We've added several new income-generating ideas to our model portfolios, including one "Dividend Speculator", two new ideas among preferred stocks and a closed-end fund portfolio pick, observes Harry Domash, editor of Dividend Detective.
We’re adding Franchise Group (FRG) to the dividend speculators portfolio. A 2019 startup, the firm was relatively unknown until recently. It had no analyst coverage, and was trading less than 100,000 shares daily.
However, that all changed on June 29 when it was added to the small-cap Russell 2000 index. It’s currently paying a 4.6% dividend yield. Also, dividend growth is a high priority, according to its CEO.
Originally Liberty Tax Services, the company began operating as the Franchise Group in November 2019 with the goal of accumulating a growing list of franchisable businesses, each with strong growth prospects.
In addition to Liberty Tax Services, FRG recently acquired American Freight, Buddy’s Home Furnishings and The Vitamin Shoppe. In December, 2019, FRG initiated a $0.25 per share quarterly dividend.
Until recently, FRG was relatively unknown, had no analyst coverage, and was trading less than 100,000 shares daily. However, that all changed on June 29 when FRG was added to the small-cap Russell 2000 index. The current dividend yield is 4.6%.
We’re also adding two new recommendations to our portfolio of preferreds. Brighthouse Financial 6.75% Series B (BHFAO) is the first of the two. Brighthouse, founded in 2016, offers life insurance, annuities, and related products in the U.S.
These investment quality (BBB-) preferreds recently traded at $25.34 per share. Dividends are eligible for the 15%/20% maximum income tax rates. The market yield is 6.7% and the yield to the 6/25/25 call date ($25 call price) is 6.4%.
Our second preferred is Heartland Financial Series E (HTLFP). Heartland, headquartered in Dubuque, Iowa, offers banking, investment, and related services via 119 locations in 12 states. The preferreds, which recently traded slightly below their $25 call price at $24.91per share are not credit-rated.
That simply means that Heartland chose not to pay for a rating. It doesn’t necessarily mean that the preferreds are not investment quality. Dividends are eligible for the 15%/20% maximum income tax rates. The market yield is 7.0% and the yield to the 7/25/25 call date is 7.1%.
In addition, in our closed-end fund portfolio, we’re adding Bancroft Fund (BCV), a Gabelli fund that invests mostly in convertible bonds issued by U.S. corporations.
Bancroft has returned 18% over 12-months and averaged 13% annually over three years. By contrast, BlackRock Enhanced lost 3% over the past 12 months and averaged 6% annually over three years.
Bancroft pays quarterly dividends, currently $0.29 per share for three quarters and a larger variable payout, recently $0.97/share, in November. Our dividend yield calculation assumes a total payout of $1.84 per share annually, which equates to a 7.7% dividend yield.
