Dear Mr. Berko: I have $100,000 to invest for income. I want at least 6 percent. At age 63, I don’t want to invest this $100,000 in dumb mutual funds or annuities from which my broker said I could withdraw money monthly and automatically. These products are very costly to buy and own. And I know that when investors take money from an annuity or a mutual fund, they’re often taking some of their principal. That’s stupid, and I’m not stupid. I want seven to 10 stocks, and I want them to be less risky than the Standard & Poor’s 500.
I want this portfolio to pay me dividends every month, not just four times a year. I won’t take any money from principal, and I can afford to be mildly aggressive. I want your investment recommendations to include stocks that can appreciate by an average of 2 to 5 percent a year. I refuse to own bonds! And I want this portfolio to own stocks with good dividend payouts. I want to keep pace with inflation, and I must have your answers ASAP. — KS, Erie, Pa.
Dear KS: “I want, I want, I want” is too bratty for me. I’ll wager you are single, have few friends, are clinically depressed, hated your father, are an only child and have never been kissed.
The following $100,000 portfolio of 10 issues has a beta of 0.81, so it’s less volatile than the S&P 500, which has a beta of 1. The issues in this portfolio have a combined 6.28 percent current yield and will produce $6,288 in annual dividend income the first year and a bit more each successive year.
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Five of the following 10 issues have long-term records of modest annual dividend growth. So each year, your income should grow by a little bit more than the year before. And in 10 years, your total income could grow from the current $6,200 to $7,800 annually, which is better than a poke in the nose with a fat fist. I also believe that the following issues can provide moderate principal growth — between minus 3 percent and plus 6 percent a year. So in 10 years, this $100,000 could grow to $125,000.
Meanwhile, your income could be safely enhanced by writing call options on the securities in the portfolio. There are few stockbrokers who have the smarts to do this, but if you have the right professional, your income could be increased by about 60 to 120 basis points annually by writing six- to 18-month call options on these issues. It’s open sky and easy as pie if you have the right guy.
Here’s what you can do:
▪ Invest $10,000 in Main Street Capital (MAIN-$38), a business development company yielding 5.8 percent, and $10,000 in the DNP Select Income Fund (DNP-$11), yielding 7.1 percent. Together, these issues pay dividends of $1,368 yearly at the rate of $114 every month.
▪ Invest $10,000 in Blackstone Mortgage Trust (BXMT-$30.50), yielding 8 percent, and $10,000 in W.P. Carey (WPC-$67.75), which yields 6 percent. Together, they’ll pay annual dividends of $1,416 -- though they pay $354 in April, July, October and January.
▪ Invest $10,000 each in AT&T (T-$36), yielding 5.4 percent, AmeriGas Partners (APU-$45), yielding 8.5 percent, and AbbVie (ABBV-$73), yielding 3.3 percent. These issues pay combined annual dividends of $1,812, or $453 quarterly in May, August, November and February.
▪ Invest $10,000 each in Qualcomm (QCOM-$53), yielding 4.3 percent, Buckeye Partners (BPL-$64), yielding 7.8 percent. and Southern Co. (SO-$47), which yields 4.9 percent. These issues pay $1,692 annually, or $423 quarterly in June, September, December and March.
Discuss this portfolio with your broker, who may be gabberflasted by this simple application of common sense. But don’t buy this portfolio from him, because his big firm would charge you 3 percent, or $3,000, to make these purchases. That’s bloody turnpike thievery. My friend Iggy Oop suggests taking this to a discount broker, such as Charles Schwab, Fidelity or TD Waterhouse. Iggy says the total commission on this 10-issue portfolio would cost you about $50 at one of the above firms. And that’s a lot less than $3,000.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at firstname.lastname@example.org. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.