An Income Portfolio that Yields a
Safe 13%
By Tom Dyson
Monday, April 20, 2009
People always ask me what I think of the financial crisis. They know I'm an investment analyst, and they expect me to moan about the deep recession we've gotten ourselves into...
"This is the best thing that could ever have happened to us," I tell them.
It's as if someone just flicked on the "turbo" switch for income investors. Every dollar you invest is now bringing in two, three, even four times as much income as it did a year ago. As I covered last week, yields on the MLP sector are high. You can earn safe double-digit income in assets like Annaly. Best of all, options premiums are high, so you can turn world-class blue-chip stocks into 15% income yielders right now.
I write an advisory called The 12% Letter. It's dedicated to finding the best income opportunities in the stock market. Right now, our portfolio of income-producing assets is just amazing.
Take Procter & Gamble as an example of the kind of blue chip we're holding. Procter & Gamble has the highest dividend yield its had since 1988.
The dividend is 4%... and it grows every year. P&G now has 53 consecutive years of dividend growth... and over the last 10 years, the dividend has increased an average 11% a year.
To supplement Procter & Gamble's 4% dividend yield, we've sold covered calls against our position... turning the 4% yield into a 15% yield. The quality of P&G's business lets me know it's a safe 15% yield as well.
Procter & Gamble generates obscene amounts of cash. In the last 12 months, P&G's operations spun off so much cash, it was able to invest $3 billion in growing its business, buy back $10 billion in stock, pay off $2.8 billion in debt, and pay out $4.9 billion in dividends.
And as Dan Ferris highlighted last week, you can pick up names like Procter & Gamble and ExxonMobil at cheap prices right now.
Combine the cheap valuations, the dominant competitive advantages, and rich option premiums, and you have yourself a very safe stable of income stocks. (I encourage you to learn about companies like Annaly and pipeline stocks to round out your income portfolio. These ideas are also safe double-digit yielders.)
Right now, the yield in my newsletter's portfolio is 13%, including the income from our option selling. In other words, $100,000 spread evenly across the stocks in the portfolio will spin off $13,000 per year in income.
To get safe 13% annual income from the world's strongest stocks is unbelievably attractive... especially when you consider 30-year mortgage rates are 4.75% and national CD rates are 2%.
This opportunity is available right now. And it's paying off for those who have the guts to stand up and buy when no one else will.
Good investing,
Tom
P.S. You can learn the full details of this world-class income portfolio with a subscription to The 12% Letter. There will never be a better time to take advantage of these ideas. To learn more about a subscription, click here. |
NEW HIGHS OF NOTE LAST WEEK
ImmunoGen (IMGN)... biotech
Clarient (CLRT)... diagnostics
Hot Topic (HOTT)... clothing retail
Darden Restaurants (DRI)... restaurants
Star Scientific (STSI)... cigarette technology
Force Protection (FRPT)... military vehicles
Green Mountain Coffee (GMCR)... coffee
Williams Pipeline Partners (WMZ)... pipeline MLP
Sourcefire (FIRE)... security software and services
Allscripts-Misys Healthcare (MDRX)... health care info
Allegiant Travel Company (ALGT)... travel
ICF International (ICFI)... climate change research
NEW LOWS OF NOTE LAST WEEK
Abbot Labs (ABT)... Big Pharma
The9 Limited (NCTY)... retail
Matthews International (MATW)... tombstones |
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Rates on 30-year mortgages dipped this week after rising a week earlier and remain just above record lows.
Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages fell to 4.82% this week, from an average of 4.87% last week. Rates have been below 5% for five consecutive weeks.
The all-time low of 4.78% was recorded on the week of April 2. Freddie Mac's survey dates back to 1971.
– USA Today
Real estate legend Sam Zell says the economy and the residential real estate market have seen their worst.
The government's massive fiscal and monetary stimulus is having a beneficial effect, he tells Bloomberg TV.
As for residential real estate, "the supply-and-demand scenario and the creation of new households are leading to a bottoming out of the single-family market," Zell says.
"I think this summer we will begin to see equilibrium, bringing costs of housing down to the point where they are very attractive."
– Newsmax
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My Top Inflation-Fighting Stock Ideas
Saturday, April 18, 2009
Do This, And You'll Never Suffer Another 2008
Friday, April 17, 2009
Now Is a Once-in-a-Lifetime Opportunity for Income Investors
Thursday, April 16, 2009
Education Stocks Are About to Collapse
Wednesday, April 15, 2009
Why This Is Not the Next Great Depression Tuesday, April 14, 2009 |
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