I sold my 1994 Mazda 626 -- affectionately called "The Green
Monster" -- to a neighbor about two years ago. The car had served
me well and still had enough life left to see his two teenagers
through those dicey "new driver" years. I'm happy to report that
the teens and car are all doing well.
In its place, I bought a used 2004 Honda Civic from a no-frills
used-car wholesaler. When I walked into the office, the salesman
gruffly explained, "We don't do financing here. Cash only." That
suited me fine. I always pay cash for a car. In fact, I'd been
slowly saving up for this car since the day I bought the Mazda. And
of course, I'm already saving up for the next one.
And while it might seem unpatriotic, it's been a while since I've
owned an American-made car. Yes, that's a picture of me sitting in
a classic Lincoln Continental Convertible. I won't give away my age
-- but the car was built in 1966 and I was a teenager when this
picture was taken.
But I might consider going back to an American-made car for my next
You see, I plan on making a nice little bankroll thanks to an
all-American car company:
. I might repay the favor with my next car purchase.
I've already received one paycheck of $68.90. My next payment, due
in August, will be a little over $70.
But there are millions of Ford investors that aren't getting paid.
On any given day, about 100 million shares of Ford traded hands...
and not one of those common shares has paid a cent in four years.
Mutual funds aren't being paid. Hedge funds aren't being paid.
University endowments aren't being paid. And retail investors
aren't being paid, either.
So what's the secret? How am I able to get paid 8% a year to invest
in a company that doesn't pay a cent in dividends?
The key is where to look.
For most major companies, the common stock is one of the last
places you should look for income. All the companies in the S&P
500 combine to pay an average
of about 2%. Yes, a handful pay more, but they're the outliers.
But lots of companies also issue debt securities to help fund their
business. And unlike years past, a large number of these securities
now trade on the New York Stock Exchange.
These securities are called exchange-traded bonds -- and I've
noticed that they're growing rapidly in popularity. Instead of
dealing with the
markets, investors simply buy the exchange-traded bonds like they
would a stock. Most trade near their par value (usually $25) and
pay interest quarterly.
Action to Take -->
The Ford bonds that pay me so handsomely trade under the ticker
FCJ. Each quarter I receive $0.475 per share for a yield of nearly
8%. As long as Ford can keep the lights on -- very likely
considering they didn't take a bailout and have more than $30
billion in cash -- I should be locked-in to this income stream.
It's a game plan that my colleague Carla Pasternak and I have been
following for awhile now. Between the portfolios of our three
premium income newsletters --
The Daily Paycheck
-- we hold nearly a dozen such bonds.
The best news is that there's so much variety out there for income
investors. If you don't like Ford's prospects, just look for
exchange-traded bonds from a company you do like.
-- Amy Calistri
Amy Calistri is the Lead Investment Analyst behind
StreetAuthority's Stock of the Month and The Daily Paycheck. Amy
has broad experience in finance, including helping to manage over
$5 million in trust funds for a non-profit. Before joining
StreetAuthority, she created and taught online investment courses
used by Bloomberg.com and National City Corporation and even worked
with noted economist James Galbraith, with whom she authored
several publications. Read more...
P.S. If you want to hunt for exchange-traded bonds on your own,
check out QuantumOnline.com. Simply enter the ticker of the company
in the top right and then click on "Find All Related Securities" on
the subsequent page. If there are bonds available, you'll see an
Disclosure: Neither Amy Calistri nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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