A 14.34% Yield + Powerful Uptrend = Big Winner

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

 

Last week was a solid one for your Dividend Pro portfolio, with your mortgage real estate investment trust (REIT) positions stabilizing after the Fed’s extension of “Operation Twist.” As a result, all of these positions — Two Harbors Investment Corp. (TWO), American Capital Agency Corp. (AGNC), and the iShares FTSE NAREIT Mortgage REIT (REM) — have turned back above their 50-day moving averages and are back to a BUY.

As you know, I search far and wide to bring you unusual, high-yielding investment opportunities. And for this week’s Dividend Pro recommendation, I’ve found an especially interesting opportunity that takes you back into the world of Business Development Companies (BDCs).

Think of BDCs as private equity or venture capital funds that pay out their profits directly to their investors on a quarterly basis. Much like REITs, BDCs must distribute 90% of investment income, with income distributed from interest on loans taxed as ordinary income and stock dividends taxed at a lower rate.

This week’s Dividend Pro pick — the UBS E-TRACS 2xLeveraged Long Wells Fargo Business Development Company ETN (BDCL) — tracks the performance of 26 Business Development Companies that are listed on the New York Stock Exchange or NASDAQ.

The Wells Fargo Index includes many of the usual suspects in the BDC world: Ares Capital (ARCC), American Capital (ACAS), Apollo Investment (AINV), and Fifth Street Finance (FSC), as well as current Dividend Pro holding Prospect Capital (PSEC).

But BDCL adds a twist. By leveraging your investment by 2X, for every dollar of BDC stock it buys, the BDCL borrows another dollar. Given that most BDCs are paying relatively high dividends of 8%-9%, BDCL yields a whopping 14.34% — one of the highest-yielding instruments you can find. The 2X leverage means that will you will also benefit twice as much from a rise in the Wells Fargo Business Development Company Index.

And that’s where the real upside may be. Even as the broader U.S. indexes languished, the Wells Fargo Business Development Company Index recently broke out of a long time trading range, leaving the broader U.S. indices in the dust.

Exclusive  Why ‘High Intelligence’ is a Handicap to Profitable Investing

Chart forUBS E-TRACS 2x Wells Fargo Bus Dv Cm ETN (BDCL)

Combine a high yield, with a strong underlying index, throw in 2x leverage… and you have the makings of a potentially huge — if volatile — winner in the months ahead.

So, buy UBS E-TRACS 2x Wells Fargo Bus Dv Cm ETN (BDCL) at market today and place your stop at $17.50.

Portfolio Update

 

Hospitality Properties Trust (HPT) dropped back 1% this past week. The company announces earnings on Aug. 5. Still trading below its 50-day moving average, and yielding 7.7%, HPT is a HOLD.

Global X SuperDividend ETF (SDIV) fell 1.57% in sympathy with global markets. The risk of investing in high-yield equities is the possibility that the dividends are not sustainable. Fortunately, GlobalX will screen, once a quarter, for companies that might cut their dividends, reducing that risk. Slipping below its 50-day moving average, SDIV is back to a HOLD.

Two Harbors Investment Corp. (TWO) rose 1.17%. The $0.40 dividend is payable on July 20, 2012, to common stockholders of record at the close of business on June 22, 2012.  TWO yields 15.4% and carries a price/earnings (P/E)  ratio of 8.9, making it attractive at these levels. Back above its 50-day moving average, TWO is a BUY.

American Capital Agency Corp. (AGNC) recovered strongly, rising 2.46%. The stock went ex-dividend yesterday, June 27. You’ll be getting a cash dividend of $0.556 per share on July 16, 2012, to preferred shareholders of record as of July 1, 2012. With a dividend yield of 15.5% and a beta of 0.2, AGNC remains a BUY.

Prospect Capital Corporation (PSEC) slipped 0.53% last week. With a dividend yield of 10.8%, and a P/E ratio of 6.69, PSEC is a BUY.

Exclusive  Staying Bullish on Biotech

iShares FTSE NAREIT Mortgage REIT (REM) recovered 0.72% over the past week. You received your dividend of $0.44 on Monday, June 25. Now trading above its 50-day moving average, REM is back to a BUY.

PIMCO Municipal Income Fund II (PML) jumped 1.57% last week, unfazed by the potential fall out from the bankruptcy of Stockton, Calif. This bet on municipal bonds remains a BUY.

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE


img
previous article

After the housing bubble popped, most people have been wary of the real estate market. Despite this trepidation, foreclosure rates have been falling and property values have started to recover. As such, now might be a good time to revisit the real estate market, not just in the United States, but around the world. In particular, I've got my eye on the iShares S&P World Ex-US Property Index Fund (WPS). The exchange-traded fund (ETF) could provide an enticing

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Mike Turner

Mike Turner’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details

LEARN MORE HERE

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE