"Duff & Phelps Utility & Corporate Bond Trust (NYSE: DUC) owns a nice blend of corporates, utility, and mortgage-backed securities," notes income expert Bryan Perry in his growth & income oriented Cash Machine advisory.
"These types of securities are getting more attention with the notion of an economic recovery occurring late this year, implying a higher demand for power and thus a rebound in the utility sector as a whole.
"If investors can lock in a 7.5% yield through this senior debt holder of major global utilities, then you can rest assured that the monthly dividend, which was raised this month, is secure.
"This is a great long-term bet on rising electricity demand, big stimulus money being dedicated to the power grid, and cleaner technologies for fossil fuel use.
"And when business activity re-ignites, demand for power will turn up and so will DUC's profits-especially if raw material inputs remain somewhat constant.
"With $447 million in assets, DUC is large enough to attract institutional money as well as retail interest, making it a core holding when big money rotates from cash to equity exposure.
"The fund pays monthly dividends, making it ideal for investors seeking a steady and reliable payout. Quality stocks always rebound the quickest, which explains why shares of DUC-made up of a portfolio of superior stocks-are so resilient.
The utility sector is still down 40% from its yearly high and in my view represents a terrific entry point for investors seeking to return to the equity markets in a durable sector.
"In my view, this closed-end fund will deliver a secure monthly dividend to us, and I like our chances of 10% to 20% on the up side for DUC shares over the next year."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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