Another 12.6% Yielder — And Getting Back into Spain

Nicholas Vardy

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

After a see-saw week, U.S. markets ended slightly higher, with the S&P 500 up 0.73%.

Your Dividend Pro portfolio had a mixed week with gains and losses evenly divided. Many of your positions also announced earnings this week.

You were stopped out of your position in Banco Santander, S.A. (SAN) last week at a loss.

I rarely do this, but I am recommending that you get back into Banco Santander, S.A. (SAN). Note that the stock is already trading back above its previous stop price. I still believe that European Banks may become the investment story of 2013. For a review of the investment case for Santander itself, you can read the relevant issue of Dividend Pro by clicking here.

So buy Banco Santander, S.A. (SAN) at market today and place your stop at $6.80. If you want to play the options, I again recommend the June $8.00 call options (SAN130622C00008000). As you have seen, this is a volatile ride. But it also is one that I think can pay off in a big way.

This week, I also want to return to a similarly oversold investment theme — U.S. Real Estate Investment Trusts (REITs) through the iShares FTSE NAREIT Mort Plus Cp Idx (REM).

REM is a broad-based bet on the U.S. REIT sector. Rather than betting on a single mortgage REIT, REM invests in the 28 real estate investment trusts that make up the FTSE NAREIT All Mortgage Capped Index. The index itself consists of residential and commercial real estate, mortgage finance and savings associations in the U.S. equity market.

Recall that last fall, U.S. REITs sold off sharply on expectations that the interest rate spread — the difference between what the REITs pay to borrow money and what they earn by investing was falling.

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Well, it turns out that with interest rates now starting to rise, spreads also are rising. And suddenly, your current holdings like Annaly Capital Management (NLY) now are reporting better-than-expected earnings.

The benefit of investing in REM versus any of its individual components is, of course, diversification. REM is not held hostage to the fate of any individual REIT. The cost is that its yield is “only” 12.60%. But it’s also worth noting that REM’s “beta” — or volatility — is about half of the overall stock market. That kept investors in this REIT sleeping well at night.

Forbes magazine recently looked at the weighted underlying holdings of REM and found that an impressive 49.0% of holdings have experienced insider buying within the past six months. That’s because a number of REITs — including your holding in Annaly Capital (NLY) — announced stock buyback programs to take advantage of the sell-off in the fall.

So, buy the iShares FTSE NAREIT Mortgage REIT (REM) at market today, and place your stop at $13.50.

Full disclosure: REM is a position that I hold in my “Double Your Dividends” Investment Program at Global Guru Capital.

NOTE: Global Guru Capital is a Securities and Exchange Commission-registered investment adviser, and is not affiliated with Eagle Publishing.

As a courtesy, I would like to bring your attention to my latest special report: The Top 12 Stocks You Should Buy Right Now. You can get it FREE on my website.

Portfolio Update

Global X SuperDividend ETF (SDIV) dropped 0.65% last week. SDIV paid out a 14.5-cent dividend on Feb. 1. Yielding 7.68%, SDIV remains a BUY.

Two Harbors Investment Corp. (TWO) dropped 0.48% this past week. The company announced its financial results yesterday — delivering comprehensive income of $185.4 million, or $0.63 per diluted weighted average common share. After declaring a dividend of 55 cents a share, TWO remains a BUY.

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PIMCO Municipal Income Fund II (PML) rose 0.15%. PML declared a monthly dividend of 6.5 cents. The dividends will be payable on March 1, 2013, to shareholders of record on February 11, 2013, with an ex-dividend date of February 7, 2013. Slipping below its 50-day moving average (MA), PML is now a HOLD.

Apollo Investment (AINV) dropped 5.30%, after the company reported its third quarter results. Net investment income per share for the quarter ended December 31, 2012, was $0.21, compared to $0.22 for the quarter ended September 30, 2012. Apollo also declared a dividend of $0.20 per share for the fourth fiscal quarter of 2013. Now trading below its 50-day MA, AINV is a HOLD.

Omega Healthcare Investors Inc. (OHI) rose 0.82%. Its quarterly dividend of $0.45 is payable on February 15, 2013, to common stockholders of record as of the close of business on January 31, 2013. The company will release its earnings results for the quarter and year ended December 31, 2012, on Tuesday, Feb. 12. OHI is a BUY.

PowerShares Preferred (PGX) was unchanged. You should receive a dividend of about 7.8 cents per share next week. This monthly income payer, with a 6.47% yield, remains a BUY.

Fifth Street Finance Corp. (FSC) rose 0.56%. Net investment income for the quarter ended December 31, 2012, was $26.6 million, or $0.28 per share, as compared to $21.0 million, or $0.29 per share, for the quarter ended December 31, 2011. A dividend of $0.0958 per share will be payable on February 28, 2013, to stockholders of record on February 15, 2013. The company confirmed this level of dividend payments through the end of May. FSC remains a BUY.

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Rentech Nitrogen Partners, L.P. (RNF) dropped 0.79%. Rentech began trading ex-dividend on Feb. 5 for its quarterly dividend of $0.75, payable on Feb. 14. Up 26.82% just this year, RNF remains a BUY.

Annaly Capital Management (NLY) dropped 0.20%. The company reported GAAP net income for the quarter ended December 31, 2012, of $700.5 million, or $0.70 per average common share as compared to GAAP net income of $445.6 million, or $0.46 per average common share, for the quarter ended December 31, 2011, and GAAP net income of $224.8 million, or $0.22 per average common share, for the quarter ended September 30, 2012. Beating expectations, NLY is a BUY.

Peritus High Yield ETF (HYLD) fell 0.02%. Despite fear about a bubble in junk bonds, this 8%-plus yielder is holding up just fine. HYLD remains a BUY.

Northern Tier Energy Trust LP (NTI) soared 5.89% as the energy sector remains red hot. NTI remains a BUY.

Apollo Residential Mortgage Inc. (AMTG) rose 0.49%. Apollo Residential Mortgage, Inc. is a real estate investment trust that is managed by a subsidiary of Apollo Global Management, LLC, a leading global alternative investment manager with $110 billion of assets under management. AMTG is a BUY.

SPDR S&P Emerging Markets Dividend ETF (EDIV) rose 0.32% as emerging markets steadied. Yielding 5.43%, this bullish bet on emerging markets is a BUY.

UBS E-TRACS 2x Wells Fargo Bus Dv Cm ETN (BDCL) recovered 1.40% last week. With a double-digit percentage yield of 12.87%, BDCL remains a BUY.

Market Vectors International High Yield Bond ETF (IHY) fell 1.19%. This ETF announced a monthly payment of 13.1 cents on Feb. 1. This high-yield play remains a BUY.

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