By Rebecca Ellis
FRI, JANUARY 19 2018-theG&BJournal- Income-seeking investors have had some miserable years. Interest rates are near zero and even a yield of 2.5% on a ten-year US Treasury would not generate much-needed income. To generate a certain level of income, yield-seeking investors would have to invest more and more as returns decline. Most of us do not have unlimited funds, so we must look at alternatives to maintain the level of income.
One traditional alternative would be to ‘go down’ the credit curve, i.e. buying ever riskier assets such as emerging market bonds or junk bonds. Alas, these markets are the playing field of big funds that scoop at most of the bonds on offer as you would have to purchase a minimum of USD one hundred or even two hundred thousand worth of a single bond. This may be quite steep for some portfolios.
Another choice has been to look at stocks from major world-class corporations that pay a handsome annual dividend. There are many such companies around. However, as stock prices have gone up to record levels and the dividend are not adjusted, the yield has dropped significantly to some 2 or 3%. This is better than nothing as you get the potential upside in the share price as it appreciates. In terms of income, this is still not very palatable.
We have looked at a further alternative for you which can increase your income. We have looked at companies that are mid-caps, i.e. companies that are smaller than the blue-chip companies and which may have been overlooked by the market. We would take some of these stocks to supplement a current portfolio and therefore add some more diversification. We would not put all our eggs in one basket.
We recommend focusing on finding stocks that consistently grow cash distributions in a sustainable way over the long term, and reinvesting those payments. Finding stocks that combine these traits with a high dividend yield can create potent compounding machines if consistently applied over the long term. Some of these companies which offer sustainable dividends and reasonable upside potential are listed below:
To find out more about these companies, drop us a line and we will be happy to expand on the merits of each and discuss whether anyone of them would be suitable to achieve your financial goals.
Rebecca Ellis A Personal investment advisor, based in Zurich| REBECCA.ELLIS@POMOMAWEALTH.COM|
