Dear Mr. Berko: I’m 77. I have an $86,000 certificate of deposit that came due, from which I need more income. CDs, which used to give me good income, don’t work anymore. I must have at least $435 more a month in income to meet my expenses. A stockbroker guaranteed me that I could get 7.1 percent from an annuity, which would be $508.80 a month. That sounded good to me. But my daughter says annuities’ fees are very high and when I die, the insurance company would keep the money. So she had a broker put together a list of 12 stocks that pay 11.6 percent, and I think I will buy them instead of the annuity. I would appreciate your thinking on the list, which I have enclosed. And if you have any other stock suggestions, I would like to know them.
— L.D., Jonesboro, Ark.
Dear L.D.: Your daughter’s right. She would get nothing from an annuity when you pass. And annuity commissions are enormous, but that’s why broksters sell those things.
Yes, THL Credit, Stellus Capital Management, Chimera Investment and the nine other stocks that a brokster put together do yield over 11 percent. However, those yields may have the life span of a t quark. You and your daughter had better get off that turnip truck quick, ’cause those 12 stocks are ticking time bombs.
I guesstimate that 513 U.S. stocks pay over 11 percent and that 492 of them will reduce or eliminate their dividend and trade lower a year from now. Though I can’t identify the 21 stocks that won’t fail, I’m sure that none of the stocks presented by that brokster is among them. Therefore, I suggest that you consider the annuity once more and tell your daughter to suck it up or blow away.
While I understand your concern for her concern, I urge you to be more concerned for your concerns and the comforts you’d lose if you made the wrong choice. If you must own dividend stocks, then please consider the following seven, which will produce a 7.3 percent yield with significantly better protection (by orders of magnitude) than that dirty dozen the brokster put together. And five should increase their dividends modestly and annually over the years you will own the portfolio.
AmeriGas (APU-$44.36) is a $2.3 billion-revenue distributor of propane, plus related equipment and supplies. The yield is 8.5 percent, and management has consistently raised its dividend and will do so again next year.
Buckeye Partners (BPL-$70), a $3.1 billion-revenue company, operates a liquid petroleum products pipeline. The 6.9 percent dividend has increased yearly since 1993.
HCP Inc. (HCP-$37) is a $2.5 billion real estate investment trust that invests in medical office, hospital and skilled care facilities. The $2.30 dividend yields 6.1 percent and has been raised annually for over 25 years.
Pimco Dynamic Income Fund (PDI-$28.48) is a highly leveraged five-star high-income fund with a portfolio of global debt. The 22.1-cent dividend, paid monthly, yields 9.3 percent; annual capital gains have been generous.
America First Multifamily Investors (ATAX-$5.82) acquires and owns a portfolio of multifamily and student housing bonds issued by state and local governments. The quarterly 12.5-cent dividend, which has been reduced once in 20 years, is tax-free and yields 8.4 percent.
Omega Healthcare Investors (OHI-$34.38) pays 60 cents quarterly and yields 6.8 percent. OHI invests in long-term health care facilities and has raised its dividend yearly since 2003.
Royal Dutch Shell (RDS-B-$53.80), with $235 billion of revenue, is one of the world’s largest oil companies and one of the few companies with an A-plus financial rating. The $3.76 dividend is secure, according to management, and yields 6.9 percent.
This 7.3 percent yield is far from the 11.6 percent that this lamebrain ganef proposed, but it’s much safer. I wish him 60 months of intense pruritus while his scleras turn chartreuse. May you live long and wealthier.
Malcolm Berko addresses questions about stocks. Reach him at P.O. Box 8303, Largo, FL 33775 or mjberko@yahoo.com.
