{"id":21515,"date":"2011-06-06T15:04:51","date_gmt":"2011-06-06T19:04:51","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=21515"},"modified":"2011-06-06T15:04:51","modified_gmt":"2011-06-06T19:04:51","slug":"if-you-dont-know-about-this-income-investing-oddity-pay-attention","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/06\/06\/if-you-dont-know-about-this-income-investing-oddity-pay-attention\/","title":{"rendered":"If You Don’t Know About This Income Investing Oddity, Pay Attention"},"content":{"rendered":"

By Carla Pasternak, DividendOpportunities.com<\/span><\/strong><\/a><\/p>\n\n\n\n\n
If \t\t\t\tYou Don’t Know About This Income Investing Oddity, Pay Attention<\/strong><\/span><\/td>\n<\/tr>\n
I know what income investors like.<\/span> <\/p>\n

If I put a double-digit yield in the headline of an article, \t\t\t\t\tit will see thousands more reads than an article without a \t\t\t\t\tbig headline yield.<\/p>\n

I can put “safety” in the headline. I can put in enormous \t\t\t\t\tcapital gains. But yield is what really excites income \t\t\t\t\tinvestors.<\/p>\n

That’s one of the reasons I have a “10%-Plus” Portfolio in \t\t\t\t\tmy High-Yield Investing<\/em> advisory. To be included, a \t\t\t\t\tsecurity has to pay double-digits at the time it’s added. No \t\t\t\t\texceptions.<\/p>\n

But there’s a secret to those high yields I’d guess most \t\t\t\t\tincome investors don’t know.<\/p>\n

Take a look below. I’ve shown the performance of my current \t\t\t\t\tholdings in the “10%-Plus” Portfolio (to be fair to High-Yield Investing<\/em> subscribers I’ve redacted the \t\t\t\t\tticker symbols).<\/p>\n

Why are the yields you see here below 10%? Nearly all the holdings \t\t\t\t\tin the portfolio have risen since I added them. That lowers \t\t\t\t\tthe current yield, but those who bought when I highlighted \t\t\t\t\tthe play are still earning 10% or more on the initial \t\t\t\t\tinvestment.<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
“10%-Plus” \t\t\t\t\t\t\t\tPortfolio<\/span><\/strong><\/td>\n<\/tr>\n
<\/td>\nYield<\/span><\/strong><\/span><\/td>\nTotal Return<\/span><\/span><\/strong><\/td>\n<\/tr>\n
Security #1<\/span><\/td>\n10.2%<\/span><\/td>\n30.2<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #2<\/span><\/td>\n9.5%<\/span><\/td>\n17.2<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #3<\/span><\/td>\n9.1%<\/span><\/td>\n5.6<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #4<\/span><\/td>\n9.0%<\/span><\/td>\n29.4<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #5<\/span><\/td>\n8.8%<\/span><\/td>\n69.8<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #6<\/span><\/td>\n7.7%<\/span><\/td>\n32.1<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #7<\/span><\/td>\n7.1%<\/span><\/td>\n47.2<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #8<\/span><\/td>\n6.6%<\/span><\/td>\n72.8%<\/strong><\/span><\/td>\n<\/tr>\n
Security #9<\/span><\/td>\n9.0%<\/span><\/td>\n5.1<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #10<\/span><\/td>\n7.6%<\/span><\/td>\n46.8<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #11<\/span><\/td>\n7.5%<\/span><\/td>\n67.1<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #12<\/span><\/td>\n9.3%<\/span><\/td>\n-1.8%<\/span><\/td>\n<\/tr>\n
Average<\/span><\/strong><\/td>\n 8.5%<\/span><\/td>\n35.1<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

Sure, I have a losing position. No one \t\t\t\t\tcan pick 100% winners. But I have one more list I want you \t\t\t\t\tto see.<\/span><\/p>\n

It’s the performance of my lower yielding “Dividend \t\t\t\t\tOptimizer” Portfolio. These are investments you can count on \t\t\t\t\tto deliver above-average income year-in and year-out, but \t\t\t\t\tthey don’t pay out the juicy double-digit yields.<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
“Dividend Optimizer” Portfolio<\/span><\/strong><\/td>\n<\/tr>\n
<\/td>\n Yield<\/span><\/strong><\/span><\/td>\n Total Return<\/span><\/span><\/strong><\/td>\n<\/tr>\n
MLPs\/REITs<\/span><\/strong><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Security #13<\/span><\/td>\n 8.3%<\/span><\/td>\n7.7<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #14<\/span><\/td>\n 6.8%<\/span><\/td>\n 51.3%<\/span><\/strong><\/td>\n<\/tr>\n
Security #15<\/span><\/td>\n 6.2%<\/span><\/td>\n 3.2%<\/span><\/strong><\/td>\n<\/tr>\n
Security #16<\/span><\/td>\n5.4<\/span>%<\/span><\/td>\n 74.0%<\/span><\/strong><\/td>\n<\/tr>\n
Security #17<\/span><\/td>\n5.4<\/span>%<\/span><\/td>\n 96.0%<\/span><\/strong><\/td>\n<\/tr>\n
Security #18<\/span><\/td>\n5.0<\/span>%<\/span><\/td>\n 120.2%<\/span><\/strong><\/td>\n<\/tr>\n
Security #19<\/span><\/td>\n 6.8%<\/span><\/td>\n 14.2%<\/span><\/td>\n<\/tr>\n
Security #20<\/span><\/td>\n6.3<\/span>%<\/span><\/td>\n2.2%<\/span><\/strong><\/td>\n<\/tr>\n
Bonds\/Preferreds<\/span><\/strong><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Security #21<\/span><\/td>\n8.0<\/span>%<\/span><\/td>\n36.6<\/strong><\/span>%<\/strong><\/span><\/td>\n<\/tr>\n
Security #22<\/span><\/td>\n8.0<\/span>%<\/span><\/td>\n34.6<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #23<\/span><\/td>\n5.3<\/span>%<\/span><\/td>\n 4.6%<\/span><\/strong><\/td>\n<\/tr>\n
Security #24<\/span><\/td>\n7.2<\/span>%<\/span><\/td>\n6.7<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #25<\/span><\/td>\n6.9<\/span>%<\/span><\/td>\n23.6<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Security #26<\/span><\/td>\n 6.2%<\/span><\/td>\n 4.4%<\/span><\/strong><\/td>\n<\/tr>\n
Security #27<\/span><\/td>\n 3.5%<\/span><\/td>\n19.1<\/strong><\/span>%<\/span><\/strong><\/td>\n<\/tr>\n
Common Stock<\/span><\/strong><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Security #28<\/span><\/td>\n 7.3%<\/span><\/td>\n 8.5%<\/span><\/strong><\/td>\n<\/tr>\n
Security #29<\/span><\/td>\n 4.5%<\/span><\/td>\n 87.4%<\/span><\/strong><\/td>\n<\/tr>\n
Security #30<\/span><\/td>\n 8.5%<\/span><\/td>\n 7.3%<\/span><\/strong><\/td>\n<\/tr>\n
Security #31<\/span><\/td>\n 5.6%<\/span><\/td>\n 2.1%<\/span><\/strong><\/td>\n<\/tr>\n
Security #32<\/span><\/td>\n 4.6%<\/span><\/td>\n 40.2%<\/span><\/strong><\/td>\n<\/tr>\n
Average<\/span><\/strong><\/td>\n 6.3%<\/span><\/td>\n 32.2%<\/span><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

That performance is very good. But with the \t\t\t\t\taverage returns between the two portfolios, there’s something \t\t\t\t\todd happening.<\/span><\/p>\n

The “10%-Plus” Portfolio is showing an average gain of about four times the average yield. But the lower-yielding “Dividend Optimizer” Portfolio shows an average gain over five times the yield. Just a few weeks ago the average return was actually six times the yield.<\/p>\n

So despite one portfolio boasting double-digit yields (which should make the securities more attractive to investors), the performance of the two portfolios is roughly the same.<\/p>\n

My colleague Daniel Moser attributes this phenomenon to the “sweet spot” for yields — those in the 5-8% range.<\/p>\n

It’s the area where yields are not so low that they’re trivial and not so high that they make it tough for management to pay steadily increasing dividends.<\/p>\n

Most importantly, this little quirk shows you don’t want to always pass up lower-yielding securities simply because you’ve found something paying more. You can be rewarded just as handsomely by those sitting in the “sweet spot.”<\/p>\n


\nGood Investing!<\/span><\/p>\n

<\/span> \"\"
\nCarla Pasternak’s Dividend Opportunities<\/em><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

By Carla Pasternak, DividendOpportunities.com If You Don’t Know About This Income Investing Oddity, Pay Attention I know what income investors like.  If I put a double-digit yield in the headline of an article, it will see thousands more reads than an article without a big headline yield. I can put “safety” in the headline. I … <\/p>\n

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