There are some stocks that pay very high dividends, and not because their is a problem. In the last 18 months I wanted to receive more dividends for retirement. I, also, wanted something safe. True, there are stocks like MO paying about 8% and will be spinning off Kraft. It appears to me that the buying motive in that case is mainly capital gains--and a good choice. Let me give you some ideas that worked well for me. I purchased Equity Inns (ENN)@ $5.56 a share paying a dividend of $1.00 annually--18% yield. There is nothing wrong with that stock that I know off. It is required by law to pay our 95% of net income because it is a REIT. I bought it for income not growth. I did not expect it to give me growth. I have been pleasantly surprised to find my $5.56 per share grow to $8.79 per share--growth rate of 58%. Go Figure! That part of my portfolio has done better than my growth sector. In fact, all of my REIT investments are in the black. I am not sure that I would put new money in ENN, but I sure like what I have. Other good dividend stocks include JDN and HPT. There is one stock that is not a REIT, but pays a good dividend. However it is a Royalty Trust. It is BP Prudhoe Bay (NYSE: BPT)paying 21.4% dividend yield. Most of the dividend is tax free because of a depletion allowance. The product is oil from Prudhoe Bay, Alaska. It will be a very long time before Prudhoe bay runs out of oil, therefore, I feel very safe. The downside with a royalty trust is that you receive a K-1 form instead of a 1099. But Tax Cut and Turbo Tax handle K-1s with ease. The other caveate is that some day Prudhoe Bay will run out of Oil. I do not want to be holding any shares when that happens. In the meantime I can live with 21.4% yield--and look at the growth on a chart.
Dear 1stEngr:Re: your post #6673"The other caveate is that some day Prudhoe Bay will run out of Oil. I do not want to be holding any shares when that happens."So what actually happens to the shareholders' investment at that time?Does the company anticipate that date and provide it?....I got an annual report from PBT and cant find reference. Thank you.Best regards,Sheila
Dear Sheila:When Prudhoe Bay runs out of oil, the shares will be worthless. But there is so much oil coming through Prudhoe Bay that will take a life time. You can figure that holding the shares for 3-5 years returns your original investment. Anything after that is just gravy. With the demand for oil as it is, I am not expecting to sell in the next 10 years. In fact, I may add to the position I have, because it allows me to obtain the income I desire with less money invested. I use other money for growth and value.I really consider BPT to be a core holding as an income producing stock. I will be adding to my position anywhere between $14--$15 per share. I believe BPT to be worthy of your consideration. Do not be afraid of a K-1. It is slower and different, but the returns are great.1stEngr
Dear Sheilaoliver:You listed the symbol PBT, I hope that was a typo. The correct symbol is BPT.1stEngr.
Dear First:Please 'scuse my brain failure: PBT etc. I have also been investigating Permian Basin Royalty Trust (hence PBT) mostly because I am West Texas oil field trash. Roughneck relatives tell me there is some secondary recovery in the Permian Basin fields. Have you looked into this stock? Would you? Thank you for responding- your information/opinion is most helpful and welcome.Best regards,Sheila
What's the catch? I'm wondering about Prudhoe Bay... 21.4% dividend yield? How can this be? Why wouldn't everyone buy this?
billybaruch1 asks,What's the catch? I'm wondering about Prudhoe Bay... 21.4% dividend yield? How can this be? Why wouldn't everyone buy this? It's a depleting asset. The amount of oil BP pumps out of the Prudhoe Bay Field declines each year.This isn't the same thing as a Pfizer or General Electric that GROWS its earnings each year.intercst
Stocks Paying Dividends.Sheila: No, I have not. Yes, I will. I will look this weekend.Interest, responded to Billy's question quite correctly. I believe he said the same thing I did, but in a different way. Your friends are talking about the same type of thing. The main difference is that Prudhoe Bay has oil--they do not have to recover--much less risk. At least this is my initial thought. I'll get back.Billy: You asked, "Why doesn't everybody do it?" Most people do not know about them--advantages, disadvantages, when to get in, and when to get out. In addition, it takes a little extra effort to find this information. For example, if one tries to research a trust, one frequently gets "No Data Available". Many people turn away at that point. I would not want every trust and certainly not at every price. The ones I have purchased have done well for me over the years. BPT for example has a P/E of 6, a yield of 21%+, pretty much tax free with the depletion allowance, and look at the chart. The proof is in the pudding. It should be easy enough to compare the capital gains and dividend yield of BPT to your portfolio and decide whether or not your portfolio would have been better off with a little bit of BPT. Remember, just a little bit. Do not go "hog wild" with any single investment. My last thought is that King Faisal has done real well with royalties.1stEngr
Sheila:PBT declared a qtr. dividend of .094147 per share or unit in April. that is an annual dividend of 38 cents a share or unit. If a share price is $6.65 then that would be dividend yield of roughly 6%. I am not real interested in 6% when I can have 21% with the same capital outlay. To phrase it another way, the same dollar amount invested with BPT will yield 4 times the income invested in PBT. Or...1/4 of the amount invested in PBT will yield the same amount invested in BPT and the rest you can invest in value or growth. Balance it out for your growth and income needs. I quess the bottom line is that BPT has the oil, and PBT has some oil. I would be more likely to buy MO than PBT. I did not realize my reply to your request would cause as much interest as it seems to have done. Please, do not forget REITs as an income producing vehicle--like HPT, ENN, KPA. I hope this is of some help. P.S. West Texas has nothing but pure gold where Waylon, Willie, and the boys come from.1stEngr.
1stEngr.,I am new to this board, and your post that included mention of REITs caught my attention. I am very interested in adding a REIT to my portfolio. Do you have any websites, recommendations for me to research?thanks, purtygud
Author: purtygud Date: 5/13/01 8:46 PM Number: 6700 1stEngr.,I am new to this board, and your post that included mention of REITs caught my attention. I am very interested in adding a REIT to my portfolio. Do you have any websites, recommendations for me to research?I noticed that you did not get a response to your question. Hope you're still around.Check out the Real Estate Board here at TMF at:http://fireboards.fool.com/Messages.asp?mid=14909614&bid=100061They discuss every detail about REITs.Russ
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