Roy, I have some money just drawing Wells Fargo bank interest of about 4%, I wanted to do better and still stay liquid. I was wondering if LQD even though its above the max buy price, or GIM or something else would fill the bill.—T.T. 8/19/10
Roy Ward: I follow one bond fund and two ETFs that offer attractive dividend yields.
Templeton Global Income Fund (GIM: 10.50) Min Sell Price = 13.00
The Fund is partially hedged against foreign currency volatility and is invested in government bonds of Asian countries (36% of total portfolio), North and South America (30%), Europe (21%), and other countries. GIM’s dividend provides a 4.8% yield and is paid monthly. International government bonds are attractive.
iShares $ Invest Grade Corp Bond ETF (LQD: 111.97) Min Sell Price = 140.00 LQD’s dividend yield of 5.3% is attractive - dividends are paid monthly. We are rating LQD as a “Hold”, because interest rates could begin to rise before the end of 2010. High grade corporate bonds are trading at a noticeable discount to U.S. Treasury bonds.
SPDR Barclays Capital Municipal Bond ETF (TFI: 23.50) Min Sell Price = 28.00 TFI’s dividend is paid monthly and provides a yield of 3.6%. Municipal bonds are trading at a substantial discount to U.S. Treasury bonds and could attract new investors if Congress fails to extend tax breaks on dividends.
I recommend investing in GIM, LQD, and TFI at current prices to diversify your holdings. Each of these investments holds unique characteristics that could provide high yields (by today’s standards), as well as some appreciation potential.
Information on Cabot Benjamin Graham Value Letter
J. Royden Ward
Value Investment Specialist, Analyst and Editor of Cabot Benjamin Graham Value Letter
J. Royden Ward has been editor of the Cabot Benjamin Graham Value Letter since 2003. The Letter features The Wise Owl Model, the Classic Benjamin Graham Value Model and monthly Special Features. The Letter is directed to individual investors seeking a guide to profitable value investing. Roy has spent his entire career seeking strong investment returns for his clients. In 1969, he developed a computerized model based on formulas for a unique ranking system created by investment legend Benjamin Graham.
What our readers are saying about Cabot Benjamin Graham Value Letter