Income Without the Dividend (Part III): Generating Income From Growth Stocks

Investing with a Margin of Safety Benjamin Graham and David Dodd, the so called founders of the value investing mantra, coined the term “margin of safety” in their 1934 book, Security Analysis. According to Graham and Dodd, for an investment to have a proper margin of safety, it should only be purchased if there is minimal downside price risk. The term “margin of safety” is often misunderstood, especially when investors seek a perceived margin of safety within volatile growth stocks. These investments are oftentimes not suitable for individual investors who do not have the time or skill set to evaluate these securities. In addition, many investors blindly make purchase decisions without having an exit strategy in place, which is an extremely risky endeavor. In the current... more

Identifying Master Limited Partnerships and Other Worthwhile Dividend Stocks

Master limited partnerships typically are engaged in the transportation of oil and gas across a vast network of pipelines. While prices of energy products fluctuate greatly, the volume transported does not change by much. In addition, once a pipeline is built, there is little in maintenance expenses for this long term asset, and there is little -- if any -- competition in the particular geographic area for transporting energy products like oil or gas. As a result, master limited partnerships are able to pass most of their distributable cash flows to investors in the form of distributions. In effect, master limited partnerships are the perfect dividend growth stocks, as they pay above average yields and they also consistently grow distributions at least once per year.The list of consistent... more

5 Core Dividend Stocks Underappreciated by Investors

We have taken a look at investments that should form a portfolio's core, meaning: a lower beta, earnings stability, durable competitive advantages, and capable leadership. While core holdings are typically bid to or above fair value, a few core holdings are under-appreciated in this market. Here they are:AT&T Inc. (T) maintains real advantages in bandwidth and smartphone technology over its major competitors Verizon (VZ) and Sprint Nextel Corp. (S). This mega cap company has continuously and predictably paid out increasing dividends since 2004. Yearly dividend payouts tend to remain the same for each year, so a consistent record makes for a predictable investment. How much bang for your buck are you getting with AT&T? A dividend of $1.71 and a close price on July 21, 2011 of $30.23 yields... more

4 Tech Dividend Stocks Under the Radar Screen

One of the toughest sectors to find high current yield is technology. Most of the "tech" stocks are growth engines that plow investment profits back into the business to expand and grow the company. However, there are several companies, besides the more well known giants such as Intel (INTC), Microsoft (MSFT), and Automatic Data Processing (ADP) that fly under the dividend radar screen of most investors. In this article we will analyze a few that are not household names. In searching the technology sector for hidden gems, the choices were limited to companies in which the current yield exceeded 3%, that had raised the dividend for 4 out of the last 5 years, and have a payout out ratio of less than 60%. The screen only produced 4 companies. I might also add, that of the three giants listed... more

Global ETFs and CEFs: An Income Investor's Hunt for Yield

Currently, I am getting ready to release the last article of a three part series of suggested holdings to create an aggressive income investment portfolio. The first two articles, Part 1 (MReits, BDC’s, Energy, and Trusts) and Part 2 (Shipping, Fertilizers, Municipal CEF’s, and Pipelines) were extensive. To lighten things up, I thought it would be a good change of pace to shift gears and present a unique kind of income investing based on very specific Exchange Traded Funds (ETF) and Closed End Funds (CEF). These funds, though not classified as aggressive income... more

Desperately Seeking Yield Through Equities Part 10: The Importance of Context and Price

We have reviewed a number of investments in the equity sector that produce attractive dividend yields. Many of these are "special" or "unusual" equities in the sense that they are subject to peculiar regulatory restrictions (Business Development Companies - BDCs), are subject to special tax rules (Master Limited Partnerships - MLPs), are subject to price regulation (public utilities), or are required to pay out large percentages of earnings as dividends. Context - Many investors see the world as consisting of stocks, bonds and cash and allocate among the three. Some of the "special' investments we have been discussing may not even show up on their radar screens. Stepping back a moment and viewing the universe of investment opportunities, it may make sense to think of some of these... more

Best and Worst Total Returns and Yield for Key Asset Categories

This table shows the best and worst three-month, one-year, and three-year total return, the trailing yield; and the three-year and five-year standard deviation, total return, and Sharpe Ratio, for each of nine important asset categories.The nine categories are: money markets (proxy VMMXX), investment grade U.S. corporate bonds (proxy VFICX, similar to LQD), below investment grade (junk) U.S. corporate bonds (proxy VWEHX, similar to HYG), gold bullion (proxy GLD), large-cap U.S. stocks (proxy SPY), large-cap U.S. dividend stocks (proxy SDY), mid-cap U.S. stocks (proxy MDY), small-cap U.S. stocks (proxy IWM), emerging market stocks (proxy VEIEX, same as VWO) click image to enlargeThe best values are shaded in green. The second best values are shaded in tan. Third best values are... more

BlackRock Credit Allocation Funds: CEFs With Exceptional Yield

BlackRock has a series of nearly identical closed end funds, investing in corporate debt and offering exceptional yields. They are all leveraged and presently offering yields of approximately 6.5%. They are all traded on the New York Stock Exchange. In purchasing these funds, I simply look to which fund offers the highest discount from net asset value. These discounts fluctuate and sometimes one fund offers a much more substantial discount than another.On, July 22, 2011, the discounts on the four funds range from 10.20% to 12.65% which is not much of a spread. All the funds have the majority of their assets in corproate bonds with the balance in preferred shares. I will now talk about each fund individually.BlackRock Credit Allocation Income Fund I (PSW) was launched on August 1, 2003 and... more

Intel: A Top 40 Dividend-Growth Stock

There has been a lot of interest lately in Intel (INTC) as a dividend or dividend-growth stock, especially after they announced that they will increase their dividend 16% in Q3 2011. That follows a similar increase at the end of last year. With the two increases, Intel’s current (projected) yield has jumped above 3.5%. Intel just fell short of making my Top 40 Dividend-Growth Stocks compilation earlier this year, being one of the last stocks eliminated when I finalized the list in January. I always encourage investors to keep checking out new ideas throughout the year, so I decided to re-rate Intel to see whether it would make the list now. The answer is Yes. Summary Intel is a tech stock, and it is still hard for many people (including me) to get their heads around the... more

Should Dividend Growth Investors Forgive General Electric? Part 2: The Jeffrey Immelt Era

Jeffrey R. Immelt is only the 12th person to serve as leader of General Electric Co. (GE) since Thomas Edison founded the company in 1878. Upon taking over the reins of this great American corporation, Jeffrey R. Immelt faced two difficult challenges: First, he had to fill the shoes of Jack Welch, one of the most respected CEOs in all the world. Second, he took over the reins from Jack with General Electric trading at one of the highest valuations it ever had. The following earnings and price correlated F.A.S.T. Graphs™ looks at General Electric Co. when Jeffrey R. Immelt first took the reins up to just before the great recession of 2008. There are two points that I emphasize with this graph. First, in order to be fair to Mr. Immelt, we should acknowledge that General Electric was... more