This week's Blue Harbinger Weekly is a continuation of our free report, Top 10 Big Dividends Worth Considering, but this version contains all the details for the Top 5. We own all 5 of the top 5 as long-term positions in our Blue Harbinger Income Equity strategy (we purchased three of them just last week, and two we've owned since the first half of 2016), and their dividend yields are 7.6%, 9.9%, ~7.8%, 9.9% and 6.0%, respectively. Without further ado, here are the Top five...
5. Williams Partners
(Ticker: WPZ, Yield 6.0%)
We purchased shares of MLP, Williams Partners (WPZ), at a distressed price in May 2016 amid volatile oil prices and management challenges. However, we believe it continues to be very attractively priced for multiple reasons (for reference, you can read our original thesis and full report using the following links).
First, we believe WPZ has continued upside potential due largely to its Transco System gas mainline which runs near the valuable Marcellus Shale in Pennsylvania. Also, WPZ’s fee revenue is near 90% which insulates it from the volatile energy markets. And WPZ has 15-year Marcellus-related contracts that help ensure it will have plenty of cash for years to come.
Very importantly, last week WPZ’s continued upside was validated as a deal was announced whereby Williams Companies (WMB) would increase its ownership of Williams Partners (WPZ) to 72% via a private placement offering. We view this as a positive for WPZ because it allows the company to reduce its debt, and it postpones the need to access the public equity market for the next several years. The market agreed this was a “positive” for WPZ (but not WMB) as its price was up more than 4% on the news. As part of the deal, it was announced WPZ’s quarterly distribution would be reduced to $0.60 (to a more “right-sized” yield of approximately a 6%) beginning with the March 31st distribution. This reduced dividend is still very attractive, and it further reduces the company’s need for future financing via the expensive capital markets.
4. Tekla World Healthcare Fund
(Ticker: THW, Yield 9.9%)
If you like big yield and significant price appreciation potential, then the Tekla World Healthcare Fund is worth considering. It’s a sector-specific closed-end fund (CEF) that yields nearly 10% (paid monthly). And not only is the sector an attractive contrarian play for multiple reasons right now, the fund is trading at a big discount to its NAV which suggests it may have even more upside rebound potential. We initiated a new long-term position in THW just last week (you can read about that trade here). And our full report on the Tekla World Healthcare Fund is available here...
3. Royce Value Trust & Royce Micro-Cap Trust
(Tickers: RVT and RMT, Yields 8.0% and 7.7%)
These two closed-end funds (CEFs) offer attractive access to the powerful return potential of small cap stocks, and they also offer access to an impressive management team with a successful long-term track record. Further, the management fees are very reasonable considering the asset class and management team. Also, both funds currently trade at very attractive discounts to their net asset values (NAVs). We initiated new long-term positions in both of these funds just last week, and we especially like the growth/value exposure they offer on on a combined basis, as we described here. Further, you can access our full reports for both of these funds here...
2. Triangle Capital
(Ticker: TCAP, Yield 9.9%)
Triangle Capital is an attractive opportunity for income investors, and we continue to own it in our Blue Harbinger Income Equity strategy. We purchased shares in May 2016, two days after it announced a proactive dividend cut (you can read that report here: Triangle Capital, Dividend Cut Creates Opportunity). Specifically, we like Triangle because of its conservative, internal, management team, and because it is an often overlooked opportunity. Further, it is well-diversified, its valuation remains attractive, and its big dividend is rare, well-covered, and compelling. Here is our last full write-up on TCAP (the report is from late Fall '16, but our thesis remains intact, and TCAP's valuation remains attractive)...
1. Adams Diversified Equity Fund
(Ticker: ADX, Yield 7.6%)
If you want to sleep well at night, this closed-end fund (CEF) has been making that possible for income investors since it's inception in 1929! That's right, ADX has been paying distributions for over 80 years, and it's currently trading at a big attractive discount to its net asset value (NAV). We also like the fund's sector exposures and diversified holdings. We initiated a new long-term position in ADX last week, and you can read about that trade here. You can read our full report on the Adams Diversified Equity Fund here...