I Am Loading Up These 2 Big Yields
This is the perfect time to spot-check your portfolio and make sure your income is as strong as you expect it to be.
Don't let the tidbit of news that's blown up out of proportion between quarterly updates derail your mental thinking.
These two opportunities can provide you with plenty of income to help you to achieve financial independence.
I can remember when I used to have to wait a whole week to watch a new episode of my favorite show. Now you can binge watch an entire season in a night or two. So many shows that are releasing new episodes in batches, to force you to watch some and wait for the next set. You could be patient and wait until the whole season has been released to binge watch it.
It's part of human nature to want to be in the know. There's another group that has capitalized on this - the financial news. Even though the companies only update you about every three months on how they are doing, the media provides you with continuous opinions of Wall Street analysts and bankers. This creates a lot of unstable sentiment throughout the quarter and keeps everyone glued to the television or smartphone.
Today, I want to take a look at two opportunities that I think are outstanding yields to be loading up on while main street waits in suspense to see what the Fed will do next.
Let's dive in!
Pick #1: GHI - Yield 8.90%
Greystone Housing Impact Investors LP (GHI) is a publicly traded partnership with a focus on multi-family real estate. GHI's investment strategy centers around two core strategies.
1. Mortgage Revenue Bonds
The first is investing in "mortgage revenue bonds," or MRBs. These are loans originated by government housing agencies for the purpose of encouraging the construction of low-income housing. Investors in GHIs get a secured mortgage, with a first lien interest on the property.
GHI provides capital and profits from the "spread," the difference between GHI's cost of capital and the interest rate paid by the borrowers. The interest from these loans is Federal Tax Exempt.
2. Vantage Joint Venture
GHI provides capital to develop multi-family properties, and their partner manages the property until it is leased up. The property is then sold.
It is this strategy we can thank for the special and supplemental dividends that GHI paid in 2021 and 2022. For FY 2023, GHI has already produced CAD (Cash Available for Distribution) of $1.43/share in the first half, compared to a regular distribution of $0.74/share during the same period.
GHI also entered into a joint venture agreement with Camden Securities Company which will follow a similar strategy starting with construction in Huntsville, Alabama. GHI has seen fantastic returns from this repeatable strategy and has increased its capital allocation to it. That will create substantial upside potential for the company in the future.
Pick #2: AWP - Yield 12.4%
abrdn Global Premier Properties Fund (AWP) is a Closed-End Fund ("CEF") diversified across 75 global REITs with almost ~50% allocation to industrial, retail, healthcare, and data center REITs. These highly location-dependent sectors tend to maintain their presence in the selected neighborhood for a very long time, ensuring reliable rent payments and steady occupancy levels for the landlords.
Today’s public REITs have much more manageable debt levels than during the Great Financial Crisis. REITs on average, have debt at 34% of assets (down from 65% during the financial crisis).
AWP’s top holdings are some of the most robust REITs with a higher allocation to companies with a solid track record of dividend growth over past decades. The CEF pays $0.04/share monthly, a solid 12.4% yield at current price levels. YTD 2023, AWP has paid nine monthly distributions, broken down as 73% Return of Capital ("ROC"), 1% Short-Term gains, and 26% Net Investment Income ("NII").
AWP is modestly leveraged at 20%, and the fund carries a 1.4% expense ratio, including a 0.21% interest expense.
When it comes to my retirement, I want a portfolio that pays me strong income quarter after quarter, month after month, and year after year. Owning companies like these two allows me to have that strength of reliable income in my portfolio. The only thing I have left to do then, while my portfolio pours in dividends, is to fantasize about what hobbies I want to pick up or where I want to travel and take my vacation. As a professional income investor, money creates opportunities, opportunities are boundless. Having boundless opportunities because you're not restricted by your money is the definition of financial security, the #1 requirement for a stress-free retirement.