Finance, Investing, Money, Saving and Entertainment

Income Investing

2011-08-27T20:09:00.000-07:00

DATA UPDATED CLOSING 01-27-12 shown in [ ]

Everyone should include investing for income as a part of their portfolio. As with all investing, diversification and risk tolerance would apply to the strategy for income investing. Usually the higher the yield the higher the risk and this is mostly true for stocks yields in the neighborhood of 20%. But there are some yields of 5% to close to 10% that are in the moderate to low risk area. Going below around 5% really doesn't seem necessary from a risk point of view since most stocks yielding less than that are not particularly less risky than some in the 5% and maybe higher range.

In the following, prices and yields are as of closing on Fri. 08-26-11 and in parenthesis are (price; yield; div. on last pay date for that period, not yearly; div. frequency, monthly as Mo or quarterly as Q). As usual past performance is not necessarily indicative of future performance. All investors should do their own research before investing.

Many stocks in the high risk and high yield area are REITs just because of their high yield. REIT dividends are mostly non-qualified for tax purpouses. Some examples are:

Invesco Mortgage Capital Inc. Co (IVR); (17.08; 23.10%; 0.97 on 06-15-11;[15.81; 16.40%; 0.65]; Q); Div. variable. A mortgage real estate investment trust(mREIT) founded 2008, acquires, finances and manages residential and commercial mortgage-backed securities and mortgage loans.

American Capital Agency Corp. (AGNC); (28.06; 20.20%; 1.40 on 06-21-11;[29.09; 19.30%; 1.40]; Q); Div. same 09-30-09 - 06-21-11. REIT. Invests in agency pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government sponsored entities.

Annaly Capital Management (NLY); (17.60; 15.00%; 0.65 on 06-28-11;[16.81; 13.60%; 0.57]; Q); Div. variable. REIT. Engages in the ownership, management, and financing of a portfolio of investment securities. The company invests primarily in mortgage pass-through certificates, collateralized mortgage obligations, agency callable debentures, and other mortgage-backed securities representing interests in or obligations backed by pools of mortgage loans. Annaly Capital also invests in Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association debentures.

Perhaps medium risk of various types:

Hatteras Financial Corp (HTS); (26.97; 15.00%; 1.00 on 06-23-11; [27.60; 13.00%; 0.90]; Q); Div. variable; 1.00 or above since 10-01-08. REIT. Invests in adjustable-rate and hybrid adjustable-rate single-family residential mortgage pass-through securities guaranteed or issued by the United States Government agency, or by the United States Government-sponsored entity.

Frontier Communications Corporation (FTR); (7.22; 10.40%; 0.188 on 06-07-11; [4.31; 17.40%; 0.188]; Q); Div. dropped from 0.25 on 06-07-10 to 0.188 on 09-07-10. Wide range of telecommunications services.

Low risk of several types:

Reality Income Properties (O); (33.64; 5.20%; 0.145 on 07-28-11; [36.61; 4.80%; 0.146]; Mo); Div. steadily increasing for over a decade. Reliable source of monthly income. REIT. Engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company leases its retail properties primarily to regional and national retail chain store operators.

AT&T, Inc. (T); (29.04; 5.90%; 0.43 on 06-06-11; [29.16; 6.00%; 0.44]; Q); Div. steadily increasing for over a decade. Qualified dividend. Engaged in almost all aspects of the telecommuniction business too broad and extensive to list.

Verizon Communications Inc. (VZ); (35.76; 5.50%; 0.488 on 07-06-11; [37.21; 5.40%; 0.50]; Q); Qualified dividend. Provides communication services. The company operates through two segments, Domestic Wireless and Wireline. The Domestic Wireless segment offers wireless voice and data services; and sells equipment in the United States. The Wireline segment provides voice, Internet access, broadband video and data, Internet protocol network, network access, long distance, and other services in the United States and internationally.

Dreyfus Strategic Municipals Inc. (LEO); (8.08; 7.30%; 0.049 on 08-10-11; [9.16; 6.40%; 0.049]; Mo.); Div. was 0.049/mo 12-01-09 - 08-10-11; 0.042/mo 02-07-06 - 11-12-09. Mostly Federal tax free. Operates as a diversified, closed-end management investment company. The fund invests primarily in municipal obligations of various states of the United States.

Dreyfus Strategic Municipal Bond Fund Inc. (DSM); (8.07; 7.10%; 0.048 on 08-10-11; [8.90; 6.40%; 0.048]; Mo.); Div. relatively consistent or increasing. Mostly Federal tax free. Operates as a diversified, closed-end management investment company in the United States. It primarily invests in long-term municipal investments.

Disclaimer: Long: IVR, AGNC, NLY, FTR, O, T, LEO.

Ethanol from Corn II

2008-03-19T23:02:00.000-07:00

The large increases in food prices mentioned in the previous post on this subject in Dec. 2007 are very apparent now and getting worse. Milk, eggs, meat and many other foods are sharply up. Also, due to fields being diverted from wheat to corn, bread prices have risen rapidly. Some may say that the high price of gas has a lot to do with these increases. But, while it may have some impact, gas has been high for a couple of years or more without a large effect while the ethanol boondoggle is just really starting to take effect. In the previous post it was mentioned that ethanol cannot be sent through pipelines due to degradation but must be transported by truck. Thus if ethanol were to become widely used another problem would exist. There would be the possibility of accidents and ethanol fires and almost none of the fire departments across the country have the right kind of foam to fight an ethanol fire. They have foam that is for gasoline which is not good for ethanol and water is useless for such a fire. Of course one must remember that even with an extremely large scale production of ethanol, it would only reduce the dependence on foreign oil by about 5% at the most. Part of the governmental support, through legislation, for ethanol is to pander to the almost extreme environmentalist who want ethanol supposedly to reduce CO2. But once more they have not done any in depth thinking of the consequences. Environmentalist almost completely stopped the use of nuclear energy for power generation and, therefore, the incentive to develop better, safer and lower waste producing nuclear energy. The consequence of that was more and more dependence on coal power plants which give off CO2 and other green house gases which provided these same environmentalists with their next great cause. Now, the one after this will be from the pollution of rivers and water from the fertilizers necessary for growing so much corn for ethanol. So in addition to the continuing rapid increases in food prices and fire hazards that cannot be combated effectively, ultimately the ethanol from corn will result in more not less pollution.

Ethanol from Corn

2007-12-23T14:54:00.000-08:00

In the U.S. politicians in both parties have jumped onto the bandwagon of ethanol from corn as the panacea for our energy problems. However, this is just not the case. There are even differing studies as to whether corn ethanol produces more energy than it takes to grow corn and convert it into fuel. One study (Science Daily, July 12, 2006) simply states it tracked the energy needed for growing and converting corn to fuel and that ethanol provided 25% more energy. Another study (Science Daily July 6, 2005) was more specific and said the detailed analysis done included the energy used in producing the crop, including production of pesticides and fertilizer, running farm machinery and irrigating, grinding and transporting the crop and the production of the ethanol. This latter study found that it took 29 percent more fossil fuel energy than the fuel produced. Neither study took in to account the energy required to try to manage or clean up the pollution caused by the production of fuel from corn. Other problems are the greenhouse gases produced in the process and the ground water and runoff pollution from the fertilizers used. There is already a large dead zone in the Gulf of Mexico from the runoff of fertilizers that is killing plants, fish, shrimp and other sea life. Another problem is the increase in food prices from diverting corn from animal feed to fuel. Meat, milk and eggs have been directly affected and other foods as well since corn by-products are in many foods. The recently passed and signed energy bill mandates a seven-fold increase in the production of ethanol from both corn and cellulosic sources. Ethanol from cellulose, corn cobs, wood chips, prairie and other sources may not require as much fertilizer but also has problems. Ethanol as a liquid fuel has other problems in that it degrades and can not be transported by pipeline but must be transported by truck, etc. More at a later date.

Tips

2007-12-22T15:41:00.000-08:00

Many of my tips for improving ones finances and remaining as debt free as possible are either common sense or have been given by many sources or both, but because of that it is sometimes easy to ignore them or put them off. It is very important to incorporate as many as one can in order to reach financial goals in life.
* Start saving and investing as early in life as possible.
* Always pay credit card bills in full each month; never incur any credit card debt. If you can not afford to pay for something do not buy it unless it is absolutely necessary to eat, maintain shelter or preserve health.
These two are the most essential and most effective. The following are helpful.
* Shop and stock up on non-perishable foods when possible.
* Take advantage of sales and rebates whenever possible on things you must have or really desire; don't buy anything on sale just because it is a good price.
* Use coupons but only on things you will actually use.
* Eat out only on special occasions and avoid the expensive habit of getting a specialty, or any coffee, at a high priced coffeehouse everyday.
* Plan outings and shopping trips to avoid unnecessary trips and distances.
* The days of taking a drive just to take a drive are gone, unless you are a multi-millionaire, being just a millionaire is not enough these days. Take a walk instead, it is better for you.

Useful Information

2007-12-22T15:35:00.000-08:00

Disclaimer: The following information is in no way meant to be complete and there is no guarantee given or implied that it is accurate. It is solely intended to draw the reader's attention to the information for their consideration and further research.
Dividend Dates:
For cash dividends:
Declaration Date: Date the board of directors announcers that the company will pay a dividend.
Ex-dividend Date: On, or after this date, the security trades without the dividend. Buying a dividend paying stock one day before the ex-dividend gets the dividend, but buying it on the ex-dividend date means no dividend. To receive a dividend when selling, the security must be sold on or after the ex-dividend date. The ex-dividend date is the second business day before the record date.
Record Date: Date a company looks to see who owns a security.
Payment Date: Date the company pays the dividend. This is set by the company and can be anytime after the company has sufficient time to ensure accuracy of the payments and varies from company to company and dividend to dividend.
Dates for dividends payed in the form of stock may differ from the above and should be checked in each individual case by the investor.

Qualified Dividends for Income Tax Purposes:
Ordinary dividends, shown in box 1a of 1099-DIV, are taxed as ordinary income, but qualified dividends, box 1b, are taxed subject to the 5% and 15% maximum rates that apply to net capital gain. If you are in the 25% bracket the qualified dividend rate would be 15% and below the 25% bracket it would be 5%.
To qualify the following requirements must be met:
* Dividend must be paid by a U.S. corporation or a qualified foreign corporation. For information on a qualified foreign corporation see IRS Publication 550 for starters. Roughly to be qualified a foreign corporation must be incorporated in a U.S. possession or be eligible for the benefits of a comprehensive income tax treaty with the U.S., etc. or be readily tradable on an established securities market in the U.S.
* Dividends not listed on as a type that are not qualified, see Pub. 550.
* You must meet the holding period.
Holding period: Stock must be held for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. For a preferred stock, note few preferred stocks pay qualified, it is 90 days during the 181-day period beginning 90 days before the ex-dividend date. As an example if you buy a stock the day before the ex-dividend date and sell it 63 days later the dividend is a qualified dividend if it meets the other requirements.