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Harry Domash
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Harry Domash publishes DividendDetective.com, a site specializing in high-dividend investing. He also publishes WinningInvesting.com, a free site featuring “how to” investing tutorials and other resources. His best selling book on fundamental analysis, “Fire Your Stock Analyst,”... More
My company:
Dividend Detective
My blog:
Dividend Detective
My book:
Fire Your Stock Analyst
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  • Market Beating Selection Strategy Applied To Dividend Stocks

    Around 15 years ago, Joseph Piotroski, an accounting professor at University of Chicago, formulated a strategy for pinpointing value-priced stocks likely to outperform the overall market.

    In a nutshell, Piotroski's strategy involved defining a universe of cheap stocks, based on price to book ratios. From that universe, he pinpointed those with the best track records of improving fundamentals, which he defined as increasing profitability while at the same time cutting debt. Over the years, stocks meeting Piotroski's requirements have been shown to outperform other value-based strategies, as well as the overall market.

    I've been experimenting with adapting Piotroski's principals to high-dividend payers, but not necessarily value-priced stocks. I've maintained Piotroski's basic strategy, but tinkered with the details, particularly, putting more emphasis on cash flow growth.

    My version, which I creatively dubbed, High-Dividend Payers with Improving Fundamentals," has produced promising results over a variety of time periods. However, as you've heard; historical results don't necessarily predict the future. So, with that caveat, here's my current list.

    Name

    Recent Price

    Dividend Yield

    AGL Resources (NYSE:GAS)

    50.07

    4.1%

    Comtech Telecommunications (NASDAQ:CMTL)

    35.25

    3.4%

    Costamare (NYSE:CMRE)

    19.60

    5.7%

    DineEquity (NYSE:DIN)

    104.49

    3.4%

    Douglas Dynamics (NYSE:PLOW)

    21.90

    4.0%

    Duke Energy (NYSE:DUK)

    79.84

    4.0%

    Entergy (NYSE:ETR)

    79.12

    4.2%

    Schnitzer Steel Industries (NASDAQ:SCHN)

    17.19

    4.4%

    Targa Resources (NYSE:TRGP)

    93.93

    3.3%

    Waddell & Reed Financial (NYSE:WDR)

    49.94

    3.4%

    Wi-LAN (NASDAQ:WILN)

    2.71

    6.1%

    As is the case with the results produced by any screen, consider these stocks to be research candidates, not a buy list. My testing has found good results for holding periods as short as four weeks. So, I'll revisit the list in a month and report on the results

    .

    Feb 23 12:33 AM | Link | 1 Comment
  • 2014"S Hottest Closed-End Funds

    If you had purchased shares of Morgan Stanley India Investment (NYSE:IIF) a year-ago, you would have enjoyed an 80% return over those 12 months. MS India Investment is a "closed-end fund" or CEF, which is a special type of mutual fund. Here's why you should consider CEFs.

    Conventional mutual funds are technically "open-end" funds. When you buy an open-end fund, you purchase shares directly from the fund, even if you buy through a broker, The price you pay, the net asset value (NYSE:NAV), is the value of the fund's holdings (assets), expressed on a per-share basis, regardless of how many investors want to buy or sell its shares.

    The downside for open end funds is that the fund managers must find places to invest new money coming from newly created shares when investors are net buyers. Conversely, when sellers outnumber buyers, the manager must sell shares he or she might not want to sell to raise cash to redeem the shares.

    By contrast, closed-end funds sell a fixed number of shares via an initial public offering (NYSEARCA:IPO). After that, the fund trades just like a stock. Buyers must purchase from existing shareholders, and shareholders must find a buyer if they want to sell. Since the funds themselves are not involved in those transactions, CEF fund managers can execute long-term strategies without worrying about raising cash to redeem existing shares or investing unexpected new cash.

    Here's another advantage of closed-end funds. Unlike open-end funds, CEF share prices reflect the balance of supply and demand. They rarely trade at their net asset values. Instead, they trade either above (premium) or below (discount) to their NAVs. In practice, most closed-end funds trade at discounts, typically 5% to 10% below their net asset values. So, if a fund trades at a 10% discount, you can get $100 worth of assets for $90. The Morgan Stanley India Investment fund that I mentioned earlier recently traded at 9% discount.

    Here are four more high-performing closed-end funds trading at 8% or higher discounts. These particular funds also pay regular dividends.

    Morgan Stanley China A (NYSE:CAF): Holds a diversified portfolio of large-cap China-based companies. The fund returned 51 over the past 12-months. It's currently trading at an 11% discount to its NAV, and pays a 5.6% dividend yield.

    Cohen & Steers Quality Income Realty Fund (NYSE:RQI): Holds U.S. based real estate investment trusts (REITs) that own various types of commercial real estate properties. It returned 40% and is trading at a 13% discount. Dividend yield is 6.2%.

    John Hancock Tax-Advantaged Dividend Income (NYSE:HTD): Holds bonds and preferred stocks mostly issued by U.S.-based utilities. Returned 33% and is trading at an 8% discount. Yield 6.3%.

    Dreyfus Muni Bond Infrastructure (NYSE:DMB): Holds federal tax-exempt bonds issued to finance development of U.S. infrastructure projects. Returned 27% and is trading at an 8% discount. It's paying federal tax-exempt dividends equating to a 6.2% yield.

    Just because U.S. real estate investment trusts as well as India and China stocks were hot last year, doesn't mean that they'll repeat that performance this year. As always, past performance doesn't necessarily predict the future. Do your due diligence. The more you know about your holdings, the better your results.

    Feb 11 1:03 PM | Link | Comment!
  • Which Works Best: ETFs Or Mutual Funds

    Are you better off owing conventional mutual funds or exchange-traded-funds (ETFs) focusing on the same sector? I'll tell you what you need to know, but leave the decision up to you.

    ETF Advantages
    Both mutual funds and ETFs track the returns of stocks or other securities in specified market sectors. But ETFs offer trading advantages. Unlike mutual funds, you can buy and sell ETFs just like stocks, and you pay the same commissions as you would for trading stocks. Most ETFs require no minimum investment, and there is no required holding period. ETFs can be traded at any time during the day, but mutual funds trade only once a day, after the market closes.

    Mutual Fund Advantages
    Although ETFs may be easier to trade, you'd think that mutual funds would generate better returns. Most are actively managed by professionals who can react to changing market conditions. By contrast, most ETFs either track fixed indexes, or indexes that can only be changed quarterly.

    What the Numbers Say
    With that in mind, let's see what the numbers show. We'll start with China and India, which were last year's hottest markets.

    In China, an ETF, PowerShares China (NYSEARCA:CHNA), racked up a 66% return, edging out managed mutual fund Matthews India Investor (MUTF:MINDX), which returned 64%.

    Looking at India, two ETFs, iShares MSCI India Small-Cap (ticker SMIN), up 53%, and EGShares India Small-Cap (NYSEARCA:SCIN), up 47%, beat the best mutual fund, Wasatch Emerging India (MUTF:WAINX), which returned 45%.

    In the U.S. biotechnology was the strongest category in 2014. There, First Trust Arca Biotech (NYSEARCA:FBT), an ETF, gained 48% compared to 35% for the top mutual fund, Fidelity Select Biotechnology (MUTF:FBIOX).

    Real estate investment trusts (REITs), a type of corporation limited to investing in commercial real estate, was another strong category last year. The top ETF focusing on REITs, iShares Residential Real Estate (NYSEARCA:REZ), returned 35%, compared to 32% for the best mutual fund, Phocas Real Estate (MUTF:PHREX).

    Three Year Returns
    Obviously, last year's numbers aren't necessarily typical of long-term performance. Looking at three-year returns generally told a similar story, but the differences narrowed.

    For instance, the top performing ETFs, Market Vectors Biotech (NYSEARCA:BBH), up 45%, and First Trust Arca Biotech (FBT), up 44%, narrowly beat the top funds, Fidelity Select Biotechnology (FBIOX), up 44% and Rydex Biotechnology (MUTF:RYOAX), up 39%, on average, annually.

    After biotechs, pharmaceutical makers were the strongest category over the past three years. There, a mutual fund, T. Rowe Price Health Sciences (MUTF:PRHSX), up 37%, edged out the top ETF, PowerShares Dynamic Pharmaceuticals (NYSEARCA:PJP), which returned 36%.

    Transportation stocks, e.g. railroads and airlines, also outperformed over the past three years. Looking at that sector, the SPDR S&P Transportation ETF (NYSEARCA:XTN), up 29%, outperformed the best mutual fund, Fidelity Select Transportation (MUTF:FSRFX), which gained 26%.

    There you have the numbers. Draw your own conclusions.

    For these comparisons, I considered only no-load mutual funds currently open to individual investors and unleveraged ETFs, meaning that they do not attempt to double or triple their sector's returns.

    Jan 28 12:58 PM | Link | Comment!
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