Many MLPs have become favorites of momentum investors, and income expert Roger Conrad reminds investors that it is always OK to take partial profits on big gainers.
Roger, you're our favorite income expert among several phenomenal income experts. Explain to us the five areas that you're specializing in to create income for investors today.
Well, you know the first time I spoke out here was 1989 actually at this conference. Then I had Utility Forecaster. So that's the first newsletter I have. It focused on a wide range of income investments. It sort of has taken off from there.
Canadian Edge we've had around for about ten years. It focuses on Canada obviously. Very good income opportunities there. A lot of the former income trusts have maintained very generous dividend-paying policies; many of them pay monthly. You also have the benefit of a very nice currency there as well. So that's another letter.
Also, for Australia-which has very similar investment characteristics to Canada-we have a letter called Australian Edge. It's pretty much set up the same way as Canadian Edge. We look for dividend-paying companies primarily that are growing their business. We're taking advantage of a pretty nice currency situation there. Australia is very tied to the economies of Asia in particular, so there's a lot of growth there for developing its resources well.
MLP Profits is another letter. Master Limited Partnerships I think are very interesting right now. You know, I don't know what's going to happen in 2013 regarding dividend taxes. I know a number of politicians want to bring them down even or at least keep them at a low rate, but I'm thinking probably they're going to go up in 2013 and beyond.
Master Limited Partnerships though offer a really nice way to shelter income, because many of them pay dividends from return of capital. So you don't pay a tax on that. The year received, it just comes off your cost basis, and then at the end of the road it's a capital gain. Very nice tax advantage.
There also again, good companies, big dividends growing those dividends over time. There is a lot of need for pipelines and other kinds of infrastructure. That's what we're looking for. It's boring, but it's very, very nice duration.
Well, it's not very boring. Actually, it's modest of you to say that. Traditionally it's been boring, but in recent years the Master Limited Partnerships have put out many of them...not just a couple of off the beaten path ones, but many of them that have been at this conference and that you've written about and recommended have put up returns that remind me of the late 1900s in technology stocks.
They really have gone up very significantly to the point where I'm wondering of the best of the advances have already been seen, and yet they're still putting out very high current returns. What concerns you about income investing in general as we go forward from this juncture with so much advance behind us?
Well, I think that's a really good point. We have seen a lot of demand for dividend-paying stocks-in particular, things that are safe. That's part and parcel of the kind of market we've had.
There's some permanence to it in that we don't have these pensions anymore for most people. People have to take their investments, whatever kitty they've saved, through retirement, and hopefully do something with it, maybe even live off of the return. So dividend-paying stocks are meeting that need.
I think some of that is going to be permanent. On the other hand, we've something of a momentum type of investing take over in some of these areas.
You mention how a lot of these MLPs have generated huge returns that you'd expect maybe the tech stocks of the 90s on those. Maybe that's overstating it a little bit.
Tickers Mentioned: EPD