| Income trio: Neil George's 'fabulous finds' |
| Monday, November 30, 2009 |
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In his Stocks that Pay You, the advisor reviews three income oppotunities -- a holding company, an investment firm, and a medical center REIT -- that he calls, "fabulous finds". "I'll start with a company, Compass Diversified Holdings (NASDAQ: CODI), that as its name implies - holds stuff. "Specifically, it holds ownership in small set of operating companies in varied but basically solid businesses. "They include a temporary and contract worker company, a medical device manufacturer, a research equipment purveyor and a couple other similarly boring but steady businesses. "And the holding company only buys into businesses without the need for heavy leverage, and in sectors where the businesses have control of their individual markets. "The outcome is steady cashflows and a very low level of debt - and lots of cash and cash-like assets on the books. Return on capital is running at over 13% -- over 17% on the common equity. "And from those returns, investors get a nice fat cut - quarter after quarter, even during the past two years of economic and market hell. In fact dividend growth is running up over 50% in the past three years. Trading around 10.50 a share, it pays a yield of over 12.9%. "Next is AllianceBernstein Holding LP (NYSE: AB), which runs a number of investment funds including two of my favorite bond funds: the AllianceBernstein Global High Income Fund and the AllianceBernstein National Municipal Income Fund. "But while both of these funds are solid buys, I'm also suggesting that you might want to share in the success of the managers of these funds by getting a piece of AllianceBernstein itself. "Because the more these and their affiliated funds perform and grow - the bigger the revenue flows will continue to be for the management company. "AllianceBernstein is structured as a publicly traded partnership which in turn owns the shares of the operating fund company. "This is a great means for individual investors to gain access to ready and rising cashflows while taking advantage of tax rules for partnerships that avoid the double-taxation of regular corporations. "The dividend flows vary by quarter as the funds pay their fees to the LP - but what counts is how they add up over the entire year and keep piling up year after year. "Right now that means you're buying into a dividend yield of over 10% -- with more coming as AB's funds continue to perform and grow. "Last up in this eclectic garage sale is a real estate company. But I'm not writing about a commercial or residential deal that has to rely on some sort of economic upturn to make it work. Instead, this company is structured as another tax-advantaged investment in the form of a REIT -- focused on medical facilities. "And not just general hospitals but very targeted cost-saving surgical procedure centers and specialized care facilities. These are the sorts that will stay in demand with or without more government control of the medical markets. "And in fact, the argument might well be made that these are the sorts of operations that are working to streamline healthcare services, thus trimming costs to insurers -- be they private or Uncle Sam. "Medical Properties Trust (NYSE: MDT) has seen its shares down last year with the move by the entire market to discount property companies. "But since then, the realities of its holdings and its cashflows have been bringing it back strongly. Dividend flows are ample and high at over 9%. Just the medicine your portfolio needs." |
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