BUYING MORE SHARES OF PFF TO BOOST DIVIDEND INCOME

In a move to boost monthly dividends, I've decided to increase my stake in iShares S&P U.S. Preferred Stock Index Fund (PFF:NYSE).  They have a current yield of 9.23% on a recent share price of $39.85.  Exchange traded funds that focus on dividend paying stocks trailed the market by a wide margin in 2009, but may attract yield starved bond investors who are also worried about the prospect of rising interest rates.  Several factors are causing some fixed income investors to take a second look at stocks to generate income.  Yields on CDs, money markets and high quality bond funds are at paltry levels thanks to the Federal Reserve's commitment to keep rates low to fight recession.  There's also the fear among bond fund investors of the potential losses from rising interest rates.

After taking all this into consideration, I decided it would be a good place to put available funds to work.  Where else can you get a reasonably safe 9.23% yield?  As with all stock investments there are risks, so if you're thinking about investing in PFF, do your homework people.

INVESTING IN PREFERRED STOCK THROUGH ETF'S

Recently I decided to look into investing in preferred stocks, as a means of boosting dividend cash flow. I currently hold around 30 different stocks in my regular investment portfolio, so I'm not really interested in adding a lot of new stocks to keep track of. So instead of researching individual stocks, I decided to simplify the move by purchasing shares of an ETF that invests in preferred stocks.

The one I've chosen to add to my portfolio is ISHARES S&P U.S. PFD STOCK (PFF :NASDAQ). Their current dividend of $2.92 works out to a 7.98% yield on their recent stock price of $36.62. Since their top ten holdings are all financials, I won't be concentrating a great deal of my investment capital in this fund, but I don't think it out of line to invest around 5% of my cash in the fund. At their current yield, I could have all my money back, from dividends alone, in less than 9 years and anything after that would be icing on the cake. I could also benefit from any further recovery in the financial sector, while reducing risk by spreading my investment over a wide range of financials held by the fund. This will be a long term addition to my portfolio.

Normally I strongly advocate investing in individual stocks over funds. In a case like this however, where I don't want to expend a lot of time and energy researching individual investments, I've opted for an ETF to broaden my investments and take advantage of the preferred stock issues.

Reverse ETF S&P 500

I mentioned in a previous article that I thought the market would pull back some during the summer months. It looks to be the case, with the recent turn of events. A pull back was to be expected after such a rapid run up in stock prices. Barron's had an interesting article on this at:


http://online.barrons.com/article/SB124579457810443905.html?mod=googlenews_barrons


This is usually the time of year when I take advantage of lower stock prices to add to my long term holdings, reducing my average price per share and increasing dividend income. As a new tactic, I've decided to invest in a reverse ETF or exchange traded fund called Short S&P 500 ProShares (ticker symbol: SH). In theory, a reverse ETF shorts the market and should move in the opposite direction of the stock market. In this case, since I expect the market to go down some, the shares in SH should move up, balancing out my portfolio. This is a way of shorting the market with less risk than opening a margin account. I'll keep readers posted on how it works out.

Re-invested in Universal Insurance (UVE) for my regular portfolio on price pull back, looking to add more shares if the price goes lower. Also added Calumet Specialty Products (CLMT) as a long term holding for their dividend payout. Not much going on with my recent purchases in energy limited partnerships, but with the good dividends, I can afford to wait for upward movement with those.