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 like a good return for me. But my daughter doesn't like annuities, as their fees are very high and when I die, there would be nothing left for her because 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. — LD, Jonesboro, Ark.
Dear LD: 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 high-yield stocks that a brokster put together do yield over 11 percent. However, the longevity of those yields may be shorter than the life span of a t quark. Then you'd be up the proverbial crick without an oar and with a hole in the bow. You and your daughter had better get off that turnip truck real quick-like, 'cause those 12 stocks are ticking time bombs.
I guesstimate that there are 513 U.S. stocks paying 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 of the following issues 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 five-star high-income fund that is highly leveraged and owns a portfolio of global debt obligations. The 22.1-cent dividend, paid monthly, yields 9.3 percent, and year-end 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 primarily 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 largest oil companies in the world 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 yield 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.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected] To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.