Alternatives to Bonds for Safe Income

1. Alternatives to Bonds for Safe Income Robin Carpenter, Moderator Chloe Lutts Jensen Roy Ward, Jacob Mintz

2. Why Seek Alternatives? Bond Yields Are Down by Half 10-Year T-Note Index

3. The Current Income Menu • Treasury Bonds • Municipal Bonds • Investment Grade Corporates • High-Yield Corporates (so-called “Junk”) • Preferred Stock • Common Stock • MLPs & REITs • Buy-Write (Options) • Annuities

4. Income Risk Issues • Safety of principal • Volatility • Appreciation • Accessibility • Call-ability • Reinvestment rates • Taxes • Inflation

5. A Value Screen with Yield • Current ratio greater than or equal to 1.5 • Long-term debt/working capital greater than 0% and less than 110% • Earnings per share positive for each of the last 5 years • Indicated dividend positive for coming year • Dividend maintained over the last 12 months • 12-month EPS greater than EPS five years ago • Price/book ratio less than or equal to 1.2 • P/E among the lowest 10% of the universe • Yield (June) = 5%, 10-Year Return = 15%, YTD = -5%

6. Potential Characteristics of Income Investments • Low- or High-Yielding • Unlikely to Lose Value • Capital Appreciation Potential • Dividend Growth – Another Story

7. Potential Characteristics of Income Investments

8. Treasuries, Investment-Grade Bonds & Funds

9. High-Yield Bonds Treasuries, Investment-Grade Bonds & Funds

10. High-Yield Bonds Preferred Stocks Treasuries, Investment-Grade Bonds & Funds

11. MLPs & REITs High-Yield Bonds Preferred Stocks Treasuries, Investment-Grade Bonds & Funds

12. MLPs & REITs High-Yield Bonds Preferred Stocks Treasuries, Investment-Grade Bonds & Funds

13. MLPs & REITs High-Yield Bonds Preferred Stocks Dividend Stocks Treasuries, Investment-Grade Bonds & Funds

14. MLPs & REITs High-Yield Bonds Preferred Stocks Safety-First Stocks, Utilities Treasuries, Investment-Grade Bonds & Funds

15. MLPs & REITs High-Yield Bonds Preferred Stocks Blue Chips Safe Stocks, Utilities Treasuries, Investment-Grade Bonds & Funds

16. MLPs & REITs High-Yield Bonds Preferred Stocks Blue Chips Safe Stocks, Utilities Dividend-Paying Growth Stocks Treasuries, Investment-Grade Bonds & Funds

17. MLPs & REITs High-Yield Bonds Energy Stocks Preferred Stocks Blue Chips Safe Stocks, Utilities Growth Stocks Treasuries, Investment-Grade Bonds & Funds

18. MLPs & REITs High-Yield Bonds Energy Stocks Preferred Stocks Telecoms, Insurance, Utilities Blue Chips Safe Stocks, Utilities Growth Stocks Treasuries, Investment-Grade Bonds & Funds

19. MLPs & REITs High-Yield Bonds Energy Stocks Preferred Stocks Telcos, Insurance, Utilities Blue Chips Safe Stocks, Utilities Growth Stocks Treasuries, Investment-Grade Bonds & Funds

20. ETFs for Income • SPDR S&P Dividend ETF (SDY) • iShares MSCI USA Minimum Volatility (USMV)

21. Buy Writes/Covered Calls • A Buy Write or Covered Call consists of Buying or Owning a Stock and Selling (i.e., shorting) a Call Option on that Stock

22. QQQ • Buy 100 Shares of the QQQ at $76.00 • This is a capital outlay of $7600 • Sell 1 September 76 Call for $2.00 or $200

23. Profit and Loss Graph

24. Yield at September Expiration • Stock at $76 or above, we have created a Yield of 2.6% • We do this 12 times a year, we have created a Yield of 31.2%

25. NFLX • Buy 100 Shares of NFLX at $250 • This is a capital outlay of $25,000 • Sell 1 September 250 Call for $16 or $1600

26. Profit and Loss Graph

27. Yield at September Expiration • Stock at $250 or above, we have created a Yield of 6.4% • We do this 12 times a year, we have created a Yield of 76.8%