Hinton also likes Redwood Trust (RWT), a real estate investment trust that yields 5.2%. The REIT invests in residential mortgages that are not backed by the government. Prices of mortgages sank during the financial crisis, and investors have remained concerned about potential defaults. Hinton says that the REIT managers have assembled a solid portfolio. "They are value investors who know how to spot very high-quality mortgages," he says.
Buffalo Flexible Income holds a mix that includes mainly dividend-paying stocks and high-yield bonds. During the past five years, the fund has returned 6.8% annually. Buffalo, which yields 3.0%, aims to deliver income as well as capital gains. "We want to provide a stable income vehicle that can be a core holding for conservative investors," says portfolio manager Paul Dlugosch.
Many portfolio holdings are rock-solid blue chips, including Microsoft (MSFT) and Exxon Mobil (XOM). Lately Dlugosch has been shifting to master limited partnerships, which invest in energy infrastructure, and yield from 4% to 8%. A favorite holding is EQT Midstream (EQM), which yields 4%.
At the time of publication the author held no positions in any of the stocks mentioned.Follow @StanLuxenberg This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.