Our Best Idea: Securities that pay a 7.5% Dividend

Below you will find the graph of our best idea, investing in bank issued securities called Trust Preferred that yield 7.5% on average in dividends. These public traded securities are from the largest banks in the US and Europe. The graph shows the current yields on our basket of trust preferred securities, BBB Corporate bonds, and 10 Year US Treasury bonds. The yield gap is quite dramatic. Besides, it is hard to like stocks in this volatile market. In August, Warren Buffett’s purchased $5B of Bank America preferred stock with a 6% dividend plus warrants. Those warrants better pay off since we can buy for our investors the Bank America trust preferreds with a current yield of 7.5% and a yield to redemption of 10.4%. The trust preferreds rank higher in the bank’s capital structure than the traditional preferreds Buffett bought and, thus, the dividend is more protected than the one Mr. Buffett is getting. U.S. banks look solid to us as well as their trust preferreds. Taking advantage of this 7.5% current yield is our best idea.