All the securities carry equal weight in the portfolios. I do not follow any asset allocation guidelines, but I do seek to not overweight any one sector. That said, I may tend to overweight MLPs as well as preferred shares and exchange-traded bonds, as these securities often provide a secure income stream and relatively stable returns.

The risk meter is intended to serve mainly as a guide to income security. However, since share price also affects total returns, the risk meter also provides an assessment of how stable total returns may be going forward, including both income and share price.

For example, a "Low" risk security is deemed to offer secure income and a steady or rising share price. Together, the risk that total returns will be negative is considered low. A "moderate" risk security is considered to offer reasonably secure income and share price. A "volatile" security is deemed to be a higher risk/higher reward income play that offers income and a share price that may fluctuate sharply.

The tax treatment of any one security is often not a straightforward matter. There are often several components to a dividend payout, each of which is taxed at a different rate. For example, closed-end funds often distribute capital gains which are subject to a very different tax treatment than the qualified portion of their distributions. The same goes for many other types of securities.

Another consideration is the unique investment situation of each individual investor. How long a security is held, where it's held -- a standard IRA, a Roth IRA, a taxable account, in a business or personal account, in a trust, etc. -- where the individual resides, the individual's overall portfolio value -- all these factors may affect the tax treatment of a distribution.

You can generally find information on the tax treatment of components of a company's dividend on the firm's website. Sometimes, you may need to write or phone an investor relations contact listed on the website for additional information.

In the model portfolios, we give guidance as to whether we believe the security is more suited for a tax-advantaged account or a regular brokerage account. For more specific information that applies to an individual's unique investment circumstances, you may wish to hire a personal accountant for more individualized assistance.

The dividend payout ratio measures a stock's annual dividend payment as a fraction of its earnings. It tells you what portion of its earnings a company is paying out to shareholders. A company that earned $1 per share in profits over the past year and is now paying out 60 cents a share in annual dividends has a payout ratio of 60%.

Payout ratios may vary on different financial web sites. One of the reasons for the discrepancy is that the dividend payout can be calculated as a percentage of cash flow instead of reported earnings. The payout ratios of securities such as real estate investment trusts, limited partnerships, Canadian income trusts, and telecom firms can seem deceptively high if they are based on earnings instead of available cash flow. That's because these companies typically have very high non-cash depreciation expenses, which reduce earnings but don't affect the cash flow available to shareholders.

In High-Yield International great care is taken to list the most appropriate payout ratio for each particular security. In many cases, we'll list payout ratios as a percentage of available cash flow instead of earnings. This is calculated by reviewing each firm's latest annual financial statements. 

Again, because earnings include a number of non-cash changes, including depreciation, the use of cash flow figures usually provides a more accurate indication of each firm's ability to continue to meet its dividend requirements. However, since we often use cash flow data instead of earnings, the payout ratios we reference in High-Yield International may differ from what you'll find on other financial web sites.

When it comes to certain share types -- such as preferred stocks, foreign shares, companies listed on the bulletin board, etc... -- various financial websites will often list these ticker symbols differently.

For example, let's consider the case of Capstead Mortgage Corporation's preferred class B shares.

Yahoo Finance lists this symbol as: CMO-PB

Because this tends to be one of the most commonly-used sites by investors, we typically list the symbols offered by Yahoo Finance within our newsletters..

However, when using other web sites, such as online broker E*Trade, you'll need to enter in the symbol CMO.PR.B in order to get a price quote for this same security. If you visit E*Trade and try to enter in "CMO-PB", you'll get an error message that the symbol is not found.

Because the symbols listed often differ from web site to web site, the best way to look up current prices is to use each web site's "Symbol Lookup" feature to search for the appropriate symbol. You'll find a link to a "Symbol Lookup" feature at just about all financial web sites.

When using the "Symbol Lookup" feature, all you need to do is enter in the company name into the search box. In the example of Capstead Mortgage, you merely need to search for the term "Capstead Mortgage." This type of search will lead you to a listing of both common and preferred shares offered by Capstead. In this example, you'd then want to make sure to choose the symbol listed next to the firm's preferred class B shares.

Our ratings are intended to give our current evaluation of an investment. The system is very straightforward and easy to understand.

We rate every holding on a simple scale of 1 to 5:

A rating of a "1" indidcates we think the investment is a strong sell. Likewise, a rating of "5" indicates a strong buy.

You can find this rating within a designated column in each portfolio. The intention of the rating system is to provide one more tool to assist readers in making an investment decision.

High-Yield International provide a broad range of investment ideas with different risk/reward profiles. To assist readers in making investment decisions, we're always mindful to present the potential risks along with rewards of any investment idea.

Every investor's situation is different, so the risk factors of an investment may also differ. Here are a few of the items investors should consider before making any investing decision:

-- Risk tolerance
-- Personal tax situation
-- Number of years until expected retirement
-- Planned holding period

One of the most important considerations in making an investment decision is to decide whether you want an investment that offers low-risk/lower-reward, medium-risk/medium-reward or higher-risk/higher potential reward. As a rule of thumb, in many cases higher-yield investing ideas also carry greater risk.

Once you've examined your own investment needs, here are some tips on how to get the most out of your subscription to High-Yield International.

1.) Make a special note of our assessment of an investment's suitability for a low-risk, medium-risk, or high-risk income portfolio. We generally include this assessment in our "Outlook" or "Action to Take" section of each investment profile.

2.) Also note when we add a security to one of our model newsletter portfolios. These portfolios are intended to help you track our performance. Therefore, we make every effort to add holdings that we believe will show positive performance. If you're a new subscriber, then you should probably focus most of your attention on our new portfolio additions.

3.) Use the newsletter to learn about the tremendous variety of securities and asset types you have to choose from. That will help you diversify your portfolio risk. Consider holding a range of securities, including core holdings with steady returns, as well as some higher risk/reward investments that may lift overall returns. You may also want to consider holding a variety of different asset classes, including bonds, preferred shares, funds, trusts, and stocks.

4.) Do your own due diligence. Don't buy any company you don't thoroughly understand. In the course of your research, make sure you clearly understand how a company makes money and whether the economic environment seems favorable for the stock to continue to perform well and to cover its future dividend payments. Check out a security's home page, read through the latest press releases and earnings reports, and make your own decision if each security meets your investment needs at this particular time.

5.) Go slowly, experiment at first with small amounts of capital, and be prepared to learn by trial and error. Investing is a life-long learning process -- sometimes you'll be successful; sometimes your investments may not work out as expected. In either case, if you're able to consistently build up a portfolio of income-paying investments, then you're headed in the right direction.

6.) Take advantage of the magic of compounding by enrolling your investments into Dividend Reinvestment Plans (DRIPs). There's no sounder way to grow wealthy in over the long term than to systematically invest in high-quality stocks and funds, hold on for the long haul . . . and reinvest your dividends. By plowing your dividends back into more shares, DRIPs make it easy to harness the miraculous power of compounding. The beauty of compounding is that any little smidgen of money you can put to work now -- no matter how small -- can have an extraordinary effect on your wealth down the road.

Dividend yields can be calculated in a number of ways, and depending on which way they are calculated, various web sites will often list different yields for the exact same security.

When payments vary greatly, the most reasonable calculation involves taking the last 12 months of dividend payouts (trailing twelve months, or ttm) and dividing that figure by the firm's current share price. This is called a trailing yield.

Some financial web sites and other media sources report yields a bit differently -- instead of showing trailing yields, they list forward yields. Unlike a trailing yield, a forward yield projects dividend payments over the next 12 months, and is best used when these payments can be predicted with reasonable accuracy. The forward yield takes the stock's latest declared dividend payment and annualizes it over the next 12 months.

In High-Yield International, we generally use trailing yields when possible, as they represent concrete dividend payments that a firm has already made. However, when a company has announced a regular dividend payout for the forthcoming 12 month period, we may use a forward yield to more accurately reflect what shareholders can expect to receive.

To make matters even more complex, what counts as a dividend payment may also vary. Some web sites include all components of the payment, including ordinary dividends, short-term capital gains, long-term capital gains, return of capital, and one-time special payments.

Meanwhile, other sites may count certain parts of the distribution, but may exclude others based on their different tax treatment or the fact that they are not considered part of the "regular" dividend payment, or a variety of other reasons.

When possible, it's best to go directly to the source. Most companies list their historical distributions on their website, and declared distributions can usually be found in their press releases. We use this data, which comes directly from each respective company, to calculate the yields we present in our various newsletters.

But again, please keep in mind that due to differences in the way yields are calculated, some financial web sites may list dividend yields that differ with the ones we present in our newsletters. Because many sources calculate yields differently, these types of discrepancies are unavoidable.

If you're unfamiliar with any of the terms or analysis we use in our High-Yield International newsletter, then you will likely find a complete description of these terms in our financial dictionary. To view our financial dictionary on our web site, please click here.
 

Although we'd love to answer all of your personal investing questions, SEC regulations prohibit us from providing direct, personal investing advice. Nonetheless, rest assured that we will always give you sufficient guidance on all of our investing ideas in each of our High-Yield International newsletters. As always, please make sure to do your own due diligence to decide if a particular investment idea is right for your portfolio. You should use our newsletters for informational and entertainment purposes only. Any and all final investing decisions for your own account are entirely up to you.