Ares Capital (ARCC) invests in the debt and equity of privately held companies. Its management keeps...
Retirement Income: A Trio of "Mom-Worthy" Stocks
07/17/2017 2:52 am EST
My parents recently sold their home and asked me to invest some of the sale proceeds to supplement the withdrawals from their retirement funds, notes Igor Greenwald, editor of Investing Daily's Personal Finance.
Their idea was to find "mom-worthy" stocks that would generate a better income yield than currently offered by banks, without taking on too much risk or volatility.
The first thing I did was buy her some Blackstone Group (BX). Blackstone far and away is the leading private equity firm and alternative asset manager.
Organized as a master limited partnership (MLP), Blackstone pays a variable distribution targeting 85% of long-term profits. The current yield based on the last four quarterly distributions is an annualized 6.3%.
And while there’s no guarantee the next year will prove similarly fruitful, the current bull market will be a big help on that score.
The stock seems to have recently broken out of a two-year consolidation, helped by Saudi Arabia’s recent commitment of $20 billion for a U.S. infrastructure fund.
But Blackstone hardly needs the Saudi money. It’s already managing $368 billion for leading global institutions that have beaten a path to its door based on results. The firm’s private equity funds have delivered a 19% average annualized return over 30 years. Buy BX below $38.
I also believe many investors are missing out on some great yields in the energy pipeline sector. Valuations have been hit by low energy prices, to an extent that provides an excellent entry point.
Enterprise Product Partners (EPD) is the largest energy midstream player and as usual, the best performing one in terms of business fundamentals.?
The most recent quarterly results showed gross operating margin up 11% year-over-year and distributable cash flow higher by 7%. Distributable cash flow was 30% above a distribution currently yielding an annualized 6.3% and growing 5% annually.
With its concentration in Texas, where the bulk of new drilling activity is taking place, Enterprise is poised to benefit disproportionately. Buy EPD below $33.
I also bought a real estate investment trusts with a high but sustainable yield Gaming & Leisure Properties (GLPI), a unique REIT deriving its income primarily from property leases to regional casino operators in the Midwest and the South, with full ownership of operations at a couple of the properties thrown in.
The current annualized yield is at 6.5%, and while there’s been a lot of casino construction on the coasts the competition doesn’t look as fierce in smaller regional markets. GLPI’s leases are split almost evenly between Penn National Gaming (PENN) and Pinnacle Entertainment (PNK).
Regional markets held up much better than Las Vegas during the Great Recession, and the casino operators must pay GLPI before they can even service their debts.
The gambling boom affords GLPI plenty of opportunities for future growth and expansion into untapped markets. The current annualized yield is at 6.5%. Buy GLPI below $45.
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