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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 922  
Subject: Re: opinions on preferred stocks for income? Date: 12/22/2011 3:51 PM
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QuanumOnLine lists many trust preferred issues. But be very careful about call provisions. With interest rates so low, most issues are priced well above their call price. Hence, you can take quite a loss if the issue is called. Low interest rates make it easy for issuers to refinance at lower cost and call the issue.

As for closed end funds, I like NQS and BLE (tickers). Both are leveraged but have done well in spite of dire predictions when the yield curve flattens out. They increase their yield by borrowing at short term rates (currently very low rates) and investing at longer term rates. Hence, extra yield comes from the slope of the yield curve. A flat yield curve means reduced income but it does not mean the fund fails; it merely means a few pennies shaved off of income.

BLE is paying 6.8% fed tax free (mostly, yield from borrowing is now taxable apparently). NQS pays 6.8% mostly fed tax free. Both are near their all time highs.

Utility stocks make a reasonable choice these days. Ameren (AEE) is paying 5%. Cigarette stocks have nice yields. These have potential to increase their dividends over time, and may help keep up with inflation.

All of these have their risks. Don't forget to diversify. Don't over do any one holding.
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