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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These Preferred Shares Offer
an Above-Average 6.2% Yield |
Published:
September 28,
2007
Freddie Mac, 6.02% Non-Cumulative Perpetual Preferred (NYSE:
FRE-PX, $24.50) -- Freddie Mac (short for Federal Home Loan
Mortgage Corporation) was chartered by the federal government to
help people buy a home. FRE can't originate loans. Instead, it
buys residential mortgages from lenders like IndyMac (NYSE: IMB)
and
packages them into mortgage-backed securities. It then sells
these securities to investors like Capstead Mortgage (NYSE: CMO). What makes
FRE's mortgage-backed securities especially valuable is that the
agency guarantees the payment of principal and interest on all
of its mortgage-related securities. Its activities help finance
about 16% of the homes bought in the U.S. every year.
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Freddie Mac seeks to reduce risk by putting strict standards on
the loans it will purchase and by trading financial derivatives
such as credit-default swaps. As a government-chartered agency,
FRE would appear to have access to ample financing. However, the
firm is not insured by the government, and its earnings do tend
to be volatile.
Freddie Mac is currently under investigation for accounting
irregularities. It's been forced to restate its financial
statements and to improve its accounting controls. Regulatory
constraints have also been put in place to cap the firm's
growth.
Although these issues have weighed on the share price, Freddie
Mac seems to be turning things around. Meanwhile, Freddie Mac
has paid regular dividends on its common shares at an
ever-increasing rate over the past two decades. Since 2003, the
firm's common share quarterly dividend has nearly doubled to
$0.50 per share.
Dividend: FRE's preferred shares pay a $1.51
dividend, distributed quarterly. At today's share price, FRE-PX carries a 6.2% market yield.
Although the yield may seem a bit underwhelming at first, looks
are deceiving. FRE-PX is a traditional preferred stock, making
its dividend eligible for the reduced 15% tax rate. As such, you
get to keep a larger share of the income than you would from
most preferred stocks, and you can hold them in a taxable
brokerage account.
The shares are highly rated as Aa3 (Moody's) / AA- (Standard &
Poor's). That means they are very good quality and are
considered to carry only slight long-term risk. They can't be
called until June 2012 and don't have a maturity date.
Valuation: If Freddie Mac were to exercise the
option to redeem the shares, then you would receive $25 per
preferred share. Since the shares are trading below that price,
your principal would be protected if the shares were called.
Action To Take --->
Freddie-Mac's preferred shares have a generally attractive
risk/reward profile in an otherwise highly volatile market. For investors with a fair dose of risk tolerance, they offer
above-average fixed income. Good Investing!
Carla Pasternak
Editor
High-Yield Investing
http://www.StreetAuthority.com
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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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