How to Generate Almost 1% a Month in Income

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
There’s nothing quite like the sound of a cash register ring — even if in today’s world, it’s more like seeing a number on your computer screen. It makes the ups and downs of the market so much easier to bear — especially during the Dog Days of Summer. There will be plenty of time for more Bull Market-style gains when the markets heat up as we move into the fourth quarter.
 
You already have a handful of holdings in your Dividend Pro portfolio that pay you monthly income from a wide variety of sources, including Global X SuperDividend ETF (SDIV), Prospect Capital Corporation (PSEC), PIMCO Municipal Income Fund II (PML) and, of course, last week’s recommendation, PowerShares Preferred (PGX).
 
This week’s Dividend Pro recommendation, Fifth Street Finance Corp. (FSC), adds to your sources of reliable monthly income. With FSC currently yielding 11.26%, that’s less than 1% per month in a zero interest rate world.
 
Like current holding Prospect Capital Corporation (PSEC), FSC is Business Development Company (BDC) that lends to and invests in a broad variety of small and mid-sized companies as a private equity investor.
 
In contrast to all of the doom and gloom about the U.S. economy, FSC’s management is optimistic about its own prospects, noting that financial markets and M&A deal flow remain resilient, despite the uncertainty in Europe and the United States. Management recently pointed out that the company ended the June quarter with over $200 million in gross originations across its product offerings of senior and junior secured, mezzanine and one-stop debt. We’ll know the impact of all this new business on FSC’s earning soon enough, as the company will report earnings for the second quarter on Wednesday, August 8, 2012.
 
Another thing I like about Fifth Street is that it has thus far avoided the questionable practice of issuing new shares at prices below the net asset value of its holdings, thereby diluting existing shareholders.
 
In fact, earlier this year, the FSC actually announced a share buyback when shares went below net asset value. That shows that management is focused on maximizing returns to shareholders.
 
So buy Fifth Street Finance Corp. (FSC) at market today, and place your stop at $9.00.

Portfolio Update

Hospitality Properties Trust (HPT) dropped back 2.02% in the last week. You will receive your quarterly dividend of $0.45, payable on Aug. 22. Back above its 50-day moving average, HPT is a BUY.
 
Global X SuperDividend ETF (SDIV) rose 2.58% as global markets recovered. Your monthly dividend payment is due today, Aug. 2. SDIV remains a BUY.
 
Two Harbors Investment Corp. (TWO) rose 1.5%. The company reported Q2 earnings $0.66 per weighted share, blowing away the analysts’ consensus estimate of 40 cents. Book value increased to $9.94 per common share at June 30, 2012, compared to $9.67 per common share on March 31, 2012, due primarily to appreciation in the company’s Agency and non-Agency RMBS holdings. TWO is a BUY.
 
American Capital Agency Corp. (AGNC) was essentially flat. Still boasting an eye-popping yield of 14.23% in a red-hot sector, AGNC remains a BUY.
 
Prospect Capital Corporation (PSEC) pulled back 1.17%. Slipping below its 50-day moving average, PSEC is now a HOLD.
 
iShares FTSE NAREIT Mortgage REIT (REM) was flat. REM currently yields 11.93% and year-to-date it is up 22.5%. REM is a BUY.
 
PIMCO Municipal Income Fund II (PML) rose 0.23% last week. You received a monthly dividend of $.065 on Aug. 1. Unperturbed by its 14.4% weighting in California, this leveraged bet on municipal bonds remains a BUY.
 
UBS E-TRACS 2xLeveraged Long Wells Fargo Business Development Company ETN (BDCL) bounced back 0.91% last week. Trading above its 50-day moving average, it remains a BUY.
 
Apollo Investment (AINV) was flat. The company is scheduled to report its Q2 2012 results on Aug. 8. Analysts expect EPS of $0.21 and revenue of $138.76 million. Trading above its 50-day moving average, AINV remains a BUY.
 
Omega Healthcare Investors Inc. (OHI) rose 0.75%, and helped generate your first triple-digit percentage option gain in Dividend Pro. The company reported that key measurement, funds from operations, jumped 31% in the second quarter, as rental income and gains from asset sales also helped boost the real estate investment trust’s net income. OHI is a BUY.
 
PowerShares Preferred (PGX) rose 0.68% in its first week in the Dividend Pro portfolio. This monthly income player remains a BUY.
 

 

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