Pausing For Breath… As Two Positions Hit 52-Week Highs

Nicholas Vardy

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

It was a difficult week for U.S. stock markets with the S&P 500 pulling back 3.54% and the Dow Jones down 3.88%.

Several of your positions slipped below their 50-day moving averages (MA), and moved to a HOLD. These included the Global X SuperDividend ETF (SDIV), Annaly Capital Management (NLY), Fifth Street Finance Corp. (FSC), and UBS E-TRACS 2x Leveraged Long Wells Fargo Business Development Company ETN (BDCL).

The good news is that your Dividend Pro portfolio is proving to be much more resilient than the overall market, with not a single position — not even the 2x leveraged Exchange Traded Funds — dropping more than the major indices.

There were also some strong individual performances in your portfolio, despite the market sell-off. Both PIMCO Municipal Income Fund II (PML) and Vanguard Natural Resources (VNR) hit new 52-week highs over the course of the week. Two Harbors Investment Corp. (TWO) eked out another 1.44% gain. Omega Healthcare Investors Inc. (OHI) actually moved back to a BUY, as it reclaimed its 50-day MA.

I’d also highlight the strong relative strength of your Mortgage REIT positions — Two Harbors Investment Corp. (TWO), American Capital Agency Corp. (AGNC), iShares FTSE NAREIT Mortgage REIT (REM), and Annaly Capital Management (NLY) which have held up very well, after selling off sharply in earlier weeks.

Overall, I am bullish that we will soon emerge from this current bout of selling. History is on our side. Since 1950, the period from the last week in October through the day of the Presidential Election saw the S&P 500 rally 12 out of 15 times, averaging +2.4% (The losses were -1.4%, -0.6% and -2.5%.)

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In the meantime, you can keep collecting your regular, high dividends from each of your positions, with a Dividend Pro portfolio currently yielding over 10%.

Portfolio Update

Global X SuperDividend ETF (SDIV) dropped 2.24% last week giving up the previous week’s gains. This ETF’s country allocations include U.S. 35.9%, Australia 24.1%, U.K. 8.5%, Singapore 5.7%, Canada 5.5%, Poland 2.0%, China 1.9%, Brazil 1.9%, Netherlands 1.8% and Spain 1.5%. Now trading below its 50-day MA, SDIV is a HOLD.

Two Harbors Investment Corp. (TWO) rose another 1.44% this week. TWO plans to carve out the single-family home division with an IPO for Silver Bay. This move will provide for a more streamlined investment vehicle, while giving investors the ability to invest directly in the single-family market. TWO is a BUY.

American Capital Agency Corp. (AGNC) was broadly flat, dropping 0.22%. You should receive your dividend of $1.25 a share is payable on Oct. 26. Dropping below its 50-day MA, AGNC remains a HOLD.

Prospect Capital Corporation (PSEC) dropped 1.01%.Since its IPO eight years ago, Prospect has grown its dividend by 60%. It managed to do so while consistently generating enough income to cover rising dividend payments. Dividends are paid monthly at a $1.22 annualized rate for a yield of about 10%. PSEC is a BUY.

iShares FTSE NAREIT Mortgage REIT (REM) pulled back slightly, as the mortgage REIT  sector remains severely oversold. Investment bank Credit Suisse has predicted 10%+ yields in the sector through 2015. Dropping below its 50-day MA, and severely oversold, REM remains a HOLD.

PIMCO Municipal Income Fund II (PML) rose another 1.75%. This position is as solid as a rock in the face of the current pullback, and hit a new 52-week high. A steady performer, PML is back above its 50-day MA, and is a BUY.

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UBS E-TRACS 2x Leveraged Long Wells Fargo Business Development Company ETN (BDCL) dropped 2.85%. Banks are not lending much to the types of businesses BDCs support. As a result, BDC’s will have their pick of the litter and should do very well. BDCL paid out a dividend of $.9169 per share on Oct. 22 for a yield of 14.13%. Trading back below its 50-day MA, BDCL moves to a HOLD.

Apollo Investment (AINV) dropped back 1.51%. The company will report its second quarter results on Nov. 8. Yielding 10.2%, but still trading below its 50-day MA, AINV is a HOLD.

Omega Healthcare Investors Inc. (OHI) ended the week 0.59% higher. A dividend of $0.44 per share will payable Nov. 15 to common stockholders of record as of the close of business on Oct. 31. The company has boosted distributions for 10 years in a row. OHI is scheduled to release its earnings results tomorrow, Oct. 26. With the stock trading at its 50-day MA, OHI is back to a BUY.

PowerShares Preferred (PGX) was essentially flat, falling 0.47%. It paid out a dividend of 7.6 cents per ETF on Oct. 15. Yielding over 6.4%, this monthly income payer is a BUY.

Fifth Street Finance Corp. (FSC) fell 1.85%. Fifth Street’s shares recently traded at a 52-week high which brought its market capitalization to over $1 billion. The company will announce earnings on Nov. 28. FSC is now a HOLD.

Vanguard Natural Resources (VNR) rose 0.53%, hitting yet another new 52-week high. The company announced a $0.20 per unit dividend ($2.40 on an annual basis) payable on Nov. 14, to unit holders of record on Nov. 1. VNR is a BUY.

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CVR Partners, LP (UAN) fell 2.0% this past week. The company will release its third quarter 2012 earnings on Monday, Nov. 5, after the close of New York Stock Exchange trading. Yielding 8.9%, and trading above its 50-day MA, UAN is a BUY.

PowerShares S&P 500 BuyWrite Portfolio (PBP) dropped 2.7% — less than the S&P 500’s drop of 3.54%. With a 10.28% yield, but slipping below its 50-day MA, PBP is now a HOLD.

Rentech Nitrogen Partners, L.P. (RNF) dropped back 1.91% after last week’s big 6.21% gain. By all metrics, Rentech outperforms its competitors in terms of profitability and management efficiency. The company reports its Q3 results on Nov. 8. Still trading above its 50-day MA, and yielding a whopping 13.40%, RNF remains a BUY.

UBS E-TRACS 2x Leveraged Long Alerian MLP Infrastructure Index ETN (MLPL) tumbled 2.75% this past week and is due for a bounce, MLPL remains a BUY.

Annaly Capital Management (NLY) fell a mere 0.56% as the Mortgage REIT sector seems to have bottomed. As I noted last week, the company recently announced a $1.5 billion stock repurchase, equivalent to nearly 10% of the outstanding shares. If this market leader is buying stock, investors should follow their lead — at least until rates rise. NLY is now a HOLD.

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