Taking Stock: MLPs

Dear Mr. Berko:
Our broker of the last 26 years (you and he know each other) had me invest $93,000 in six different pipeline MLPs in early 2009, and I know you know how well they have done. And I think you know that he retired last December and moved out west. Since I have been unable to find an adviser who can give me good advice, I must rely on you again. We just retired, are in our late 50s without debts and depend on our portfolio for 40 percent of our income. And because a mortgage we owned was paid off ahead of time, we have $108,000 to invest for income and basic long-term growth. Our stock portfolio is just under $800,000, and we would appreciate your recommendation of four to five issues with dependable revenue and dividend growth.
E.P., Cleveland

Dear E.P.:
By George, I really like your broker, and I’m sorry that he did a runner on you and retired to Wyoming. We met when I spoke to a Kiwanis Club in Cleveland almost 30 years ago, and our paths crossed occasionally at various meetings across the country. Since his investment philosophy and mine are very similar, I was always comfortable recommending him to readers in the Midwest who ask for the name of a knowledgeable, experienced and wise money manager.

As you know, health care reform is still the key topic of conversation because neither Congress nor the administration has a handle on what the costs will be, nor how those costs will be paid. And knowledgeable observers are on the sidelines because they are unsure how the new agenda will affect profits of the drug industry. The sentiment is negative, and drug stock values have disappointed most investors.

But there’s one apparent benefit few investors seem to consider that could provide opportunity for attractive, long-term growth. And that benefit is the certainty of significant consumer demand that will derive from the rise in the number of Americans who will soon be covered by health care plans. Some observers believe that drug demand could increase between 30 percent and 40 percent and that this growth could generate impressive increases in revenues and profits for many drug stocks.

I believe the following issues will increase their revenues annually over the coming five to seven years. I also believe their earnings are dependable and that earnings can grow nicely in that time frame.

And I also believe their dividends are stable and that each issue has the potential to regularly increase its dividend.

So consider owning: Pfizer (PFE-$16.61) with a 72 cent dividend yielding 4.4 percent; Sanofi-Adventis (SNY-$30.20) with a $1.62 dividend yielding 5.3 percent; Eli Lilly (LLY-$33.87) paying $1.96 and yielding 5.7 percent; GlaxoSmithKline (GSK-$39.03) with a $1.84 dividend yielding 4.6 percent; and Bristol-Myers Squibb (BMY-$26.10) paying $1.28 with a 4.9 percent yield.

I think these issues are significantly more impervious to recession, inflation and the economic cycle than Boeing, Monsanto, DuPont, 3M and other blue or pale blue chips. Yes, like your six master limited partnerships, they will fall in value when the markets decline, but their dividends are secure. Their dividends will also grow if the market flounders and, like your MLPs, their market values will recover quickly when the market recovers.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com.
© 2010 Creators Syndicate Inc.

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