Domash, Dollars and Dividends
Harry Domash covers the full spectrum of dividend investing to find the best income opportunities in the current market environment. Here, the editor of Dividend Detective discusses his strategy and a trio of top income ideas.
Steve Halpern: Our special guest today is income-investing expert, Harry Domash, editor of Dividend Detective. How are you doing today Harry?
Harry Domash: I'm doing fine; how are you doing?
Steve Halpern: Very good; thank you for taking the time. Can you give our listeners an overview of your investment strategy and talk in general about the importance of dividends, as part of an investment portfolio.
Harry Domash: Well, I didn’t start out with dividends; I don't know whether you know this or not, but I used to have a newsletter called Winning Investing, which was all about growth “stocks and rockets”. This was in the late 1990s, when the internet boom was happening.
Then when the internet stocks crashed, around 2000, I decided to put in some dividend-paying portfolios into my newsletter, just so people would have something to buy while the tech stocks were going down.
Over the years, I had these in Winning Investing and I noticed at the end of the year it was always the dividend portfolios that outperformed; even though I had all of these rockets in the growth portfolio. Rockets crash. I ended up deciding that the dividend stocks just look like a long-run, more profitable way to go.
Around early 2000s, I started a separate website called Dividend Detective and then I made it a premium site a year or two later. In end of 2008, I closed Winning Investing and just concentrated on Dividend Detective.
The reason is that in investing, it’s kind of slower and steady is better. I found dividend stocks really work well.
Steve Halpern: Now, one of the most valuable parts of your advisory service is your four sample portfolios. Can you explain how you compiled these portfolios and how they differ from each other?
Harry Domash: Well, I started with three; one was conservative portfolio, which was supposed to be a low-risk portfolio. Of course, that’s hard to predict what’s low risk until it’s too late.
But then, I also had the Growth and Income; the portfolio was designed to track the market in a sense. In other words, in a strong market, Growth and Income stocks outperform regular dividend stocks. All of these are dividend payers but the ones that have high growth outlook are the ones that perform best in a strong market.
Then I had high-yield speculative portfolio for investors who want to walk a little bit on the wild side and just want to take a little more risk -- with the chance of getting higher returns.
Then about a year-and-a-half ago, I added a fourth one, called Monthly-Paying Stocks. That’s not too exciting a name, but people -- a lot of subscribers of Dividend Detective -- are retired and want monthly income.
That’s who this portfolio was aimed at. In fact, in the next month or so, I'm going to rename it to the monthly paying retirement portfolio or something like that. Those are the portfolios that we have.
Steve Halpern: Now, you cover a very wide breadth of income opportunities; are there any particular subsectors of the income market where you’re seeing the best opportunities now?
Harry Domash: Yes, as everybody is aware, this is a treacherous market and anything can happen. What I've found is - first of all -- preferred Stocks, which are more akin to notes or bonds than they are to common stocks, they’ve been a really hot sector this year and are doing well. I'm advising subscribers to overweight those.
Another area that’s done really well this year is Real Estate Investment Trusts, or REITs, as they are called. There are two kinds of REITs; the kind that invest in property and the kind that invests in mortgages and secured by property.
When I say Real Estate Investment Trusts have been good in this market, I'm talking about property REITs; those that own shopping centers and housing, apartment house and office buildings and things like that.
The ones that invest in mortgages, I don’t expect them to do well -- especially, if interest rates rise.
Steve Halpern: Now, looking at some of your specific recommendations, within your portfolio of Preferred Stocks, you recently added an issue that was related to eBay (EBAY). Could you tell us about this?
Harry Domash: Well, preferred stocks; we’re not the only ones that have realized preferred stocks are a good place to be now.
Preferred stocks, generally, most of them are issued at $25 a share and they can be called, typically, five years later $25 a share; but because the preferreds are kind of popular now, a lot of them are trading at $26, $27, even $28.
And the downside of that is when it can be called -- usually five years later, at $25, you’re going to lose that $3.
You have to factor that in and you do that by calculating it yield-to-call, which is how much your net yield would be if you bought a stock for $27 and you had it called at $25, five years from now; that sort of thing.
What’s happening, is preferred stocks tend to be going up in price, almost every month.