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My parents are retiring soon and want some additional income to help fund their retirement. They're considering these options: PSTL yields 7.28% and pays quarterly, O yields 5.9% and pays monthly, PFE yields 5.85% and pays quarterly.
Please let me know what board members think of these options? Any other suggestions for a fairly dependable yield?
Retired guy here. I understand the real and emotional need to try to generate income. But at the end of the day the first rule is do not lose money. Check out the TOTAL RETURN numbers and decide if these three are the best way to go. It also matters to consider these three in the context of their entire portfolio.
Long term shareholder of O here and it's been a very satisfactory investment. Excellent management team. Nothing glamorous, has it's ups and downs with the share price depending on the economic cycle (read: interest rates) but through it all it keeps delivering the same steady dividends with dividend growth to boot. It's one investment I rarely ever have to look at. I add whenever it goes below $50/share because it generally doesn't stay there for long.
In the past 6 months I've considered both PFE and PSTL. I believe in the PSTL concept, just haven't pulled the trigger yet because I own other REIT's. My only issue with PFE is that I aside from ABBV I have a horrible track record in the healthcare segment. Price fluctuations are my biggest concerns.
Are they considering large positions and what % of total assets? I would be cautious, as an individual investor, putting a lot of money in individual stocks. Why not pick a good dividend fund, a REIT fund and maybe a bond fund like OSTIX.
I would also do a lot more digging and look for a well diversified income portfolio. Why take on the risk of individual stocks when treasuries pay 4.5 to 5% ?
BYW my parents owned PFE all the way up to 50 and now down to 28. Hard to think it will go down more but even as an MD I cannot predict what their drug pipeline will do. They used to be top of the class, but no more
My parents currently own HABDX and RPSIX and are looking to add individual stocks and/or funds with hopefully higher yields. The objective is the 60 - 40 portfolio with 60% in stocks and 40% in bonds/income producing investments. They're kinda there now but are thinking of adding to the income side of their portfolio which is why I started this thread. My suggestions have been O and PSTL, although all of the suggestions on this thread are excellent. Thanks!!
Really tough right now. Middle of the road income funds haven’t produced this year the way I would have expected. I hold FKIQX and CVSIX for income. Neither is “shooting the lights out.”
Hard to believe the mess RPSIX (mentioned by @PopTart) has become in recent years. TRP seems to have somehow shot that one in the leg. A couple etfs worth a look are PYLD / BINC. Probably decent longer term holds. Trying to generate income via CEFs can be very productive but has a “wild west” feel to it. 20-25% losses in 2022 were common even for those CEFs that profess to be income oriented.
No recommendations. But you’ve remind me of the time I tried to motivate my parents to invest in a money market fund back when they paid 20%. I seeded the account with $500. But they fled in a month or so. Grew up in the Depression. Only trusted the local bank.
PFE is cheap enough to be on my "throw some $$$ and forget about it" mental map @ the moment, but I've not pulled the trigger....also, the div payout ratio is 116% so that's a red flag when 'analysts' and pundits say to buy it for the fat dividend and wait for recovery.
Thanks Hank and rforno! My parents have also been unhappy with RPSIX, which is one of the reasons they wanted me to post this question on MFO. They want to know what else is out there ...
I owned PSTL for perhaps 2 years and finally dumped it at a loss. It might be the most unloved REIT in the Market. It's gone nowhere. Actually, it's been a loser the whole time I owned shares. David Sherman does not like REITS, for a good reason. It's been mentioned here at MFO before.
The only REIT I like (but don't own yet) is CDP because of its unique client base and facility requirements. (I've been in many of their buildings over the years for work). Getty is another one I've considered as well.
I've held off buying them (and other things b/c other than interest on cash in SGOV, I don't really want more income being taxed at my marginal rate these days -- so I tend to stick with qualified dividends and/or MLP distros.
The effective rate on REITs is somewhat more than that of qualified divs, even after the 20% discount. There's a still big difference between the tax rate for REITs and for qualified divs for people in the 12% bracket and for high earners. The sweet point, where the rate difference is not so significant, is in the 22%-24% brackets.
12% bracket: 0% qualified div vs. 9.6% REIT (12% x 80%) 22%-24% bracket: 15% vs. 17.6% - 19.2% 32%+ bracket: 15% (or 20%) vs. 25.6%+
I haven't included the 3.8% Medicare surtax on higher incomes. It wouldn't change the conclusions.
If you are looking at REITs for income (which aren’t qualified dividends) for your parents, there are several CLO ETFs (I know that acronym is kind of a dirty word) that pay 6-8% and have had steady performance in ‘22-23 (some of them are newer than that but still have had good performance since they listed): JAAA (AAA CLOs have not had a down year, per the ETF sponsor), JBBB and CLOZ (theses are BBB CLOs but have 7-9% yields), and you can search for other CLO ETFs that are out there. I own the 3 I mentioned, and they parallel RSIVX/CLBDX for steady performance plus good income spit out.
EDIT: I guess @msf showed that REIT income is not fully taxable (skipped over that post). Sorry. But above still holds true if taxes are not a worry. Plus, REITs are in a multi-year rough patch until rates come down (and they will likely only come down significantly once economic weakness hits, which will likely also hit REITs).
Hi PopTart Nice to see you here again. The below chart is for 5 years, for PSTL, O and PFE. Stockcharts still provides Total annualized returns which includes all distributions; to the best of my knowledge. I find similar performance at M*, which I recall is ONLY NAV returns.
I request that those familiar with these holdings, as several of you also use various charts, to let us know whether they agree with my statement; as I don't want to misguide anyone with data. SO, @yogibearbull, @Mark , @msf et al. Does anyone find improper results shown at the chart for the 5 year period. The chart includes the COVID period.
Now, the dangerous part. I recall you and your parents have accounts with Fido. Also, whether your parent's account(s) are taxable or not may have some bearing upon choices. One could use a real simple FBALX and something like Fido's FBND (total bond) with a 50/50 mix. FBALX may be presumed to be about a 70/30 mix and of course FBND being all bonds. FBALX has an indicated yield of about 1.8% and FBND at a 30 day yield of 5.2%, with 61% at AAA bonds. FBALX will be subject to draw down with any type of 'melt', but so will most other equity. Bonds at this point are a form of insurance, not unlike auto or home insurance (want it when you need it). There isn't a hell of a lot right now for making serious money in bonds, especially after taxes (this doesn't apply to traders). But, bonds will likely smile more in the future; as I think yields will come down again; which will provide price increases.
REAL WORLD EXAMPLE of keeping simple can be okay.
We've managed a 529 account since 2006. We set our own investments, being a Vanguard total return domestic equity and Vanguard total return domestic bond indexes at 50/50. The portfolio automatically resets to 50/50 each September. Each index holds several thousand issues. And of course, both holdings traveled through the 2008 and Covid melt periods without portfolio index changes.
LONG TERM results: 15 year, combined, all distributions re-invested, annualized returns = 8.35% YTD, as of last Saturday = 6.74%
Well, anyway just some jabber for this thread.
WARNING: errors, spelling and omissions. I'm using a head cold product that may cause one to be a bit out of sorts.
Thanks msg, rforno, Graust and catch. Excellent food for thought from everyone on this thread, thanks to everyone for your help! I'll let you know what my parents decide to do. We need to study these options some more before making any decisions.
Catch - Thanks for the warm welcome! I don't have much to say/post but I've been a pretty steady lurker for awhile
I forgot to answer this question - These income producing investments that my parents are considering adding would be held in taxable accounts. Thanks!
I would be cautious adding REITs to a taxable account...they may want to research that a bit further given the taxable nature of the distributions. PFE is a tempting turnaround story.
Given the fact that the market appears to be wanting to broaden out a bit, and rates will be adjusted by the Fed, my favorite fund in a taxable account I've been adding to is EVT...Eaton Vance Tax-Advantaged Dividend Income Fund. A monthly payor, -9.84% discount, 8.49% distribution, 80/20 equity to fixed income allocation.
PFE trades around $28. It first traded at that price back in 1998. I understand the purchase is being considered for divds, not growth of capital, but a stock that has not grown its price in over a quarter century is not one I would be interested in.
I like 'O', but in the REIT space, I'd just buy FRIFX, and avoid the single company risk.
Another area to think about for income is the MLP space. The ETF AMLP lets one own the whole space, and it has a 1099 tax document (no K1). The sector is cheap -- and has mostly done a good job of capital discipline for the past decade. I assess the chart action in the space as generally constructive. (i.e. "up and to the right").
For a very diversified equity income vehicle, I like JEPI (for deferred accts) or SCHD in taxable accounts.
Many thanks once again for the many excellent suggestions in this thread. My parents decided to buy some OSTIX and AMLP to hold in their taxable account.
OSTIX. Could do worse. .... The yield seems lean, given its category: junk bonds. I'm holding three such, and the yield is over 7%. Even so, Osterweis is solid.
TUHYX. PRCPX. FALN.
AMLP: now yer talkin.' But be aware (I suspect) that your parents will have to wait rather a while for the K-1 tax form each year, since the thing is comprised of LPs. I hold one of those, too. So far, the results have been very much worth the waiting.
@Crash - "AMLP does not issue a K-1 rather it reports on a 1099 for taxes. AMLP also provides qualified dividends, and a portion of distributions are tax-deferred."
You may have had it confused with MPLX which does issue a K-1.
Comments
In the past 6 months I've considered both PFE and PSTL. I believe in the PSTL concept, just haven't pulled the trigger yet because I own other REIT's. My only issue with PFE is that I aside from ABBV I have a horrible track record in the healthcare segment. Price fluctuations are my biggest concerns.
I would also do a lot more digging and look for a well diversified income portfolio. Why take on the risk of individual stocks when treasuries pay 4.5 to 5% ?
BYW my parents owned PFE all the way up to 50 and now down to 28. Hard to think it will go down more but even as an MD I cannot predict what their drug pipeline will do. They used to be top of the class, but no more
My parents currently own HABDX and RPSIX and are looking to add individual stocks and/or funds with hopefully higher yields. The objective is the 60 - 40 portfolio with 60% in stocks and 40% in bonds/income producing investments. They're kinda there now but are thinking of adding to the income side of their portfolio which is why I started this thread. My suggestions have been O and PSTL, although all of the suggestions on this thread are excellent. Thanks!!
Hard to believe the mess RPSIX (mentioned by @PopTart) has become in recent years. TRP seems to have somehow shot that one in the leg. A couple etfs worth a look are PYLD / BINC. Probably decent longer term holds. Trying to generate income via CEFs can be very productive but has a “wild west” feel to it. 20-25% losses in 2022 were common even for those CEFs that profess to be income oriented.
No recommendations. But you’ve remind me of the time I tried to motivate my parents to invest in a money market fund back when they paid 20%. I seeded the account with $500. But they fled in a month or so. Grew up in the Depression. Only trusted the local bank.
(I already have some BMY.)
I've held off buying them (and other things b/c other than interest on cash in SGOV, I don't really want more income being taxed at my marginal rate these days -- so I tend to stick with qualified dividends and/or MLP distros.
Because of the 20% 199A deduction, REIT income is not taxed at one's marginal rate.
CCH, Section 199A Qualified Business Deduction
IRS, Qualified Business Deduction
The effective rate on REITs is somewhat more than that of qualified divs, even after the 20% discount. There's a still big difference between the tax rate for REITs and for qualified divs for people in the 12% bracket and for high earners. The sweet point, where the rate difference is not so significant, is in the 22%-24% brackets.
12% bracket: 0% qualified div vs. 9.6% REIT (12% x 80%)
22%-24% bracket: 15% vs. 17.6% - 19.2%
32%+ bracket: 15% (or 20%) vs. 25.6%+
I haven't included the 3.8% Medicare surtax on higher incomes. It wouldn't change the conclusions.
If you are looking at REITs for income (which aren’t qualified dividends) for your parents, there are several CLO ETFs (I know that acronym is kind of a dirty word) that pay 6-8% and have had steady performance in ‘22-23 (some of them are newer than that but still have had good performance since they listed): JAAA (AAA CLOs have not had a down year, per the ETF sponsor), JBBB and CLOZ (theses are BBB CLOs but have 7-9% yields), and you can search for other CLO ETFs that are out there. I own the 3 I mentioned, and they parallel RSIVX/CLBDX for steady performance plus good income spit out.
EDIT: I guess @msf showed that REIT income is not fully taxable (skipped over that post). Sorry. But above still holds true if taxes are not a worry. Plus, REITs are in a multi-year rough patch until rates come down (and they will likely only come down significantly once economic weakness hits, which will likely also hit REITs).
I request that those familiar with these holdings, as several of you also use various charts, to let us know whether they agree with my statement; as I don't want to misguide anyone with data.
SO, @yogibearbull, @Mark , @msf et al. Does anyone find improper results shown at the chart for the 5 year period. The chart includes the COVID period.
5 year chart
Now, the dangerous part. I recall you and your parents have accounts with Fido. Also, whether your parent's account(s) are taxable or not may have some bearing upon choices.
One could use a real simple FBALX and something like Fido's FBND (total bond) with a 50/50 mix. FBALX may be presumed to be about a 70/30 mix and of course FBND being all bonds.
FBALX has an indicated yield of about 1.8% and FBND at a 30 day yield of 5.2%, with 61% at AAA bonds.
FBALX will be subject to draw down with any type of 'melt', but so will most other equity.
Bonds at this point are a form of insurance, not unlike auto or home insurance (want it when you need it). There isn't a hell of a lot right now for making serious money in bonds, especially after taxes (this doesn't apply to traders). But, bonds will likely smile more in the future; as I think yields will come down again; which will provide price increases.
REAL WORLD EXAMPLE of keeping simple can be okay.
We've managed a 529 account since 2006. We set our own investments, being a Vanguard total return domestic equity and Vanguard total return domestic bond indexes at 50/50. The portfolio automatically resets to 50/50 each September. Each index holds several thousand issues. And of course, both holdings traveled through the 2008 and Covid melt periods without portfolio index changes.
LONG TERM results: 15 year, combined, all distributions re-invested, annualized returns = 8.35%
YTD, as of last Saturday = 6.74%
Well, anyway just some jabber for this thread.
WARNING: errors, spelling and omissions. I'm using a head cold product that may cause one to be a bit out of sorts
Remain curious,
Catch
Catch - Thanks for the warm welcome! I don't have much to say/post but I've been a pretty steady lurker for awhile
Given the fact that the market appears to be wanting to broaden out a bit, and rates will be adjusted by the Fed, my favorite fund in a taxable account I've been adding to is EVT...Eaton Vance Tax-Advantaged Dividend Income Fund. A monthly payor, -9.84% discount, 8.49% distribution, 80/20 equity to fixed income allocation.
Maybe consider High-Yield munis? Just throwing that out there. The AMT does not kick-in for a couple until that couple are millionaires:
https://www.municipalbonds.com/education/high-yield-muni-bonds-risk-with-plenty-of-tax-free-rewards/
I like 'O', but in the REIT space, I'd just buy FRIFX, and avoid the single company risk.
Another area to think about for income is the MLP space. The ETF AMLP lets one own the whole space, and it has a 1099 tax document (no K1). The sector is cheap -- and has mostly done a good job of capital discipline for the past decade. I assess the chart action in the space as generally constructive. (i.e. "up and to the right").
For a very diversified equity income vehicle, I like JEPI (for deferred accts) or SCHD in taxable accounts.
Good luck.
Thanks!!
TUHYX. PRCPX. FALN.
AMLP: now yer talkin.' But be aware (I suspect) that your parents will have to wait rather a while for the K-1 tax form each year, since the thing is comprised of LPs. I hold one of those, too. So far, the results have been very much worth the waiting.
You may have had it confused with MPLX which does issue a K-1.