INCLINE VILLAGE, Nev. and#8212; Most investors are worried about Europe and the effects overseas on their portfolios. While that is a valid worry, I rate our slowing economy as the greater concern now. Virtually all the data (here and overseas) are showing declines and that has implications for your portfolio. Read on.
Recent weekly jobless claims stood at 377,000, near the 400,000 mark that is often considered the dividing line for progress in reducing unemployment. The governmentand#8217;s monthly nonfarm payroll report for May showed the economy created just 69,000 jobs and the unemployment rate rose to 8.2 percent. As a result, the Fed lowered its outlook for GDP growth this year through 2014. That doesnand#8217;t bode well for earnings growth and interest rates, already rock-bottom, they wonand#8217;t rise anytime soon. Theyand#8217;ll remain low into 2014 and when they rise they wonand#8217;t rise much. What does this mean for investment portfolios?
It will continue to be a difficult environment for growth, but investors can still find attractive yields as long as they are willing to think and#8220;outside the box.and#8221; Thatand#8217;s because the traditional cash equivalents and bonds arenand#8217;t generating much income.
As Iand#8217;ve discussed in previous articles, preferred stocks are my favorite income producing vehicles. Bank trust preferreds are being called, but there are 66 preferred stocks with investment-grade ratings that trade for less than par value ($25) on U.S. exchanges. Equity preferreds with fixed dividends yield more than 6 percent. My July 19, 2011 article featured a new PartnerRe Ltd 7.25 percent Series E issue that was $25 then, now itand#8217;s $27 and it pays and#8220;qualified dividends.and#8221; I still hold it in client accounts.
Floaters and adjustables, all currently paying the minimum annual dividend, yield about five percent and trade well under par, which means there is an opportunity (strong likelihood) of capital gains. A new issue Iand#8217;ve been accumulating is the U.S. Bank 6 percent Fixed/Float Series G. This security went ex-dividend on June 27.
High-yielding stocks offer investors both income and an opportunity for growth. Our September 2011 article, The Utility Sector is in the Sweet Spot, recommended the Utilities SPDR (XLU). It was $33.30 then and is $36.23 now. It yields 4 percent. I still hold this security in client accounts.
With all the gloomy headlines it is tempting to sit in the money market or buy U.S. Treasuries. That wonand#8217;t meet your investing goals, however. Yes, with the slowing economy and rock-bottom interest rates this is a difficult investing climate, but there are still good opportunities for those seeking income and stability.
and#8212; David Vomund is an Incline Village-based fee-only money manager. Information is found at www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.
