One Top Strategist's Favorite Income Play Right Now
An Interview with Amy Calistri
We recently sat down with Amy Calistri -- editor of
StreetAuthority's newest publication, The
Daily Paycheck -- to get her thoughts on the current
market, her favorite income play right now and why her income
strategy could be just the thing to help you avoid the market's mood
Read on to see what Amy has to say...
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Top Strategist's Favorite Income Play Right Now
Amy, what do you see as promising areas for income
investors in 2010?
Despite this rally, I'm happy to say there are still plenty
of chances to lock in strong -- and frequent -- dividends.
area I like is master limited partnerships (MLPs). This
sector provided steady income through the worst of the
recession, even when oil fell to $40 per barrel. Now oil
prices have rebounded and look to be stable above $70.
Meanwhile, demand has also stabilized. I think this will
lead to above-average income and dividend increases for the
sector in the coming year.
I'm also finding gems in some beaten-down sectors.
Shippers are a good example. Yes, rates for shipping have
dropped, but some companies lock in their business with
long-term contracts that don't depend on current rates --
allowing the strong yields to continue.
Is there anywhere you suggest income investors avoid?
I'm steering clear of any yields powered by precious and
industrial metals. I think the sector has probably seen its
run. As well, I think bonds might be a little tricky going
forward. On one hand, the Fed has said they don't plan on
raising interest rates anytime soon. On the other, rates
have nowhere to go but up -- which would hurt the bond
That said, I wouldn't totally steer clear of bonds. I have a
feeling that income taxes are going to rise. It may not be
in the immediate future, but rising taxes could crimp your
dividends. That's why I'm interested in tax-free municipal
bonds and funds to help shelter income.
Your "daily paycheck" strategy toward income investing is
a bit different than what most income investors have seen.
Why are you so confident in its ability to profit?
There is no safer profit that one that is in your hand. Each
dividend payment is concrete -- it can't be taken away by
the market. It's yours to keep. And if you can have a stream
of these payments coming in every day, it just adds to those
Apart from that, readers will likely know that dividend
reinvestment is a major part of my strategy. Reinvesting
dividends might be "old school," but there's a reason it's
still around -- because it works.
It's also simple
as can be. I really like that it's simple. There aren't
complex derivatives, you don't have to trade in and out of
stocks. Simply buy a security, reinvest the dividends and
watch your account grow. I think this simplicity means even
novice investors can follow along with my real-money
portfolio without being overwhelmed.
What's the response been like for The Daily Paycheck?
To be honest, I've been surprised! While I knew the strategy
behind the newsletter was sound, that's sometimes lost on
some readers... but not in the case of The Daily Paycheck!
I've been especially surprised by the cross-section of
investors who've joined me. It's not just retirees looking
for income -- it's also baby-boomers, younger investors, and
even those who haven't focused on income investing in the
I think with the trouble in the markets over the past two
years many people are just looking for a strategy that
doesn't make them as vulnerable to the market's mood swings.
Going after frequent income payers and reinvesting dividends
is just that type of strategy.
Finally, do you have a single favorite income play right
Aside from MLPs, I think telecoms are one of the most
attractive plays for income. Yes, many people think of them
as "boring old telecoms," but they may not realize how
interesting they've become as dividend plays.
While fixed-line services are declining, most telecoms are
gaining in the use of wireless smartphones like Apple's
iPhone. And each of these smartphones comes with a hefty
data plan and long-term contract. That's one reason why I'm
interested in AT&T (NYSE: T). I think it's a strong
dividend play that's hidden in plain sight.
If we're in for a rocky ride in the market, cash-rich
telecoms that have customers locked into contracts look to
be a good place to ride out the storm. And if we see a
recovery, the growth engine of smartphone adoption will be
Plus, this same phenomenon is going on around the world.
There are a number of funds that not only tap into global
telecoms, but also pay you monthly. In fact, I added one
such fund to my portfolio in the inaugural Daily Paycheck issue a few days ago.
P.S. -- You can join Amy today as she puts her "daily paycheck"
strategy to work in a $200,000 real-money portfolio! Simply
visit this link to see how daily income can help
your portfolio starting this month and join The Daily Paycheck.
AT&T Inc. (NYSE: T) raised its quarterly dividend a penny to
$0.42, marking the 26th consecutive annual increase for the
Based on AT&T's roughly 5.9 billion shares outstanding, the
+2.4% increase will boost annual payouts by $236 million.
Wall Street Journal
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