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In This Choppy Market, Safety Literally
Pays |
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By
Andy Obermueller |
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The S&P
500 has mounted an impressive rally -- up +35% from its March ebb.
By most accounts, that's pretty good news. But is the overall
market's advance sustainable? Most experts say that the market
is beginning to look fairly valued from a fundamental perspective.
And even setting aside the fundamentals, there's clearly a limit to
how far stocks can advance before the investors start to stumble
over psychological barriers.
That's the ball game for a lot of investors. It doesn't have to be.
In fact, income investors don't have to worry about any of it. If
you don't want to parse earnings estimates and examine lots of
fundamental metrics, then the simple fact is you don't have to. All
you have to do is seek safety by finding a solid company with a
recession-proof business model and a rich dividend yield.
I know that sounds like a tall order, maybe even an impossibility.
But it's not. In fact, I'm about to tell you about an entire asset
class that offers all of this. You could begin to collect your
double-digit payout today!
(Full Story Below) |
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Also in Today's
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In This Choppy Market, Safety Literally Pays
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They say a picture is worth a thousand words. Let's see if
they're right:
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The top line on our chart shows the performance of an oil and gas
master limited partnership (MLP) that owns a network of
pipelines and other hardware necessary to move petroleum
products throughout the United States. The bottom line shows
the S&P 500, basically flatlining.
As you can see, the MLPS has done extremely well
this year, about 44 percentage points ahead of the anemic
S&P 500 Index. The picture tells the MLP story, which can be
summed up in one word: Safety. MLPs have delivered strong
gains as the rest of the market struggled because almost
nothing can interrupt their business.
That's why MLPs have been able to not only deliver
these astounding returns, but also to accomplish another
amazing feat: They've kept paying their dividends. In fact,
the company in the chart, like most MLPs, has a strong
double-digit payout, one that's roughly three times the
market average. Other MLPs that my colleague Carla Pasternak
holds in her
High-Yield Investing portfolio have done even
better.
So what is an MLP, besides being yet another acronym in
the alphabet soup that is Wall Street? These are special
entities set up to finance and own an asset and earn revenue
from its business. And though that business -- oil -- is one
of the most volatile on the plant, MLPs are among the most
stable investments you can buy. In fact, as you can see,
they're something investors run to when the rest of the
market looks too risky.
The reason for this is the MLP business model, which looks a
lot more like a toll bridge than an oil derrick. Oil, as you
know, fell from a high of $147 a barrel down to the low $30
range. Great news for drivers but an apocalypse for some
investors.
But even that dramatic drop didn't change how much it
costs to pump a barrel of oil from Point A to Point B. That
rate stays pretty steady, regardless of the value of what's
being pushed through the pipeline. Or, to use our other
analogy, the bridge toll for a $375,000 Rolls-Royce Phantom
is the same two dollars it is for a $2,750 Kia Spectra. A
car is a car, just like a barrel of crude is a barrel of
crude, whether it costs $150 or $50.
Now, while it's true that recession reduces crude use
in emerging markets, where driving is a luxury, it's not as
pronounced in developed countries where driving is
essential.
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As you can see from the chart, there hasn't been a
precipitous falloff in crude shipments. A slight reduction
some months, yes, but no crash.
What this means practically is simply this: The nation uses
a lot of oil in good times and bad, and the MLPs that own
the pipelines that move oil do well throughout the upswings
and downturns of the economic cycle. Your dividend checks
are backed up by the nation's insatiable thirst for oil for
our cars and natural gas to heat our homes. That's one of
the reasons that the MLP shown in the top chart has
increased its revenues +58.5% since 2005.
What does it mean to have a strong dividend payer in your
portfolio? It means one thing: Safety. You don't have to
worry about what's going on in the market when you've got
tangible results. For conservative investors, there's simply
nothing safer than a cash return. And MLPs throw off cash
like no other asset -- that's their entire reason for
existence!
If that sounds like it's right up your alley, then there's
another asset class you should be aware of. You can read all
about it
here.
Many Happy Returns
Andy Obermueller
Co-Editor
Global Dividend Opportunities
GlobalDividends.com
839-K Quince Orchard Blvd.
Gaithersburg, MD 20878-1614
P.S.
-- Don't miss a single issue! Add our address,
Research@GlobalDividend.com,
to your Address Book or Safe List. For instructions,
go
here.
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| Income
Notes
Bankrate says 1-year CDs are paying 2.33%, but high-yield
checking accounts are paying nearly twice that. To find banks in
your market that are offering the best rates, visit the Web site
www.checkingfinder.com.
--
Andy Obermueller
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Fixed-income investors have another reason to
continue on their search for the best yields: The Social
Security trust fund will run out of assets in 2037, four years
sooner than forecast, trustees said Tuesday. The news is equally
dire for Medicare, which will reach its limit by 2014. --
Andy Obermueller
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We're Putting
$100,000 into These Picks
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simple investing strategy. So far her results are
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Don't be left on the sidelines.
Go here to get Amy's strategy now. |
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Recent
Articles
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Looking For A Great Dividend Play? Easy! Just Ask Uncle Sam
By Andy Obermueller
May
6, 2009
It takes a lot of work to find a solid
company with a rich, dependable dividend stream. So why not let the
government do the heavy lifting? Government databases have a wealth
of valuable information about companies, including which ones are
likely to outperform. You don't even have to be a hacker to tap into
them. The data is yours -- for free, including information about
this dividend-paying gem.
Read
On...
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The Rarest Security on Earth Carries An Average 17.2% Dividend Yield
By Carla Pasternak
April 8, 2009
Are you
looking for a way to grow $10,000 into $35,598?
How about the opportunity to turn $25,000 into $88,994? You can do
it with a rare security that blends stocks and bonds. Only eight of them exist. Carla Pasternak, editor of
High-Yield Investing, explains what these securities
are and how they work. The only question is: Why aren't they juicing
the returns in your portfolio?
Read On.
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How to Build a
High-Yield Portfolio That Won't Lose Money
By focusing on
dividend safety as much as yield, Carla Pasternak
has built a portfolio full of winners. 20 out of her
21 picks are up -- and they're yielding an average
of 8.0%.
Get the full story here...
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