Published: July 24, 2009
The
correct answer is 
(D.) DaimlerChrysler 7.25% Trust
Preferred Stock (PYO)
It's true: you can make money in
the car business. Daimler (NYSE:
DAI), most known for its luxury-car
brand Mercedes-Benz, is the company
behind preferred shares that are
reaping tidy profits and steady
income for investors. Despite being
in a vulnerable industry of late,
the company's cost-savings measures
have helped it raise $2.7 billion in
new capital, preserve cash, and
retain a relatively sound balance
sheet.
Through its North American
subsidiary, Daimler is also the
largest heavy truck maker in the
U.S. The German car maker holds a
major stake in EADS, Europe's
largest supplier of aerospace and
defense services, which owns Boeing
rival Airbus. Daimler gets about
half of its sales in Europe.
Formerly known as DaimlerChrysler,
the company changed its name to
Daimler in 2007, when it sold its
controlling interests in Chrysler to
a subsidiary of private equity firm
Cerberus. Daimler assumed
DaimlerChrysler's debt, including
the trust preferred stock. As
"third-party" trust preferred stock,
Merrill Lynch (now part of Bank of
America, NYSE: BAC) packaged and
issued shares of PYO, but Daimler is
responsible for interest and
principal payments on the underlying
bond.
Those interest payments totaling
$1.8125 annually give the stock a
yield of 9.7% at today's share price
($1.8125/$18.66). Payments are made
twice a year and are taxed as
interest income, so PYO is best held
in a tax-deferred account. Moody's
and Standard & Poor's give the
securities investment-grade "A3" and
"A-" ratings, indicating that
payments and principal are
considered highly secure. The notes
can be called after July 18, 2009,
for $25 a piece and mature in 2031.
PYO is a fine example of how foreign
markets can offer exceptional
yields, reliable income, and share
price appreciation—if you know where
to look. With that in mind,
StreetAuthority editor Carla
Pasternak scoured the globe to find
ten amazing securities with average
yields of 12% that also delivered
better than 21% in shareholder
returns year-to-date. Carla profiles
her picks—several of which have
higher yields and returns that PYO!—
in the latest issue of the
High-Yield International newsletter.
To see Carla's picks, and to learn
more about High-Yield
International,
please visit this link.
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