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Guarding Your Wealth for Senior Citizens
Income plus Growth for Retirees may be Income
Deposit Securities
IDS is combination of a corporate bond and a common
stock
By Jeffrey D. Voudrie, CFP
 May 9, 2007 - Investors everywhere seek
opportunities that can provide stable income while increasing the value
of their initial investment. Traditionally, these investors turn to
stocks that pay dividends. Income Deposit Securities are designed to
more directly meet these goals. Read on to learn about three such
investments you should consider now.
A money manager’s job is to help investors adjust
their portfolios to changing market conditions. In uncertain times like
these, I believe it is important to use investments that pay healthy
dividends. I’m not talking about the dividends you see in the big
well-known companies found in the Standard & Poors 500. Most of those
companies pay a paltry 2-3% in dividends.
Nor am I impressed by the dividends you can get
from mutual funds. The size of most mutual funds means that they have to
search for dividends among the large, well-established companies. As a
result, the dividends they pay don’t cut it either.
But there is another dividend option that is far
better, found in an Income Deposit Security (IDS). The Income Deposit
Security was developed in coordination with the American Stock Exchange.
It is a combination of a corporate bond and a common stock. That means
it can provide the interest certainty associated with a corporate bond,
but also the potential for long-term growth found in a common stock.
A lot of people don’t understand the two-part
nature of an Income Deposit Security so when they try to analyze it as
an investment it doesn’t appear as attractive. It’s only by breaking it
down into its components that the true valuations can be found.
One IDS that continues to work well in my client’s
accounts is B&G Foods (BGF). This company makes condiments and
spreadable preserves. It makes pickles, peppers and hot sauces under the
Red Devil, B&G and Trappey labels. B&G Foods produces the staples that
people continue to buy regardless of how fast the economy is growing.
That makes it very defensive.
It also is a company that generates a steady,
consistent cash-flow. It pays a dividend of around 7.5%. That’s very
attractive compared to the interest paid on many corporate bonds. That’s
considerably higher than the measly dividends paid by the companies in
the S&P 500.
There’s more to B&G Foods than a healthy dividend.
It’s generated excellent growth as well. According to Morningstar (www.morningstar.com),
an investment in B&G Foods grew 52.3% in 2006 and is already up over 20%
this year. Not bad for a defensive, dividend-oriented company!
Another example of an IDS that you might consider
is Coinmach Service Corp (DRY). This isn’t a company you will hear about
from the analysts at the big firms. You can’t even find out much about
it from Morningstar. That’s OK; I know that there is a lot of money to
be made for my clients in solid businesses such as Coinmach Service
Corp—and it’s my job to find them.
Coinmach Service Corporation is the leading owner
and operator of laundromats across the nation. It’s another boring,
defensive company whose revenues aren’t dependent on a surging economy.
In fact, the slower the economy the better this company will do because
more people will rent apartments as opposed to buying homes.
It pays a healthy dividend, too. Currently, the
dividend is around 7.5%. Overall it was up over 25% in 2006 and has
already increased in my clients’ portfolios by 13% so far in 2007.
A third IDS that you should consider for your
portfolio is Centerplate (CVP). I’ve mentioned this darling in my column
before—hopefully you purchased it then. Centerplate runs the concession
stands in most major stadiums and ballparks. They’re the ones selling
those expensive hotdogs!
Centerplate has a yield of almost 9% right now. And
it produced a return of over 60% in 2006. It is down 5% this year
because of an attack by some short-sellers. If your investment
time-frame is only 30 days then move on. But is you are looking for a
solid, growing company that pays an attractive dividend, consider
Centerplate.
Income Deposit Securities are an investment that
can help your portfolio. But you can’t just pull one up in Morningstar
and get an accurate picture of their worth. With a little digging,
though, you may uncover a real gem.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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