Three Undercover Ideas for Income

02/13/2020 5:00 am EST

Focus: FUNDS

Harry Domash

Publisher, DividendDetective and Winning Investing

Good U.S. and China trade talk news have been overshadowed by concerns revolving around the coronavirus and how it might affect the world’s economies, observes Harry Domash, income expert and editor of Dividend Detective.

What’s next? No one knows for sure at this point, but it will probably take several months before a vaccine could be developed and distributed to control the virus. In the meantime, news headlines regarding various ramifications of the virus outbreak will periodically drive the stock market down.

Still, the virus will be eventually controlled and when that happens, the market will likely recover any lost ground. Bottom line: we’re advising staying invested despite periodic negative news.

In our Preferred Stocks portfolio, we’re adding one new cumulative preferred, meaning that the issuer remains on the hook for any missed dividends. It’s paying at 7.0% yield. What is your money market account paying?

ARMOUR Residential REIT 7.00% Series C Cumulative (ARR-C) invests in government-insured and nongovernment- insured residential mortgages. These preferreds pay monthly dividends.

Although not credit-rated, the shares are cumulative, meaning that ARMOUR remains on the hook for any missed dividends. Recently trading at $25.14 per share, the market yield is 7.0% and the yield to the 1/28/2025 call date is 6.9%.

In our ETF Monthly Income portfolio, we’re replacing Invesco S&P 500 High Dividend Low Volatility (SPHD) which limits its holdings to high dividend paying S&P 500 members with Invesco S&P 500 Low Volatility (SPLV), which tracks the 100 lowest volatility members of the S&P, regardless of dividend yield.

While that may sound like a subtle difference, our new pick, SPLV, returned (dividends plus price appreciation) 24% over the past 12-months and averaged 15% annually over three years vs. SPHD’s 6% annual returns over both timeframes.

In our ETF Growth Opportunities portfolio, we're buying Invesco Listed Private Equity (PSP) which holds listed global stocks of firms that primarily invest in, or lend money to, privately held companies.

PSP has returned (dividends plus share price appreciation) 26% over the past 12-months and averaged 12% annually over three-years. It’s currently paying a 5.9% dividend. By contrast, Oppenheimer returned 16% over 12-months, averaged 8% annually over three years, and is paying 4.1%.

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