Taking Stock: Income-yielding investments

Dear Mr. Berko:
I’ve noticed during the past several years that many of your recommendations were income-yielding investments. Please tell me why you seem to favor issues with high dividends rather than high growth potential. Though, I admit that during the past couple of years, most of your high-income recommendations (of which I’ve bought 26) have done a lot better than the market. So how about listing a dozen or so high yield stocks that you haven’t recommended yet? I’d like to add eight or nine new high-yield stocks to my list.
R.P., Moline, Ill.
   
Dear R.P.:
I entered this business in l958 at Merrill Lynch when a trading day that exceeded 10 million shares or a 2-point rise in the Dow was a cause to celebrate. And for the next 30 years until the late 1980s, investors could depend on Wall Street’s research, purchase 200 shares of a recommended stock, hold it for five years and have a decent profit. Everything was peaches and gravy, and your most difficult decision then was: Should I sell the stock or buy another 200 shares?

I was comfortable with that market when common sense was common, Wall Street research was honest and gulosity measured the sticking power of commercial adhesives. Today’s market is characterized by enormous volatility, high stock correlations, quick reversals, tight trading ranges, a massive trading in quirky options, multi-trillion-dollar derivative transaction, computers and algorithms.

So selecting an issue that will continue to have a good record of revenue, earnings and dividend growth, and expecting it to double in six to seven years is not how the stock market works anymore. And unlike many in this business, I am not comfortable trading issues hoping to scalp a profit of a few points.

That’s never been my style and will never be. I’d rather be the turtle and buy good issues with high yields and reinvest the dividends. So if I can buy a stock paying 8 percent, in five years, I’ll have l40 shares (more or less). And if the stock trades 10 percent above my purchase price, I’ll have earned a 50 percent return. Meanwhile, your total dividend return (with 40 more shares) has now grown to 11.2 percent, which ain’t chopped liver.

I firmly believe that carefully selected high-dividend issues make more sense than buying touted Wall Street research with an l8-month price target at 50 percent above its purchase price. I’m also mindful that Wall Street abhors investors like me, who will hold a dividend issue for a dozen or more because we don’t generate trading commissions.

I’m not prepared to recommend a list of high-income stocks that I haven’t previously covered. So here are l6 of some 40 issues that are on my screen. But be mindful that I am NOT recommending them. Rather, give them to your broker and have him do the research. That’s what you pay him for.

Medical Properties Trust (MPW-$10.03 at 8.45 percent), United Online (UDT-$5.15 at 7.7 percent), Pitney Bowes (PBI-$21.01 at 7 percent), Advance America Cash Centers (AEA-$3.90 at 6.4 percent), American Capital Agency (AGNC-$26.10 at 21 percent), Anworth Mortgage (ANH-$7.11 at 13.9 percent), Capstead Mortgage (CMO-$10.88 at 12.1 percent), Kohlberg Capital (KCAP-$6.45 at 10.2 percent), Teekay Tankers (TNK-$11.88 at 11.4 percent), Ferrell Gas (FGP-$25.10 at 8.0 percent), Hatteral Financial (HTS-$28.07 at 15.4 percent), Exterran Partners (EXLP-$21.90 at 8.5 percent), Formula Systems (FORTY-$13.45 at 8.2 percent), Walter Investment Management (WAC-$17.11 at 11.6 percent), BP Prudhoe Basin Royal Trust (BPT-$103.03 at 8.1 percent) and Great Northern Iron (GNI-$116.10 at 12.7 percent).

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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