Sleep At Night Investments: Utility Preferred Shares

Apr. 27, 2011 3:54 AM ETXEL, WR, SRE, CEG, GXP, CNLPL212 Comments
Five Plus Investor profile picture
Five Plus Investor

Five Plus Investor has been active on the Seeking Alpha boards for several years. In my time of reading and contributing comments under dividend-related articles, I've noticed four kinds of dividend / income investors:

Dividend Growth - This method is considered is the surest path to a secure and growing dividend stream. Dividend growth stocks are primarily common stocks with a "sweet spot" yield between 2% to 4% and a dividend payout that increases at least once per year. This method is addressed often on Seeking Alpha and has many faithful adherents. For retirement purposes, this method works best when starting young and investing much, or when starting later with a large capital base. The motto of the Dividend Growth Investor is: "slow and steady wins the race."

High Yield with High Risk - From my experience - both on the boards and in my own life - High Yield with High Risk investors fall into three camps: traders, newbies and desperate retirees. The motto of the High Yield with High Risk investor is: "it's my dividend and I want it NOW!"

While experienced traders may be able to navigate this dangerous highway, all others need to heed this warning: unless you understand what kind of stock you are considering, high yield is not a "green light" for a buy. If the stock is not created specifically for high yield (i.e., MLPs, REITs, BDCs), you are risking a loss. High yield in common stocks is usually a "yellow" or "red" light, cautioning you that the market has priced in, or believes in, bad news for the company.

Income Investors - These investors value capital preservation and a steady income. They may categorize themselves as high yield (above 5%) or median yield (3 to 5%). They look primary to bonds, mutual funds and preferred shares for their

This article was written by

Five Plus Investor profile picture
Five Plus Investor is a stock market enthusiast and former contributor for Seeking Alpha.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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