UPDATED March 2018
Dividend Income Investor provides comments and thoughts on the financial markets and specific suggestions for dividend producing investments.
Dividend investing is not a well known concept. But with interest rates rising you are seeing more and more retirees looking at this segment of the financial markets. Most people have absolutely no idea what an MLP or REIT is. Or a preferred stock. Or a business development company. Or an INDIVIDUAL corporate bond. They only know what they see on CNBC which is stocks or bonds. You do not have to day-trade stocks or buy bond funds to see a nice income.
Dividend investing is not publicized because it is not sexy enough to be featured in the financial mainstream media. In addition, it is not profitable for Wall Street.
Your broker and advisor want to sell you “load” funds and annuities because they generate billions in commissions, despite the fact that they might not be in the best interest of small investors.
Learn how to implement dividend investing on your own and follow this blog for investing ideas. The blog is a comprehensive listing of all investments that we follow with the exception of holdings purchased BEFORE starting this blog.
Dividend investing in stocks and bonds, other than CDs or Treasuries, are not a “sure thing.” Dividend paying positions can be risky, especially in interest rate changing environments. You can lose money. Unless you are an educated and experienced investor, you must follow an advisor that can provide you direction.
This blog is designed for baby boomers who are retired or semi-retired and:
need dividend income
are interested in directing their own investments
do NOT have the desire or experience to “Day Trade” stocks
have a brokerage account
and have a sufficient portfolio that can support 50-100 positions.
This blog can be very educational for younger people who are interested in learning more about dividend investing.
What are “baby bonds”: http://www.dividendyieldhunter.com/time-publish-baby-bond-25-debt-issue-primer-0
One of the BEST financial sites: http://realinvestmentadvice.com/
Business news: http://www.bloomberg.com
If you want the ultra-conservative view: http://www.breitbart.com/
One of the MOST visited Web sites: http://drudgereport.com/
Excellent weekly recap of market technicals: http://www.ciovaccocapital.com/wordpress/
Best site for learning trading using charts: http://www.philsgang.com
Recommended sites for income investors: http://www.quantumonline.com/Index.cfm
Site for financial articles on stocks and bonds: http://www.seekingalpha.com
Recommended advisors: if you need financial planning advice, hire a registered financial advisor. www.napfa.org
Recommended financial radio show Sunday mornings-Rezny : http://925foxnews.com/
Radio show Weekdays: http://gundersoncapital.com/radio-show-archives/
The truth in economic numbers: http://www.zerohedge.com
Recommended web site for dividend investors–loaded with great info: http://www.dividenddetective.com
Recommended financial newsletter:
Recommended newsletters: http://www.cabot.net/videos/stock-market-analysis-video
Recommended Chicago area advisor: (Excellent market commentary: updated weekly.)
Disclosure: I encourage you to follow my discussions and see if the selections suit your income needs. I am not an investment professional. You must do your own research before buying any position. All gains or losses that you realize are based on your choices. I hold all issues discussed here. In some rare cases I am not able to get my target price and will purchase in the future.
INVESTMENTS FOR DIVIDEND INCOME
Individual corporate bonds and trusts and short term funds
Exchange Traded Debt Securities (ETDS)
Exchange-traded debt securities (ETDSs) are corporate debt securities designed for sale to the individual investor. They include the debentures, notes and bonds that are traded on the stock exchanges and resemble preferred stocks in their basic features. Exchange-traded debt securities generally mature in 30 to 100 years. The debt securities are normally redeemable at the issuer’s option on or after five years from the date of issue at par. Most of these debt securities pay quarterly interest distributions. In payment of interest and upon liquidation, the exchange-traded debt securities rank junior to the company’s secured debt and senior to the company’s preferred and common stock. In contrast to the more common $1000 corporate bonds, exchange-traded debt securities are issued in $25 denominations and can be traded on the stock exchanges in the same manner as common stocks. These debt securities are NOT eligible for the 15% tax rate on dividends as they pay interest, not dividends.
Floating rate securities
Defined maturity corporate bond funds.
Gold (CEF for income)
Preferred Stocks: watch interest rates for signal to sell. Preferreds are Not the best investment during a rising rate environment. They tend to act like long term investment grade bonds. (Following from isharesblog.com)
Straight Perpetual Preferreds
Compared to all other classes of preferred shares, the perpetual preferreds potentially carry the greatest interest rate risk given that they do not have stated maturity date. Due to their long duration, perpetual preferred shares typically rise in value as credit spreads and interest rates decline. However, the opposite typically happens when the rates increase or when credit spreads widen.
Hybrids and Trust Preferreds
Have a stated maturity date and therefore a shorter duration, so relative to perpetual preferred shares they carry lower interest risk. The risk will be related to the individual’s security term to maturity (or duration) and the dividend rate.
Floating Rate Preferreds
Relative to other preferred types, floating rate preferreds generally exhibit lower interest rate risk due to the frequent coupon resets that helps to mitigate the price response in a rising rate environment. Floating-rate preferreds offer the potential for higher coupon income as Fed rate increases occur. Since the majority of floating-rate preferreds are tied to short term interest rates, additional Fed tightening will likely lead to higher income distributions.
Convertible preferred stock gives investors the option to convert shares into common stock issued by the same company. The terms of conversion, including the ratio of preferred to common shares involved in the exchange, will be defined at the time of issuance. As a result, these securities are mostly affected by the price of the common stock shares.
CD’s and money markets (they are paying nothing)
annuities (Biggest Scam in the History of Investments.)
You can expect anywhere between 5% up to 15% using the positions mentioned here.
Generally speaking, MLPs are not suitable for IRA accounts. There are MLP alternatives that are excellent for the IRA.
MLPs ARE a great dividend investment for Taxable accounts. (Following is an excellent article copied from energyandincome.com)
“Some of the net income that MLPs allocate to their unit holders is classified as unrelated business taxable income (UBTI) Each taxpayer has a $1,000 total annual allowance for UBTI paid into a 401K or IRA account, levels over this threshold could incur a tax liability.
As many MLPs actually generate negative UBTI, the possibility of reaching $1,000 is actually quite remote-unless the investor holds literally tens of thousands of units of high-UBTI MLPs. And even in the worst case, any tax due on UBTI would be rather neglibible.
Investors who hold MLP units in an IRA account don’t need to monkey with a Schedule K-1. Rather, the custodian will file a Form 990-T summarizing the account and any UBTI. And if you owe any tax on UBTI it’s the custodian’s responsibility to pay it our of your account
In our view, the real drawback of holding MLPs in a tax-advantaged is the opportunity lost. When you withdraw funds from an IRA, you pay taxes at your regular rate, not the MLPs tax-advantaged rate. You do shelter most capital gains. But unless you’re a long-term save and not withdrawing funds, you’ll almost certainly pay a higher tax on the quarterly distributions paid by an MLP when you hold the units in an IRA
We’d argue that the fat returns offered by MLPs are worth the added hassles at tax time. We are encouraged however that the industry is still working hard to make things easier for investors.
There are also alternatives for investing in MLPs that involve no K-1 filings or tax complications of any sort…..closed-end funds
I suggest holding no more than one percent (1%) of a portfolio in a single issue. Core holdings can go up to 4%.
For very small portfolios, I suggest buying $2000 of a single issue-do the math to determine the number of shares.