BERKO: How to create a portfolio for monthly dividends
Dear Mr. Berko:
We have an $83,000, 4.5 percent CD coming due. It was paying us a monthly income of $260. We have other CDs coming due later this year, as well as some utility stocks. We need to invest this $83,000 so that it will pay us a monthly income of $260 or more.
We can afford some modest risk, but we can’t afford the 0.75 percent interest that Wells Fargo Bank will give us on a new CD. The (blankety-blank) government has set interest rates so low to help the banks earn more money, but they don’t give a (blankety-blank) about us retired folks, who need higher yields to pay our higher gas, medical, food and insurance costs.
Please give us some good recommendations for this money. And is it possible to buy stocks that pay dividends each month rather than only four times a year?
D.S., Fort Walton Beach, Fla.
Dear D.S.:
Since the market fell to 6,440 in March 2009, the Dow Jones industrial average has nearly doubled. The overarching reason behind the advance — even though corporate revenues and earnings are still below 2008-09 peak levels — is low interest rates.
The Three B’s (Ben Bernanke, Barack Obama and John Boehner) knew that the Dow needed legs, and our investment banks needed profits. They also knew that if money remained cheap, retirees would be forced to search the stock market for higher yields, thereby pushing up prices. So the Three B’s figured a strong Dow would re-establish corporate and consumer confidence, and low- to zero-interest rates were the quickest way to do it.
Back to your case. I recommend you first purchase 200 shares of AmeriGas Partners LP (APU-$43.17), which distributes propane to residential, commercial, agricultural, industrial and motor fuel customers in 50 states and yields 6.9 percent.
Then, purchase 200 shares of each of the low-volatility issues described below. Each should increase revenues, earnings and dividends annually, and each has modest appreciation potential. You can expect to receive three dividend checks each month from all of the following issues.
For dividends payable in January, April, July and October:
● Plains All American Pipeline LP (PAA-$60.39) is a master limited partnership (or MLP) engaged in the transportation, storage, terminaling and marketing of oil and natural gas products. PAA yields 6.6 percent.
● Rogers Communications Inc. (RCI-$38.90), which yields 3.7 percent, is a diversified Canadian media company handling wireless, cable, Internet, radio, TV and print media.
● Altria Group Inc. (MO-$27.11), formerly known as Philip Morris; in addition to tobacco products, MO also owns 28 percent of SABMiller Brewing. The issue yields 5.6 percent.
For dividends payable in February, May, August and November:
● Abbott Laboratories (ABT-$52.13), a classy global health-care company, sells pharmaceuticals, nutritionals and medical products. Its dividend yields 3.7 percent.
● McDonald’s Corp. (MCD-$90.21) is a company you may have heard of. It’s in the breakfast, lunch and dinner business all over the world. It yields 2.7 percent.
And for dividends payable in March, June, September and December:
● UGI Corp. (UGI-$29.66) has a 3.5 percent current yield. UGI is an electric and natural gas utility in Pennsylvania and is also a national marketer of propane.
● Merck & Co. Inc. (MRK-$32.97) is a global health-care provider selling pills, vaccines, biologic therapies and animal health-care products. The dividend yields 4.6 percent.
● Mercury General Corp. (MCY-$39.31) yields 6.1 percent and is one of the leading independent agency writers of automobile insurance in the nation.
In total, these issues will cost you less than $83,000, and their annual dividends of $3,836 will give you a current yield of 4.6 percent — six times more than a 0.75-percent Wells Fargo CD.
If you use a discount broker, the commission costs won’t exceed a C-note. If you buy these stocks from Merrill Lynch or JP Morgan or Dean Witter, it may cost you $500 to $600.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775, or email him at mjberko@yahoo.com. © 2011 Creators.com
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