Day: September 15, 2024

The biggest tech companies in the world are shelling out millions of dollars every year to protect their CEOs—but some pay more than others, and for good reason.

Among the generous perks awarded to top executives, security costs can be among the priciest, especially when it comes to high-profile business leaders. These security costs include everything from home monitoring to personal bodyguards and security consulting which come at a big cost to companies, depending on the executive.

Bill Herzog, the CEO of Arizona-based LionHeart Security Services, told Fortune that it’s important for companies to invest in protecting their CEO, especially if they’re among the richest people in the world, like Meta’s Mark Zuckerberg and Tesla’s Elon Musk. Herzog, whose company has provided security for politicians and other high profile individuals, said that these kinds of celebrity CEOs could especially be targeted. And if something were to happen to them, the company may be the one to take the hit financially and reputationally, he added.

“When you’re talking about somebody who’s worth millions of dollars or billions of dollars, and they are in charge of an entire company, there is a real possibility of kidnapping, there’s a real possibility of extortion, there’s a real possibility of attempts on their lives,” Herzog said.

For round-the-clock security, a service that requires specially trained security experts and specific resources, Herzog said his company would charge $60 an hour or more, a sum that could bring the total bill to upwards of $1 million per year for two guards.

Yet, some companies pay out much more than that to protect their chief executives. Here are some of the tech companies that pay the most:

Meta

Meta pays over three times more than the next closest tech company on the list to protect its longtime CEO and founder Mark Zuckerberg. In 2023, the company spent a total of $23.4 million for Zuckerberg’s personal security, including $9.4 million in direct security costs and another $14 million in an annual pre-tax allowance meant to “cover additional costs related to Mr. Zuckerberg and his family’s personal security.”

In previous years, Meta has paid out even more to protect Zuckerberg, with the bill for his personal security exceeding $24 million and $25 million in 2022 and 2021, respectively, according to a filing with the Securities and Exchange Commission (SEC).

The company paid these large security payments, “for the company’s benefit because of the importance of Mr. Zuckerberg to Meta,” according to the filing. Zuckerberg is especially at risk because of his position, the company argues.

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“We believe that Mr. Zuckerberg’s role puts him in a unique position: he is synonymous with Meta and, as a result, negative sentiment regarding our company is directly associated with, and often transferred to, Mr. Zuckerberg,” the company wrote in the SEC filing.

Luckily, Zuckerberg is also a big aficionado of mixed martial arts.

Alphabet

Alphabet CEO Sundar Pichai talks a lot about cybersecurity, but his personal security is also top of mind for his company. In 2023, the tech giant forked over $6.8 million for Pichai’s personal security, according to a filing with the SEC.

The company also pays for a company car and his use of “non-commercial aircraft,” e.g. the private jet.

View this interactive chart on Fortune.com

Tesla

Tesla’s Elon Musk is no stranger to the limelight, and his personal security bill reflects that. Tesla paid $2.4 million in 2023 to a security company owned by Musk for security services, along with another $500,000 through February of this year, according to an SEC filing.

The bombastic CEO’s steep security costs are apparently very necessary. In July, Musk said in a post on X that two separate people had tried to kill him in the last eight months.

“They were arrested with guns about 20 mins drive from Tesla HQ in Texas,” Musk wrote.

After the failed assassination attempt on Donald Trump in July, Musk mulled taking his security into his own hands.

“Maybe it’s time to build that flying metal suit of armor [sic],” Musk said in a post at the time.

Nvidia

For one of the star CEOs of the moment, Nvidia spends comparatively less than its tech peers on CEO Jensen Huang’s security. In its fiscal 2024, the company spent about $2.2 million on residential security and consultation fees for Huang, plus hundreds of thousands on security monitoring services and car and driver services, according to a filing with the SEC.

While Huang once said Jackie Chan would be best suited to play him in a movie, Huang definitely doesn’t have Chan’s martial arts skills.

Apple

Although Tim Cook is not as famous as his predecessor, the iconic Steve Jobs, he’s still Apple’s most successful CEO, and the company wants him around for many years more.

Apple paid $820,309 for expenses related to Tim Cook’s security in 2023, which, while not a pittance, was still less than the $1.6 million it paid for his private jet use.

This story was originally featured on Fortune.com

When the Federal Reserve began raising interest rates in 2022, financial adviser David Flores Wilson needed time convincing clients to put their cash in places where it would produce yield — like CDs, money-market funds, T-bills BX:TMUBMUSD06M and high-yield savings accounts.

Now, the opposite is true. Wilson says it’s a challenge persuading some of them to reduce their money in those positions.

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For the past year or so, these supersafe investments were fetching investors 4% or 5% on their cash. But when the Fed starts cutting rates, that return is expected to diminish. Yet even when Wilson’s clients know this, some are still hesitant to budge.

“It’s a little bit of fighting city hall,” said Wilson, managing partner of Sincerus Advisory, where he’s compromised with certain clients on smaller allocations out of cash. “The certainty of a return is so attractive to so many people, and particularly to my client base.”

There’s plenty of people who have learned to love cash in recent years, and they don’t plan to break-up with it anytime soon. The coming Fed cuts aren’t going to change that, financial advisors and cash investment experts agree.

See also: Most retail investors are holding on to their cash these days. Here’s why.

What’s playing out on a big scale is “ambiguity aversion,” according to Vicki Bogan, a professor at Duke University’s Sanford School of Public Policy where she specializes in behavioral finance.

People tend to prefer what’s known and familiar, avoiding actions with an uncertain range of outcomes. Cash is a conservative asset, but Bogan said this isn’t “risk aversion.” That’s where people avoid risk — but at least they know the distribution of outcomes and odds.

Questions surrounding the Fed’s rate moves, the economy’s health and presidential election are clouding the range of scenarios, Bogan said. “As the dominoes start to fall, investors will become more confident or certain about what the distribution could be.”

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Until then, guaranteed yield is still going to look pretty good.

Automated investing company Wealthfront currently offers up to 5.5% APY on its high-yield cash account. Leading into rate cuts, the company said it’s still seeing clients open new high-yield cash accounts and more money flowing into current accounts.

Betterment, another fintech company that offers high-yield cash accounts, also confirmed that it’s still seeing money flow into these accounts from new and existing clients.

Where to put your cash now

Some financial advisors think this money is better off invested elsewhere.

“I would not be in short-duration fixed income or money markets,” Elliot Dornbusch, the chief executive and chief investment officer of CV Advisors, told MarketWatch.

CV Advisors provides investing advisory services and asset management for high-net worth individuals. Dornbusch said that many of CV Advisors’ new clients come to the firm with portfolios that are filled with short-term fixed income securities or cash parked in money-market funds. Getting them to move their money out of those positions takes a little persuasion.

“They were afraid of investing. We’re trying to take away that idea of being afraid,” Dornbusch said. “If they’re very conservative, we’ll put them in longer-duration fixed income. And if they have more appetite for risk, we can combine that with some equities.”

Dornbusch believes that the best way to take advantage of high rates isn’t by maximizing yield through short-duration bonds or by collecting interest on cash assets, but instead by investing in long-term Treasurys BX:TMUBMUSD10Y and investment-grade bonds. Although the yield might not seem quite as high, those rates can stick around for years.

Dornbusch tells clients that long-term fixed income securities have all the benefits of the yield-generating assets that investors love — they are conservative assets that offer reliable returns — but they’re more insulated from rate cuts.

“When you explain it in simple terms, people can understand. It’s a matter of just having the conversation,” he said.

Investing strategies should depend on personal risk tolerance, as well as someone’s age. Maybe locking away money for 10 years or longer isn’t the best idea if an investor is of an advanced age. Others might be hesitant about migrating into riskier investments like stocks while they’re close to record highs.

When the market changes, it’s important to adjust your investing strategies as needed. Even without a financial adviser, retail investors can choose to shift their strategies as the market shifts.

Or not.

Yields on cash will fall, but how quickly will hinge on the size of the Fed’s first rate cut in four years, which is expected at next week’s central bank meeting. It also depends on if economic data allows for a slow, or swift pace, of future rate cuts.

“A lot of people have been rewarded for having way too much in cash. Those day seems to be numbered,” Daniel Masuda Lehrman, a Honolulu-based financial adviser, told MarketWatch.

There’s over $6.3 trillion sitting in money-market funds right now and roughly $2.6 trillion comes from retail investors, according to the Investment Company Institute.

Even if the Fed eventually brings its rate to 2.5% or 3%, that’s still a relatively good-looking yield that keeps money pouring into money-market funds, said Shelly Antoniewicz, deputy chief economist at the asset management industry association. 

As rates decline, she said, “retail investors certainly may slow the pace of their investment in money-market funds as they decide where to put newly available cash to work. We’ve already seen this happening this year, but we don’t expect widespread outflows.”

So whether retail investors will break up with their interest yielding assets is to be determined. Maybe people will be happy collecting 2.5% interest — as long as that return is reliable.

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The 4% rule has long provided guidance to retirees on how to maintain a safe withdrawal rate from retirement accounts. But with today’s low bond yields and stock market volatility, this once-steady rule of thumb looks increasingly open to change. An approach detailed by John Hancock Investment Management suggests using diversified multi-asset income portfolios. The idea is to provide more durable and ample income streams, while better protecting nest eggs through volatile markets.

Do you want help building a retirement plan for the future? Speak with a financial advisor today.

What Are Multi-Asset Income Portfolios?

Multi-asset income portfolios combine a variety of assets with the objective of generating steady cash flows. They typically hold an array of bonds, including government, investment-grade corporate and high-yield issues. They may also include dividend-paying stocks, real estate investment trusts (REITs), master limited partnerships (MLPs) and alternative income generators, like private equity and infrastructure securities.

Diversification across many income sources is the hallmark of multi-asset strategies. This aims to deliver higher yields for investors, while controlling for the risk of overexposure to any single asset class or market sector. Portfolios mix higher-risk, higher-yield securities with lower-risk securities to balance pursuing returns and managing risks.

Multi-asset income strategies offer ordinary investors, savers and retirees today the opportunity to develop greater resilience to market downturns compared to simply relying on the 4% rule over the long term. This rule of thumb suggests withdrawing 4% of retirement savings the first year of retirement and increasing the withdrawal amount annually by the inflation rate.

With long-term bond yields still depressed compared to historical norms, however, a traditional 60/40 stock/bond portfolio may produce overall returns insufficient to support a 4% withdrawal rate. Stock market volatility also adds uncertainty around the idea that 4% will be a safe withdrawal rate for decades into retirement.

In contrast, multi-asset income portfolios have delivered steadier payouts and lower volatility through three recent market downturns, according to John Hancock’s report. These include the 2008 financial crisis, the 2020 pandemic-driven selloff and the 2022 stock and bond correction. Investors in these portfolios enjoyed average annual payouts slightly exceeding 4% throughout most of this turbulence, according to an analysis by Manulife Investment Management referenced in the report.

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Who Should Consider This Approach?

Multi-asset income investing isn’t necessarily right for everyone facing retirement. The wide mix of assets across stocks, bonds and alternative investments increases portfolio costs and complexity versus holding just an index fund. It also requires active management of the asset allocation, as market risks shift over time. And yields will fluctuate, so income cannot be guaranteed the way a bond’s coupons promise fixed interest.

But for retirees seeking to generate durable cash flow to support their lifestyle, multi-asset income strategies merit consideration. For those uncomfortable with depending on dividend stocks or high-yield bonds alone to fund retirement, multi-asset diversity spreads risk. These portfolios have delivered steady payouts for years according to Manulife Investment Management’s aforementioned data, with likely lower levels of volatility than stocks. Consider talking to a financial advisor about your investment options and what may be appropriate for your goals.

Individual investors’ income needs, withdrawal rate requirements and risk tolerance all determine whether or not a multi-asset income portfolio would be a good fit. While past performance doesn’t guarantee future results, the record of resilience through recent stock and bond storms suggests multi-asset funds could be a viable option for many.

Limitations and Risks of Multi-Asset Income Portfolios

While multi-asset income portfolios contain risks better than relying on the 4% rule, limitations remain. Income isn’t guaranteed year-to-year, and future returns could fall short of historical averages. Additionally, the variety of securities involved leads to higher management fees than simple index funds, as investors pay for active oversight of these more complex strategies.

Finding the right mix of assets that aligns with your income goals and risk tolerance takes guidance. No standard portfolio allocation meets every investor’s needs, so it may be prudent to consult a financial advisor. And shifting some holdings like private equity or real estate into income-generating assets can take time and involve transactional costs.

Retirement Tips

• If you have a questions about how to parse out your money in retirement, a financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• SmartAsset’s investment and return calculator helps you project how large your portfolio will grow over time.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Photo credit: ©iStock.com/kate_sept2004, ©iStock.com/Paperkites

The post Do You Follow the 4% Rule for Retirement Income? You May Want to Consider This Style of Portfolio appeared first on SmartReads by SmartAsset.

Companies around the world paid a record $606.1 billion in dividends to their shareholders during the second quarter — 8.2% more than the prior-year period. Nearly 90% of dividend-paying companies have either held their payments steady or raised them over the past year.

This data suggests that right now is a great time for dividends. However, that’s not always the case. Downturns and recessions can severely impact the ability of some companies to continue making those payments.

While some companies might at some point be unable to maintain their dividends, Enterprise Products Partners (NYSE: EPD), Enbridge (NYSE: ENB), and American States Water (NYSE: AWR) are models of dividend durability. They’ve continued doling out those payments to investors over the years no matter what. Because of that, they stand out to a few Fool.com contributors as great stocks to buy for those seeking reliable dividend payments.

Enterprise is ready to pay you (well)

Reuben Gregg Brewer (Enterprise Products Partners): The honest truth is that most investors will probably find Enterprise Products Partners’ 7.2% distribution yield to be the main attraction of its stock. Given the S&P 500‘s miserly current yield of just 1.2%, that’s not shocking. But when it comes to creating a passive income stream, there’s a lot more than that to like about Enterprise Products Partners.

For starters, there’s its position as one of the largest midstream energy businesses in North America. It owns a virtually unduplicatable network of energy infrastructure assets — pipelines, storage facilities, processing facilities, and more — that produces reliable fee income over time. That is what supports the dividend, and its distributable cash flow covers its distribution by a safe 1.7 times. On top of that, Enterprise’s balance sheet is investment-grade rated, so there’s little reason to worry about it needing to cut its distribution. Also notable is the fact that Enterprise is one of the most financially conservative players in its peer group, and has been for years. So what you see today is really what you’ll be getting for the long term.

That all leads up to the next big number on the distribution front, which is 26. That’s the number of consecutive years that the energy company has increased its distribution. If you are looking for a reliable high-yield income stock, Enterprise Products Partners should be on your short list.

Proven dividend durability

Matt DiLallo (Enbridge): Enbridge pays one of the most reliable dividends in the energy sector. The Canadian pipeline and utility company has made dividend payments for more than 69 years, and increased those payments for 29 straight years. That streak should continue no matter the market conditions.

Driving that view is the overall durability and predictability of Enbridge’s earnings. The company has met its annual financial guidance for 18 straight years. That period included two major recessions and two other periods of oil market turbulence. Enbridge has an extremely stable earnings profile, with 98% of its income coming from cost-of-service or contracted assets. It also gets more than 95% of its earnings from investment-grade rated customers. Meanwhile, about 80% of its earnings come from contracts with inflation protections in place.

Enbridge’s target is to pay out 60% to 70% of its stable earnings in dividends. That enables it to retain a meaningful percentage of its cash flow to fund expansion projects. The company also has a solid investment-grade balance sheet. Its leverage ratio was 4.7 at the end of the second quarter, and is on pace to slide toward the low end of its 4.5 to 5.0 target range by next year as the company captures the full benefit of its recent natural gas utility acquisitions.

Those deals will help it grow its earnings over several years. In addition, the company has an extensive backlog of capital projects. These help support management’s view that it can grow its earnings at an annual rate of around 5% over the medium term.

With a strong financial profile and visible growth coming down the pipeline, Enbridge should have plenty of fuel to continue increasing its dividend, which yields more than 6.5% these days. Those features make Enbridge an excellent option for those seeking a dividend they can bank on.

70 years of dividend raises and counting

Neha Chamaria (American States Water): When it comes to dividends, American States Water has achieved something no other publicly listed stock in the U.S. has — it has increased its dividend every year for the past 70 consecutive years. That makes American States Water stock the Dividend King with the longest active streak of dividend increases. Yes, this is one stock that doesn’t just pay you a dividend, but also sends ever-fatter checks your way every year, no matter what.

It doesn’t take much to guess why American States Water has been such a bankable dividend stock. It’s a regulated water utility and generates stable and predictable cash flows from its services. It provides water services to more than 1 million people across nine states, and also has an electric utility subsidiary. That aside, American States Water’s contracted services subsidiary provides water and wastewater services to 12 military bases in the U.S. under 50-year contracts and one under a 15-year contract.

What’s truly remarkable about American States Water’s dividend is its pace of growth. It has grown its dividend at a compound annual rate of 8.8% over the past five years, and 8% over the past 10. Its latest hike, announced in August, was an 8.3% boost. That’s rock-solid dividend growth coming from a utility. With American States Water also targeting at least 7% payout growth in the long term, this 2.3%-yielding dividend stock is the kind every income investor would want to own.

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Matt DiLallo has positions in Enbridge and Enterprise Products Partners. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

Rewarding Dividends: 3 Stocks That Pay Out No Matter What was originally published by The Motley Fool