price for Pembina is $38.

A UK-based asset manager and annuity specialist, Legal & General is up 10% since we launched Fortress in January 2023.

Legal & General navigated an unprecedented UK pension crisis in September 2022 when the value of 50-year UK bonds fell 50% in just two days.

The Bank of England had to announce emergency bond buying to prevent the nation’s pension system from collapsing.

Legal & General had almost no exposure to those bonds or the highly leveraged securities that almost destroyed many of its peers.

But due to the ongoing effects of Brexit and a mild UK recession that is expected to last into 2025, high inflation has weakened Legal & General’s growth outlook, making it fall to 3.9%.

More concerning is the payout ratio that is expected to rise to 80% and remain that high for the next three years.

Although management delivered on its 5+% dividend growth goal in 2023 and is expected to keep the dividend growing steadily in the years to come, our internal safety score for Legal & General has fallen to 56%. This indicates that the risk of a dividend cut in a future potential recession has quadrupled from 2% to 8%.

While that is still a relatively low probability, investors will want to reassess whether they want to buy more Legal & General now or continue holding it.

Legal & General’s 7.5% yield remains safe for now, but should the UK recession prove worse than expected, the risk of a dividend cut could increase from its current expectancy of 8%.

Long-term, 11% to 12% annual returns look likely. And the 20% historical discount today means 16% returns are expected over the next five years for 110% total returns.

But that assumes the growth outlook doesn’t continue to decline. Something that is outside of management’s control at the moment.

If it does, look to sell the position.

Our buy-up-to price for Legal & General is currently $18.

We’ll continue to hold for now, but if you’re looking for safer ways to earn similar returns and income… You can sell Legal & General and collect a 10% profit today.

We recommend investing those gains into Enterprise Products Partners, a proven high-yielding SWAN stock that controls its own growth destiny.

Enterprise Products Partners, the safest and highest quality name in midstream oil companies, is up 12% since we added it to the portfolio in January 2023. And it isn’t slowing down.

Last year, Enterprise became the only midstream pipeline and energy transport infrastructure company in history to achieve an A-credit rating.

Enterprise was also the first company in America to win the right to export crude oil.

In fact, Enterprise’s investments in oil export capacity along the Permian Basin helped drive U.S. oil production to a record 13 million barrels a day.

And Enterprise is planning to double its oil export capacity to 2 million barrels per day by 2025.

This is only part of a $7 billion growth backlog. Enterprise has a 25-year plan to transition to green energy and achieve a 50-year dividend growth streak by 2048.

It announced this after hitting a 25-year dividend growth streak and becoming a Dividend Champion in 2023.

It’s no wonder the bond market is confident in Enterprise’s long-term 4% growth plans. So confident in fact that it’s willing to buy Enterprise’s bonds maturing in 2057, 34 years from now.

And Enterprise is generating so much excess cash that even if demand for new pipelines were to dry up, it could buy back enough stock to grow at the 4% annual rate that analysts and bond investors expect.

Combine a nearly 8% safe yield with 4% growth and you have a Nasdaq-rivaling 12% return potential. Then factor in an 18% historical discount, and you get a 16% annual expected return for the next five years from today’s prices.

That’s 110% returns over the next five years from the most trusted name in the industry.

Our buy-up-to price for Enterprise is $33.

Keyera is another Canadian pipeline company and a hidden gem that has been enriching dividend investors for decades.

Last year, Keyera completed its KAPS natural gas liquids project, a $2 billion endeavor that supports its long-term 5% growth plans.

Completing this major project on time and on budget was a major accomplishment in 2023 when many of its larger peers, like Enbridge (ENB) and TC Energy, fell victim to billions in cost overruns.

Keyera’s strategic long-term plan is to transition itself into a green energy future that will include hydrogen, carbon sequestration, and renewable natural gas solutions.

S&P is confident in Keyera’s long-term plans and its ability to survive and thrive for decades to come. And bond investors are willing to buy its 2081 bonds, meaning the most conservative income investors on Wall Street are betting millions of dollars that Keyera will be growing successfully 57 years from now.

Keyera currently yields 6.2% and is expected to grow at 4% to 5%, delivering solid 11% long-term annual returns.

And thanks to its highly attractive 21% discount when we purchased it, you can expect 5% higher returns for the next five years. That’s almost 16% annual returns.

We are currently up 13% since recommending Keyera in January 2023, and our buy-up-to price is $30.

Manulife Financial is Canada's 3rd largest insurance company, focused on the Asian market.

This is significant because insurance is a mature industry in the West, while it’s a much younger growth industry in Asia.

Manulife has a rich history of successful risk management in insurance and wealth management and has opened offices in Japan, Hong Kong, and Singapore. It also has joint ventures with large insurance companies in China.

Manulife completed its $1 billion cost savings program ahead of schedule. And this accomplishment along with its strong Asian growth plans, has led management to predict 10% to 13% long-term earnings growth.

We believe (due to falling interest rates in the future) that growth will more likely be around 7.3%. And even if we are correct, the current safe 5.2% yield makes for an attractive 12.5% long-term return potential.

If management can deliver on its 11.5% growth guidance, then you’re looking at tech bubble-like returns for years or even decades to come.

If a more modest 7% to 8% growth is achieved (what we and other analysts expect), that still gives you 12% to 13% returns when combined with its 5.2% yield.

Right now, we are up 18% on Manulife since we added it to our portfolio in January 2023. And our buy-up-to price for Manulife is currently $26.

MPLX is one of the highest safe-yields on Wall Street.

It began as a $550 million annual cash flow partnership that owned Marathon Petroleum’s pipelines.

After eight years of steady diversification, acquisitions, and investments, MPLX is now a $6.1 billion-per-year cash flow business. It’s also the largest gas gathering and processing company in America.

MPLX is now investing in the Permian Basin to build out the U.S.’s export capacity. Its goal is to help increase the U.S.’s oil export capacity to 6 million barrels per day by 2027.

MPLX hiked its dividend 9% in 2023, showcasing the strength of its rock-solid balance sheet.

In fact, its debt ratios are continuing to fall, and MPLX is funding all growth and dividends with free cash flow. And it still has plenty left over as a safety cushion. The bond market is so confident in MPLX’s growth plans that it's willing to buy bonds that don’t mature for another 34 years (in 2058).

And despite soaring 20% in the last year, MPLX is still yielding an attractive and safe 9.2% yield – courtesy of that 9% payout hike.

That 9.2% yield is expected to grow at 4% annually over the long-term, delivering 13% to 14% returns.

For context, hedge funds strive to achieve 15% returns and charge 5% average fees.

Meanwhile, MPLX is paying you 9.2% to entrust your money to them.

We are currently up 20% on MPLX since January 2023, and our buy-up-to-price is $43.

U.S. Bancorp is the largest regional bank in America, founded in 1929 at the start of the Great Depression. And its expert risk-management has kept this A-rated super-bank safe and growing for almost 100 years.

Despite buying Union Bank in December of 2022, U.S. Bancorp skillfully sailed through the regional banking crisis and delivered us over 20% returns in less than a year.

And even as it faces the tightest job market in 54 years and a slowing economy, U.S. Bancorp’s earnings are expected to grow 21% in 2024, followed by 10% and 12% growth in 2025 and 2026.

That means you could see a potential 80% gain in three years for a 22% annual return potential. That is, if U.S. Bancorp grows as expected, returning to its 20-year historical fair value.

Over the long-term, U.S. Bancorp is expected to grow 6% per year.

And even though it soared 20% in a few months, it’s still 25% undervalued.

That means you could make another 116% on top of 20% gains you already have if U.S. Bancorp returns to fair value in the next 5 years. That’s three times more than the average U.S. investor makes.

Altogether we are up 21% on U.S. Bancorp since we added it to the portfolio in May 2023. Right now, our buy-up-to price for U.S. Bancorp is $54.

Main Street has one of the only investment-grade credit ratings in the business development corporation (BDC) industry.

And as a BDC, Main Street operates like a shadow bank, offering financing, loans and even making Shark Tank-like investments in small- to medium-sized businesses that larger banks don’t want to lend to.

In 2023 and 2022, despite historic interest rate volatility and a regional banking crisis, Main Street kept delivering rock-steady dividend growth. And raised its dividend three times in the past 12 months alone.

This is the only BDC in the world to never to cut its dividend during a recession. And it was around for the two most extreme and severe recessions of the last 75 years.

But Main Street isn’t immune from cyclical economic conditions. A modest 5% earnings contraction is expected in 2024 and 2025 due to the effects of all the Fed rate hikes.

But despite a 25% rally in the last year and the earnings decline in the next few years, Main Street is still undervalued. It offers 50% upside in the next two years… And a 23% annual return potential.

That means 22% annual returns or 80% gains for Fortress members over the next three years. All from one of the safest 7%-yielding monthly dividend stocks on Wall Street.

Right now, we are up 25% on Main Street since we added it to the portfolio in January 2023. Our buy-up-to price for Main Street is $58.

Founded in 1917, ONEOK is the oldest midstream company in North America and our best-performing pick in Fortress Portfolio.

This past year, it acquired Magellan Midstream, allowing us to lock in almost 25% gains in just a few months.

We recommended selling Magellan for a nice profit and buying shares of ONEOK, which fell almost 10% after news broke about the acquisition.

ONEOK’s acquisition was structured masterfully to deliver solid gains for Magellan investors… and then (thanks to tax benefits) we achieved a nearly 50% discount for ONEOK.

ONEOK’s free cash flow is now set to soar, slashing its dividend payout ratio from a safe 62% to a very safe 53%. This includes ONEOK’s recently announced 4% dividend increase, which extended its dividend safety streak to 35 years without a cut.

So it’s not surprising that today, ONEOK is slightly overvalued at a 10% historical premium, which makes it a hold.

ONEOK’s Magellan acquisition is expected to boost its long-term growth outlook to an industry-leading 7% to 8%. This, combined with its attractive 5.5% very safe yield, should drive its long-term returns even higher.

We are currently up 28% on ONEOK since we added it to the portfolio in May 2023. And our buy-up-to price is $63.

(Source: Gurufocus Premium)

I welcome your questions and will try to answer as many as I can in the weekly update videos and these monthly newsletters.

Just remember, I can’t give individual investment advice. But I can supply information and general guidance for the average investor. Write in with your questions here.

Response: Leggett was the final company that made the screen when we built the 15 stock + 2 hedges portfolio. It was 15% undervalued at the time.

It ended up 35% undervalued when our hard stop was triggered. What happened was that Leggett’s fundamentals were deteriorating and continued to do so.

This is why its so important for us to not just recommend companies but to continuously monitor them over time. Look at General Electric (GE) – the quintessential proof that even the mightiest dividend aristocrats can crash and burn.

In 2000 at the peak of the Dot Com mania, GE was the world’s most valuable company. It was an AAA-rated company, a dividend aristocrat, and led by Jack Welch, which Fortune had just named its “CEO of the Century.”

Yet today GE has cut its dividend 5 times, and investors who bought in 2000 are still down 36% including dividends, and down 65% adjusted for inflation.

At the time GE seemed as close to perfection as could ever be achieved on Wall Street. And yet even the world’s greatest company became a failed investment even a quarter century later.

This is why our safety and quality model are designed to quickly update changes in fundamentals. Even outside of a recession, the wheels can fall off the bus, but in a recession entire sector can take a beating.

So we must be prepared for that possibility and invest without emotions.

Safe investing,

Adam Galas Chief analyst, Fortress Portfolio