Steady Income in Unsteady Times

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Taxes on the remaining 80% or so are usually deferred until the investor sells out.

OFF THE BEATEN TRACK

Brian Smith, a financial adviser and president of Quant in Vienna, Va., is steering his clients into energy- related MLPs such as Enterprise Products Partners (EPD) and Kinder Morgan Energy Partners (KMP). He recommends them because there is also an opportunity for the appreciation of the "units," the partnership equivalent of shares. Encouraged that insiders at these partnerships are also snapping up units, he's recommending clients put 5% to 15% of their assets in MLPs.

Farther off the radar than MLPs are trust preferreds. Neil George, editor of Personal Finance newsletter, calls TRUPs "bonds for the masses because they trade at a face value of $25 instead of a bond's $1,000 price tag." These bite-size bonds, from issuers such as General Motors (GM), Tribune (TRB), and AMR (AMR), provide investors with steady cash flow—yields currently range from 7% to 14%. That's well above the typical corporate bond rate, but these are companies that have less than stellar credit ratings. Robert Wasilewski, a financial adviser at Baltimore-Washington Financial Advisors in Columbia, Md., will put up to 15% of a client's assets in these securities.

For investors in search of an all-in-one dividend option, several advisers are recommending the Alpine Dynamic Dividend Fund, a mutual fund that tries to increase the dividend flow through adroit trading. "The fund has a significant portion of its holdings in financials and business services, so it is not without risk," says Kevin Brosious, president of Wealth Management in Allentown, Pa. Keep in mind that turnover is high, so you'll be on the hook for capital gains tax, too. However, with a fat dividend of 14.1%, it could be worth the stretch.

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