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Ben Stein How Not to Ruin Your Life

Ben Stein, How Not to Ruin Your Life

Time to Sniff Out Juicy Dividends

by Ben Stein

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Posted on Friday, May 23, 2008, 12:00AM
I've been dismayed lately, as many of us have been, by the low interest rates we're getting on our CDs and savings accounts. If we are retired or approaching retirement, we may be especially upset by these low rates.

Fortunately, we have options. Even in today's low interest rate environment, many stocks and funds offer attractive dividend yields.

I would never advocate putting all of your eggs in any one of them, but rather to spread around a good chunk of your savings in these assets if you need current yield. As discovered by my pal Phil DeMuth, and often utilized in his rapidly growing client base at Conservative Wealth Management, here are a few options for high current yield with safety.

The iShares Lehman Aggregate Bond (AGG) exchange traded fund (ETF) largely owns bonds of investment grade and steers well clear of the subprime mess. Experts are expecting more defaults on bonds through next year, but the default rate lately has hovered at or close to zero so even a jump will not significantly affect a large mix of bonds. AGG's trailing twelve month yield (TTMY) is 4.8%. (Note: The trailing twelve month yield, used throughout this column, is not the same as the current yield. As the price fluctuates, the yield changes even if the dividend stays constant or rises. Check with Yahoo! Finance for the latest yield figures.)

The Cohen & Steers Dividend Majors (DVM) ETF is comprised of many high yielding real estate investment trusts (REITs). As any reader of this space knows, I love REITs for their yields. Yes, I know they took a huge drop last year. But that only increased their yield. They are recovering now and so the yield is falling. But the trailing twelve month yield is 6.5% and that looks good enough to eat.

BlackRock Global Energy and Resources (BGR) holds high yielding energy stocks from all over the globe. I happen to think oil prices are in a bubble (I could well be wrong). But even if they are, with a yield like 8.7%, BGR could lower its dividend and still be doing fine.

Templeton Emerging Markets Income (TEI) contains bonds of emerging markets. These bonds are often issued by nations that are in better economic shape than the US is right now by virtue of running budget surpluses and trade surpluses. With a yield of 9.1% it's good enough for me and own it I do.

Black Rock Dividend Achievers (BDV) is comprised of high dividend stocks. It has an amazing yield of 6.9% and while its price will fluctuate like mad as markets move, its yield is positively mouth watering.

Great Northern Iron Ore (GNI) mines, well, iron ore, in Northern Minnesota. Its 6.9% dividend rate tells us that world demand for iron ore remains robust.

BP Prudhoe Bay Royalty Trust (BPT) pays you a royalty on the oil taken from a series of oil fields near Prudhoe Bay. Its yield for the past 12 months was a stunning 10.4%. As the price of oil rises, it could do even better but might not as a ratio of price.

Bank of America (BAC), the nation's second largest bank, has been stung by sub-prime and other poor investments. It's possible that it will cut its lofty 7.1% dividend, so if you are really, really cautious, you might wish to stay away. Even if it were cut by 20%, however, it would still yield north of 5%, which isn't bad at all.

Consolidated Edison (ED), which New Yorkers know as Con Ed, is an immense electric utility. It's paying a fabulous 5.6% yield. It is regulated, although not as much as it once was, so the yield is fairly safe.

General Maritime Transport (GMR), a firm that transports oil, that most precious of commodities, across the seas, pays a 6.9% yield. Looks good to me.

Now, the REITs mentioned here will not, repeat NOT, qualify for the super low Bush dividend taxation rate. Neither will the oil royalty trusts. And neither will the bond fund at the top (AGG) or in the middle (TEI). But the yield on all these remains excellent.

The strategy here is to not buy just one of these investments. As always, diversify. I would also highly recommend that you talk to your own financial advisor, and you should have a financial advisor. He or she may have his or her own ideas. But this is a start towards a Stein/DeMuth High income portfolio you might like.

 

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126 Comments

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  • Yahoo! Finance User - Friday, June 6, 2008, 12:43AM ET  Report Abuse

    • Overall: 1/5

    Google "Peter Schiff". Buy gold and silver.

  • Mark - Monday, June 2, 2008, 9:43PM ET  Report Abuse

    • Overall: 1/5

    Buy GOLD as fast as you can. Don't buy any of Ben Stein's recommendations. If anything, steer clear. He's been as wrong as can be for years now on the subprime mess, etc.

  • Jason - Monday, June 2, 2008, 10:35AM ET  Report Abuse

    • Overall: 4/5

    sound advise as always thank you for the details

  • john - Monday, June 2, 2008, 10:11AM ET  Report Abuse

    • Overall: 2/5

    Many of these closed end funds have high expenses, and the dividends they pay out are not always just income dividends, but they include a "refund" of some of your capital investment or appreciation. You need to know exactly what you're getting, and Mr. Stein doesn't address that issue.

  • Linda - Sunday, June 1, 2008, 11:07AM ET  Report Abuse

    • Overall: 5/5

    Thank you Mr. Stein. As always, to the point and highly specific. Your recommendation that everyone seek out a reputable financial advisor is spot on, but here's a question for you...how does one go about finding such a person? I think many people are skeptical and concerned about having such a person take advantage of them. Thank you for any words of wisdom you might share and thanks again for the great article!

  • Yahoo! Finance User - Sunday, June 1, 2008, 3:21AM ET  Report Abuse

    • Overall: 1/5

    Excellent way to get rich! Brilliant! Am I paying to read this? Probably...

  • David - Friday, May 30, 2008, 11:04AM ET  Report Abuse

    • Overall: 2/5

    Great Northern Iron Ore is a Trust which will dissolve in 2015. At that time the shares will only receive net cash on hand. (Today it would be less than $10.) See the official site at GNIOP.com VERY DANGEROUS BUY

  • matt - Friday, May 30, 2008, 10:57AM ET  Report Abuse

    • Overall: 1/5

    cse, dre, real companies with appreciation potential and low valuations. none of this etf bond garbage.

  • Yahoo! Finance User - Friday, May 30, 2008, 9:25AM ET  Report Abuse

    • Overall: 1/5

    I'm makin' a fabulous 5.8% on my GM "investment". I'll get RICH!!! I'm planning to soon marry a rich widow. I'll get RICH!!! I also sent a bucket of money to one of those prosperity preachers on Sunday morning TV. I'll get RICH!!!

  • Yahoo! Finance User - Friday, May 30, 2008, 8:58AM ET  Report Abuse

    • Overall: 3/5

    For diversification and inflation protection of YOUR income sources, go for those companies with a history of raising dividends annually, not just high current yield. That might give you better long term inflation protection than treasuries or annuities.

  • Brett - Thursday, May 29, 2008, 8:20PM ET  Report Abuse

    • Overall: 5/5

    Once again the people reading this seem to be wearing financial blinders. "The average working man" should invest in CD's that are federally insured, and have savings for emergencies. And of course like most, he has a bit of "fun money" that he can afford to spend frivolously. That could go to a big screen or it could go into some higher performing and albeit more risky investments. The key is diversify, and we all know it, and the article even states it, as does every investment article worth its salt! I have been into Ship Finance Int'l - SFL - for about 2yrs now after reading about their dividends in a financial magazine. Followed, watch for lows, and buy in. GREAT dividends! That is why this article caught my eye. Especially if you can get into a DRIP or dividend re-investment program with the ETF's where your dividends automatically go back into buying more shares. As they accumulate, your fund growth goes exponential in a few years. But I also own a dozen other stocks, and real estate, and of course, savings accounts and CD's! AND I AM A WORKING MAN!

  • MPT rules! - Thursday, May 29, 2008, 8:16PM ET  Report Abuse

    • Overall: 5/5

    I have two points for the person bellow me who commented that working families dont have the money to invest. Firstly, You don't have to have alot of money to invest in stocks, and other investments mentioned in the article. YOu should have an emergency fund for the unexpected. This should be invested in liquid assets such as a money market accounts, savings or super short term CDs. The remainder of your money should be invested in a diverse portfolio of stocks, bonds and REITs. The allocation should be determined by your age and to a lesser extent your risk tolerance level. The amount of money you make has nothing to do with it. If you have $50.00 extra or $5000.00, the strategy would be the same. It is irresponsible to say that since you have a family, you should not invest unless you have "big bucks". If you do not invest as early as you can, you might never acheive "big bucks" status! Secondly, Some like to invest for divided income, specifically those in retirement. Following ben's strategy can provide someone who has been devastated by low interest rate CDs enoth income to eat. Again, diversification is key, but this strategy can be a life saver.

  • Yahoo! Finance User - Thursday, May 29, 2008, 7:18PM ET  Report Abuse

    • Overall: 1/5

    Once again Mr. Stein seems out of touch with the average working American trying to support a family!! Granted CD's interest rates are low, but you forgot to mention........"They are FEDERALLY insured by the FDIC for up to $100,000.00"........So if you are supporting a family and are able to SAVE, it would be better to have it insured by the FDIC which was set up after the great DEPRESSION. If you have plenty of money to RISK and are not happy with the performance of your growth stocks.........then by all means, invest the higher dividend stocks mentioned by Mr. Stein!!........... The way help resue our economy is for institutions such as Harvard, Yale etc........to divest their endowments from foreign countries and to put more of them into US Treasuries until a new administration can reign in Federal spending and improve the value of the dollar!!

  • Dan K - Thursday, May 29, 2008, 2:01PM ET  Report Abuse

    • Overall: 4/5

    Practical, useful and actionable. I'm not sure I agree that oil is in a bubble right now but I sure hope I'm wrong.

  • Yahoo! Finance User - Wednesday, May 28, 2008, 10:14PM ET  Report Abuse

    • Overall: 5/5

    Can Ben please write an article that refutes that village idiot Robert Kawkosaki? It is an insult to Ben Stein to share space with a guy who admits he was in 700K debt, a "C"student, and never went to college. Just today Bobby said that saving, investing in stocks, and living below your means are a bad idea, as he pumps his usual real estate. I hope his money runs out and he ends up living in a car again talking about his imaginary rich dad. Ben, if you really want to get 5 stars, point your economic guns at Kawosaki and show his faithful what a moron he is.

  • garyc - Wednesday, May 28, 2008, 7:49PM ET  Report Abuse

    • Overall: 5/5

    Always enjoy Mr Stein's articles, and appreciate his viewpoint.

  • Yahoo! Finance User - Wednesday, May 28, 2008, 4:36PM ET  Report Abuse

    • Overall: 4/5

    Good article Ben. However I'm less inclined to trust your opinion after reading that article Shermer wrote about you in this month's issue of Scientific American. That guy really reamed you.

  • Michael - Wednesday, May 28, 2008, 3:04PM ET  Report Abuse

    • Overall: 4/5

    Dividend stocks can be an excellent way to supplement retirement income, but look at safety and dividend growth rather than how high the yield is (I speak from experience). I own HTE and it does have a good distribution, but in 2011 the Canadian government will increase the taxes on these trusts so they will probably move to a corporate structure, which will reduce the distributions (but may increase growth of the stocks). Ben is right - diversify no matter how good you think your idea is!

  • Karl - Wednesday, May 28, 2008, 12:33PM ET  Report Abuse

    • Overall: 5/5

    I will continue to give Ben 5 Stars, to do my part to balance out the 1-star whiners who are mad at Ben for his documentary movie. What does it have to do with his economic columns?! Really, just grow up, your attempts to shut Ben down just support the fact that some people don't really believe in expression of opinion and will stop at nothing to stifle those who hold a different opinion. Looking for a better return on your investments always seems like a good idea to me. Even if you don't like Ben's picks the advice is solid. Keep up the good work.

  • chih tong - Wednesday, May 28, 2008, 12:15PM ET  Report Abuse

    • Overall: 1/5

    Think about this: He's recommending dividend-paying stocks when the Fed has signaled a pause in the interest rate cutting campaign. Think about this: His recommendations include a REIT, a bond ETF, a bank mired in the mortgage mess, and a utilities. All in a likely rising interest rate environment. Does this guy know what he's talking about???

  • Alain - Wednesday, May 28, 2008, 9:56AM ET  Report Abuse

    • Overall: 2/5

    Well at least he's in the ballpark with recommending dividend paying stock. Although I have to quibble in regards to his recommendation list. One of the qualities to look for is for a stock/mlp/reit/canroy that increases its dividend at a greater rate than inflation while maintaining good earning/cash flow coverage depending on the entity class.

  • dick schlong - Wednesday, May 28, 2008, 9:02AM ET  Report Abuse

    • Overall: 5/5

    Thank You Ben and all the others that gave POSITIVE IDEAS to search out..Does any1 know of a foreign stock open ended fund that is similar to the Alpine Dynamatic Dividend Fund(ADVDX).or even a closed end fund that is at a big discount that invests in foreign stocks that pays a hugh dividend each month.......or a good blog or website that talks about good mutual funds that pay good dividends each month??.......Thank You and Kindest Regards

  • the hammer - Wednesday, May 28, 2008, 6:22AM ET  Report Abuse

    • Overall: 4/5

    It is most interesting that there are now regular posters on every Stein article who criticize him for making "Expelled". It is equally interesting that either they have not seen the movie or they simply don't like the premise. The reason - for those of you who have not seen it - Stein merely asks questions in the movie. Both sides of the argument on Darwinism have their say; and Richard Dawkins is by far the most damning of his own view by his own words. The people here on Yahoo! only serve to underscore the premise of the movie - that the Left will only tolerate one point of view. Any discussion of "the other side" is met with ad hominem attacks and obfuscating - to downright persecution. Don't slow down, Ben. You're doing fine!!!

  • Yahoo! Finance User - Wednesday, May 28, 2008, 4:55AM ET  Report Abuse

    • Overall: 5/5

    Thanks Ben for some useful suggestions. Thanks to those commentators who also offer useful advice and suggestions. I will do my part and research some of your suggestions to see if they fit my needs.

  • Yahoo! Finance User - Wednesday, May 28, 2008, 12:25AM ET  Report Abuse

    • Overall: 1/5

    Ben has gone from a paid Wall-Street cheerleader to a snake oil salesman as of his past two articles. There isn't a moral or principle he wouldn't be willing to throw out the window if it nets him a single shiny dime (not that I've ever known him to ever have either in the first place). There doesn't seem to be anything too preposterous for this man to schill if theres something in it for himself. I feel so sorry for anyone who has taken his advice over these past few years. Common sense and facts, even science does not stop this man from being a mouthpiece for any group willing to part with a few dollars.

  • Oose - Tuesday, May 27, 2008, 11:34PM ET  Report Abuse

    • Overall: 3/5

    Ben's article is general good. If he thinks a 6.9% is an amazing yield for a dividend fund, then he should check out the historical 12% yield Alpine Dynamic Dividend (ADVDX) has returned. If you want a safe fund, try Fairholme (FAIRX) it returns about 12-14% with a focus on capital preservation.. Want knockout returns try CGM Focus (CGMFX).

  • 1906rob - Tuesday, May 27, 2008, 11:27PM ET  Report Abuse

    • Overall: 3/5

    Ben thanks for the tips and being a "creationist".

  • Neal - Tuesday, May 27, 2008, 10:13PM ET  Report Abuse

    • Overall: 1/5

    you are a lousy shill, except when it comes to Ben Stein's Money

  • Yahoo! Finance User - Tuesday, May 27, 2008, 9:33PM ET  Report Abuse

    • Overall: 1/5

    6%-10% Come on Ben, We want 25% like the credit card companies get.

  • Yahoo! Finance User - Tuesday, May 27, 2008, 9:29PM ET  Report Abuse

    • Overall: 1/5

    When did a 5% yield become acceptable? Here is some sound, researched advice : do the opposite of what Mr.Stein suggests and your yields will gravitate upwards.

Showing comments 6-35 of 126<< PreviousNext >>
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