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7 Hot High-Yield Plays
01/25/2012 11:30 am EST
These little-known dividend payers should do well in this overall low-yield environment, says Mark Skousen of Forecasts & Strategies.
Looking for income in a low-yield environment? Well I think we all are. Let’s talk to Mark Skousen and find out what we should do. Mark, what should we be doing?
Well, you know this is the most exciting area of investing today. I mean, growth stocks? Forget them…they go up and down like a yo-yo. You just don’t know, it’s very speculative. But these income investments, I mean they’re really fantastic what you can do there.
I’ve been recommending, for example, the Aberdeen Asia-Pacific Income Fund (FAX)—that’s very easy to remember, FAX. That’s an Australian income fund that invests in Australian sovereign debt, as well emerging markets, and a little bit of US debt as well.
I looked, and since 1986, if you take any three-year period, you have never lost money. Meanwhile, it yields 6% per year right now, so it’s a really good investment right around $7 a share.
Of course I also like a way to invest. One of my latest discoveries is a way to earn 11% interest on gold and mining stocks and energy stock. Now, you may wonder, how can you do that?
Well, it’s the Gabelli Gold and Natural Resource Income Fund (GGN), and they write call options on their mining stocks and their energy stocks. They’re getting about 11% yield right now. It’s a new recommendation that we’re making.
You can get 14 cents a month payment in income—11% a year—by investing in this, and it protects…here’s a way to invest in natural resources and earn income while you wait for these gold and oil stocks to go back up. I think it’s a great way to play that.
They came out in 2005 at $20 a share, and they’re only around $16 a share right now, so it’s come down a little bit. But the dividend has been so good that the annualized return is like 7% per year since inception over the last five years. Great investment vehicle.
Is it like a master limited partnership?
No, it’s a closed-end fund. It’s selling slightly above its net asset value, but with 11% yield I think it looks pretty good.
I’m going to go back to your sovereign debt issue in Australia, because Greece has put a real black eye on sovereign debt issues. Is there any problem there about defaulting?
Well, not with the Australian. Their monetary system is very sound, and they’ve been through these rollercoaster rides many times.
Now there is no guarantee that that $7 price is going to stay there. FAX dropped in 2008 down to $4, but it came back immediately. You have to follow the waves, but if you add the 6% dividend in…even the 2008 period, if you take the year before and after, it still made money for investors, and how many investments can we say have done that?
That’s true. And how about the strength of the Australian dollar versus the US dollar?
The dollar has actually been strengthening lately, just because Europe is so bad that now the US dollar is looking good. Even then, I’ve been recommending the emerging-market debt fund called the Western Assets Global Partners Income Fund (GDF).
That’s yielding 9.5%, and it’s done really quite well, although again it’s dropped a little bit because of the concerns, like you say, about Greece.
I just returned, by the way, from the Mediterranean, and Spain and Italy and Croatia were doing really well. But Greece, I would say, there were quite a few closed buildings, and they were on strike, and we couldn’t even go into Athens, because there were riots. The garbage isn’t being collected, so that’s a serious problem. I’m not sure that problem is going to go away anytime soon.
It’s been around for two years.
Yes, that’s right. So I like the oil stocks, the Canadian oil and gas trusts. Those are yielding 8% right now. I think that’s a very good investment.
MO is still plugging along, people are nervous right now and they’re returning to smoking. Who knows, maybe even Karen Gibbs will go back to smoking.
No, no, never again.
Do you own any of these for your own?
I own FAX, of course. It’s a core element, and Dennis Gartman, for example, he says this is where I park my money, and I feel the same way, so I have a very big position in FAX.
I’ve got some in GDF, and I’m going to be adding the Gabelli Fund, but I wanted my subscribers to get in first. These are tremendous investment opportunities. Enerplus Resources (ERF) is another one I hold.
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