Where to invest for dividend?

I need some help! I have about $50,000 and it sitting in Emigrant about 5% interest and I would like to get about 8% do anyone know a good dividend mutual fund or stock? Thanks for your help.

Chris

Reply to
chris
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Chris: I have done this sort of investing for the past 3-4 years. A couple of years ago I could get that return in REIT's and LLP's but that has pretty well gone away. There are some REIT income muturals that are pretty good but I am finding my best yeilds (not necessarily my best investments) in closed end funds. google awhile and you will turn up sone screen sites. You will need a strong stomach, these are not CD's. Leo

Reply to
Texas slacker

Two random ideas:

Pick 10 highest yielding stocks in the dow (dogs of the dow) PRFDX ( T Rowe Price Equity Income)

Reply to
jIM

There is a dividend-oriented ETF with the symbol DVY. However, no one is going to guarantee you 8%, anywhere, except with significant risk of your investment. Over the long term, stocks in general deliver about that much, but clearly not as a smooth steady stream. What is your time-frame? Do you need cash flow now, or are you just trying to grow it?

Reply to
joe.weinstein

If he is worried about the sustainability of the dividend yield, he should do some additional homework. For instance, he should look at factors such as 1/the payout ratio of the chosen stocks (dividends/ earnings), for a given industry, the lower the payout ratio the better; 2/ in the short term: how much cash and cash equivalents the company holds as a percentage of short term liabilities (current ratio). The higher the current ratio, the higher the likelihood that the past dividend yield is going to be sustained in the short term; 3/ in the long term: earnings growth (both past and expected) and financial leverage of the company; if the company has a history of increasing earnings growth and a reduction in the debt/equity ratio, then it is much more likely that the current dividend yield could be sustained in the long term.

In general, if you have a choice between a stock with a high dividend yield but without these requisites on the payout ratio, liquidity, and financial leverage, and a stock with lower dividend yield but with lower payout ratio, a higher current ratio and decreasing debt/equity ratio, it is better to choose the stock with the lower dividend yield, because it looks much more sustainable than other one. Another factor is that the higher dividend yield but more financially distressed stock is usually riskier, because the stock prices tend to fall quite a lot when the dividend yield is cut.

Reply to
Jose Bailen

Nothing is guaranteed of course but here are the following high-yield instruments available.

Closed-end bond funds tradng at discounts. Typically bond funds have yields of 4%-6% depending on the duration and quality. Closed-end funds are subject to market irrationality so they can be overvalued or undervalued. And if you buy at a 15% discount, 4%-6% becomes 5%-7%. Target a mix of funds trading at discounts with low expenses.

Master Limited Partnerships. By law, these companies are limited to the energy pipeline, natural resources. Yields are currently in the

5%-7% range.

REIT funds. Average yields of 5% now.

Dividend ETFs (DVY, SDY, Wisdomtree ETFs). Current yields of 3%-4%.

Reply to
wyu

Sounds tricky to me.

I realize wyu likely was posting off the top of his head, just to get down some generalities. The above is not necessarily wrong. But I think a little elaboration is appropriate here.

-- The MLPs available are overwhelmingly young. I'd say something like 90% of them are under eight years old, from a quick check of the few dozen listed at

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.So I can't get much of a feel for how they do against, say,the S&P 500, as far as principal growth is concerned. Nothaving that history denotes risk, to me.-- MLPs are not terribly liquid. Their trading volume istypically a tenth or less of a blue chip stock.-- MLP dividends do not necessarily keep up with inflation,though with some notable exceptions, like TPP.-- MLP evidently were vulnerable to scandal in the 1980s. Anyone buying individual MLPs today should study that period and make sure they understand the problems that existed in the 1980s do not exist today.

That would surprise me, based on how high REITs are lately, and the fact that VGSIX is yielding about 3.5% now.

Closer to 3%, I think.

Reply to
Elle

Thank you, I don't need the money right now. I am disable so I want some income.

Reply to
chris

Not really a big deal. etfconnect.com lists all ETFs + closed-end funds, their yields, premium/discounts, etc. I've been looking for international bond funds to diversify my bond allocation without much luck until I decided to look at closed-end funds. Through etfconnect, I found a few closed-end intl bond funds in the 6.5%-8.5% yield based on the current discount/premium w/ ~1% expense ratios.

Yes, that was just a little snippet about the possibility. I don't have any MLPs myself and only looked at it a little. I decided against it because there's a limit on distributions that can be sheltered in an IRA which is where I hold all my stocks/etfs/closed-end funds. On the otherhand, I read some tax snippet where much of the dividends can be added back into the cost basis so it gets long term capital gains treatment outside of an IRA. I may look at this more later in the future.

I know websites show lower numbers but I hold VGSIX and my dividends last year was a whopping 6% based on the share price on the ex- dividend date (whopping as in bad because I hold it in a taxable account). Since then, the share price is up about another 5% which decreases the yield by a touch.

Wisdomtree high yield/small cap/sector ETFs are 4+. Their regular large caps are in the mid 3s. DVY/SDY/VYM are high 2s to low 3s.

Reply to
wyu

Bond Guru Bill Gross of PIMCO has recently put in a good word for closed end bond funds that invest in municipal bonds. Don't know the original poster's tax bracket, but he should run the numbers to calculate the equivalent taxable yield. (Search for closed end funds at

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If he's in the 33 percent federal bracket, he could probably get an equivalent taxable yield of about seven percent. If he's in a high tax state and he finds a fund that's double-tax-exempt for him, then he'd be close to the eight percent yield that he's looking for.

Reply to
Paul Michael Brown

I have some stock in TNP which has a 5.9% forward yield and has high earnings now so the assets aren't being depleted by the dividends. It's a small oil shipping company, so don't take to big of a risk.

-- Ron

Reply to
Ron Peterson

I have some stock in TNP as well, and I think that it is an excellent choice: besides the high dividend yield, the company is clearly undervalued (P/B of just 1.31), with lots of cash (it covers 3 years of dividends), excellent growth -both recently and in the past 5-yr period, and a payout ratio of just 22.8%:

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Reply to
Jose Bailen

Chris

To achieve much over the current market rate (about 2% yield) you are going to have to take risks. Risk and return come with each other, and the market has been chasing yield for so long that there are few cheap plays.

Some suggestions for improving income:

- a large cap value fund (like a Vanguard Index fund). You will get about 3% yield, and that yield will, most likely grow about 2-3% faster than inflation, over time. Right now it's growing a lot faster than that. Say it grows at 7% a year, then in 10 years your income will have doubled.

Vanguard has an equity income fund as well. What you want are low costs and a spread of investments

- a small cap value fund. Much more likely to be volatile, dividend income is likely to be more risky.

The 15% tax rate on dividend income means your after tax position could be a lot better than your after tax position investing in bonds.

A balanced fund like Vanguard Wellington might be a reasonable compromise

- REITs - I think REITs are overvalued right now. Commercial property usually performs in cycle with housing prices, with a 1 to 2 year delay. REITs normally trade at a discount to NAV, they are mostly trading at premiums right now.

- tax exempt municipal bond funds (closed end eg Nuveen, or open ended). Depending on your tax position, your *after tax* income position could be quite good with these.

- high yield (junk) or emerging market bond funds - I would avoid these. History has shown the risks don't outweigh the rewards, particularly not at the end of the economic cycle. The time to buy these is when all is panic, not when they are trading at the lowest spreads ever over US treasury bonds.

Note closed end bond funds can have leverage. This can increase returns, it can also increase risk (volatility of NAV). If you go into these, you want funds that are mainly invested in A or above quality credits.

- covered call funds. I don't know a lot about these.

- Master LPs - I don't know enough about these. Canadians had income trusts, but then the tax law changed and investors lost billions. Many were quite low quality, and ran into trouble in terms of maintaining their dividends. The same could happen, I would guess, in MLPs.

I would favour investing in a large cap value fund, and even selling some of my capital if I needed more money than the fund could produce.

Over the long run, dividends are a lot less sensitive than NAVs. A large cap value or equity income fund should pay out a consistent, and growing, dividend yield over time.

Reply to
darkness39

The Canadian income trust fiasco is an excellent example of failure to realize that yield and risk go together. These products were promoted as yielding 10% or 15% or more in a period when bank rates were low and people on fixed incomes needed help. And it turned out in many cases that the promised yields did work out for a while.. The big monthly checks kept coming, but nobody paid much attention to NAV's and what would be left if and when the product were sold. Personally, I would prefer to keep the money under a mattress and take out 15% every year.

Reply to
Don

These closed end funds were discussed on CNBC today. they are what I would consider to be "sophisticated instruments" but they all have dividend yields north of 8.5%.

BEP ECV RCC

Just something to broaden your options a bit. I personally own BEP and RCC, very happy with them.

Hope this helps, Shhhh

Reply to
Shhhh

Yes but for a disabled person with 50k to invest, I would never put them into a limited group of small cap stocks.

Nor would you, if you have any ethical concerns.

Reply to
darkness39

ACAS has a market cap of $6.8 billion, and AINV of $1.8 billion, so they are not exactly small caps. He is asking about good dividend yield stocks or funds, and these ones are among the best of what I've seen in the U.S. market.

I actually invested in these three stocks -they are part of my 35- stock portfolio- and I did so because I think they are good bets (TNP is also in my portfolio). A high dividend yield - IF sustainable- is always a positive point when picking stocks.

Reply to
Jose Bailen

No, he was asking about ways to increase his income from his current deposit account, and noted that he is disabled.

and these ones are among the best of what I've

You are not disabled and therefore presumably don't have a diminished ability to earn labour income.

You are not concerned about short term preservation of capital value-- you want long term value growth. You've argued many times smaller cap stocks are more risky.

You have a portfolio of 30 small cap value stocks.

You wouldn't put someone in his position into 2 or 3 small value stocks, nor would you do so yourself.

Reply to
darkness39

That was his specific question (first post):

" I need some help! I have about $50,000 and it sitting in Emigrant about 5% interest and I would like to get about 8% do anyone know a good dividend mutual fund or stock? Thanks for your help. "

He clearly asks for a good dividend fund or stock. I provided him infor about 4 stocks, 2 of them were small caps but the other two were mid and large cap stocks. Of course, I would never advice anyone to put ALL his money in just four stocks, even if they provide a high dividend income and this dividend income looks sustainable, according with the public information available as of today.

I have some other large and mid cap stocks with a high, sustainable dividend yield, he may wish to take a look at these. I carefully researched these stocks myself to make sure that the companies look great (again, according to the information available now):

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Div yield: 4.2%, payout ratio: 65%, 5-yrs average earnings growth:

3.24% (it's an electrical utilities companies).

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Div yield: 4.37%, payout ratio: 66.52%, 5-yrs average earnings growth:

4.09% (again, it's an electrical utilities companies).

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Div yield: 6.63%, payout ratio: 67.83%, 5-yrs average earnings growth:

19.27% (this one is a foreign -Korean- telecom company).

Right. That's why I gave him a list of 5 high dividend yield stocks which are medium and large caps. Also provided him with 2 other high dividend yield stocks which are small caps -TNP and PSEC- in case he wants to take an extra principal risk associated with a higher return. By the way, TNP is not so small anyway -market cap of $988 million as of today-.

Actually, 28 (and 7 mid and big cap value stocks, all of them with a high dividend yield). I like dividend income as well, even if I don't need it now or don't plan to need it in the near future. A high, sustained and sustainable dividend yield is one of the best signals that a stock may be undervalued.

He asked for high dividend yield stocks, and that was my advice, completely free of charge. Of course, he can take it of leave it, that goes without saying...

Reply to
Jose Bailen

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