February 2011 – Recommended US Stock Dividend Investments

Foreign currencies and bond funds have been very tricky to play over the last year.  I must confess that my currency and bond fund recommendations are negative for the last five months or so.  The European debt crisis and emerging market equity bubbles are throwing otherwise steady positive boring investments into negative territory.  I am dedicated to getting you (and myself) better returns.  I have done my research and I have concluded that dividend paying stocks offer a good combination of relative safety with better than cash performance.

The following list of dividend paying stocks is designed to replace the earlier bond and foreign-currency ETF investments.  Do not place all of your cash into the following investments because there is still some risk.  However, there is much less risk than what is normally associated with stocks.  Spread your money equally amongst these investments.

• American Capital Agency Corporation – symbol AGNC - US-based Real Estate Investment Trust
• Alliance Resources L.P. – symbol ARLP - US coal production and marketing
• Grupo Aeroportuario del Sureste – symbol ASR - Latin American Airport Operator
• Energy Transfer Partners L.P. – symbol ETP - Natural gas properties
• Partner Communications Company Ltd. – symbol PTNR - Israeli-based cell phone communications

Most of these investments pay dividends between 3% and 5%.  They all have some possibility for the future growth.  On average, the total return should be a little higher than the dividends they are paying.  The dividend paying stocks are not risk free.  The following table will explain the rewards and risks.  It also details the conditions under which the stocks should be sold.

AGNC

This company is a Real Estate Investment Trust.  This company pays the highest dividend at 5.6%.  This company is currently trading at the low end of a trading range that is established now for several months.  February 2011 is a good entry point time.  The risk is that interest rates shall go up significantly.  However, the US central bank has promised to keep rates low to stimulate US job growth.  US jobs will continue to be tough throughout most of 2011.  Hold onto the stock as long as these conditions are true.

ARLP

This company is all about coal.  With industrial production ramping up in the United States and power needs increasing as well.  This stock looks well positioned for 2011 to grow modestly and also supply a superior dividend.  In the United States, coal is one of the cheapest energy sources and is the least effected by energy price swings.  Nonetheless if coal production ramps down significantly, sell this stock. Generally, the US economy would have to take a large slowdown in growth in order to sell the stock.

ASR

This company operates airports mostly in Mexico.  They are looking to expand airport operations into South America.  This company offers the possibility of modest growth with a superior dividend.  The economies of Mexico and South America are doing quite well, thank you.  This should keep up the demand for air travel in the region.  However, should Mexico and South America experience a drop in their economic health, sell this stock.

ETP

This company operates natural gas pipelines in the United States.  This company has some risk to natural gas prices.  But they benefit from low natural gas prices because demand for pipelines supplying cheap natural gas is increasing.  This trend should continue throughout 2011.  This company has a dividend that is well above average.  Sell the stock if US natural gas pipeline demand wanes.  Generally, the US economy would have to slow down significantly in order to sell the stock.

PTNR

This company is based in Israel and I am assuming that the tensions in Egypt shall pass without harm to Israel.  Over the course of 2011, I believe this is a good bet.  The stock has the lowest paying dividend of the group at 2.12%.  Nonetheless, I am a contrarian and I believe it is a good time to buy the stock.  The price recovery, growth and the dividend should be a good combination.

These companies should offer modest growth and safe returns for 2011.  They are an excellent replacement for foreign currency and bond funds.  They should offer better returns, while the world continues to come to grips with European sovereign debt issues and wide currency swings.