| The
Best of Both Worlds -- High Yields and High Safety |
Published: March 15, 2006
Where can you turn for both yields AND safety?
Certainly not the S&P 500. Although the benchmark index of America's
500 biggest companies boasts some of the safest dividend-payers on the
market today, these companies carry an average yield of just 1.8%. Even
if we exclude all but the top 100 dividend payers among them, which are
held in the Dow Jones Select Dividend Index, we still get an average
yield of just 3.6%.
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Yes, the risk-free 10-year Treasury note now yields nearly 5%, but it
looks like we may see a couple more interest rate hikes down the road.
If that happens, then higher rates could drive down the price of bonds
and erode returns on your fixed-income investments.
So, if you can't seek shelter in bonds, then where's the best place to
put your hard-earned dollars to work?
In my upcoming April issue of High-Yield Investing, I'll bring
you a closer look at five high-yield but safe investment ideas that can
help you turn your savings into a steady income stream.
Specifically, I'll showcase several closed-end funds with yields of up
to 9%, some investment-grade preferred shares now yielding up to 8%, and
a solid dividend-paying stock with a 6%-plus yield and a strong earnings
outlook.
I'll also feature a closed-end fund as April's "High-Yield
Security of the Month." At this point I've narrowed the choice
down to two candidates. One invests in the world's second fastest
growing major economy after China and now yields around 9%.
I like that fund for its great growth potential, but I also like
another, more diversified fund that seeks to reduce its exposure to
individual country or stock risk. It does so by investing in over 500
different stocks from around the world. The fund is also yielding a
head-turning 9.9% right now. Both funds offer a good balance between
high-yield and high-safety.
What also sets my favorite funds apart from their peers is their price
tag. All but one are now selling at a discount to the value of their
portfolio holdings. In other words, they enable investors to purchase a
dollar's worth of assets for less than a dollar. I don't think they will
be selling at these bargain prices for long, though, as the spread
between their share prices and portfolio values has been growing
narrower.
Good investing!
Carla Pasternak
Editor
High-Yield Investing
http://www.StreetAuthority.com
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Carla
Pasternak draws on a variety of financial backgrounds to make profitable
calls on income-generating stocks for her readers.
Carla has
been employed in the investment industry for more than two decades. In
addition to her work as a writer for several other nationally recognized
financial publishers, her previous experience includes a position as
President of a well-respected investor relations firm. She has also been
writing shareholder reports for public companies (annual reports,
speeches, corporate profiles, slide shows, etc.) since 1980.
A highly
successful investment analyst, Carla specializes in high-yield,
income-paying stocks. In that pursuit, she's always mindful to select
companies that not only pay rich dividends, but that also have the
potential to deliver strong long-term capital gains.
On the
educational front, Carla holds both MBA and Ph.D. degrees. When she's
not watching the market, she's teaching business courses at the college
level and managing several million dollars in portfolio assets.
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