A Trio Of Higher-Yield Bond Substitutes

Certain bond substitutes are yielding more than Treasuries, with the prospect of inflation-beating boosts to your cash income as the years go by. I'm talking about dividend-rich, low-volatility common stocks. Three worth adding to your stash of income producers now are Government Properties Income Trust (GOV), Tortoise MLP Fund (NTG) and Westpac Banking (WBK). Find me a safer way to own commercial real estate Government Properties Income Trust, if you can. This office landlord derives 93% of its rents from federal and state tenants. So defaults aren't a pressing issue. But what if a Second American Revolution comes along and shrinks the size of government? Aha! Even now, GOV's small roster of private tenants pay higher rent (per square foot) than the government tenants do. Hence, a downsizing of government might actually benefit GOV if the trust managed to fill its vacancies with private tenants. Current yield: 6.6%, more than double a 10-year T-note. GOV recently lifted its dividend for a second consecutive year; the trust went public in 2009. Tortoise MLP, a closed-end fund holds, 26 master limited partnerships in the energy sector, mainly pipelines (and related natural gas gathering/processing operations), as well as propane distributors. With a fund, you eliminate the complicated tax paperwork that comes with owning individual MLPs directly. You can also tuck an MLP fund into your retirement account without any adverse tax consequences. Thanks to the general market dip, the Tortoise fund's yield has crept up to 6.5%. Quarterly distributions. Bear in mind that NTG uses leverage (borrowed money) to enlarge its portfolio. Leverage increases the volatility of your returns, up and down. The only Australian bank with a Big Board listing, Westpac throws off a luscious 7.1% yield, paid in semiannual installments. The word "bank" unnerves you? I understand. Australia, though, is a world apart, with a healthy resource-based economy, low unemployment and much tougher mortgage standards than we had in the United States during our late, lamented housing boom. For instance, Australian mortgage borrowers can't just walk away from their homes-the debtor remains personally liable for the loan. When the global financial crisis hit, Westpac, as a prudent measure, temporarily pared its dividend. However, the bank quickly restored the payout and has now jacked it up to an all-time high. Over the past decade, in fact, WBK's dividend has soared 153% (in Australian dollars, which have doubled against the greenback). Trust me, no bond will treat you that well in the years ahead!... Read more