Dear Mr. Berko: I’m looking to invest $50,000 in four high-income stocks, and I’m willing to speculate to get 10 percent annually. My stockbroker recommends AllianceBernstein, Waddell & Reed, Duff & Phelps Select Energy, Apollo Investment and BlackRock Capital Investment. We’d appreciate your thoughts on these five stocks. We figure that your recommendations might limit any potential loss.
— K.L., Joliet, Ill.
Dear K.L.: You’re giving me too much credit, though I’m mindful that losing money is like stepping on a snake. You must be careful out there. Too many investors are seeking high yields, and too many brokers are taking too many chances betting on borderline stocks.
AllianceBernstein’s (AB-$22) $2.68 dividend yields 11.7 percent. AB, a global investment management firm, provides research, investment management and related services to institutions, trust departments, private wealth accounts and brokerages. AB’s services span numerous investment disciplines, including customized target date funds, hedge funds, taxable and tax-exempt strategies, global and regional portfolio strategies, dynamic asset allocation, private equity multi-asset allocation, enhanced index solutions, and more. Jeez! Last year’s $3 billion in revenues should improve to $3.15 billion this year, and earnings should come in at $1.95 a share. Opinions on Wall Street vary widely, from “avoid” by Market Edge to “hold” by Thomson Reuters to “outperform” by S&P Capital IQ. I agree with S&P.
Waddell & Reed Financial’s (WDR-$16.76) $1.84 dividend yields 10.9 percent. WDR is a brokerage firm that provides investment management services to the public, product underwriting, mutual fund administration, open-end and closed-end fund distribution, life insurance, and annuity products. Revenues for 2017 are expected to come in at $1.02 billion, lower than 2016’s revenues of $1.3 billion, which were lower than 2015’s revenues of $1.5 billion and lower than 2014’s revenues of $1.6 billion. But WDR has an impressive balance sheet, with $900 million in cash, $10.79 in cash per share and a book value of $10.35. WDR expects to earn $1.53 a share this year, and the Street believes that its substantial cash position will enable it to maintain the dividend. Bank of America, UBS and Ned Davis Research rate WDR “neutral” and suggest the dividend will be maintained from cash flow. But I say forgetaboutit. Meanwhile, WDR’s flagship mutual fund’s (Ivy Funds) performance stinks.
