“Income deposit securities are composed of a bond and equity,” says growth and income expert Bryan Perry in his The 25% Cash Machine. Here, he looks at two favorite ‘hybrids’.
“These kinds of structured securities are designed to attract investors to otherwise (somewhat) boring businesses. B&G Foods (NYSE: BGF) is a dry foods company and Centerplate (NYSE: CVP) is America’s biggest stadium concessionaire. The hybrid combination generates dividend.
“These are very defensive businesses and help us maintain a balance in our portfolio by owning assets in non-correlating sectors. During uncertain markets, money rotates toward bonds, and consumer noncyclical sectors, like food, beverage and everyday services — which is where these two holdings operate.
“Nothing much changes in the dry food business or the concession business. Housing markets may come and go, and gasoline prices may rise and fall, but people still eat and they still go to baseball and football games. Both stocks remain buy recommendations.”
“Yet both entities throw off excellent cash flow and are growing revenues and net earnings by very steady and reliable rates. B&G Foods just reported its Q2 numbers on July 30, and once again the company delivered some healthy results.
“Net sales for the second quarter of 2007 increased 12.3% and overall gross profit (expressed as a percentage of net sales) rose by 4.1%. These are solid numbers and show good forward visibility.”
