Detective Commentary

March 2010 Commentary (3/2/10)

Review of February 2010 Results & This Month's Changes

Good Month For Dividend Stocks  

Our three Sample Portfolios were all in positive territory. High Yield/Speculative, up 4.4%, did the best.

Also during the month, eight of our picks increased their dividends, including one utility that surprised us with a 19% hike.

What Happened?
Most economic indicators signaled a weakening U.S. economy, and troubles in Greece and Spain added more uncertainty. The market, however, decided to ignore all that and move up anyway.

Which way the market moves next is anybody’s guess. But given the problematic economic outlook, caution should remain your watchword. We try our best to pick solid stocks with strong fundamental outlooks. But they would likely drop along with a weak stock market. Thus, don’t add cash to the market that you’re going to need back in the next few months. Instead, only add funds that you won’t need for six to nine months so that you can wait out any market downturns.

What’s New?
This month, we’re adding one new pick to our Preferred Stocks portfolio that is not only paying a nice 7.3% expected dividend yield, but also offers 16% appreciation potential. It’s hard to find terms like that for preferreds with investment grade credit ratings, which is the case here

We’re also adding a new pick to our Closed-End Fund list that is paying monthly dividends equating to an expected 8.5% yield. We did quite a bit of research and picked this particular fund because of its low historical volatility compared to other funds paying similar yields. Also, I suspect that its monthly pay schedule will please many of our subscribers.

Finally, in terms of new picks, we’re adding one new stock to the Dividend Speculators portfolio that is paying an expected 10.5% yield. It’s a Speculator because it’s a very small company. But it operates a steady business and carries no long-term debt.

Last month we changed one Speculator pick to 'do not add' from 'buy' on news that it was cutting its dividend. This month, after analyzing its long-term prospects, as well as considering its current 8.9% yield, we're again advising adding to positions.

We’re not selling anything this month, but we’ve downgraded three Canadian Royalty Trusts and one Real Estate Investment Trust (REIT) to ‘do not add’ from ‘buy.’

Changing fundamentals that favor crude oil producers over natural gas producers triggered the Canadian trust downgrades. Similarly, a possibly temporary change in market conditions triggered our REIT downgrade.

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