Dear Mr. Berko:
My husband and I are both 76 and retired from the medical profession 12 years ago. We have had a large retirement account at a big brokerage firm for eight years, and including dividends, since November 2008, our total return for those eight years has been 12.34 percent, or less than 1.5 percent annually. We have a much smaller account there, too, which I've managed since 2008, and our total return exceeds 9 percent annually. But I don't like doing it, and we've had it with stockbrokers. We are moving to your area in Florida in January and hope you can recommend a non-stuffy trust department to run our stock accounts and handle our other financial affairs. How could a stockbroker do so poorly with our account, especially in an up market? Finally, could you give me your opinion on Verizon? Do you think I should sell the 700 shares of Verizon that I bought at $39?
-TT, Cleveland
Dear TT:
There are two very simple possible answers. 1) Because the Earth still continues to spin counterclockwise on its axis at about 1,000 miles per hour, stockbrokers who spend much of their time walking clockwise during the day become dizzy and are prone to making bad investment decisions. Your broker may be one of them. 2) Your broker may have been among the 129 workers who were fired from Mars Inc. in 2003 because they threw away the W's from the M&M's. I believe that 11 of them applied for jobs as investment advisers with your current brokerage in Cleveland.
I've met quite a few trust officers at several Florida banks, but most of them are young lads without, in my opinion, adequate life experiences under their belts. I have nothing against youngsters (my sister tells me that I was also young once), but in the main, I'm not comfortable having a young lad, someone who's not sufficiently dry behind the ears, give me book-read financial advice.
Sabal Trust is a trust company in Florida that I like, and I know some of its principals on a personal basis. I think their investment record, their individual maturity, their range of financial expertise and their knowledge of taxes, wills, probate and trusts might serve you folks well. Unlike some other trust departments, the folks at Sabal are comfortable to be with and as easy to talk to as a good next-door neighbor.
Meanwhile, do not sell your shares of Verizon Communications (VZ-$50.21), which was created by the merger of Bell Atlantic and GTE in 2000. VZ is one of the few public companies with an A++ financial strength rating. And VZ, with its 4.6 percent dividend yield and a 10-year track record of consecutive dividend increases, is a fine proxy for owning a corporate or U.S. government bond. VZ has a superb balance sheet, with nearly $6 billion in cash, up from $4.5 billion a year ago, and a reduction of $5 billion from long-term debt since last year. Verizon's revenues, earnings and dividend will probably increase annually, though modestly, for many years. VZ's 177,000 employees helped their company record $128 billion in revenues while providing service to nearly 100 million Americans and generate $16 billion in profits. Another way to look at this is each employee was responsible for $7.2 million in revenues and contributed about $9,000 in net profits.
Value Line likes VZ and figures it could trade in the mid-$80s within the coming five years. Morningstar and S&P Capital IQ rate VZ as a "hold." Argus Research and Market Edge rank VZ as a "buy." And Ned Davis Research ranks VZ as "neutral." I think VZ should be one of the bedrock stocks in every growth and income portfolio. Keep it for life.
If you want to make it a bit more enjoyable to manage, you might consider writing Verizon January 2017 call options at $55, which should increase your current return quite nicely, probably by about 2 percent a year.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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Published: Tue, Oct 25, 2016
