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Potential New Additions to My "Ultra-High Yield" Portfolio |
Published: April 22, 2005
My monthly High-Yield
Investing
newsletter is devoted exclusively to income-oriented investments. In
each issue I not only introduce my readers to a variety of new high
yielding investing ideas, but I also provide continued guidance on
several dozen of the market's best and brightest income-generating
opportunities. I organize these various picks into the following four
model portfolios...
Income Anchors
Portfolio -- This portfolio
contains dividend-paying stocks with above-average yields (versus the
S&P 500) at the time of purchase. And since dividend payments are by
no means guaranteed, this portfolio focuses on financially sound
companies that should have the ability to continue paying sizable
dividends in the years ahead.
Ultra-High Yield Portfolio
-- This portfolio focuses on quality investment opportunities that offer
above-average dividend yields. These include real estate investment
trusts (REITs), royalty trusts, master limited partnerships (MLPs),
preferred shares and income deposit securities, among others.
Double-Barrelled Growth Portfolio -- Stocks in this
portfolio offer investors the best of both worlds -- a steady income
stream and strong capital gains. Although some of the stocks in this
portfolio may have average or below-average dividend yields (versus the
S&P 500) at the time of purchase, all are expected to deliver
above-average returns over the long term.
Dividend-Focused Funds Portfolio -- This portfolio includes
a mixture of income-oriented-ETFs (exchange-traded funds) and a variety
of outperforming mutual funds. These funds should provide both steady
income and much-needed diversification to any income portfolio.
In the analysis below I'll
introduce you to several quality companies that I'm now considering
adding to my Ultra-High Yield Portfolio. In addition, I'd encourage
you to stay tuned for further updates throughout the next several weeks.
In those updates I'll introduce you to a variety of additional stocks
and funds that I'm now considering adding to my other portfolios.
"Ultra-High Yield"
Watch List
Although I reserve my actual Ultra-High Yield Portfolio picks
for paid subscribers to my monthly High-Yield
Investing
newsletter,
below you'll find several securities that I now considering as possible
new additions to this portfolio. I am constantly researching and
following these investment ideas, and I may eventually add them to this portfolio
if and when their risk/reward profiles meet my stringent investment
criteria:
| Company |
Symbol |
Apr.
21 Price |
Yield |
| General
Motors 7.5% |
GMS |
$21.00 |
9.2% |
| Pengrowth
Energy |
PGH |
$20.28 |
10.9% |
General Motors 7.5% (GMS, $21.00) -- If you're looking for
yield, then it's hard to beat this General Motors preferred stock, which
yields a hefty 9.2%. Shares of the world's leading automaker have come
under pressure in recent trading after the company announced that its
earnings would come in below expectations this year. Investors reacted
harshly to the news by dumping GM securities, thereby bringing down
share prices and providing investors with an opportunity to lock in
higher yields. Although GM's common stock now delivers an enticing 7.8%
yield, that payout is by no means ironclad. GM management could
potentially cut that dividend in an effort to reduce costs, as the move
would save the company about $1 billion a year.
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By contrast, preferred shares like GMS offer a higher yield as well
as a much more secure dividend payment. After all, these securities are
called "preferred" because they have a senior claim to
dividends and must be paid before the company's common shares can
receive a dividend. With this in mind, the dividend payments provided to
GMS shareholders should remain secure in the years ahead.
Pengrowth Energy (PGH,
$20.28) -- Pengrowth is one of the largest energy trusts in North
America. It produces and sells oil and gas from an extensive portfolio
of oil and gas properties in Canada.
Pengrowth has been an aggressive buyer of new oil and gas reserves
over the years, and as a result, the company has increased production by
an average of +30% a year for the past decade. Higher production volumes
should enable the trust to boost its earnings -- and dividends -- even
if energy prices decline. In the meantime, PGH continues to enjoy the
best of both worlds -- record high commodity prices and steady
production growth. Production has grown +10% a year since 2002, while
oil and gas prices have soared +34%.
PGH pays a $2.21 annual dividend. This translates into an enormous 10.9%
yield based on current share prices, making the stock an excellent
choice for income-oriented investors.
Important
Note: The above article was merely a small excerpt from a
recent issue of our premium, income-oriented
investing newsletter -- High-Yield Investing. In each
issue of that newsletter, editor Carla Pasternak delivers a host of
other investing ideas and tips designed to help you earn steady gains
and above-average income from your portfolio. To receive your copy of
our most recent High-Yield Investing newsletter, as well
as other guidance similar to this every month, you'll need to register
for this separate publication. Please visit one of the following links
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