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Published: July 28, 2010
II sold my 1994 Mazda 626 -- affectionately
called "The Green Monster" -- to a neighbor about two years ago.
The car had served me well and still had enough life left to see
his two teenagers through those dicey "new driver" years. I'm
happy to report that the teens and car are all doing well.
In its place, I bought a used 2004 Honda Civic from a no-frills
used-car wholesaler. When I walked into the office, the salesman
gruffly explained, "We don't do financing here. Cash only." That
suited me fine. I always pay cash for a car. In fact, I'd been
slowly saving up for this car since the day I bought the Mazda.
And of course, I'm already saving up for the next one.
And while it might seem unpatriotic, it's been a while since
I've owned an American-made car. Yes, that's a picture of me
sitting in a classic Lincoln Continental Convertible. I won't
give away my age -- but the car was built in 1966 and I was a
teenager when this picture was taken.
But I might consider going back to an American-made car for my
next purchase.
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You see, I plan on making a nice little
bankroll thanks to an all-American car company: Ford (NYSE:
F). I might repay the favor with my next car purchase.
I've already received one paycheck of $68.90. My next payment,
due in August, will be a little over $70.
But there are millions of Ford investors that aren't getting
paid. On any given day, about 100 million shares of Ford traded
hands... and not one of those common shares has paid a cent in
four years.
Mutual funds aren't being paid. Hedge funds aren't being paid.
University endowments aren't being paid. And retail investors
aren't being paid, either.
So what's the secret? How am I able to get paid 8% a year to
invest in a company that doesn't pay a cent in dividends?
The key is where to look.
For most major companies, the common stock
is one of the last places you should look for income. All the
companies in the S&P 500 combine to pay an average
yield of about 2%. Yes, a handful pay more, but they're the
outliers.
But lots of companies also issue debt securities to help fund
their business. And unlike years past, a large number of these
securities now trade on the New York Stock Exchange.
These securities are called exchange-traded bonds -- and I've
noticed that they're growing rapidly in popularity. Instead of
dealing with the
bond markets, investors simply buy the exchange-traded bonds
like they would a stock. Most trade near their par value
(usually $25) and pay interest quarterly.
The Ford bonds that pay me so handsomely trade under the ticker
FCJ. Each quarter I receive $0.475 per share for a yield of
nearly 8%. As long as Ford can keep the lights on -- very likely
considering they didn't take a bailout and have more than $30
billion in cash -- I should be locked-in to this income stream.
It's a game plan that my colleague Carla Pasternak and I have
been following for awhile now. Between the portfolios of our
three premium income newsletters --
The Daily Paycheck,
High-Yield Investing, and
High-Yield International -- we hold nearly a dozen such
bonds.
The best news is that there's so much variety out there for
income investors. If you don't like Ford's prospects, just look
for exchange-traded bonds from a company you do like.
-- Amy Calistri
Editor
Stock of the Month
The Daily Paycheck
PS. If you want to hunt for exchange-traded bonds on your
own, check out QuantumOnline.com. Simply enter the ticker of the
company in the top right and then click on "Find All Related
Securities" on the subsequent page. If there are bonds
available, you'll see an entire list. |
