An ‘Earth-Shattering’, Low-Risk Dividend Stock

Today, I want to tell you about a low-risk, high-yield dividend stock that has delivered huge market-beating returns to our Cabot Dividend Investor subscribers over the past 18 months. But first, a story about something remarkable that happened on my recent visit to New Zealand…


One month ago, at 3:31 in the morning, in Christchurch, New Zealand, I was shaken out of a sound sleep by an earthquake that measured 4.3 on the Richter scale.

It felt as though a couple of strong men were shaking the bed.
I didn’t panic; my first thought was regret—that I had missed the start of the earthquake by being asleep!

But the experience did make me thankful that I live in a place where earthquakes are extremely rare.

So what was I doing in Christchurch, which is far from a tourist hot spot these days?

My Christchurch story starts back in September 2008—near the nadir of the financial crisis—at a meeting of fellow publishers in Chicago.

One of the attendees had come all the way from New Zealand. And seeing that it’s such a long trip, he had brought his wife too, and they were making a tour of the U.S.

To make a long story short, when they were in the Boston area, my wife made a delicious home-cooked meal for them (on a cold and rainy autumn night). And we’ve stayed in touch ever since.
So, given that we were heading to Sydney, Australia last month for a family wedding, it only made sense to stop in New Zealand, too, to see them at their home in Christchurch.

And, given that Christchurch has had some serious earthquake activity in recent years, it made sense to bone up on the subject.

The main facts are these:

On September 4, 2010, a 7.1 magnitude earthquake occurred, centered 25 miles from Christchurch, 6 miles deep. No deaths were directly attributed the quake.

Six months later, on February 22, 2011 there was a 6.3 magnitude earthquake, centered just 6 miles southeast of the center of the city, and only 3 miles deep.

In that earthquake, 185 people died, 115 of them in the collapsed Canterbury Television Building. More than 6,000 people were injured. More than 1,000 buildings were rendered unfit for use. And more then 10,000 people subsequently moved out of the city (which had a population of 386,000).

Five years later, Christchurch is still rebuilding. But it still has an excess of empty lots—there’s no shortage of parking. And plenty of people are still arguing with their insurance companies.

And, it still has aftershocks, like the one we experienced. In fact, in the five years since the big one, there have been some 10,017 measurable aftershocks!

On the afternoon that we arrived in Christchurch, our friends gave us a tour of the downtown, so we could see firsthand where they each used to work. Sort of. Both their buildings are now gone—plus, the publishing company was forced to work out of their house for 18 months, as rents in Christchurch went sky-high following the earthquake.

We also saw the ChristChurch Cathedral, built between 1854 and 1904, which now looks like this—and may or may not be completely demolished. 

And we saw its temporary replacement, the Cardboard Cathedral, which looks like this inside. 

Bottom line, there’s still a lot of work to do. And yet, from my optimistic perspective, Christchurch is a relatively safe place to live today, given that everything loose or fragile or unsteady has already come down!

Still, people in Christchurch are careful—because they don’t feel as secure as most of us. They don’t put good glassware on shelves. They have emergency supplies at hand—just in case another big one hits. And they’re careful to keep their phones charged.

Interestingly, both my research and my personal experiences illuminate a key characteristic of people in the aftermath of such a disaster. Those people with strong social networks often grow stronger, as they deal with a “common enemy,” while those with weak social networks grow less resilient, more anxious.

With more than 10,000 aftershocks, it’s totally understandable!

One Low-Risk Dividend Stock

So, are there any compelling investment opportunities in New Zealand?

Given that the country’s economy still has a large agricultural component, and that a “brain drain” has been a problem in recent decades, no.

On the other hand, the complete collapse of commodity prices around the globe in recent years does make me eager to spot a nascent uptrend in despised commodities that have been discarded in the panic selling of recent months.

Coal, for instance.

Last week the news that Peabody Energy (BTU) might go bankrupt made big headlines, and I like that. It’s headlines like that that make market bottoms.  

Unfortunately, none of the Cabot analysts are recommending coal yet.

A quick look at the group tells me that Alliance Holdings (AHGP) may be the best prospect, given the stock’s liquidity and the company’s ability to keep on making a profit.

But that’s a high-risk play right here. So instead, I’ll just keep an eye on that and a few others.

A more prudent investment, meanwhile, would be Xcel Energy (XEL), the utility that provides mainly electricity (and some natural gas) to customers ranging from North Dakota to Michigan to Texas. The dividend stock currently yields 3.2%, and subscribers to Cabot Dividend Investor have racked up a gain of 36% in the stock over the past 18 months.

If you’re interested in joining them, and in building a well-diversified portfolio of high-quality dividend stocks, your best bet is to click here now. 


Timothy Lutts
Chief Analyst, Cabot Stock of the Month
and Publisher of Cabot Wealth Advisory


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