Investors everywhere seek opportunities that can provide stable income while increasing the value of their initial investment. Traditionally, these investors turn to stocks that pay dividends. Income Deposit Securities are designed to more directly meet these goals. Read on to learn about three such investments you should consider now.
A money managers job is to help investors adjust their portfolios to changing market conditions. In uncertain times like these, I believe it is important to use investments that pay healthy dividends. Im not talking about the dividends you see in the big well-known companies found in the Standard & Poors 500. Most of those companies pay a paltry 2-3% in dividends.
Nor am I impressed by the dividends you can get from mutual funds. The size of most mutual funds means that they have to search for dividends among the large, well-established companies. As a result, the dividends they pay dont cut it either.
But there is another dividend option that is far better, found in an Income Deposit Security (IDS). The Income Deposit Security was developed in coordination with the American Stock Exchange. It is a combination of a corporate bond and a common stock. That means it can provide the interest certainty associated with a corporate bond, but also the potential for long-term growth found in a common stock.
A lot of people dont understand the two-part nature of an Income Deposit Security so when they try to analyze it as an investment it doesnt appear as attractive. Its only by breaking it down into its components that the true valuations can be found.
One IDS that continues to work well in my clients accounts is B&G Foods (BGF). This company makes condiments and spreadable preserves. It makes pickles, peppers and hot sauces under the Red Devil, B&G and Trappey labels. B&G Foods produces the staples that people continue to buy regardless of how fast the economy is growing. That makes it very defensive.
It also is a company that generates a steady, consistent cash-flow. It pays a dividend of around 7.5%. Thats very attractive compared to the interest paid on many corporate bonds. Thats considerably higher than the measly dividends paid by the companies in the S&P 500.
Theres more to B&G Foods than a healthy dividend. Its generated excellent growth as well. According to Morningstar (www.morningstar.com), an investment in B&G Foods grew 52.3% in 2006 and is already up over 20% this year. Not bad for a defensive, dividend-oriented company!
Another example of an IDS that you might consider is Coinmach Service Corp (DRY). This isnt a company you will hear about from the analysts at the big firms. You cant even find out much about it from Morningstar. Thats OK; I know that there is a lot of money to be made for my clients in solid businesses such as Coinmach Service Corpand its my job to find them.
Coinmach Service Corporation is the leading owner and operator of laundromats across the nation. Its another boring, defensive company whose revenues arent dependent on a surging economy. In fact, the slower the economy the better this company will do because more people will rent apartments as opposed to buying homes.
It pays a healthy dividend, too. Currently, the dividend is around 7.5%. Overall it was up over 25% in 2006 and has already increased in my clients portfolios by 13% so far in 2007.
A third IDS that you should consider for your portfolio is Centerplate (CVP). Ive mentioned this darling in my column beforehopefully you purchased it then. Centerplate runs the concession stands in most major stadiums and ballparks. Theyre the ones selling those expensive hotdogs!
Centerplate has a yield of almost 9% right now. And it produced a return of over 60% in 2006. It is down 5% this year because of an attack by some short-sellers. If your investment time-frame is only 30 days then move on. But is you are looking for a solid, growing company that pays an attractive dividend, consider Centerplate.
Income Deposit Securities are an investment that can help your portfolio. But you cant just pull one up in Morningstar and get an accurate picture of their worth. With a little digging, though, you may uncover a real gem.
Nationally-syndicated financial columnist and Certified Financial Planner Jeffrey Voudrie provides personal, in-depth money management services and advice to select private clients throughout the USA. Hell answer your financial question FREE at www.guardingyourwealth.com
Nationally-syndicated financial columnist and Certified Financial Planner Jeffrey Voudrie provides personal, in-depth money management services and advice to select private clients throughout the USA. Hell answer your financial question FREE at http://www.guardingyourwealth.com