Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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| This
Covered-Call Fund Offers a Different Way to Extract Extra
Yield |
Published: January 15,
2007
Formed last January, the $900
million Eaton Vance Enhanced Equity Income Fund II (NYSE: EOS) fund
invests in over a hundred mid- and large-capitalization common stocks,
mostly in the U.S. Top holdings include names like General Dynamics
(NYSE: GD), Oracle (Nasdaq: ORCL), Apple (Nasdaq: AAPL) and Teradyne
(NYSE: TER).
The fund writes call options on over half of the stocks in its portfolio
and generally doesn't sell puts. It's well positioned to benefit from a
rising stock market -- since it writes calls on just a portion of its
portfolio, it can enjoy capital gains on the remaining stocks. Since
covered calls rely on volatility to generate income, the fund has
invested about 60% of its portfolio in mid-cap stocks, which tend to
exhibit greater price volatility than large-cap stocks.
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Dividend: The
fund has dished out a $0.144 per share dividend every month since March
2005. That equates to an annual payout of $1.73 per share, which gives
the stock a yield of 8.5% at today's share price. EOS also carries a
management expense ratio of 1.07%, which trims a little off your return.
The fund's 2005 dividend income consisted entirely of capital gains from
the fund's premium income and investment sales. Since these were treated
as short-term gains of less than a year, the distribution was taxable at
your ordinary income tax rate. Assuming a similar composition for this
year's dividend, the fund is likely best held in a tax-advantaged
account. As yet, the fund does not offer a dividend reinvestment plan.
Performance: EOS uses two management teams to keep the
stock picking function separate from the options writing role. Eaton
Vance's managers focus on individual stock selection, with the goal of
building a portfolio of financially strong stocks with capital gains
potential. The idea is not to skew the selection toward stocks that
could deliver the greatest option premiums. Meanwhile, independent
manager Rampart Investment Management writes the options using computer
models to preserve the stock's upside potential.
The fund's strategy of not writing calls on the entire portfolio allows
it to benefit from share price gains in a rising market. Over the past
year, ending November 30th, the fund delivered total returns of +21%,
well ahead of the S&P's +12% gains.
Valuation/Outlook: While no strategy is fail-safe, the
fund's performance to date has shown that writing calls is one way to
extract greater returns, particularly in a rising market.
In a down market, the strategy provides increased premium income because
the stocks are less likely to be called away. However, the premium
income may not offset losses in the fund's portfolio.
Like most covered call funds, EOS has but a short track record, and it's
too soon to tell how this strategy would work in various markets. That
said, its performance has so far been impressive.
The fund is trading at a small premium to the value of its underlying
portfolio, and despite rallying sharply over the past year, the shares
are still attractively priced.
Action To Take ---> With its
covered call strategy, EOS is particularly suitable for medium-risk
investors who believe the stock market will remain in a strong uptrend
over the coming year.
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Editor's
Note: Carla Pasternak's model portfolios focus exclusively
on investment opportunities with ultra-high yields. In fact, in each
of her monthly High-Yield Investing newsletters she
provides readers with an entire portfolio of stocks, funds and
preferreds that are delivering annual dividend yields of +10% or
more. That's right -- in order to even be considered for
inclusion in this portfolio, an investment
must deliver cash payments of at least 10% per year. Visit
this link to learn more about Carla Pasternak's High-Yield
Investing newsletter.
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Good investing!
Carla Pasternak
Editor
High-Yield Investing
http://www.StreetAuthority.com
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receive in-depth guidance on today's leading income investing
opportunities each month, plus access to several model portfolios,
please subscribe to Carla Pasternak's premium newsletter -- High-Yield
Investing. |
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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