This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Prospect Capital Sports A 12% Yield

By Bill DeShurko

For our Covestor Dividend and Growth Plus portfolio, I combine stocks that pay a modest but increasing dividend with stocks that have a high dividend yield but typically are less likely prospects to raise their dividend consistently over time.

This combination potentially provides our clients with a relatively high and rising dividend stream that can be used for income – or reinvested for growth. I like the idea of stocks that pay us to hold them – it’s like adding a “company match” to an 401(k) account. Of course, future dividends are at the discretion of the company.

Below is one of our more popular holdings, Prospect Capital Corporation (PSEC). Shown is a price chart for the past twelve months. You can see that PSEC had a sudden drop in November of 2012.

This turned out to be more frustrating than troubling, as the following month, (indicated by the yellow arrows) PSEC actually increased its dividend by 7.8%. Not the typical actions of a company in trouble, as might have been indicated by the November price drop.

Chart 1 Prospect Capital Corporation 12 Month Return

However, what the chart doesn’t show is that PSEC’s current dividend adds up to a 12.03% yield. The stock also sports a lower than market Price to Earnings ratio (P/E) of only 8.49 based on projected 12 month earnings.

These are the stocks I love: high yields and low valuations. The only question is whether earnings will be stable enough to continue paying high dividends. If recent results are any indication, the answer may be “yes.” The company just announced that their net investment income increased by 43%, year over year for the period ending June 30, 2013.

What does this mean to our clients? Not only does the current dividend seem “safe,” but PSEC also announced that they plan on increasing their dividend payout beginning in March of 2014.

The investments discussed are held in client accounts as of July 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. The opinions and views expressed herein are of the portfolio manager and may differ from other managers, or the firm as a whole.

Bill DeShurko

Bill DeShurko

401 Advisor, LLC is a registered investment adviser based in Centerville, OH. Bill DeShurko founded 401 Advisor, LLC in 2003

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

DOW 17,619.51 +23.16 0.13%
S&P 500 2,063.12 +5.48 0.27%
NASDAQ 4,986.8670 +28.3990 0.57%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs