Energize Your Portfolio

09/01/2006 12:00 am EST

Focus:

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

In his High Income Alert newsletter, Mark Skousen finds investments that pay hefty dividends, in addition to their price appreciation. Here, he recommends three investments whose income features should make investors happy while they await a market turnaround…

 

“We currently are profitable in all six of our high-income investments, including hotels, telecommunications, banks, and prime rate funds. But amid a growing energy crisis, our High Income Portfolio needs to keep a position in high-dividend-paying oil and gas stocks.

 

“Canada's Enerplus Resources Fund (ERF NYSE) is a Calgary-based energy trust, and the investment has been a stellar performer in the energy industry. This $7-billion trust consistently has posted an annual earnings growth rate of 18% or better. With natural gas prices rising again, Enerplus Resources could see substantial increases in its funds from operations. In the meantime, ERF continues to pay out a steady monthly dividend of 37 cents a share—equal to a 7.6% annual yield. Other Canadian energy trusts may pay higher dividends but the Enerplus Resources payout is linked to earnings, not capital, so the payout is more sustainable.

 

“According to several oil and gas analysts, Enerplus has an intrinsic value of $85 a share—substantially above the price at which the stock is currently trading. With the stock selling for around 16 times earnings, Enerplus looks promising. Let's buy Enerplus Resources (ERF) at today's price, and set a protective stop of $50 a share. For those willing to take a gamble, consider picking up some January $65 calls (.ERFAM NYSE): Buy. I recommend that you place a sell stop at $50.

 

“Telecom company Citizens Communications (CZN NYSE) reported that its second quarter earnings beat analysts expectations by doubling, to $101 million. The company's free cash flow also rose 17% to $156 million. The stock pays a 7.40% dividend. Buy. Place your sell stop at $10.75.

 

Hospitality Properties Trust (HPT NYSE), a real estate investment trust (REIT), which owns and manages Marriott hotel chains such as Fairfield Inn, now is comfortably profitable in our portfolio. I recently drove down to my home in Florida, and tried to stay at a Fairfield Inn. All the rooms were sold out, so we ended up staying at a local Sleep Inn. But I slept soundly, knowing that I was making money as I slept. The stock pays a 6.6% dividend. Buy. I recommend that you place your sell stop at $43.”

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