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BIG YIELD HUNTING: BUYING INTO HIGH, SAFE, GROWING YIELDS WHILE OTHERS CHASE JUNK

BIG YIELD HUNTING: BUYING INTO HIGH, SAFE, GROWING YIELDS WHILE OTHERS CHASE JUNK. ROGER S. CONRAD MARCH 2011. A THIRD YEAR OF GAINS?. THE INCOME INVESTING BULL MARKET: MARCH 2009--?? HIGHER PRICES = RISING EXPECTATIONS “BLACK SWANS” AND THE WALL OF WORRY. THE NEGATIVES.

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BIG YIELD HUNTING: BUYING INTO HIGH, SAFE, GROWING YIELDS WHILE OTHERS CHASE JUNK

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  1. BIG YIELD HUNTING: BUYING INTO HIGH, SAFE, GROWING YIELDS WHILE OTHERS CHASE JUNK ROGER S. CONRAD MARCH 2011

  2. A THIRD YEAR OF GAINS? • THE INCOME INVESTING BULL MARKET: MARCH 2009--?? • HIGHER PRICES = RISING EXPECTATIONS • “BLACK SWANS” AND THE WALL OF WORRY

  3. THE NEGATIVES • HIGHER EXPECTATIONS = ROOM FOR DISAPPOINTMENT • ECONOMY STRONGER BUT WEAKNESS REMAINS • RISING COMMODITY PRICES: INFLATIONARY OR DEFLATIONARY? • BLACK SWANS: JAPAN AND THE MIDDLE EAST

  4. THE POSITIVES • CORPORATE RATES STILL VERY LOW • LITTLE REFINANCING RISK • Q4 RESULTS GENERALLY SOLID • DIVIDEND GROWTH RETURNS • BLACK SWANS = LOWER STOCK PRICES

  5. MANAGING YIELD • STOCKS ARE BEST • SHOP FOR DIVIDEND GROWTH • BEWARE THE HIGHEST YIELD • KNOW WHO’S WRITING THE CHECKS • BALANCE AND PARE BACK WINNERS • BUY QUALITY WHEN OTHERS ARE DISAPPOINTED

  6. NUCLEAR POWERED • JAPAN’S NUCLEAR CRISIS: FACT, FICTION AND FALLOUT • US NUCLEAR: LIMITED LIABILITY AND LOWER PRICES • BEST BETS: EXC--4.9%, ETR--4.7%, DUK--5.4% • VULNERABLE: PCG

  7. ADVANTAGE: GAS • PLAY VOLUME, NOT PRICE • SHALE--EAGLE FORD, MARCELLUS • NEW PROJECTS CONTRACTED FIRST • DIVIDEND GROWTH ACCELERATING • MLPS: TAX ADVANTAGED--KMP--6.3%, EPD--5.7%, ETP--6.8%

  8. LOOKING NORTH • 2011 CONVERSION/TAXATION DONE • DIVIDENDS: GROWING AGAIN • CANADIAN DOLLAR: HARD CURRENCY • MPT (MCQPF)--8.5% • PKI (PKIUF)--8.5%

  9. SUPER PRODUCERS • BEWARE POLITICAL INVESTING • BIG CYCLE UP: OIL, NGLS • LOOK FOR LOADED LAGGARDS • Eni (NYSE: E)--4.2% • Enerplus (NYSE: ERF)--7.2%

  10. HIGH YIELD TELECOM • NO “HIGHLANDER” SCENARIO • WIRED TO CONNECTIVITY GROWTH • BIG CASH FLOWS = HIGH YIELDS • FCC NO LONGER A THREAT • BIG WIRELESS: VZ--5.4% • RURAL CASH COWS: WIN--7.9%

  11. BIG YIELDS DOWN UNDER • AUSTRALIA’S ASIAN CONNECTION • AUSSIE DOLLAR: A HARD CURRENCY • FLOODS DEPRESS OUTPUT AND VALUATIONS • LEIGHTON HOLDINGS (ASX: LEI, OTC: LGTHF)--5.0% • TELSTRA (ASX: TLS, OTC: TLSYY)--10.8%

  12. WHERE THEY AIN’T • SMALL BANK PROFITS: FNFG--4.6% • PROFITABLE PROPERTY: WRE--5.9% • SHORT DURATION OPEN END BOND FUNDS: VFIIX • PROVEN JUNK: NTHEX • TEF--5.8%

  13. WHAT TO AVOID • LONG-TERM BONDS AND FUNDS—NO YIELD ADVANTAGE, MORE RISK • CARRIED INTEREST MLPS • MORTGAGE REITS • MOST CLOSED-END BOND FUNDS • MUNIS YOU DON’T KNOW • THE HIGHEST YIELD

  14. FOR MORE • UTILITY FORECASTER www.utilityforecaster.com • www.utilityandincome.com • CANADIAN EDGE www.canadianedge.com • www.mlpprofits.com • www.pfnewsletter.com • user name: carnival • password: feather

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