A
Bond for Income Investors
Historically,
bonds have been a major portion of an income investor’s portfolio. But the 30 plus year bull market in bonds
have rendered most bonds so expensive, yielding so poorly, that the average
income investor cannot afford bonds.
Those
high yield bonds that are available are hardly worth the risk.
With
all that in mind, I occasionally find the bond of a stock that has decent
fundamentals but has gotten hammered because of some outside influence. In this case, the outside influence is the
price of oil and gas.
Buy
at a Discount
When
you buy at a discount and your bond matures, you get back more money to then
reinvest. Often times, a bond will
improve so much that you can sell it early at a premium. I do not think that will happen with this
bond, yet just two years ago the bond profiled here traded at over $110. I will be very happy to get back my
principle and receive the coupon twice a year.
Noble
Holding 4.9% 2020 Senior Debt
Noble
Holding Company, symbol NE, is an oil and gas drilling company. Trading at About $18.61 today. D/E ratio of
.64 is within the industry standard of .64.
Interest coverage ratio is 9.62 which is comforting.
Noble
has several bonds available in the 5 – 7 year maturity range. The bond I bought
has a coupon of 4.49%, matures August 1, 2020.
Selling at a discount to par of $95.60 (price from Schwab.com) for a
Yield to maturity (YTM) of 5.857%.
This
bond is considered investment grade with a rating of Baa3 and BBB by two agencies. It is continuously callable with no survivor
option. At the very minimum you will
receive par when called and remember with bonds you receive interest income for
every day you own the bond.
CUSIP
# is 65504LAC1
Consider
this NE senior, investment grade, discount bond for the income investing
portion of your portfolio.
TheMoneyMadam
Disclosure: Long CUSIP 65504LAC1
