- Total Return
- A Word About Mutual Funds
- What Would John Bogle Do?
An Additional Word About Income Investments (See Total Return below)
From several email comments I have recently received, it has become apparent to me that many investors, when they think of “income investments”, only consider their yield and fail to recognize that there is often a “growth” opportunity that presents itself.
In the pages in Income Planner, I have emphasized the yields that different income securities can generate and only briefly mentioned the possibility and significance of growth in the share prices as well over time.
I do this because I don’t believe in making outlandish statements. I am continually bombarded with daily emails from newsletters that promise to make me 100% in 60 days or 523% in the next year and on and on and on. They suggest that you buy gold or oil or commodities, etc., etc. I’m sure that you have received some of these too if you are an investor. My only desire is to lead you to securities of solid businesses with an excellent track record of generating dividends - steady, reliable and predictable dividends! Dividends that are superior to what an investor can realize in regular passive investments.
However, by doing so, I may unfairly discourage potential investors from investing in these securities. Thus I see them search for so-called “growth” investments and subsequently take far more risks.
So now, let me show you why I am so keen on “income investments” and why you should be also. Remember, my money is in here with yours. Whether you join me or not, this is where you will find me investing. If you wish to verify what I am saying here, I’m sure that Mike Kavanagh will be glad to tell you.
All of the following were purchased because the dividends were so attractive at the time. Some are closed-end funds, some are REITs, some are energy trusts, some are in the food, transportation, health care sectors, etc. I have only listed a few so far, but I will continue to add to these during the course of the week. There are dozens of examples. Please keep checking back since these take me some time to calculate.
Let’s start with one of Mike’s favorites that he’s mentioned often on his program – ACG. (These figures are
based on a 5-year period beginning in April, 2002). Note that the yields have come down because the share prices have increased. These may or may not be used currently in the portfolios. Also, there is never any guarantee that past performance is indicative of future results.
| Name |
Symbol |
Type |
Price
Dividend
Yield as of
4/2002 |
Price
Dividend
Yield as of
4/13/2007 |
Cumulative
Dividends |
$ Gain/Share
+ Cum Dividends
Total Return |
| ----------------- |
------------ |
--------- |
---------------- |
------------- |
------------- |
----------------------- |
Alliance
Bernstein
Income Fund |
ACG |
CEF
(Bonds) |
$ 7.98
$.0825(M)
12.4% |
$8.25
$.05
7.3% |
$3.76 |
$.27 + $3.76
($4.03)
50% |
| |
|
|
|
|
|
|
Southern
Company |
SO |
Utility |
$ 27.40
$.3350(Q)
4.9% |
$ 37.45
$.3875(Q)
4.1% |
$7.22 |
$10.05 + $7.22
($17.27)
63% |
| |
|
|
|
|
|
|
Healthcare
Realty |
HR |
CEF |
$ 28.05
$.595(Q)
8.5% |
$ 34.42
$.66(Q)
7.7% |
$17.50 |
$6.37 + $17.50
($23.87)
85% |
| |
|
|
|
|
|
|
Thornburg
Mortgage |
TMA |
REIT |
$ 19.68
$.55(Q)
11.2% |
$ 25.97
$.68(Q)
10.5% |
$12.89 |
$6.29 + $12.89
($19.18)
97% |
| |
|
|
|
|
|
|
Knightsbridge
Tankers |
VLCCF |
Oil
Tankers |
$ 14.39
Variable |
$ 27.81
Variable |
$17.14 |
$13.42 + $17.14
($30.56)
212% |
| |
|
|
|
|
|
|
BP Prudhoe
Bay |
BPT |
Energy
Trust |
$ 11.40
Variable |
$ 65.45
Variable |
$27.19 |
$54.05 + $27.19
($81.24)
712% |
| |
|
|
|
|
|
|
|
Here are several additional securities that were issued less than five years ago. There were periods where each of these could have been purchased at lower prices making the yields even greater. For the purposes of this table I will use the starting date of trading rather than their low points.
| |
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|
|
|
| |
|
|
6/2003 |
4/2007 |
|
(46 Months) |
Cohen & Steers
REIT & Income
Fund |
RNP |
CEF |
$22.62
$.17(M)
9.0% |
$29.97
$.20(M)
8.0% |
$11.26 |
$7.35 + $11.26
($18.61)
83% |
| |
|
|
|
|
|
|
| |
|
|
12/2003 |
4/2007 |
|
(42 Months) |
| Centerplate |
CVP |
Food/
Beverage
Concession |
$15.20
$.13(M)
10.3% |
$17.73
$.13(M)
8.8% |
$ 5.24 |
$2.53 + $5.24
($ 7.77)
51% |
| |
|
|
|
|
|
|
| |
|
|
10/2004 |
4/2007 |
|
(30 Months) |
| B&G Foods |
BGF |
Food/Manuf.
Distributor |
$13.68
$.439(Q)
12.8% |
$23.96
$.4265(Q)
7.1% |
$4.70 |
$10.28 + $4.70
($14.98)
110% |
| |
|
|
|
|
|
|
| |
|
|
11/2004 |
4/2007 |
|
(30 Months) |
Coinmach
Services |
DRY |
Laundry Equip
Services |
$13.75
$.375(Q)
10.9% |
$20.56
$.375(Q)
7.3% |
$3.16 |
$6.81 + $3.16
($9.97)
73% |
As you can see with these examples, "income securities" can have significant growth potential. While an investor might have to wait a period of time to see this happen, we are at least being paid while we wait. Worse case, if we have selected strong, well managed companies, we'll still be making an excellent yield on our money!
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