Taking Stock: Hammering out the dents

Dear Mr. Berko:

Are you still close with Harry Dent? Didn't you write a bimonthly stock market service with him in the late 1980s and the early 1990s?

What do you think of Harry Dent's new book, which is very bearish on the stock market and the economy? In 1992, his first book predicted the Dow would go to 20,000. I haven't read his new book, but I'm told he believes that the economy will crash and the Dow will fall to 3,000.

I have about $260,000 in cash (after taxes) from a property I sold last June. The property paid my wife and me more than $1,200 a month, and we need to replace that income. At age 56, I don't want to take chances in this crazy, up-and-down market.

Other than high-cost annuities, can you recommend anything (bonds, perhaps) that can give us at least $1,000 to $1,200 a month in income?

DP, Wilmington, N.C.

Dear DP:

I'm not close to Harry Dent. I don't even know Harry Dent. The publication to which you refer was called the Closed End Fund Digest, which I wrote with Douglas Dent and Frank Cappielo.

Douglas Dent, who passed away in 1993, was an extremely competent portfolio manager. And while he was related to the famous Harry Dent, Douglas did not in any way participate in Harry Dent's celebrity or opinions.

And yes, Dent and his coauthor's predictions in their latest book, "The Great Depression Ahead," are as serious as a seizure. Because of the uncanny accuracy of Dent's past market predictions, more than a few professionals are concerned that Dent may be right again.

"The Great Depression Ahead" makes a persuasive case for a prolonged period of deflation marked by falling prices and falling wages, lower demand, slowing production, declining consumer spending and a plunging Dow. I urge you to read this book -- while Dent's negative predictions may not be quite as on-the-mark as a Timex, the book presents incontrovertible reasoning and evidence that cannot be ignored. So there's a 55/45 chance that Dent will be right.

Now, if you're a regular reader of this column, you know that during the past 35 years, I've always favored stocks that pay attractive dividends -- especially issues that have a long record of dividend growth. So forget bonds, the values of which will fall like a tear from a tall camel's eye when rates rise. I've always believed that dividends and dividend growth act as a support cushion in a down or sideways market, and they provide a bit of extra oomph in a rising market.

So if you're an old dog (like me) or a middle-aged, conservative investor who eschews volatility and risk, you can straddle both sides of the fence with comforting protection in a falling market and earn modest appreciation in a rising market. Healthy dividend payers will not fall as far as the market when the market declines. But those dividends will be welcome appetizers while you wait for a market recovery.

The following dividend portfolio has about half the volatility of the Dow Jones averages. If you invest $20,000 in each of the following 13 issues (for a total of $260,000), this portfolio will provide first-year dividend income in excess of $16,000, plus welcome annual increases.

So invest in each of the following, ten of which are utilities: AT&T (T-$29.28), yielding 6.1 percent; Verizon (VZ-$36.05), at 5.60 percent; PP&L (PPL-$28.21), at 5.1 percent; Pepco Holdings (POM-$19.99), at 5.8 percent; AmeriGas (APU-$43), at 7.1 percent; Entergy (ETR-$63.43), at 5.4 percent; Integris (TEG-$48.99), at 5.6 percent; Otter Tail Power (OTTR-$20.09), at 6.1 percent; Duke Energy (DUK-$18.23), at 5.6 percent; Energy Transfer Partners (ETP-$44.01), at 8.3 percent; NuStar Energy (NUS-$57.80), at 7.70 percent; Eli Lilly (LLY-$35.57), at 5.6 percent; and National Grid PLC (NGG-$50.22), at 7.6 percent.

Your dividend income will be a little over $1,350 a month this year and then a little more each succeeding year.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2011 Creators Syndicate Inc.

Published: Fri, Sep 23, 2011