Ideas for your INCOME BUCKET

[modhatter]

This is directed to those of you (probably already retired or about to be) and need of an INCOME flow. Besides the obvious CD's, Treasuries, I--bonds and Tips, with the desire for a little higher yield (6 1/2% and up) what would you consider for an income flow. I am somewhat risk tolerant, as I would offset the more risky insvestments with safer choices as well.

Most of the Reits paying a decent yield are quite expensive now. The Canadian Trusts have just received a blow from the Canadian Gov. Selecting Dividend Funds or stocks of course would work, but would require a very large portfolio to produce enough.

Selecting a venue for income to live on, while letting your equity portion of your portfolio alone, would be the objective. Any suggestions should be with the mind set that you allready own these yourself, or would purchase at some future date.

With keeping the objective of at least a 6 1/2% YIELD, the only catagories I know of whould be in the following catagories:

Individual Bonds
High Yield Bond Funds
Preferred Stocks
Canadian Trusts
Reits

Any suggestions that make sense now.

 

[mathjak107]

Re: Ideas for your INVOME BUCKET

i have an un-listed reit im very happy with yielding 8.27% with a fixed price per share so its very stable. at the end of a 6-7 year period the property is sold and profits distributed. not knowing what to expect in distributions at the end i just look at it as a bond on steroids paying over 8% . not all of which is even taxable as being real bricks and morter you get 13% of the dividend as a depreciation amount so your only taxed on 87% .

unlike a regular bond which will drop in irising inflation the hedge is real estate usually rises

the un-listed reit is called apple hospitality vii

 

[terminator]

Re: Ideas for your INVOME BUCKET

There are some individual stocks that meet that criteria -- offhand I can think of SRT and EGLE (and related shippers), and UNTD and WWE are close to 6%. I know there are other risky stocks out there with that kind of yield. There seem to be a lot of international stocks like that, but I have a hard time evaluating those.

Other categories you didn't mention:

CEFs like some of the Hancock dividend funds.

BDCs like ACAS and ARCC.

LPs like Suburban Propane (SPH) and Cedar Fair (FUN).

FWIW, I'm not a big fans of these -- I only own two of the ones listed above, but they are ideas for you.

 

[brewer12345]

Re: Ideas for your INVOME BUCKET

I think you are on crack with an unlisted REIT, but different strokes...

For 6.5% yield, you are mostly going to be looking at junk bonds, preferreds that are BBB rated at best, the junkier REITs, and MLPs/Canroys. There are good buys in all of these categories, but you really have to tread carefully. Why not accept a little less yield for less risk?

 

[mathjak107]

Re: Ideas for your INVOME BUCKET

when it comes to un-listed reits you have to do your homework like everything else. their are some real crappy high expense ones that are very popular . i cant imagine ever owning one of them yet they are the biggest names in the industry. the one i have been in is very popular and is the cheapest way i know of to buy real brick and morter buildings with very little closing costs, not shares in a stock as its the volitility you are trying to avoid by owning the real thing directly. you cant buy any real estate that i know of without some closing costs unless you are buying a stock. . this particular one is the 7th one that was started over the last decade . the first one was sold at a 30% gain as well as paid almost 7.5% for the time frame. if you could have gotten 7.5% all thru the early 2,000's and got a 30% capital gain to boot in a 1% money market and bond world would you have given up 1% a year of it as a sales charge cost? i sure would ... the second one is being sold off now with some handsome gains expected.

these un-listed reits are more a proxy for bonds than stocks. they dont swing on days with hundred point drops

problem on most forums is people snear at things that they dont fully understand or as soon as they hear the word sales charge and they truly miss some great opportunities in un-conventional investments.

just becareful as always and read read read what it is your buying ,which is true of any investment. the only opportunity you want to miss is the one that makes a salesman rich on your money.

 

[brewer12345]

Re: Ideas for your INVOME BUCKET

I understand pretty well about unlisted REITs, quirky small caps, foreign companies specializing in something obscure, the most hated companies in the world, and random stuff that isn't part of any index and mostly flies below the radar. That is where most of my excess returns come from.

But with any unlisted investment, there are fewer safeguards and less protection against fraud. It can be extremely hard to evaluate those risks, so unless you have a personal relationship or some other reason why such an investment wouldn't be at risk of malfeasance, I don;t think such investments are worth the risk. There are simply too many other potential investments out there.

 

[wabmester]

Re: Ideas for your INVOME BUCKET

when it comes to un-listed reits you have to do your homework like everything else.

I think I looked into your unlisted REIT when you mentioned it once before.

IIRC, it has a HUGE front-end load (was it 8%?) and a good chunk of the high yield comes from return of capital (i.e., they are simply giving you some of your money back to juice the yield).

 

[mathjak107]

i dont know anything about iirc ,, never heard of it. i cant imagine buying any investment thats yield is a return of your own money. most of the payouts in unlisted reits are about 87% dividend which comes from operating income and 13 % the max by-law of what is classified as a return of capital under tax law but is actually your share of depreciation allowance and not taxible. dont forget their is no drop in nav on any of these payouts. nav is fixed for life although never guaranteed, just like a money market isnt guaranteed but most likly wont change , and all gains are distributions over and above your dividend rate. in fact the dividends in the apple reits are based for life on your initial investestment amount not the amount after a sales load is taken.

the load is small in comparison to the returns you would get from a bond , or the amount of interest you have to give up on tips to have the inflation protection. collecting over 7% thru the 2000,'s more than covered any sales loads 10x over.

 

[mathjak107]

even if you figure interest rates dont change from here on in ,if you take a 7% fee for getting in and divide it over the 6-8 years life of the reit so instead of 8.5% you get 7-1/2% . 7.5% with just a hint of risk, probley less than a corporate bond aint to shabby. especially when you may see a nice capital gain at the end too. i think if you stick to the big names who have a proven track record some of whom are the largest property owners in the country you will be just fine. just look at the overall returns and expenses that are involved. i would stay away from wells and cnl as they are toooooooo expense crazy from reviews i have read..

dont forget these reits are designed as bond proxy's not stock proxies. these are for strictly income and stability in nav. you cant compare them to publicly traded reits which are as volatile as any stock and rise and fall big time yearly and big capital gains are the goal.

these are proxies for bonds with a possible kicker at the end . it would be nice to get the kicker but even 7-1/2% after sales load for 7 years by itself
is nice.

 

[terminator]

i dont know anything about iirc ,, never heard of it.

I belive he's talking about If I Recall Correctly Worldwide REIT, Inc.

 

[wabmester]

most of the payouts in unlisted reits are about 87% dividend which comes from operating income and 13 % the max by-law of what is classified as a return of capital under tax law but is actually your share of depreciation allowance and not taxible.

Interesting. It turns out that this is SOP for REITs. The return of capital is taxable, but not until you sell the shares (your basis in the shares is reduced by the return of capital, so you pay it as cap gains).

 

[mathjak107]

yep goes from regular income to only 15% capital gain later on.
its classified as return of capital as normally re-capture on depreciation is at regular tax rates and not capital gains rates.. another lil benefit i guess

 

[Brat]

You could look at "O", a traded REIT holding mostly retail real estate.

 

[mathjak107]

publicly traded reits are way to volatile for an income bucket in my opinion. none really have a high enough yield and the swings in price are more approriate in a stock bucket