But while not all states are in fiscal balance, the vast majority are. And thanks to voter demands for getting budgets in balance and the fact that 29 states have seen tax revenues soar some $24 billion so far this year, many munis are safer than you think. Corporate taxes are light, but income, sales and property taxes are seeing healthy gains for state and local coffers over last year.
The key to munis is to focus on the underlying issues — and avoiding the cockamamie insured deals that have largely been discounted as not worth the effort. And to get the biggest and safest performance, look to three core national muni closed-end investment companies.
The AllianceBernstein National (NYSE: AFB), BlackRock Muni II (AMEX: BLE) and Nuveen Quality (NYSE: NQU) have an average dividend yield running at just shy of 6.5% — and while all trade at or a hair above their book value, all continue to perform and should only benefit from electoral demands of state and local governments.
And with the three generating average returns for the past eight years of inception of over 70 percent — look for this to be just the ticket for steady tax-advantaged dividends with gains as well. Then with or without a dividend tax hike, you’ll either keep the same after-tax cash flows or more in the years to come.
Health Care and Drilling Gains in 2011
Two highly charged issues that should be addressed post November are healthcare costs and off-shore drilling. And there are two very politically savvy companies that are already cashing in and will only get more coming their way next year.
First, on healthcare: Even with the labyrinth of the legislation still under dispute, politicians and their constituents are agreed on the need to control costs. And with prescription drug demand only getting stronger, the need for cost controls and greater efficiencies is a paramount focus. And one of the leaders that was integral (via its lobbyists) in writing several parts of the legislation was ExpressScripts (NASDAQ: ESRX). This company focuses on controlling drug costs in both patented and generic drugs.
Sales continue to soar by ample double-digits and more importantly so does its margins, resulting in stellar returns for its shareholders with a return on equity of over 35 percent and climbing. And with those returns, share performance more than exceeds its peers and the general market with gains of over 25% over the trailing 12 months, and over 218% over the past five years. Buy the drug company that’s the private and public’s favored under $55.
Aside from Florida, the rest of the nation is demanding more petrol production via off-shore drilling. But post election, a new series of Federal regulations will focus first on at least appearing to try to avoid another disaster.
One of the best drill rig contractors that’s used to working in hostile waters — both political and natural — is Seadrill (NYSE: SDRL). With management focused on liability management — it has an admirable track record of drilling and budget safety. And not only does it satisfy the politicos — it also more than satisfies shareholders. Its dividends are solid and heavy — climbing strongly to a current rate of over 8.5%.
And the market is beginning to notice as shares are performing much like its rigs with gains over the past year of over 50 percent. Buy under $35.
Neil George is editor of The Pay Me Strategy.
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