August 27, 2018. If you are a risk averse, conservative investor who is willing to take a lower dividend rate in return for a much higher quality investment, look at TVC baby bonds from the Tennessee Valley Authority. (We own individual corporate bonds from TVA.)
TVC pays 3.65% and matures in 2028. IF you hold to maturity, your effective yield is 4.57%. Price is $24.45
QUANTUMONLINE.COM SECURITY DESCRIPTION: Tennessee Valley Authority Power Bonds 1998 Series D, 6.75% Putable Automatic Rate Reset Securities (PARRS), due 6/01/2028, issued in $25 denominations, not redeemable prior to maturity, and maturing 6/01/2028. Initial distributions of 6.75% ($1.6875) per annum are paid quarterly on 3/1, 6/1, 9/1 & 12/1 to holders of record on the business day prior to the payment date (NOTE: the ex-dividend date is one business day prior to the record date). The initial Coupon Rate of the Bonds will be 6 3/4%. Beginning 6/01/2003 and on the same date each year thereafter, the Coupon Rate will be reset to a lower rate, if on the Calculation Date the 30 Year Constant Maturity Treasury rate (CMT) plus 0.94% is lower than the Coupon Rate in effect on the Calculation Date.
From Cabot Wealth.com. We own CTL which is up 20% but it is now too late to buy. HOLD.
Dividend Yield 9.1%
Legacy landline CenturyLink’s revenues are declining as consumers “cut the cord” and cancel landline and cable subscriptions. But the company is undergoing a transformation, and the stock likely bottomed a few months ago. CenturyLink acquired business internet provider Level 3 Communications last year, and the CEO of Level 3 took over the top job at CenturyLink a few months later. The new CEO has reduced costs and lowered capex to match the pace of revenue declines, allowing management to raise their full-year free cash flow outlook by14% during August’s earnings call, sending the stock surging 30%. Based on the new guidance, CenturyLink’s dividend payout ratio could fall below 100% later this year—for the first time in four years.
We own MIC in the Core Portfolio and have recently recommended you buy. Here is a positive article from seekingalpha.com
Macquarie Infrastructure Corporation (MIC) is a highly diversified company operating in the infrastructure segment. It owns and operates a group of businesses providing services ranging from energy storage terminals, aviation, renewable energy and utilities. The stock is currently seeing strong price momentum.
We wrote about MIC back in August 2017 when the stock saw a huge selloff related to a dividend reduction by 30%. The reason why management reduced the dividend was to increase cash so that they can internally finance new growth projects in such a way that would allow the company to benefit from the recent tax reforms and reduce debt.
Management also took a view that reducing the dividend would allow management to finance new projects without dilution to shareholders through large share issuance. Right after the dividend reduction, the stock overreacted and lost 40% of its value. We saw the opportunity and recommended to buy the stock.
We are happy that we made this call. Despite the fact that MIC shares returned 28.5% since, there are many reasons why we are still bullish on this stock, which offers a tremendous upside potential.
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