When I buy an income investment I'm looking for two things; a fair yield return for putting money at at risk and price appreciation. I believe I've found a few Third Party Trust Preferred ideas that will provide both.
CWZ - Is a Senior Debenture due 10/15/2027 issued by Royal Caribbean Cruise Lines. At today's price of $26.25, the certificates pay 8.45% per annum interest, semiannually on 4/15 & 10/15. They come due in November 2027 and are callable on or after 6/28/2006 at $25 per certificate plus accrued and unpaid interest.
We do have a small risk of having these called, but we also have a dividend of $1.109 a share coming on November 15th to minimize the risk.
PIJ - Issued by Ford Motor Company and comes due November 2046. At today's price of $25.75 they yield 7.18%. Distributions are .925 cents per share paid on May 1st and November 1st.
These notes have been callable since 2006, but again our risk of a small loss by having these notes called in for $25, is somewhat offset by a near term dividend.
AVV - Issued by Aviva plc. It comes due in 2041 and can't be called until December 2016. At today's price of $27.42 it yields 7.52% and pays .515 cents quarterly. The next payment is scheduled September 1st.
I recently started a small position in GYLD. It is a global, multi asset income ETF holding five different asset classes–global equity, global real estate, global corporate debt, global sovereign debt, and global alternative.
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GTAA update -
The Cambria Global Tactical ETF has been a real disappointment and was sold. Sometimes things just don't work out.
January 4, 2012
It looks like the market wants to stabilize so lets get to buying something.
I've been picking up shares of three fairly new Oil and Gas Royalty Trusts.Chesapeake Granite Wash Trust (CHKR). Spun off by Chesapeake Energy.
The trust receives 90% of royalties from 69 existing wells and 50% of the royalties on 118 wells to be drilled in the future.
SandRidge Mississippian Trust (SDT). Spun off by SandRidge Energy.
The trust receives 90% of the royalties from 37 existing SandRidge wells and 50% of the royalties from 123 wells that will be drilled by Dec. 31, 2014.
SandRidge Permian Trust (PER). Also spun off by SandRidge Energy
PER will work 509 actively producing wells in the Permian Basin, Texas. It is also obligated to drill another 888 wells by the end of March 2015.
Information from SeekingAlpha LINK
June 11, 2011
Investments we purchased a year or two ago are up 50% to 100% and at today's prices, the yields are quite a lot lower now.
The market is going through a bit of a pull back and I'll be taking profits on some of those earlier positions. I am selling between one third and one half of my positions in: FGB, FEN, KYN, CGI and DGF.
I will be using some of the proceeded to begin buying DEF and NFJ. More on those later.
January 05, 2011
Cambria Global Tactical ETF (GTAA) is a new actively managed ETF. It started trading about two months ago.
The fund is managed by Mebane Faber and Eric Richardson from Cambria Investment Management and authors of the book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets, which outlines the trend-following strategy employed by the new fund.
In a nutshell the fund attempts to be invested in things going up and to limit losses by selling if they fall below a ten month moving average.
Investment allocation targets are 31% to equities including domestic, foreign and emerging markets, 30% to fixed income, 15% in REITs, 14% in commodities 10% in currencies. As a fund of funds, it will build each part of the portfolio using exchange-traded products; mostly ETFs, but also including ETNs and closed-end funds. The expense ratio is 1.35%.
I like the Managers. I like the concept and I like the asset mix. I own it.
Click here for current chart
August 07, 2010It's been a while since I wrote anything, but sometimes it is best to do nothing. For the last few months I have seen no reason to buy or sell any of my holdings. My views on the markets haven't changed and the trades I've made and recommended are still working. I have however recently found a good article about using Covered Calls to generate extra income and thought others might be interested.
As you read this please keep in mind I am not recommending you buy or not buy GLD.
Selling covered call options to generate income has been used by professionals for years and many funds I own and recommend utilize Covered Call strategies to generate income. Click here to read Have Your Cake and Eat it Too.
This article explains how the selling of covered calls can be used to generate income.How to rent your gold!
2009-04-25 13:15:00
New York: Gold has become the numero uno in the time of crisis. And this status has been with the yellow metal for time immemorial.
And, if you are a smart investor you can make use of the gold’s new status and cash in on it. Here is a way Dr David Eifrig found out how to have your cake and eat it too.
Although many assets have recently suffered from price deflation, the US federal reserve is doing everything in its power to cause inflation. Worse, Wall Street has made a debacle of asset values and each week brings a new collapse.
Quite simply, if inflation roars back, the big problem is things you buy will cost more... In other words, your dollar will lose value. So unless you hold something that stores value, you will become poorer. That’s why owning gold during turbulent times, like now, makes sense.
But, investing in gold comes with the problem of where to store it. Then gold doesn’t generate any income. Unless you own a well-run mine that passes on cash flow to you, gold is just a boring hedge with no income.
Dr David Eifrig has found a secret that solves both of these problems. Today, you can buy the SPDR Gold Shares Trust (NYSE: GLD). GLD is an exchange-traded fund that buys and owns gold bullion. By owning shares in this “trust fund”, you own actual gold... and the trust stores it for you. That solves the problem of storage.
But simply investing in this fund doesn’t fix the income problem. The trust doesn’t pay a dividend. So your gold just sits in the trust’s vaults, gathering dust.
In order to get some income from your pile of gold, you can sell covered call options on the shares. If you're not familiar with trading options and find the idea uncomfortable, rest assured. This call-option strategy is easy and safe. In fact, the upfront income this trade generates makes it safer than just buying shares in GLD.
Selling a call option simply gives someone else the right to buy your GLD shares at a specific price (the “strike” price) before a specific date (the “expiration” date). In exchange for that right, the investor pays you money upfront (called the “premium”).
Selling these covered calls is like owning a rental house... and giving your tenants the right to buy your house at a predetermined price, which is higher than the current value. In other words, it’s a very, very safe investment.
You collect “rent”. And if the price goes up, you get the gains up to a predetermined price.
So if your GLD shares never trade for more than the strike price, you keep the premium and the shares. If the share price exceeds the strike price on or before the expiration date, you sell your shares, book any profit up to the strike price, and still keep the premium.
Each share of GLD represents 0.1 ounces of gold. Gold sells for about $900 right now, so GLD trades at about $90. Now here’s where the income comes in...
The September $98 call options are trading around $6.50. The $98 is the “strike price”. And the “expiration date” is the third Friday in September. The “premium” is $6.60: That how much investors are willing to pay you to buy your GLD for $98 a share come September.
Each option trades in 100-share increments. So you must buy 100 shares of GLD to sell one option contract. Let's break the numbers down...
You buy 100 shares of GLD at $90, for a $9,000 cost. Then, you sell one option contract for $660 (that's $6.60 times 100). You collect a 7% "rent check" upfront. That's yours to keep no matter what. When September rolls around, you have a few different options:
If GLD trades over $98 a share: In this case the options are “in the money”. The person to whom you sold the option will “call away” your stock and hand you $98 a share, or $9,800. (This all happens automatically through your broker.) You still get to keep the $660, plus you make $800 on your shares of GLD. That's $1,400 extra cash, or a 15.5% return, just for owning gold, a super-safe crisis hedge.
If you want to collect more cash, buy more gold and “rent” it out. With 300 shares of GLD, you can pocket as much as $4,200 in six months... or $8,400 a year.
If GLD trades between $90 and $98 a share, the options expire “worthless”. That’s a great thing for you: You get to keep the $660 and you get to keep your gold. That means you can keep “renting” it out for more income.
If GLD trades below $90 a share, you still have your $660 of “rent” money to cushion any fall. And you can continue to collect income for as long as you want.
If gold continues its seven-year uptrend, I expect you can make a safe 20%-25% a year with this strategy.
The best calls to sell have a strike price about 10% above the current stock price and expire in six months or so. Those will give you the plenty of “rent” upfront and still leave you some upside on your shares. If you need help, call your broker. (That’s what you’re paying him for.)
In fact, if you haven’t sold options before, you should talk to your broker about the best way to take advantage of this opportunity. Please don’t rush out and do anything you don't understand.
But, this trade is one of the safest, easiest ways to own gold. It’s a fantastic hedge against calamity and the collapse of the dollar. Plus, with 25% annual gains, you can earn more income than the best dividend-paying stock in the marketplace today.
(Courtesy: DailyWealth)
March 01, 2010 - The First Trust Specialty Finance and Financial Opportunities Fund is on Sale
I first suggested the First Trust/Gallatin Specialty Finance and Financial Opportunities Fund (FGB) on June 25th, 2009. I still like it and it is on sale again.
It currently yields 9.5% and is selling at a 9% discount tp NAV. I'll be adding to my position.
This fund owns stock in companies that loan money to and invest in other businesses. These include two of my favorite areas of investing; Business Development Companies (BDC) and Real Estate Investment Trusts (REIT).
To reduce taxes, these types of businesses are required to pass along the bulk of their earnings to the share holders as distributions.
Click here for current chart
To read more about FGB, please click on the link below
Some stocks are worth owning
February 18, 2010
I am buying the Energy Income & Growth Fund (FEN) . It currently yields 7.95%, has had a nice dip in price and like KYN, invests in Master Limited Partnerships.The Fund's investment objective is to seek a high level of after-tax total return with an emphasis on current distributions paid to shareholders. The Fund seeks to provide its shareholders with an efficient vehicle to invest in a portfolio of cash-generating securities of energy companies. The Fund will focus on investing in publicly traded master limited partnerships ("MLPs") and related public entities in the energy sector which the Fund's investment sub-advisor believes offer opportunities for income and growth. Under normal market conditions after the invest-up period, the Fund will invest at least 85% of its managed assets in securities of energy companies, energy sector MLPs and MLP-related entities and will invest at least 65% of its managed assets in equity securities of such MLPs and MLP-related entities.
Click here to view current chart
February 01, 2010
Navios Maritime Partners L.P (NMM) has doubled since I recommended buying it on July 13th. It is time to take profits. Nordic American Tanker (NAT) has gone nowhere; I'm also selling it. Click here to read the July 13th post.
I am buying the closed end fund Kayne Anderson MLP Investment Company (KYN)
KYN is a closed-end fund that invests principally in equity securities of energy-related master limited partnerships (MLPs). KYN’s objective is to obtain high after tax total returns for its shareholders. MLPs are publicly traded limited partnerships. Energy-related MLPs own domestic infrastructure assets that are used in the gathering, processing, transportation, storage, refining and distribution of energy-related commodities.
KYN currently yields 8.2%, pays dividends quarterly and is a good way to own MLPs in a retirement account. At these prices, I also believe risk/reward ratios favor owning the Closed-End-Fund verses the individual stocks.
click here to view current chart
January 28, 2010
I added to my QQQX position today.
At todays price of $12.50, QQQX is down 19% from its high of just a month ago and it is selling at an 8% discount to its underlying value.
To read more about QQQX, click the link from the original post CLICK HERE
Click here for Current Chart
December 03, 2009 - A Well Diversified Income Fund Is On Sale
The Nuveen Diversified Dividend & Income Fund (JDD) is on sale and I'm buying.
The fund invests primarily in U.S. and foreign dividend-paying common stocks, dividend-paying common stocks issued by real estate companies, emerging markets sovereign debt, and senior secured loans. The fund expects to invest at least 40%, but no more than 70%, of its managed assets in equity security holdings and at least 30%, but no more than 60%,of its managed assets in debt security holdings. Under normal circumstances, the fund's target weighting is approximately 50% equity and 50% debt. The fund uses leverage.
At todays price, it is selling at a 14% discount to its underlying holdings and it yields 9.8%. This fund pays the dividend quarterly.click here for a current chart
Click chart to enlarge
July 27, 2009
One of the best ways to participate in the stock market and be paid to take the risk is through Convertible Bonds.
Convertible bonds give the holder the option to exchange the bond for a predetermined number of shares in the issuing company. If the company's stock rises, the bonds become more valuable, and we are paid interest while we wait.
These are two Closed-End-Funds I like for buying convertibles.
Calamos Convertible Opportunities & Income Fund (CHI)
Yielding 10.3% at $11.00 a share.The Fund seeks total return through a combination of capital appreciation and current income by investing in a diversified portfolio of convertible securities and below-investment-grade (high-yield) fixed-income securities.
Delaware Investments Global Dividend & Income Fund (DGF)
Yielding 12% at $5.70 a share.The Fund seeks to achieve high current income, with capital appreciation as a secondary objective by investing, under normal circumstances, at least 50 percent of its total assets in income-generating equity securities, including dividend-paying common stocks, convertible securities, preferred stocks, and other equity-related securities of U.S. and foreign issuers. Up to 50 percent of the Fund's total assets may be invested in non-convertible debt securities consisting primarily of government and high-yield, high-risk corporate bonds of U.S. and foreign issuers.
CHI - click here for current chart
DGF click here for current chart
Gas and Oil income Trusts
August 31, 2009
The price of Natural Gas peaked in mid 2008 and has been falling ever since. It is down nearly 80% from the peak. Oil has doubled from its brief bottom near $35 in December 2008. I think it is time to start buying a couple Oil and Natural Gas Royalty Trusts.
As natural gas prices fell the trusts cut dividend distributions and their share prices fell, but as the worlds economies recover we should expect energy prices and distributions to improve. I want to start buying now in anticipation of the recovery. We can't know when the price of natural gas will bottom, so I will start buying small and add to the positions over time.
The first trust I want is Permian Basin Royalty Trust (PBT) with a current distribution of 7.9%
The second is Cross Timbers Royalty Trust (CRT) with a current distribution of 7.6%
The third is San Juan Basin Royalty Trust (SJT) with a current distribution of 5%.
All three Trusts pay distributions monthly but unlike most securities I own, the distributions can vary a great deal month to month. I want to own oil and gas for the income and as an inflation hedge, but due to the fluctuations of their distributions, positions size will begin as a small portion of my overall holdings and build slowly over time.
Click here for a current chart
Click here for a current chart
Click here for a current chart
