THIS IS NOT INVESTMENT ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
I have been on vacation and otherwise on the sidelines for the past two weeks due to fiscal (tax) policy uncertainty. As presaged in my previous post, I am out of Europe for all intents and purposes (but have kept BP). I made some money and lost a little more in my venture across the pond, but I am very glad to be extricated. I just don't need the hassle.
I have spent considerable time identifying strong payers of "qualified" dividends in anticipation that the Bush 15% dividend rate will be extended. This is important for my personal investing (as distinguished from my IRA and 401k investments). Many dividends such as those from real estate investment trusts, business development companies and mineral trusts are excellent in retirement accounts, but would be taxed as high as 35% even with the Bush cuts, if held personally. (Note: master limited partnerships present some unique problems----I don't give tax advice either).
The first place I looked was my own portfolio. As original subscribers know, I am a fan of wireless telecoms (Verizon and AT&T), land line providers (Windstream, Frontier and Century), tobacco (Altria and RJReynolds), and of course the ultimate in "widow and orphan" plays, utilities (PGN, FE, DUK, POM). These have appreciated nicely in my hands and still pay around 6% in dividends---and a 6% qualified dividend is like an 8% nonqualified one. I have continued to add these to my portfolio since beginning this exercise in May and will continue to do so.
A second place for "qualified" dividends is the list of 15% preferred stock qualifiers located on www.quantumonline.com. Like the arena of non qualified "trust preferreds" about which I have written and invested in the past, the qualifed preferred dividend space is dominated by financials. The sexiest available are those of BankAmerica---and I do own some. But, BAC's exposure to the foreclosure mess and more tellingly the threat of having to repurchase billions of dollars of mortgages improvidently originated by its subsidiary, Countrywide (bad idea to buy this guys), makes this too unattractive at this time. Citi holds a lower bond rating than BAC (not investment grade), but seems to have a better vision of its future and less exposure to the repurchase issue. I own some qualified preferred of C and will likely add to the position, although in doing so I may have to break my rule not to purchase any preferred above its par/redemption price (usually $25, sometimes $50 or $1000). If the redemption date is sufficiently remote (say 2013 or beyond), I am less troubled by breaking the rule. JPMorgan and Wells Fargo are probably stonger institutions, but their qualified preferreds are trading too far above their par/redemption price. I am also invested in the qualified preferreds of Goldman Sachs and MetLife, the latter being one of my current favorites. I also like Zions Bank qualified preferred as a more speculative play. It currently trades at about par ($25), is not redeemable until 2013 and pays a 9.63% dividend. Note, this is speculative----Zions Bank is not investment grade.
TO REITERATE, I DON'T GIVE INVESTMENT OR TAX ADVICE. THIS IS MERELY A PERSONAL WALK THROUGH THE JUNGLE THAT IS INVESTING.
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