February is the month of love, so I showed some love to my dividend income portfolio and grew it with my second and third buys of the year. I noticed that RSO was in the ballpark of its 52-week low of $4.65 per share, so it was clearly a bargain or at least a semi-bargain. So I snatched up 100 additional shares at $4.77 per share, and with a dividend of 20 cents per share, this buy has a yield of 16.77%. Not bad, but my only concern is what will happen to RSO’s price and dividend when the Fed raises interest rates, which is expected later this year.
My second stock buy was found using CEF Connect’s stock screener. After sifting through several potential buys, I discovered the Brookfield High Yield Income Fund (NYSE:HHY). Here are what I perceive as the fund’s positive and negative qualities:
Positives
- Yield. With a monthly dividend of 7.5 cents and my purchase price of $8.90 for 150 shares, I got HHY with a dividend yield of 10.1%. Which is pretty good, and the history of HHY’s dividend payouts is also good, with consistent monthly payouts of 7.5 cents since early 2010, which was up from 2009’s payouts of 6.5 cents per share. Past performance may not guarantee future results, but it’s a strong indicator, so there’s a good possibility of a future dividend increase for HHY.
- Corporate bonds. Private sector bonds have a higher level of risk compared to government (federal, state, or local) bonds, but they do have better yields. Over 70% of HHY’s holdings are B grade or better corporate bonds, so while these bonds are less risky than C grade bonds, they are more risky than A grade bonds.
- Monthly payout. I don’t completely avoid stocks with quarterly payouts (see my above RSO purchase), but I do prefer a stock that pays out monthly. With monthly payouts, I obviously don’t have to wait so long between payouts, plus monthly payouts smooth out the spikes caused by quarterly payouts.
Negatives
- Institutional investment. HHY isn’t receiving much attention from pension fund and other institutional investors, as they only hold 15% of HHY’s total stocks.
- Leverage. While not as high as some of my previous investments, HHY’s 28.38% leverage is certainly up there, which is certainly a cause for concern.
I believe HHY’s positives outweigh, or at least counterbalance, its negatives. But I only acquired 150 shares ($1335 total), so I’m not making a heavy investment in HHY for now (but if its price drops…then maybe I’ll pick up more shares).
With these new acquisitions, my projected average monthly dividend income is now $551.55. Nice! I love giving myself pay raises with dividend income. 🙂
