The Rarest Security on Earth Carries an Average 17.2% Dividend Yield
Wednesday, April 8, 2009
Printer-Friendly | PDF Version | Whitelist Us  | Also visit StreetAuthority
The Rarest Security on Earth Carries An Average 17.2% Dividend Yield
-- By Carla Pasternak

     Are you looking for a way to grow $10,000 into $35,598?

     How about the opportunity to turn $25,000 into $88,994?

     These knock-out returns are available from a rare security that combines stocks and bonds. Only eight of them exist. In today's issue, Carla Pasternak, editor of StreetAuthority's High-Yield Investing, explains what these securities are and how they work. The only question remaining is this: Why aren't they juicing the returns in your portfolio?   (Full Story Below)

Also in Today's Issue...

Capture a 19.2% Yield Backed by the Federal Government
It borrows cheap, collects higher and pockets the spread. Simple, but elegant -- and the shares pay a rich 19.2% yield. In our special presentation, we outline another pick that also paid 19% last year... plus threw in another +34% in capital gains.

For the full story, click here to view our new presentation for income investors.
Critical Warning Number Six
Something very big will happen in America in the next 180 days. More devastating than the credit crisis of 2008 and the Great Depression. Our first five previous predictions have come true.

Click here to see critical warning number six.

    The Rarest Security on Earth Carries an Average 17.2% Dividend Yield

     There are only eight of these securities in the world.

     They carry an astronomical average dividend yield of 17.2%.

     Let's not gloss over that number.  Let's take a look at what it can do for you. As the chart shows, a high rate of return can provide an immense gain for your dollars.

     These securities marry one common share and a bond issued by the company. The lion's share of the distribution is fixed interest income. The rest of your return comes from the stock dividend powered by the company's cash flow.

    And that's before you ink even a dime's profit on the capital gain from the security.
     As if all of that weren't enough, these investment vehicles have been a bulwark of stability amid the market turmoil of the last few months.

     In fact, they have delivered impressive total returns (including dividends) of +9% so far this year, well ahead of the broader market loss of -12% as measured by the S&P 500 index.

     Double-digit yields and dividend safety often make an uneasy pairing in today's markets, but these securities are a rare exception.  Part bond, part stock, these hybrid securities offer the security of a bond's fixed income and the growth potential of a stock.

     For example, a rural telecom operator that has issued one of these securities pays a quarterly distribution of $0.42. Each security is comprised of one common share and a note issued by the company paying a fixed rate of 13%. The total distribution reflects a cash dividend $0.17625 per share and an interest payment of $0.24375 per note.

     That's a lot to keep track of, so let's flip to the last page:  The distributions together with share price gains have contributed to +27% returns so far this year. That makes a 17.2% dividend yield seem outright paltry!

     Now, the stock dividend portion of the payout may go up or down -- two companies raised their dividends this year, one slightly reduced it, the rest kept them stable.  In any case, whatever happens to the dividend portion, the bond payment remains fixed, giving you an extra degree of security in volatile markets. All but two of these securities pay distributions monthly, which provides another layer of payment protection.

     In addition, these companies throw off steady cash flow from stable, recession-proof businesses.  One is the fifth-largest funeral home operator in North America, another is one of the top 40 local phone operators in the U.S., yet another distributes some of the best known brands of packaged foods in the country. They also count among them the fifth largest provider of school bus transportation services in the U.S., and the nation's leading manufacturer of heavy-duty transit buses.

     The companies are industry leaders, but their publicly traded securities lie under the radar of most Wall Street analysts. That's partly because there are so few of them, but also because they originally were designed by Canadian investment bankers for U.S. companies seeking to tap the Canadian capital markets.

     In the early 2000s, these companies were looking for an investment vehicle that would provide a tax-efficient way to distribute their cash flow to shareholders, something like the Canadian income trust but better suited to American tax laws.

     The result: A hybrid security that goes by many different names. We call them "income deposit securities," but they are also called "enhanced-income securities" or "income-participating securities."

     Whatever name you use, they're essentially the same.

     Like Canadian income trusts, they pass along to shareholders almost all their cash flow.  Fortunately, however, these securities don't share the same fate of Canada's royalty trusts, which are doomed to disappear in 21 months. As the legislation passed by Canada's federal government now stands, companies that issued these securities are corporations not trusts. As such, they shouldn't need to convert to ordinary tax-paying corporations by January 1, 2011 like Canadian royalty trusts.

     Two of these securities trade on major U.S. exchanges. The rest are listed on Canada's benchmark Toronto Stock Exchange but also trade over-the-counter in the U.S. As a U.S. investor, you can trade Canadian-listed stocks with either the Canadian ticker or U.S. ticker.

     The shares are more actively traded on the Canadian exchange, but you can trade online more easily with the U.S. ticker and save the cost of calling your broker.  Canadian tickers will give you the most recent price in Canadian dollars, while the U.S. ticker gives you the last U.S. trade in U.S. dollars. 
     Thanks for joining me this week on the search for the world's best income opportunities!


-- Carla Pasternak
Global Dividend Opportunities
839-K Quince Orchard Blvd. 
Gaithersburg, MD 20878-1614

P.S. This rare type of security is one of my favorite investing ideas. I've been recommending one of these enhanced income securities to my readers since 2006. You can get the name of my favorite EIS, plus the names of seven others. All you have to do is just go here.

P.P.S. -- Don't miss a single issue! Add our address,, to your Address Book or Safe List. For instructions, go here.

Income Notes

The Bloomberg Professional Service shows 148 U.S. companies with a market cap of more than $500 million and a dividend yield of more than 7%. Among them: Altria (MO), Kinder Morgan (KMP) and Annaly Capital (NLY).

The prospect of tax-free returns piques a lot of curiosity. But is it a good deal? It depends on your tax bracket. Investors in the 33% bracket who buy an "AAA"-rated muni are collecting 3.27% tax free, or the same as a 4.88% taxable yield. The return on the "AAA" corporate bond is higher, at 4.99%. 

-- Andy Obermueller

Capture a 19.2% Yield Backed by the Federal Government

It borrows cheap, collects higher and pockets the spread. Simple, but elegant -- and the shares pay a rich 19.2% yield. In our special presentation, we outline another pick that also paid 19% last year... plus threw in another +34% in capital gains.

For the full story, click here to view our new presentation for income investors.

Recent Articles

Overlooking Today's Single-Digit Yields Can Cost Your Triple-Digit Gains
By Andy Obermueller
March 11, 2009

Sometimes a low yield is just the seed of greater yields and gains to come -- like this 4.4% yielding stock that has all the potential to yield 15.6% with a +304.6% gain.

Read On....

Global Economy,
Global Opportunities

An Interview with Nick Lanyi
March 18, 2009

The global economy may be slowing, but that hasn't impacted High-Yield International Editor Nick Lanyi's ability to find investments with "strong income, the potential for capital appreciation, and only moderate risk." Read the most recent interview.

Read On...

Reader Favorites

The Safest International Dividend Payer on Earth
By Paul Tracy

The Safest Dividend in the S&P 500
By Carla Pasternak

Special Offers

+127.7% Gains In Less Than 6 Months!
The StreetAuthority Investor Update is a free weekly newsletter designed to help you track down the market's most profitable stocks, funds, and ETFs.  But don't be fooled by the 'no-cost' price tag: You're moments away from receiving a steady flow of high-quality investment ideas... including triple-digit winners.



Home | Issue Archives | About Us | Meet the Staff | FAQ | Contact Us | Subscribe | Premium Content
Research Reports | Media Coverage | Testimonials | Privacy Policy | Terms of Use | Disclaimer | Advertise

StreetAuthority Financial Network Web Sites:


DISCLAIMER: and its parent company, StreetAuthority, LLC, are publishers of financial news and opinions and NOT securities brokers/dealers or investment advisors. You are responsible for your own investment decisions. All information contained in our newsletters or on our web site(s) should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence and consider obtaining professional advice before making any investment decision. As a condition to accessing our materials and web sites, you agree to our Terms and Conditions of Use, available here, including without limitation all disclaimers of warranties and limitations on liability contained therein. Owners, employees and writers may hold positions in the securities that are discussed in our newsletters or on our web site.

(C) Copyright 2001-2012. StreetAuthority, LLC  All Rights Reserved.
Unauthorized Reproduction or Distribution is Strictly Prohibited.

Subscribe for FREE

Subscribe to Dividend Opportunities today and you'll receive a FREE newsletter three times a week, plus a FREE in-depth research report that identifies some of today's highest-yielding securities.

There's absolutely nothing to purchase, we'll keep your email address private, and you can cancel at any time. You truly have nothing to lose, so take advantage of this no-hassle, risk-free offer today!

Click here to subscribe now.