13 June 2012

The Risks of Yield Seeking Strategies




Over the past couple of weeks I’ve focused on high-yield corporate bonds, but three other yield-oriented investments I frequently get asked about are high-dividend stocks, preferred stocks and oil-and-gas master limited partnerships (MLPs). In the past couple of years, I’ve found that most investors who ask about these strategies are contemplating using them in place of high-quality fixed income because “fixed income rates are low.”

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5 June 2012

More on High-Yield Bonds




In last week’s post, I referenced the performance of high-yield corporate bonds during periods of stock market turmoil. Unfortunately, we now have more recent data to evaluate how high-yield corporate bonds tend to perform during periods of bad stock market performance. The S&P 500 was down about 0.6 percent in April, 6.0 percent in May and about 2.4 percent in June (through June 4). The backdrop of the poor performance is an apparently slowing U.S. economy and a heightening of the Eurozone debt crisis, with the health of the Spanish banking system being the current area of focus.

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