I have often said that gold has no place in an
income investor’s portfolio. In my own
investing career the price of gold has gyrated incredibly. It is odd, however for gold to be highly
valued when the stock market is near a high and so are bond prices.
James Grant publishes Grant’s Interest Rate Observer
(his website link.) He tells us that as long as money is being
printed by governments, gold will be a good bet. I really respect Grant and read all his
stuff, but I still say owning the metal is not for income investors. I have two ways to deal with this
conundrum: Jewelry and Miners. Neither of the stocks profiled below qualifies
as a dividend machine yet they both have income investment potential.
Jewelry:
The problem with jewelry on your body is that you
can rarely sell it for the price you paid.
It can be bartered or pawned but it will not create income. However, you could invest in a
jeweler. In the past I wrote about
investing in Tiffany, symbol TIF. TIF
pays a dividend and often times covered call income can boost your income to an
acceptable level. Let us look at
today’s action.
CALL OPTION
|
TIF
|
Aug-13
|
|
Strike Price
|
$77.50
|
Cost Basis
|
$71.81
|
Call Premium
|
$1.80
|
Dividend
|
$0.32
|
Assigned Gain
|
$7.49
|
Call Yield
|
2.32%
|
Gain Yield
|
9.66%
|
Total Gain Yield
|
10.08%
|
TIF closing price $71.81
Last four quarters EPS $3.25
Current Dividend $1.28
Current Yield 1.78%
Dividend steadily increased since 2003
D/E ratio .37
I have played this angle in the past and it worked
out well. You can review the
post here.
Miners:
Another investment to consider are the companies
that mine gold. Newmont Mining, symbol
NEM is a company worth considering. Let’s
look at today’s action in NEM.
CALL OPTION
|
NEM
|
Jul-13
|
|
Strike Price
|
$34.00
|
Cost Basis
|
$32.43
|
Call Premium
|
$1.35
|
Dividend
|
$0.00
|
Assigned Gain
|
$2.92
|
Call Yield
|
3.97%
|
Gain Yield
|
8.59%
|
Total Gain Yield
|
8.59%
|
NEM closing price $32.43
Last four quarters EPS $3.63
Last four quarters Dividend $1.70
Current Yield 5.09%
Dividend Increases:
Held steady from 2004 through 2010 with increases since then.
D/E Ratio: .46
My
Take:
I currently own NEM and will add to my position as
the price is weak. I do not own TIF as
this time.
Consider these stocks for the income producing
portion of your investment portfolio.
TheMoneyMadam
