And the Winner Is….

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Let’s face it all income investors are winners this year (unless you have pulled some really dumb moves), but some winners are bigger than others.

Our goal, both personally and in our models on this website, is to have good success without feeling a need to trade continually and to that end we are succeeding nicely this year.  On the other hand those that have “traded” frequently have likely shown the best returns so far-whether that continues remains to be seen.

We have been most satisfied with the  2015 Moderate Portfolio with Zip.  The idea of this model is simply one in which the portfolio is comprised of about 80-85% short and moderate duration term preferreds or baby bond issues with a couple high yield REITs tossed in for potential capital gains.  For about 6 months of this year this model under performed as the 2 REIT issues didn’t add any “Zip”, but finally the zip kicked in and now there is a 12 month gain of 10.44%.  There have been 3 sales (2 of which were called issues) and 2 purchases. Unfortunately we have forgone a percent or 2 by holding too much cash (with the cash balance now at about $12,600).  Additionally many issues are past their 1st redemption dates meaning we could lose issues to calls.  Also the 2 REIT issues have current capital gains of 25% and 30% respectively and their current yields have fallen to 7.19% and 5.52% meaning we should consider swapping those 2 issues for something with a higher current yield.  Also recall that any preferred or baby bond issue trading at a price above $26 and currently redeemable should be considered for sale.  We have 1 issue trading over $26 (Ares Capital 5.875% Senior Notes Ticker-ARU).

So in summary this model has performed excellently during the 1st year.  Trading has been very minimal and the 2 REITs have served to give the returns an extra boost.  The portfolio currently holds too much cash and 3 current holdings (2 REIT issues and 1 issue trading above $26/share) need to be swapped out for other issues.

We will be looking to make these moves in the next week as we move into year 2.  The new “zip” issues could be either REITs or MLPs–basically anything with capital gains possibilities.

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Bryan Perry Dividend Income Expert Bryan Perry

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