Get Rich - Stay Rich - Investing for Monthly Income

Posts Tagged ‘monthly income stocks’

List of High Quality, High Yield Dividend Stocks

We have a new list of high yield dividend stocks that are also filtered by being high quailty stocks.  The filters are shown in the table below.  These stock criteria include a buy or hold rating from Zacks Research, a projected EPS of 10% or greater, cashflow growth rate of 0.06% or greater, etc.

Is Rated Buy or Hold
Dividend Yield Greater than or Equal to 5.00%
EPS Growth (Proj this Yr vs. Last Yr) Greater than or Equal to 10.00%
P/E (This Year’s Estimate) Less than or Equal to 20.0
Cash Flow Growth Rate (TTM vs. Prior TTM) Greater than or Equal to 0.06%
Interest Coverage (Most Recent Qtr) Greater than or Equal to 3.0x
Security Price Greater than or Equal to $5.00
Volume (90 day Average) Greater than or Equal to 50.0K


The list of stocks passing this hurdle are shown in the graph below.  The most impressive stock is Two Harbors (TWO) which sports an 18% yield due to a recent price decline.  TWO has NO long-term debt which is great for a REIT and is rated a strong buy by many analyst,  Here is a detailed company description:

Two Harbors Investment Corp. (TWO) is an real estate investment trust (REIT), which focuses on investing in, financing and managing residential
mortgage-backed securities (RMBS). The Company focuses on investing in the asset classes, which includes agency RMBS, non-agency RMBS and financial assets other than RMBS, consisting of approximately 5% to 10% of the portfolio. Two Harbors is externally managed and advised by PRCM Advisers LLC. Capitol Acquisition Corp. (Capitol) is a wholly owned indirect subsidiary of Two Harbors. On October 28, 2009, Two Harbors Merger Corp., a wholly owned subsidiary of the Company merged with Capitol.

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List of Monthly Income Stocks

Below is an updated list of CEFs with monthly dividend income as of August 29, 2011.  there are 12 monthly income stocks shown in the table.  However, many are still trading at a premium price to their net asset value.  The VIX is still at 40 as the market opens today.

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List of Covered Call Trades for September 2011

 After two weeks of uncertainty and high volatility equities look as if they have found a short-term bottom.  For covered call traders, there are so many ideas available but the market still is not as stable as we would like it to be.   All of the improvement after Tuesday’s  reversal could be unwound if there is more negative news from Europe.  Our colleagues in Europe reminds us Italy is a huge debt problem and  since the European banks will need to raise capital, they will tighten lending,  especially interbank lending which may create liquidity issues.
As for last week’s volatility in the equity  markets, here is an appropriate quote from Samuel Brittan in last Thursdays  Financial Times. “The stock exchange always has been and always will be a  mixture of investment appraisal and sheer gambling.”  With this thought in mind, we still need to exercise caution with covered call trades.  The list below is primarily conservative stock trades with Coke, Exxon, Altria and General Mills.  The covered call trades will create monthly income while these stocks have nice dividend yields to add some income.
Covered Call Trades

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The Coca-Cola Company (KO) is a non-alcoholic beverage company. The Company owns
or licenses and markets more than 500 non-alcoholic beverage brands, primarily
sparkling beverages but also a variety of still beverages such as waters,
enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and
energy and sports drinks. It also owns and markets non-alcoholic sparkling
beverage brands, including Diet Coke, Fanta and Sprite. It manufactures, markets
and sells, beverage concentrates, referred to as beverage bases, and syrups,
including fountain syrups (the concentrate business or concentrate operations),
and finished sparkling and still beverages (finished products business or
finished products operations).It operates in six segments: Eurasia and Africa,
Europe, Latin America, North America, Pacific, Bottling Investments and
Corporate. On October 2, 2010, it acquired the North American business of
Coca-Cola Enterprises Inc. (CCE).
Exxon Mobil Corporation (XOM) is a manufacturer and marketer of
commodity petrochemicals, including olefins, aromatics, polyethylene and
polypropylene plastics and a range of specialty products. It also has interests
in electric power generation facilities. It has many divisions and hundreds of
affiliates with names that include ExxonMobil, Exxon, Esso or Mobil. Divisions
and affiliated companies of ExxonMobil operate or market products in the United
States and other countries of the world. Their principal business is energy,
involving exploration for, and production of, crude oil and natural gas,
manufacture of petroleum products and transportation and sale of crude oil,
natural gas and petroleum products. On June 25, 2010, it acquired XTO Energy
Inc. by merging a wholly owned subsidiary of ExxonMobil with and into XTO. In
October 2010, Global Partners LP acquired retail gasoline stations from Exxon
Mobil. In June 2011, the Company acquired Phillips Resources.
CVS Caremark Corporation (CVS) is a pharmacy healthcare provider
in the United States. It provides pharmacy services through its pharmacy benefit
management (PBM) mail order and specialty pharmacy division, Caremark Pharmacy
Services; approximately 7,000 CVS/pharmacy retail stores; retail-based health
clinic subsidiary, MinuteClinic, and through its online pharmacy, It
has three segments: Pharmacy Services, Retail Pharmacy and Corporate. The
Pharmacy Services segment provides a range of pharmacy benefit management (PBM)
services, including mail order pharmacy services, specialty pharmacy services,
plan design and administration, formulary management and claims processing. As
of December 31, 2010, the Pharmacy Services segment operated 44 retail specialty
pharmacy stores. As of December 31, 2010, its Retail Pharmacy segment included
7,182 retail drugstores, of which 7,123 operated a pharmacy, which is its, and retail health care clinics.
Mylan Inc. and its subsidiaries (MYL) is a generic and specialty
pharmaceutical company, which provides products to customers in more than 150
countries and territories. The Company operates in two segments: Generics and
Specialty. Mylan is a fully-integrated global pharmaceutical company that
develops, licenses, manufactures, markets and distributes generic and branded
generic pharmaceuticals, specialty pharmaceuticals and active pharmaceutical
ingredients (API). In September 2010, Mylan completed the acquisition of 100% of
the outstanding equity in Bioniche Pharma Holdings Limited (Bioniche Pharma).
The United States sales are derived through the wholly owned subsidiary Mylan
Pharmaceuticals Inc. (MPI), its primary United States pharmaceutical research,
development, manufacturing, marketing and distribution subsidiary, as well as
through Mylan Institutional. Mylan Institutional. The specialty pharmaceutical
business is conducted through Dey Pharma, L.P.
General Mills, Inc. (GIS), is a global manufacturer and marketer
of consumer foods sold through retail stores. The Company is also a supplier of
branded and unbranded food products to the foodservice and commercial baking
industries. General Mills manufactures its products in 15 countries and markets
them in more than 100 countries. The Company’s businesses are organized into
three operating segments: U.S. Retail, International, and Bakeries and
Foodservice. Its product categories in the United States include ready-to-eat
cereals, refrigerated yogurt, ready-to-serve soup, dry dinners, shelf stable and
frozen vegetables, refrigerated and frozen dough products, dessert and baking
mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, and a
variety of organic products including soup, granola bars, and cereal. In July
2011, it acquired 51% controlling interest in Yoplait S.A.S.
Altria Group, Inc. (MO) is a holding company. As of December 31, 2010, Altria
Group, Inc.’s wholly owned subsidiaries included Philip Morris USA Inc. (PM
USA), which is engaged in the manufacture and sale of cigarettes and certain
smokeless products in the United States; UST LLC (UST), which through its
subsidiaries, is engaged in the manufacture and sale of smokeless products and
wine, and John Middleton Co. (Middleton), which is engaged in the manufacture
and sale of machine-made large cigars and pipe tobacco. Philip Morris Capital
Corporation (PMCC), another wholly owned subsidiary of Altria Group, Inc.,
maintains a portfolio of leveraged and direct finance leases. As of December 31,
2010, in addition, Altria Group, Inc. held a 27.1% economic and voting interest
in SABMiller plc (SABMiller). As of December 31, 2010, Altria Group, Inc.’s
segments included cigarettes, smokeless products, cigars, wine and financial

Buy The Pullback – CEFs with 10% Yields

Recently, it has been more difficult to find high yield closed-end funds because the search for yield has increased the share prices.  Now is probably a good time to consider slowly picking up high yield CEFs that have pulled back with the market.  I reccomend you slowly add positions over time due to the negative market perception.  This perception is overblown due to politics and uncertainity of increasing interest rates. 

The VIX is the stock market’s fear gauge.  A falling VIX indicates investor complacency.  A rising VIX shows fear.    The spike in the VIX indicates that the market is due for a bounce.  Recently, the VIX closed above its upper Bollinger Band – indicating an extreme move in investor fear.  Of course, we all know the best time to buy stocks is when investors are scared – when they’re so frightened of potential losses, they’re willing to dump positions at “fire sale” prices.

I think this is a good time to enter or increase positions in monthly income stocks.  You may want to dollar-cost average into these positions over time.  Here is a list of CEFs with 10% or higher yield.

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2 BDCs Offering Monthly Income at Yields Above 1o%

In yesterdays post, Fitch comfirmed that the business development company’s would remain stable throughout 2011 as recent capital raises and leverage reductions have provided ample investment capital to deploy and improved overall operating flexibility. BDCs lend to and invest in companies in connection with investments by private equity sponsors. Basically, they makes loans at a higher interest rate than money cost to them with the difference being their profit. With the market pullback over the last 6 weeks, FSC and PSEC are better priced for entry points and both pay monthly dividends. PSEC, which had been focused on the energy and industrial sectors, has expanded its range to include industries such as health care and specialty minerals.

Prospect Capital Corporation (PSEC) has fallen from a price above $12 in eaarly 2011 to around $10 today. This is a 16.7% decline during the recent market pullback. PSEC pay a monthly dividend of $0.10128 for a yield of 12%. It has a trailing PE of 7.6 which is cheap for this type of yield. PSEC just underwrote a public offering of 10,000,000 shares of its common stock at a price to the public of $10.15 per share. Barclays Capital Inc. acted as sole book-running manager in this offering and Prospect has granted the underwriter a 30-day option to purchase up to 1,500,000 additional shares. This is a good for PSEC as it just raised additional capital for more investments while lower the stock price to $10.00.

Fifth Street Finance Corp. (FSC) has fallen from around $13.50 to $11.50 during the the last few months. FSC has a monthly dividend of $0.1066 for a yield of 10.96%. It is trading at a PE of 18 which is more expensive than PSEC shown above. Fifth Street Finance Corp. announced that it has closed its public offering of 5,558,469 shares of common stock at a price of $11.72 per share, raising approximately $58.6 million in gross proceeds. Again, this raises capital for more investment opportunities.

Bottomline: Both PSEC and FSC offer a more attractive price entry point due to the new shares offering. You should continue to monitor these stocks as potential additions to your monthly income portfolio.

Company Profiles:

Prospect Capital Corporation (Prospect Capital) is a financial services company that lends to and invests in middle market privately-held companies. The Company is a closed-end investment company. The Company invests primarily in senior and subordinated debt and equity of companies in need of capital for acquisitions, divestitures, growth, development, project financing and recapitalization. The Company’s investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. It focuses on making investments in private companies, and many of its investments are in energy companies. The Company’s investment adviser is Prospect Capital Management LLC. On December 2, 2009, the Company completed the acquisition of Patriot Capital Funding, Inc. (Patriot), whereby Patriot merged with and into the Company.

Fifth Street Finance Corp. is a finance company that lends to and invests in small and mid-sized companies in connection with investments by private equity sponsors. The Company is externally managed and advised by Fifth Street Management LLC, which it also refers to as investment adviser. As of September 30, 2010, its debt investments were secured by first or second priority liens on the assets of its portfolio companies. As of September 30, 2010, it held equity investments consisting of common stock, preferred stock, or other equity interests in 19 out of 38 portfolio companies. Its deal originating efforts are focused on building relationships with private equity sponsors that are focused on investing in the small and mid-sized companies. It divides the country geographically into Eastern, Central and Western regions.

How To Get Paid Monthly Royalties

This is the fourth in the investing for monthly income series: get paid by royalty trusts.

A royalty trust is a type of corporation usually based in the United States or Canada.  In general, trusts usually own oil and natural gas wells, rights to wells or rights to the mineral deposits.  Royalty trusts are similar to real estate investment trusts (REITs) as they are tax free if they payout 90% of income to shareholders.  Most royalty trusts trade on major US stock exchanges.  Others trade in Canada and have a pink sheet listing in the US.

So many corporations were using the trust advantage that Canada changed the regulations starting January 1 2010.  This will force some trusts to convert into a regular corporations which will lower their dividends.  However, this does not  lower their status as monthly income stocks.

Non-Canadian investors owning a Canadian royalty trust is subject to a foreign income tax of 15% of payouts.  This 15% tax can be claimed on US taxes from a Form 1099.  This makes Canadian royalty trusts better investments for taxable accounts in the US.  In non-tax accounts such as an IRA, you will be double taxed by Canada upon distribution date and US when funds are withdrawn from the IRA.  The US royalty trusts do not have a 15% foreign tax so they can be held in tax-deferred accounts.  

Over the last six months, there has been a significant quest for high yield investments.  This has decreased the yields on trusts from double digits to single digits because of the increase in share prices.  This lessens the appeal of royalty trusts at time.  It would be better to patiently wait for a market correction to initiate a new position.

Here is a short list of royalty trusts:

Company Yield
Pengrowth Energy Corporation (PGH)      6.60
Enerplus Corporation (ERF)      6.60
Cross Timbers Royalty Trust (CRT)      6.60
Hugoton Royalty Trust (HGT)      5.10

The next part of this series will discuss bond funds.

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