We added Fifth Street Finance (FSC) to the Yield Generator portion of the portfolio. FSC has a dividend yield of 9.2% and is a business development company that lends to and invests in small to mid-sized companies in connection with investments by private equity sponsors. For example, FSC has a $12.4 Million Second Lien Term Loan with Filet of Chicken, a company that processes and sells chicken products to national restaurant chains, chicken processors, and grocery stores. To maintain its corporate structure, FSC must pay out at least 90% of its taxable income which sounds very REIT like.
Here's the dividend yield of our current Yield Generator lineup:
CPL 6.6%
FSC 9.2%
KMR 6.2%
BPT 8.5%
PGX 6.7%
KMR is a special case in that the dividend is in additional shares of stock rather than cash, but 6.2% is my best estimate.
Our informal sell signal for these guys is when the dividend yield drops under 6%. Since we purchased these investments mostly for their dividends, it doesn't seem logical to use our standard 13 week / 34 week moving average crossover for avoiding colossal losses.
One last thought. It turns out nearly half the Fiat Fantasy holdings pay a dividend of more than 2%. Somehow I find that reassuring. Now if only we could get the precious metal holdings to pay dividends.
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