Feast on the Fear

08/15/2007 12:00 am EST


Richard Lehmann

Publisher, Forbes/Lehmann Income Securities Investor

Richard Lehmann, president of Income Securities Advisor, sees interest rate fears and the stock market’s uncertainty as a great buying opportunity in the fixed income markets…

Aspen Insurance Holdings Limited 7.401% (NYSE: AHLPrA): par $25.00, current price $23.50, current yield 7.87%, rated Ba1/BBB-, call 01/17 at $25.00, yield to call 8.43%, pay cycle 1b, CUSIP GO5384139, family is foreign. Aspen (AHL) is a Bermuda-based insurance holding company that provides through its subsidiaries, property, and casualty insurance principally in the United Kingdom and the United States, property and casualty reinsurance globally, and specialty insurance and reinsurance to the marine, aviation, and energy markets worldwide.

Two of the company’s subsidiaries, Aspen Insurance Limited and Aspen Insurance UK Limited are rated A- and A by A.M.Best. For the second quarter 2007, Aspen reported net premium earned was $451.2 million and net income of $114.7 million. During the same period 2006, it posted net premium earned at $429 million and net income of $101.8 million. The dividend from this issue qualifies for the 15% reduced rate tax. Being a QDI preferred makes this recommendation very attractive for medium-risk investors. Buy at or below $25.00.

Alpine Total Dynamic Dividend Fund (NYSE: AOD): current price$19.94, current indicated yield 10.83%, premium to net asset value 6.70%, pay cycle monthly, expense ratio 1.70%, CUSIP 021060108, family is closed-end fund. The fund’s objective is to provide a high current dividend income and long-term capital appreciation.

The Fund invests at least 80% of its assets plus amounts borrowed for investment purposes in equity securities of domestic and foreign companies that pay dividends. Although the fund can use up to 33% leverage they are currently leverage free. Alpine seeks to provide dividend income without regard to whether the dividends qualify for the dividend tax rate (QDI). As of March 31 the funds diversification by country was US 29.7%, UK 13.7%, Sweden 12.8%, Finland 9.7% and all others 34.1%. Leaders by industry diversification were financial, industrial, consumer cyclical and energy. Like most securities, this fund was hit by the recent stock market correction as well as the mortgage default concerns. This is a good buy for medium-risk total return investors. The risk category could change if the fund begins to use leverage. Buy at or below $21.00.

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