Income investors love the benefits of stocks that pay their dividends monthly, whether they are retired looking for income or active investors parking their profits. According to the Excel list that was just updated by WallStreetNewsNetwork.com, there are almost 300 different securities that pay monthly, most with very high yields. Technically, these stocks are real estate investment trusts, oil income trusts, closed end bond funds, and closed end income stock funds, which pay dividends every month. The advantages to having monthly dividends versus quarterly or annual dividend stocks are that the invested capital is returned faster, compounding takes place quicker, and there is usually less stock price volatility. Additionally, many of monthly dividend investments pay tax free income. Here are a few that may be worth investigating.
Gas Natural Inc. (EGAS), formerly known as Energy, Inc., is a distributor of natural gas in Montana, Wyoming, North Carolina, and Maine. It was founded in 1909. The stock pays a yield of 5.1% and carries a price to earnings ratio of 7.03.
Baytex Energy (BTE) is an investment trust which generates income from petroleum and natural gas properties. It generates a yield of 5.1%, and has been paying monthly since 2006. The company trades at 23.5 times forward earnings.
Blackrock Apex Municipal Fund Inc. (APX), founded in 1987, owns medium-to-lower grade or unrated municipal bonds, and sports a yield of 6.2%. It sells at a discount to net asset value in excess of 12.7%. Management fees are 0.68%.
Realty Income Corp. (O), with the great single letter stock ticker symbol, yields 5.1%. This real estate investment trust which specializes in commercial retail real estate, has been around since 1969. The stock trades at 16.9 times forward earnings.
Calamos Convertible & High Income (CHY) has a fairly high yield of 8.2%. It trades at about a 1.5% discount to net asset value. However, the management fee is a bit on the high side at 1.13%. This CEF, founded in 2003, invests in high yield fixed income securities and convertible securities.
Provident Energy Trust (PVX) is a Canadian income trust which generates a yield of 8.7% through the marketing of natural gas liquids. It was founded in 1993. Be aware of Canada's new legislation taxing trust income in effect this year, which would tax the trusts at the corporate level in addition to the shareholder level. However, many analysts believe that this taxation is build into the price of these Canadian trusts.
Some things to keep in mind when you are doing your due diligence and analysis on these investments. Be careful of the ones with high management fees, watch out for the ones with limited liquidity and which trade very few shares on a daily basis, and if you invest in the municipal bond closed end funds, make sure you know the consequences of the Alternative Minimum Tax. You also want to find the ones that trade at a discount to net asset value, and avoid the ones using excessive leverage.
To see the latest updated list of over 275 monthly dividend stocks, including many that have yields of 8% or more, go to WallStreetNewsNetwork.com. Remember, very high yields may not be sustainable.
Disclosure: Author did not own any of the above at the time the article was written.
By Stockerblog.com
Showing posts with label APX. Show all posts
Showing posts with label APX. Show all posts
Tuesday, January 11, 2011
Thursday, October 21, 2010
The Advantages of Tax Free CEFs Yielding Over 5%
With so much uncertainty in the stock market, and with the possibility of tax increases on the horizon, investors have been allocating funds into tax free bonds (municipal bonds), directly and through tax free income closed end funds. Tax free closed end funds or CEFs have several advantages over investing in municipal bonds directly.
Many of these CEFs have yields of 5% or more, such as the Blackrock Apex Municipal Fund Inc. (APX), which sells at a discount to net asset value, uses almost no leverage, and yields 5.7%. The Nuveen New York Dividend Advantage Municipal Fund 2 (NXK) has a yield of 5.8%, is currently trading at a discount to NAV, and has about 26.5% leverage, much lower than the average leverage of 34.7% for all the CEFs. The Nuveen Investment Quality Municipal Fund Inc. (NQM) yields 6.6%, utilizes about 29% leverage, and trades at a slight discount. WallStreetNewsNetwork.com just updated its list of tax free income closed end funds, which describes almost 200 ETFs,, including yields, discounts/premiums, leverage, management fees, date founded, and other information.
High income taxpayers love municipal bonds, as they provide income that is tax free from Federal income taxes, and if the bond is issued from the state in which the taxpayer resides or from one of the territories of the US such as Puerto Rico, then the income is also exempt from state taxes. Munis are generally issued by states, counties, cities, and other governmental entities such as school districts, sewer districts, bridges, and water and power departments. Here are the advantages and disadvantages of munis and muni CEFs.
Municipal Bonds
Advantages:
1. You can pick and choose what governmental agency you want to loan money to. Maybe you want to stick with the bonds from the cities and counties near you that you are familiar with.
2. Bonds have a maturity date. This means that no matter how high interest rates go, and no matter how low the bonds drop in value, at maturity, the bonds are paid off at par.
3. What your bond is worth is what your bond is worth; in other words, the trading price of CEFs may be far higher or lower than the net asset value of the fund.
Disadvantages:
1. Higher minimum investment. Although munis are issued in $5,000 denominations, a round lot is generally considered by many firms to be $100,000.
2. Less diversification. Because of the higher minimum, investors can't own as many diverse bonds as they could with a CEF.
3. Interest payments only twice a year.
4. No professional management or monitoring.
5. Illiquidity. Munis are not traded on an exchange, and estimated prices given on brokerage statements can be way off from what brokers will actually offer you if you want to sell. This actually happened to me; I received an offer of five points less than what the statement showed a couple days before, with no change in interest rates over those couple days.
Municipal Bond Closed End Funds
Advantages:
1. No minimum investment. You could technically buy one share.
2. Monthly income.
3. With the monthly income, you receive you capital back faster, and you can do quicker compounding of your income.
4. Very liquid; traded on major exchanges.
5. Narrow bid and asked spreads compared to municipal bonds.
6. Can sell off small portions if funds are needed. In other words, if you had $10,000 invested and needed to cash in $1,000 worth, you could do it with a CEF but not with municipal bonds.
Disadvantages:
1. You pay a management fee and other administrative fees.
2. Some CEFs use leverage. You should beware that this increases the risks to the investor.
3. Some CEFs may be trading at a premium to net asset value. You want to look for those trading at a discount.
4. No maturity date (other than a few target funds). If rates go up and continue to rise during your lifetime, you may never get your principal back.
As you can see, there are benefits to both municipal bonds and municipal bond closed end funds. Just make sure that you are familiar with the risks and costs of each.
Disclosure: Author does not own any of the above at the time the article was written.
By Stockerblog.com
Many of these CEFs have yields of 5% or more, such as the Blackrock Apex Municipal Fund Inc. (APX), which sells at a discount to net asset value, uses almost no leverage, and yields 5.7%. The Nuveen New York Dividend Advantage Municipal Fund 2 (NXK) has a yield of 5.8%, is currently trading at a discount to NAV, and has about 26.5% leverage, much lower than the average leverage of 34.7% for all the CEFs. The Nuveen Investment Quality Municipal Fund Inc. (NQM) yields 6.6%, utilizes about 29% leverage, and trades at a slight discount. WallStreetNewsNetwork.com just updated its list of tax free income closed end funds, which describes almost 200 ETFs,, including yields, discounts/premiums, leverage, management fees, date founded, and other information.
High income taxpayers love municipal bonds, as they provide income that is tax free from Federal income taxes, and if the bond is issued from the state in which the taxpayer resides or from one of the territories of the US such as Puerto Rico, then the income is also exempt from state taxes. Munis are generally issued by states, counties, cities, and other governmental entities such as school districts, sewer districts, bridges, and water and power departments. Here are the advantages and disadvantages of munis and muni CEFs.
Municipal Bonds
Advantages:
1. You can pick and choose what governmental agency you want to loan money to. Maybe you want to stick with the bonds from the cities and counties near you that you are familiar with.
2. Bonds have a maturity date. This means that no matter how high interest rates go, and no matter how low the bonds drop in value, at maturity, the bonds are paid off at par.
3. What your bond is worth is what your bond is worth; in other words, the trading price of CEFs may be far higher or lower than the net asset value of the fund.
Disadvantages:
1. Higher minimum investment. Although munis are issued in $5,000 denominations, a round lot is generally considered by many firms to be $100,000.
2. Less diversification. Because of the higher minimum, investors can't own as many diverse bonds as they could with a CEF.
3. Interest payments only twice a year.
4. No professional management or monitoring.
5. Illiquidity. Munis are not traded on an exchange, and estimated prices given on brokerage statements can be way off from what brokers will actually offer you if you want to sell. This actually happened to me; I received an offer of five points less than what the statement showed a couple days before, with no change in interest rates over those couple days.
Municipal Bond Closed End Funds
Advantages:
1. No minimum investment. You could technically buy one share.
2. Monthly income.
3. With the monthly income, you receive you capital back faster, and you can do quicker compounding of your income.
4. Very liquid; traded on major exchanges.
5. Narrow bid and asked spreads compared to municipal bonds.
6. Can sell off small portions if funds are needed. In other words, if you had $10,000 invested and needed to cash in $1,000 worth, you could do it with a CEF but not with municipal bonds.
Disadvantages:
1. You pay a management fee and other administrative fees.
2. Some CEFs use leverage. You should beware that this increases the risks to the investor.
3. Some CEFs may be trading at a premium to net asset value. You want to look for those trading at a discount.
4. No maturity date (other than a few target funds). If rates go up and continue to rise during your lifetime, you may never get your principal back.
As you can see, there are benefits to both municipal bonds and municipal bond closed end funds. Just make sure that you are familiar with the risks and costs of each.
Disclosure: Author does not own any of the above at the time the article was written.
By Stockerblog.com
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