Stockpickr: Stock Plays for Baby Boomers
James Altucher
05/01/07 - 07:39 AM EDT
With a generation of baby boomers set to retire en masse over the next decade, there are at least two compelling reasons to look at stocks that pay monthly dividends:
- If you happen to be among those preparing to retire, it's nice to have that monthly income.
- With so many people piling into these stocks, they will be solid investments with plenty of capital appreciation as well as dividend payments over the next five to 10 years.
Not surprising, the most popular blog post on Stockpickr.com was Stockerblog's list of
200 Stocks That Pay Dividends Monthly. And related to that blog post is the portfolio of the
Top 100 Highest-Yielding Stocks That Pay Monthly Dividends, which offers an easy glance at which funds are invested in which stocks.
Some of the best mutual funds and hedge funds seem to be jumping on the monthly-paying-stocks bandwagon.
Take, for example, one of the highest-yielding monthly dividend payers,
Pengrowth Energy Trust(PGH Quote), a Canadian oil royalty trust that yields about 15%. Among those invested in the stock is the Dreman Value Fund, which is run by
Contrarian Investment Strategies author David Dreman. Dreman's Large Cap Value fund has delivered a phenomenal average annual return of 17% since its inception in 1991.
Dreman recently has been increasing his positions in some mega-cap stocks, such as
Bank of America(BAC Quote) and
Chevron(CVX Quote). Chevron pays its 3% dividend quarterly, not monthly; however, it trades at just 4.2 times cash flows. Bank of America, considered perhaps the most stable bank in the world -- particularly when compared with troubled peer
Citigroup(C Quote) -- has a 4.4% dividend and trades at a forward P/E of only 9.
For the rest of Dreman's holdings, check out the
David Dreman page on Stockpickr.
Another fund loading up on Pengrowth Energy Trust is the
Royce Opportunity Fund, which has returned an average of 14.8% annually over the past five years, a full 8.5% above the average return of its benchmark.
Canetic Resources Trust(CNE Quote) is another monthly-dividend Canadian trust, yielding 14.7%. Barclays holds more than 1% of the company, and Morgan Stanley also invests in the stock.
One of Canetic's largest mutual fund holders is
Kayne Anderson Energy Total Return Fund.
Harvest Energy Trust(HTE Quote), which pays a yield of 14.5%, is yet another holding of Barclays. Goldman Sachs owns nearly 1% of the outstanding shares, and Barclays owns more than 2%. And Morgan Stanley's name pops up again as a shareholder. In addition, there are several funds that own Harvest shares, such as Kayne Anderson Energy Total Return Fund, U.S. Global Investors Global Resources Fund and Dreman/Claymore Dividend & Income Fund.
Looking at some of the American monthly dividend payers,
RMK Strategic Income Fund(RSF Quote) pays 11.3% per year on a monthly basis. Oppenheimer & Co. is its largest institutional shareholder. Merrill Lynch also owns shares in the company. There is one mutual fund that owns RSF shares, American Pension Investors Efficient Frontier Income Fund.
Another American closed-end fund,
Boulder Growth & Income Fund(BIF Quote), pays about 10%. Both Merrill Lynch and Citigroup are major institutional shareholders.
There are more than
200 stocks, including exchange-listed closed-end funds (CEFs), real estate investment trusts (REITs), floating-rate funds, oil income funds and Canadian royalty trusts, that pay their dividends monthly. They all trade on the
New York Stock Exchange or American Stock Exchange.
Retirees like these investments for the regular monthly income, and preretirement investors, whether they hold them in their retirement accounts or their taxable portfolios, like these stocks for the faster compounding that monthly dividends provide.
Can monthly compounding make a difference? With a $100,000 portfolio yielding 14% (taxes excluded) over a 10-year period -- assuming the dividends could be reinvested at the same rate -- an investor receiving monthly dividends would be ahead by more than $6,300 vs. quarterly payments, more than $15,200 vs. semiannual payments and more than $31,500 vs. annual dividends.
There are a few caveats relating to these investments, however. First, some of them are thinly traded. Second, with regard to the Canadian royalty trusts, there is a withholding tax on the distributions, and that can affect the yields, especially in retirement plans.
In addition, although Canadian trusts currently avoid double taxation, the Canadian finance minister has proposed taxing all existing trusts as regular corporations, starting in the year 2011. This could affect the yields significantly in the future. However, the measure is far from approved, and the stocks have also fallen significantly, discounting the effect this rule would have on the stocks.
Check Stockpickr for the full list of
200 stocks that pay monthly dividends.
For other dividend resources on Stockpickr, check out any of the following portfolios:
Please note that due to factors including low market capitalization and/or insufficient public float, we consider RMK Strategic Income Fund and Boulder Growth & Income Fund to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
