TAKING STOCK: More high-paying stocks

Dear Mr. Berko: In September of 2009, I had a $183,000 CD coming due and asked you to recommend some high-paying stocks. You told me to put half the CD money in seven master limited partnership pipeline stocks, all paying over 10 percent, and told me to put the other half back into a CD. The MLP stocks have done very well, and six increased their dividend. The CD comes due again this week, so could you recommend some high-paying stocks again paying between 8 percent and 10 percent? I can afford the risk, as I mentioned earlier. Thank you in advance. P.L., Aurora, Ill. Dear P.L.: Some folks are familiar with an investment sector called a business development company. Many are public companies that help small companies become bigger and better companies by providing money for new machinery and equipment, balance sheet restructuring, mezzanine financing, commercial mortgages, mergers, spin-offs, takeovers, refinancing, factoring, inventory expansion, shareholder buybacks and the like. BDCs are run like venture capitol funds, but unlike VC firms, they allow smaller, non-accredited investors to have a shot at participating in investment-banking activities. And unlike VC firms, BDCs are structured like closed end funds and are registered under Section 54 of the Investment Company Act of l940. Their shares trade on the major exchanges and must pay out 85 percent of their earnings -- a huge portion of which (like your MLPs) is not taxable. Today, there may be quite a few BDCs with attractive long-term potential in this unique market environment. Before the great crash, banks stumbled over one another begging folks to borrow money. I know of a bank in Florida that lent the wife of a Florida legislator $32,000 so her dog could have plastic surgery and compete in the 2006 Westminster Dog Show. The dog died shortly after surgery. The owner sued the vet, they settled out of court, and the bank was never paid. But the best was yet to come. The uninsured dog was collateral for the loan. Only a politician could get away with that. Now after the GC, most banks won't lend you an umbrella on a rainy day unless they hold the umbrella factory as collateral. And why should they, when banks can borrow zillions from the Fed at zero interest and purchase 4 percent Treasuries? No muss, no fuss, no bother, no risks! So for the foreseeable future and with the economy on a slow mend, the BDC sector should be a thriving business environment, sort of like shooting fish in a glass barrel. BDCs will invest between a few and up to $60 million in small public or private companies, earn sweet consulting fees, a good rate of interest plus stock, and when the shares become ripe, they will be sold. Of course, the BDC shareholders get 85 percent of the profits. There are 40-some publically traded BDCs, and the following seven trade well below their highs of several years ago. I recommend these seven because I believe each has a better-than-modest potential for capital gains, that each -- with one exception -- pays a handsome dividend, and I believe each will increase their dividend this year and next. I recommend that you invest $40,000 in the following BDCs and purchase a CD with the remaining $40,000. Invest about $6,500 in each of these stocks: Apollo (AINV-$12.10), paying 9 percent; Ares (ARCC-$l7.41), yielding 8 percent; PennantPark (PNNT-$12.58), with an 8.4 percent return; TICC Capital (TICC-$12.10) at 8 percent; BlackRock Kelso (BKCC-$12.27), yielding 10.4 percent; Kohlberg (KCAP-$8.35), with an 8.30 percent return; and finally, American Capital (ACAS-$9) doesn't pay a dividend, but I think it will this year. ---------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com. © 2011 Creators Syndicate Inc. Published: Wed, Mar 9, 2011