Don't Miss Out On Today's Highest Yields! Here's How to Grab the Exact Yield You Want
Wednesday, February 18, 2009
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Don't Miss Out On Today's Highest Yields! Here's How to Grab the Exact Yield You Want
-- By Andy Obermueller

     Have you ever seen a great deal on something you really wanted -- only to see it disappear after you had thought about it? I sure have. And each time it has happened, I've slapped my forehead and said the same thing: "Boy, I'm not going to let that happen again."

     Well, income investors may find themselves slapping their own foreheads after they realize they've missed out on some tremendous yields. In today's historically volatile markets, prices -- and so yields -- move with NBA-like speed. Great yields don't last long.

    
Today, I'll show you an example of how fast these yields can slip through your fingers. I'll give you two standout dividend performers whose high yields aren't going to last. And then I'll show you how to use a sophisticated market tool that actually lets you choose the exact yield you want to receive from the stock you're interested in. (Full Story Below)

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    Don't Miss Out On Today's Highest Yields! Here's How to Grab the Exact Yield You Want  

     Blink and you'll miss it.

     Today's market is moving fast. Volatility remains high and traders are highly reactive to economic and other news. Opportunities don't last long. That's true for price, and that means it is also true for dividend yields. Investors who seize these fleeting chances will see substantial returns, both in terms of yield and capital gains.

     The Stage has Left the Station    

    Take Wells Fargo (NYSE: WFC). Shares of this leading financial institution performed 38.8 percentage points better than the S&P last year, even amid the meltdown in the financial center. Wells began 2009 with a modest dividend yield of 4.6%, about the same as a triple-A bond. 

     Ho hum, right? Nothing for a serious income investor to write home about...

     But then the markets began to roil. Stocks didn't take off, as some thought they would. Instead, they tanked. The market suffered a punishing January, and Wells reached at a low of $14.23. Its yield rose to a far more enticing 9.6%.  

     You want a yield like that in this market, you'd better grab it. The opportunity to lock in this rich payout didn't even last 24 hours.

     Here's how fast it disappeared: The very next day, bargain hunters swooped in and drove up the price of the stock. By the end of the trading session, the yield had fallen an entire percentage point, to 8.2%. By the end of the month, prices had risen to the point where the best yield investors could get from Wells was another point lower -- only 7.2%. 
    
     Now, investors who acted decisively and bought shares when the yield was at its high will earn a nearly 10% payout from one of the strongest banks in the country.  They'll actually earn twice the return of investors who bought the shares only weeks before.  Should these investors ever tire of that rich stream of cash, then all they have to do is sell their shares for a tidy profit. Remember, when yields fall, prices rise.

     And believe it or not, your opportunity to lock in this yield may be closer than you think. You see, in these rough and tumble markets, prices -- and thus yields -- can move very fast. Wells is currently inching back toward its low. Once it gets there, though, be ready. You won't have much time!

     Another example: General Electric (NYSE: GE). GE's executives have reiterated the company's commitment to its dividend. It still has its platinum triple-A credit rating. And yet shares of GE -- one of the largest, most diverse and most innovative companies in the world -- have slid -33% so far this year, pushing the yield on these shares to an astonishing 11.5%.

     This opportunity is still available -- but, just like Wells Fargo, your chance to grasp these yields isn't going to last.

     This Tool Lets You Choose Your Yield

     If you're interested in locking in high yields, there's a tool you can use to make sure you obtain the payout you're looking for. In fact, this tool actually lets you choose the exact yield you want to receive.

     It's called a "limit order." Individual investors typically use "market" orders -- which means they buy their shares at the best available price. But more sophisticated traders prefer to use limit orders to specify exactly how much they are willing to pay.

     You see, by choosing your price, you can choose your yield.  If you want to capture GE's current yield, place a market order. If you want to hold out for a 12% yield, then put in a limit order to buy shares if and only if the price drops to $10.33, which implies a yield of 12%. Just elect the GTC or "good till canceled" option on the order. If the price hits $10.33, your order will be filled and you'll have your 12% yield.

     How to Determine Your Price

     Here's the magic formula, which you can use to ascertain what price will equal the yield you're after: Annual dividend = yield times price. 

     You just plug in the variables you know.  Say you're hoping to earn an 11.5% yield from GE and you know that its annual dividend is $1.24. Your little math problem now looks like this: $1.24 = 0.115x

     To solve for x, you divide by $1.24 by 0.115.  In other words, to achieve an 11.5% yield from GE shares, you'd have to buy them at $10.78.

     Timing is everything when it comes to yield. This chart compares Wells Fargo shows the amazing difference that a strong yield can make over time....



     Strong dividend opportunities don't last long. Wells Fargo's lasted less than a day. This market is loaded with chances for serious income investors to lock in head-turning yields on some of the world's best dividend-paying securities.

     Many happy returns,






Andy Obermueller
Co-Editor
Global Dividend Opportunities
GlobalDividends.com
839-K Quince Orchard Blvd. 
Gaithersburg, MD 20878-1614

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Income Notes

Treasuries rose the most in a week Tuesday as stocks fell on renewed concern the global economic recession is deepening, prompting investors to seek safer assets. U.S. securities climbed as Moody's said credit ratings of banks with units in Eastern Europe may be lowered.

-- Bloomberg


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