In this final edition of Dividend Pro for 2012, I wanted to give you a few important updates concerning your current positions.
First, Northern Tier Energy Trust LP (NTI) soared 8.72% this past week, as the Bakken oil field investment theme heats up. Because of the sharp recent rise, this is a good time to book your profits on half of your March $22.50 call options for a gain of 59.09%. Hold on to this high-yielding stock and the rest of your options for potentially bigger gains ahead.
Second, Two Harbors Investment Corp. (TWO) spun off its residential rental business into a new company in the initial public offering (IPO) of Silver Bay (SBY) on Dec. 14. Silver Bay owns about 3,100 single-family homes and will use its $229 million in cash to acquire and rent out more single-family properties. Silver Bay is 47% owned by Two Harbors — equal to approximately 17.8 million shares of common stock. Several analysts have suggested that Two Harbors is likely to dispose of these shares after a 90-day “lock-up” period through a special dividend of Silver Bay shares to Two Harbors shareholders. The value of Silver Bay shares to be distributed will equal about 9% of your Two Harbors holdings — or roughly $1.04 per share. So don’t be surprised suddenly to see Silver Bay stock in your brokerage account. Note that this will happen by mid-March at the earliest.
Third, the fate of many of your Dividend Pro positions in the coming two weeks will depend on the results of the fiscal cliff negotiations. You’ve seen that PIMCO Municipal Income Fund II (PML) has dropped sharply recently on the possibility of a change in the tax-exempt status of municipal bonds. At the same time, you may find money flowing back into some of your current positions once the dust has settled.
Fourth, I continue to believe that, despite falling out of favor, high-yielding mortgage real estate investment trusts (REITs) will stage a comeback. While the market is focused on narrowing interest rate spreads, keep in mind that the value of the non-agency mortgages held by the REITs will rise as the housing market continues to recover.
Finally, global markets are back in vogue. This should have a positive impact on both Global X SuperDividend ETF (SDIV) and last week’s pick, the SPDR S&P Emerging Markets Dividend ETF (EDIV).
With that, I want to wish you and your family Happy Holidays and a prosperous New Year.
Portfolio Update
Global X SuperDividend ETF (SDIV) rose 1.18% last week. SDIV comes with a 7.41% 12-month dividend yield. In comparison, the S&P 500 has a dividend yield of just 2.01%. Trading back above its 50-day moving average (MA), SDIV is a BUY.
Two Harbors Investment Corp. (TWO) dropped 1.20% this past week. On Monday, TWO declared a quarterly dividend of $0.55 per share of common stock for the fourth quarter of 2012. This dividend is payable on January 18, 2013, to common stockholders of record at the close of business on December 31, 2012. TWO is a BUY.
PIMCO Municipal Income Fund II (PML) fell 3.00%, on the uncertainty surrounding the future tax-exempt status of municipal bonds, which are on the table as part of the “fiscal cliff” negotiations. Dropping below its 50-day MA, PML is now a HOLD.
Apollo Investment (AINV) rose 1.94%. AINV traded ex-dividend on Dec. 14 for its quarterly dividend of $0.20, payable on January 4, 2013. As a percentage of AINV’s recent stock price of $8.27, this dividend works out to a quarterly yield of approximately 2.42%. The company’s current level of earnings provides enough coverage for the company to continue paying a 20-cent dividend on a quarterly basis. Still trading above its 50-day MA, AINV is a BUY.
Omega Healthcare Investors Inc. (OHI) fell 0.43%. Omega Healthcare has raised its dividends, on average, by 9.4% per year over the past five years. This year, it raised its funds from operations (FFO) twice, with the latest FFO target for fiscal 2012 set at between $2.15 and $2.17 per share, above analysts’ expectations for $2.14 per share. Dropping below its 50-day MA, OHI is now a HOLD.
PowerShares Preferred (PGX) dropped 0.54% on the week. PGX paid out a monthly dividend of 7.8 cents on Dec. 14. This monthly income payer is a HOLD.
Fifth Street Finance Corp. (FSC) was unchanged to the penny. FSC is one of the growing number of Business Development Companies that is paying a monthly dividend, and that yield is now 11% at current prices. FSC remains a HOLD.
CVR Partners, LP (UAN) dropped 1.57% this past week. With its Nitrogen facility located in Kansas, CVR is in close proximity to a Union Pacific rail line, which gives the company a benefit of lower transportation costs to its customers. Still trading below its 50-day MA, UAN is a HOLD.
Rentech Nitrogen Partners, L.P. (RNF) dropped 0.90%. While fertilizer Master Limited Partnerships, or MLPs, are less publicized than energy related MLPs, these MLPs offer investors real potential upside, as well as significant income opportunities from their distributions to unit holders. Yielding 9.10%, RNF remains a BUY.
Annaly Capital Management (NLY) rose 1.18%. The company declared the fourth quarter 2012 common stock cash dividend of 45 cents per common share, which is payable Jan. 29, to common shareholders of record on Dec. 28. The ex-dividend date is Dec. 26. With strong insider buying, NLY remains a HOLD.
Peritus High Yield ETF (HYLD) rose 0.32%. This actively managed ETF yields 8.39%. You should be receiving your monthly dividend payment right after Christmas. Now above its 50-day MA, HYLD is a BUY.
Northern Tier Energy Trust LP (NTI) soared 8.72%. Based upon Bakken versus West Texas Intermediate oil prices and Brent oil spreads, some analysts expect NTI to pay $2.00 per unit for the quarter ending Dec. 31. NTI remains a BUY.
Apollo Residential Mortgage Inc. (AMTG) rose another 1.46%. The company announced the Board of Directors declared a quarterly dividend of $0.70 per share of common stock for the fourth quarter of 2012 and a special dividend of $0.35 per share of common stock. These dividends are payable on January 31, 2013, to common stockholders of record on December 31, 2012. AMTG is a BUY.
SPDR S&P Emerging Markets Dividend ETF (EDIV) was up 1.80% during its first week in the Dividend Pro portfolio as emerging markets continued on their strong seasonal run. Emerging market dividends have grown at an annual compounded rate of 14% over the last 10 years, much faster than developed markets. EDIV is a BUY.
