A list that generates income

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PamInCA

Dryer sheet aficionado
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I was given this list of investments that would generate $24k annual income on $180k investment and thought I would share.

PFN 11.02% 0.96000 8.71 800 $6,968.00 $768.00
PFL 11.29% 1.08000 9.57 1000 $9,570.00 $1,080.00
PCI 11.30% 1.96876 17.43 500 $8,715.00 $984.38
PHT 11.34% 1.14000 10.05 600 $6,030.00 $684.00
PTY 11.65% 1.56000 13.39 700 $9,373.00 $1,092.00
RAS-B 12.39% 2.09375 16.90 500 $8,450.00 $1,046.88
RSO-B 12.49% 2.06250 16.51 600 $9,906.00 $1,237.50
DMO 12.52% 2.82000 22.52 400 $9,008.00 $1,128.00
TCRD 13.04% 1.36000 10.43 800 $8,344.00 $1,088.00
CYS 13.21% 1.04000 7.87 1100 $8,657.00 $1,144.00
IVR 13.69% 1.60000 11.69 800 $9,352.00 $1,280.00
SFL 13.91% 1.80000 12.94 950 $12,293.00 $1,710.00
PHK 13.93% 1.24152 8.91 1400 $12,474.00 $1,738.13
NCV 14.29% 0.78000 5.46 2720 $14,851.20 $2,121.60
PSEC 14.30% 0.99960 6.99 2000 $13,980.00 $1,999.20
MITT 14.95% 1.90000 12.71 800 $10,168.00 $1,520.00
AINV 14.95% 0.80000 5.35 2150 $11,502.50 $1,720.00
NRZ 15.92% 1.84000 11.56 900 $10,404.00 $1,656.00

13.33% 180,046 $23,998
 
Maybe you should post this over at the Bogleheads forum, would be very interested to see their replies/thoughts...
 
Who gave you this list?

Do you realize that investments that provide a 13.33% yield are expected to be very risky/speculative?

Have you looked at any of the long term charts on those ticker symbols? Can you handle that kind of roller-coaster ride, and risk of loss of capital? I can't.


-ERD50
 
Would a stock screener with criteria "Yield > 11%" come up with a similar set of ticker symbols? What else makes these special?
 
I only looked a few of these up but it looks like they are all CEFs. Anyway, yes you can do this even easier using a fund of fund of CEFs. I know of two ETFs and one CEF that are fund of funds (i.e. FOF).

PowerShrs CEF Income Cmpst Prtfl(NYSEARCA:pCEF) = 9.08%
Exchange Traded Concepts Trust(NYSEARCA:YYY) = 10.74%
Cohen & Steers Clsd-End Optuny Fnd, Inc.(NYSE:FOF) = 9.75%

CEFs have high payouts because they use leverage and also usually pay out return of capital at least some of them time. CEFs cover just about every sector of the investing world. So you do have diversification. Your still pretty vulnerable on the leverage though.

There are also a few specific sectors that have very high yields right now (MLPs, mortgage REITs, business development companies, shipping).

Alerian MLP(NYSEARCA:AMLP) = 11.25%
iShares FTSE NAREIT Mortg.REITIn Fd(ETF)(NYSEARCA:REM) = 12.21%
Market Vectors BDC Income ETF(NYSEARCA:BIZD) = 8.94%
The Guggenheim Shipping ETF(NYSEARCA:SEA) = 12.55%

REITs and BDCs pay a high yield because they have tax breaks when paying out 90% of income (not double taxed). MLPs are setup as partnerships and not c-corps so they also have a tax incentive for paying out almost all income. I'm not sure why shipping companies have such high yields other than the sector has been beaten down to heck. Most of the shipping companies are c-corps.

If you look at the dividend history IMHO the best deal right now is with the MLPs as they are consistent dividend growers. The other options have high payout but the income is variable and I'd only expect it to grow over long periods like 10 years.

I think now is a good time to use leverage. I don't think interest rates can be raised much at all and I expect they will stay relatively flat for years. My "base case" is for long term stagnation similar to Japan's lost decades (and still going).
 
Some of these are preferred stocks. These are below junk rated "equity bonds". Meaning they are paying this money on dividends, because their capital structure is so poor they cannot access the debt market or banks with better yields. Usually they have that area tapped out. If they run low on cash the bond holders can get paid, and you get stiffed.
These are high risk...Many times you do get your 11% dividend but the stock price dropped 20%.
When buying some of these either "ignorance is bliss" or be an expect on financials... No free lunch... Either way, having more than 10% of your stash in these may be asking for big trouble. I own a lot of preferreds but safe ones, thus lower yields in 6% range... I prefer preferreds from companies like one I own that earned $300 million after taxes, and only owed $6 million in dividends from that.... About a 50-1 coverage ratio...For me life is too short to worry about something that may blow up and not even know why it did.


Sent from my iPad using Tapatalk
 
Yes, I know they are high risk. It was an example of how to generate $24k income on $180k investment. No, I wouldn't do this but posted it for example and discussion.
 
Gotta have "O"---Where is it?:facepalm:
I've taken periodic baths with PSEC, but all is calm --for now.
 
PamInCA said:
Yes, I know they are high risk. It was an example of how to generate $24k income on $180k investment. No, I wouldn't do this but posted it for example and discussion.
Click to expand...

Like you, I wouldn't do this.

Likewise, I wouldn't go down to Harrah's on the riverfront here in New Orleans, and put $180K on red or black.

I'm retired, and gambling like that with my retirement money would be stupid for me to do. Others may have the wherewithal to do such foolhardy things, but I don't.

"With risk comes reward" as they say, but if one builds a bigger nestegg one can get a nice comfortable income in retirement despite lower risk investments.
 
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I did not study the list, but it is definitely the case that some yields go high because they are not expected to be sustained. Can you say Greek bonds?
 
I wonder... if one bought these in the recommended proportion on 3/22/06 what would your inception to date return have been?
 
I can pick a day too. How about any of the Pimco cef,s on 4/1/2009(april fools day). Except for PCI it wasn't around yet.
 
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They are investments that can make people money if they know what they are doing and are a bit fortunate. The people who know what they are doing and understand these issues would not be the people I would worry about. Its the ones who look at it and say... "10% income, wow that is a great yield; I am buying me a slug of these!"
My definition of high yield is 6%. I am getting 6% plus return on investment grade issues. Investment grade bonds yield almost half of that. So, I think the value and "high income" is in these issues... Though obviously lower in rank than senior bonds, the net income coverage ratio is so high, risk is very minimal. The 2 biggest risks are extended 6% plus inflation and being called. I can handle those risks.


Sent from my iPad using Tapatalk
 
Here's a more reasonable one that I would be inclined to go with to generate income for the next 7 to 10 years. Overall yield of 5.77%

40% PONDX
40% DLTNX
20% EITHX
 
PamInCA said:
Here's a more reasonable one that I would be inclined to go with to generate income for the next 7 to 10 years. Overall yield of 5.77%

40% PONDX
40% DLTNX
20% EITHX
Click to expand...



I couldn't find EITHX but the other 2 do not appear to get you close to that yield based on Morningstar. If I am not mistaken you are using total distribution yield for past year. The true 30 day yield is 3.41% and 3.27%... This is a more accurate portrayal of what inside issues are recently yielding. These appear to be conservative funds, but the expense ratios of over 70 basis points is a killer for that 30 day yield. If I am not mistaken that is then extracted after the stated yield. Someone correct me if I am wrong.
But the TTM yield and 30 day SEC yield can both be distorting so it is hard for me to know either way for certain.. But those Exp. ratios are just killers in a low rate environment.
 
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Mulligan said:
I couldn't find EITHX but the other 2 do not appear to get you close to that yield based on Morningstar. If I am not mistaken you are using total distribution yield for past year. The true 30 day yield is 3.41% and 3.27%... This is a more accurate portrayal of what inside issues are recently yielding. These appear to be conservative funds, but the expense ratios of over 70 basis points is a killer for that 30 day yield. If I am not mistaken that is then extracted after the stated yield. Someone correct me if I am wrong.
But the TTM yield and 30 day SEC yield can both be distorting so it is hard for me to know either way for certain.. But those Exp. ratios are just killers in a low rate environment.
Click to expand...

That should be ETHIX, load waived at Fidelity.
I'm going by what Morningstar says when I create a portfolio of the above amounts, 5.77% yield.
 
PamInCA said:
That should be ETHIX, load waived at Fidelity.

I'm going by what Morningstar says when I create a portfolio of the above amounts, 5.77% yield.
Click to expand...



Not criticizing, this is just me and my personal preference only on what I do, but ETHIX has a 6.35% TTM and 30 day SEC yield of 5.07% with a demoralizing 90 basis point expense ratio. The fund has 56% of issues in B or lower rated bonds... That is in the muddy drinking water area of bonds. At nearly same TTM I can get investment grade preferred stocks from companies with A rated bonds, with no expense ratio being siphoned ($4.95 trade) off, and 15% QDI, in an area that has never had a default (public traded electrical utilities).
It just seems like better value and risk/reward to me. But I definitely note your 20% limit threshold, though in buying them.
 
I don't want to buy individual stocks. Not comfortable with it and don't want to spend time on it.
 
PamInCA said:
I don't want to buy individual stocks. Not comfortable with it and don't want to spend time on it.
Click to expand...



I did check in Morningstar data where I was getting info from so my info is apples to apples comparison... The expense ratio is included in performance of fund. That is good for you. I certainly understand why you would want to stick with funds. That is why I said it was just my personal preference as I am probably in minority by far.
 
I looked these up just now and it generated a 30.4% XIRR!

List on Yahoo

I checked the dividends over the past year, and most of them held-up. The OP dividend calculated to be $21,713 and dividends came in at $19,614, so 90% of the projection. Doesn't include RAS-B and RSO-B just because I didn't want to fiddle with those oddballs.

Ticker  Div12mo todayprice shares
PFN 0.96 9.7 800
PFL 1.08 10.77 1000
PCI 0.164 20.46 500
PHT 1 9.61 600
PTY 1.6 15.19 700
RAS-PB 0 22.5 500
RSO-PB 0 22.95 600
DMO 2.82 23.63 400
TCRD 1.29 9.61 800
CYS 1.01 7.46 1100
IVR 1.6 14.81 800
SFL 1.8 14.23 950
PHK 1.192 8.35 1400
NCV 0.78 6.41 2720
PSEC 0.996 9.18 2000
MITT 0.95 17.31 800
AINV 0.7 6.39 2150
NRZ 1.84 16.53 900

The XIRR was -180046 on 3/23/2016, then 19614 spread evenly from 4/1/2016 to 3/1/2017, then +today's prices times shares, so 210840.
 
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Turned out to be a darn good list: 43.8% XIRR after 2 years!! In the mean time, the S&P 500 had an XIRR of 19.5%.

Not only did the items in the list come through on dividends, they also had a whole bunch of price appreciation.

The original post, two years ago, suggested a dividend yield of 13.3%. Using the $180K initial investment, the yield was 13.1% the first year and 12.5% the next year ($23.6K and $22.5K, respectively, March to March).

Because of the price appreciation, the yield looks lower as calculated against today's pricing, but the payouts hung in there at the $23K level, similar to the historical values reported in the original post.

Maybe this was just a fluke for the kind of market we've had in the last two years, but boy, this list far exceeded my expectations. Don't tell ERD50 that dividend stocks "worked" :LOL:

If you want to check my math:
https://drive.google.com/file/d/1RUvtBvzSROD8OZr_mtgU7XHO-fREy1OH/view?usp=sharing
 
You can also get the same rate of return if you find two different stocks that pay around 6.7%, and have ex-dates staggered so you can swap the entire $180K back and forth between them.

But, that's also a bit risky...
 
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