June 2016 2016Vol. Vol.33 Issue Issue11 June

Celebrating Our Two Year Birthday Fellow Investor,

J

une 2014 was the inaugural issue of The Dividend Hunter. For me, it has been a quick but enjoyable two years. I believe, and your feedback confirms this, that we continue to evolve and make The Dividend Hunter a better and better service. I do want you to know, however, that producing The Dividend Hunter comes from a team effort, and the team at Investors Alley supports an integral part of everything that happens. Writing The Dividend Hunter and interacting with you and thousands of other subcribers has the effect of making me a better stock analyst and investor. I see my growth here as similar to when I was upgraded to instructor status as an Air Force pilot. To be selected to become an instructor, a pilot must already be one of the best in the squadron.

In This Issue Communications Sales & Lease (CSAL) ...... 3 Generating a 6% Income in Retirement. ... 4 Who Owns NRZ? ........................................ 6 Portfolio Update ........................................ 8 Current Portfolio Standings ....................... 9 Closed Positions ......................................... 10

But, I found after I became an instructor I had to more tightly focus on all the aspects of flying a high performance aircraft, doing the mission while teaching less experienced pilots how to do the same. I discovered that as an instructor my skills continued to improve at a high rate. Doing the research and writing for The Dividend Hunter and interacting with subscribers are having the same effect on my stock market knowledge and strategies. At the Las Vegas MoneyShow in mid-May, I was invited to make several presentations covering different aspects of my dividend investing strategies. My talks were all well received, and a couple were standing room only. This type of event and the opportunity to speak publicly about what I do reinforces the understanding that my systems are significantly different from what most investors have learned about stock market investing. The strategies I use – we use – are designed to make money for you in the stock market through all cycles, both up and down. The next section of this month’s issue covers some of the ideas from one of my presentations. I also continue to get feedback that The Dividend Hunter is a great value in the stock market newsletter space. Other newsletters at a similar price do not give subscribers email access to the editor –me. I love to get your emails and answer questions. Other newsletters do not send a weekly stock recommendation. We have done very well with the weekly stock picks. Of the 10 or so recommendations made during the first quarter of 2016, all are up with an average gain of around 20%. Admittedly, January and February were great months to pick up shares cheap, but it is good for you to get that weekly email telling you which recommendation looks like the better values in The Dividend Hunter list.

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June 2016 Vol. 3 Issue 1

As we move into Year Three of The Dividend Hunter and the Investor Alley stable of newsletters, I remain as committed to you as ever to make the services even better. If you’re following the Monthly Dividend Paycheck Calendar be sure to get the June update; just CLICK HERE to get a copy.

Land, Fly or Die, Tim Plaehn Editor The Dividend Hunter

P.S. Returns in my 30 Day Dividends service have been on a tear recently. The last six trades I closed out gave subscribers returns of 48%, 54%, 14%, 17%, 11% and 22% respectively! And, since launching 30 Day Dividends in June of 2014, my subscribers have closed out an amazing 75% of our trades with positive total returns... even during one of the most volatile markets in five years. There are still a few open slots remaining for subscribers of The Dividend Hunter to receive the instant 50% discount right now. If you want to start compounding your dividend income with regular trades, I invite you to click the link below. Click here for more information on compounding your dividend income.

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June 2016 Vol. 3 Issue 1

Time to Buy This Growth Focused REIT Distribution Systems," to quote the companies presentation materials. The initial assets included 3.5 million strand miles of fiber and 235,000 route miles of copper lines.

Near double-digit yields backed by quality companies and sustainable cash flows are not the easiest stocks to discover. The current batch of higher-yielding stocks in the Dividend Hunter portfolio are the cream of the crop. I review hundreds of dividend paying stocks every quarter, and it is rare to get one with a near 10% yield that meets my investment criteria.

The communications assets are leased back to Windstream on a 15-year triple net lease, with the option to extend the lease for up to 20 more years. The triple net type of lease means that Windstream pays for all of the maintenance, repairs, and any other expenses required to keep the communication lines operating. CSAL just collects a check. The triple net lease results in a high quality bond-like income stream to the REIT. Other REITs that use the triple net structure with buildings include Realty Income Corp (NYSE:O) and National Retail Properties, Inc. (NYSE:NNN). InfraREIT Inc (NYSE:HIFR) is another new way to use the triplenet REIT structure by owning electric power transmission lines.

I have been closely following Communications Sales & Leasing Inc. (NASDAQ:CSAL) since its IPO in April 2015. The company is a unique type of real estate investment trust (REIT) and offers a good potential for high current income and share price gains. Background CSAL was formed when telecom company Windstream Holdings, Inc. (NASDAQ:WIN) received an IRS ruling allowing fiber and copper wire lines to be qualified REIT assets. With the IPO spin-off CSAL became the REIT owner of a network of fiber and copper "Mission Critical Communication

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With its long-term, triple-net lease with Windstream, CSAL came out the gate with the cash flow to support a $0.60 quarterly dividend. At the April 20, 2015 IPO price of $28 per share, this gave CSAL an initial yield of 8.5%. When to Recommend? In the early days, the CSAL management team insisted that the company was acquisition focused and that they were looking at numerous opportunities to buy assets that would diversify them away from the risk of having a single client. Before recommending this stock, I wanted to see the company actually announce and close some acquisitions. In January 2016, the company announced its first acquisition. The deal was a $409 million purchase of privately held PEG Bandwidth, LLC. PEG provides infrastructure solutions including cell site backhaul and dark fiber for telecom carriers and enterprises. The purchase was completed in early May and is expected to produce accretive cash flow in the first year. PEG also has excellent growth prospects.

notices the diversification and growth, it is possible that the shares will be bid up to bring the yield down to the range of other net lease REITs. For example, HIFR currently yields 5.8%, while CSAL yields 9.8%. To get the yield down, the share price must go up. Because of these factors, I am adding Communications Sales & Leasing to the Dividend Hunter recommendations list. The stock currently yields 9.8% and there is a good probability of a dividend increase between now and the end of 2016.

In March, CSAL announced it would acquire 32 wireless towers owned by Windstream and operating rights for 49 wireless towers previously transferred to CSAL in its spin-off from Windstream in April of last year. Multiple wireless carriers currently leasing access to these towers will become customers of CSAL. This was a small purchase with a cost of $3 million.

Generating a 6% Income for Retirement The information that follows comes out of one of my Las Vegas MoneyShow presentations. I have been reworking the strategy somewhat, and I think it will help you rethink how you plan for a retirement income.

In its first quarter earnings report, the company announced it had started a cell tower ground lease acquisition program. These leases provide very stable income and the company is targeting $25 million of ground lease investments in 2016. Another acquisition of $1.7 million was made to purchase Summit Wireless, which constructs build-to-suit wireless towers and is currently doing so for a major telecom company in Mexico.

The financial advisor community faces a big dilemma when advising their clients about how much income their savings can generate in retirement. With interest rates remaining low and a volatile stock market that looks like it will have trouble matching past results, the old "draw 4% each year" rule has a high probability of draining a retiree's accounts well before the end of their life. For example, a recent article by Wade Pfau, Ph.D., CFA was titled "39 Modern Retirement Income Planning Techniques".

The bottom line is that Communications Sales & Leasing is moving into a real acquisition and growth phase. The result should be growing cash flow per share, and hopefully some dividend increases. As the market 4

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Yes, 39 different possible strategies!

on the current Dividend Hunter buy recommendations list. Remember that list has an average yield of 8.7%.

While I am not a retirement planning expert, I know a few things: Probabilities only work for large numbers and individual results can and will vary significantly from large group percentages. As a result, any individual retirement spending plan from a probability based system will most likely end up much different than the original plan.

In the first three month period, $6,000 will be withdrawn in the form of $2,000 per month income checks. The $394,000 in stocks will generate dividend earnings of $8,569.50. If we continue to draw $2,000 each month for a year, and let the portfolio earn $8,569.50 in dividends each quarter, at the end of 12 months, the cash in the account will be $16,278. It's time for a raise! For the second year, let's increase the monthly income by 3% to $2,060. We set aside $6,180 to cover the monthly checks for the next quarter, which leaves $10,098 that we will use to buy more shares of the holdings in our income stock portfolio.

39 different strategies put out by a lot of smart people means that a really good solution is very difficult to find. The safe end of the spectrum will result in very low withdrawal rates, not providing enough income to live on. More aggressive strategies could lead to an exhaustion of retirement funds at a time when they may be needed the most. As a contrast to PhD developed, complicated systems, I prefer the simplest approach to get the job done.

Using the false assumption that share prices have not changed over the course of the year, with the added investment our stock portfolio is now hypothetically worth $404,098. With more shares in the account, we will be earning more in cash dividends.

With an average yield of 8.7%, the Dividend Hunter recommendations list allows us to set up a 6% withdrawal strategy that will not result in a depletion of capital and the chance to run out of money in our later years. As I stated in my presentation, just because the basic strategy may be simple, the execution will likely be more complicated. What follows is an illustration of the strategy using a hypothetical example.

After drawing $2,060 monthly checks in the second year, and retaining dividend payments, by the end of the year the cash balance is up to $16,613. Another 3% raise gives us a monthly check of $2,121 in year three and after setting aside three months of retirement income, we will have about $10,250 in excess cash to reinvest. Each year this pattern will repeat.

Let's start with $400,000 in retirement plan assets as an example. This is the money that will be used to produce a portion of your retirement income. In addition, you should have other money set aside as an emergency fund. Six percent of $400,000 is $24,000 or $2,000 a month of retirement income out of this starting nest egg. With our income goal set, here is how we set up the retirement income system.

Our static example here shows that with a portfolio dividend yield of about 9% and a disciplined withdrawal of 6% per year produces an income stream, dividend stream and portfolio value that all grow by about 3% per year. I like that plan better than some of the mainstream investment and withdrawal strategies where you draw just 4% per year and run out of money after 30 years.

Three months’ worth of income, or $6,000 is set aside in cash. Since all of the Divided Hunter stocks pay at least quarterly, in a three month period our brokerage account will collect a full cycle of dividends. The remainder, $394,000 is evenly invested into the stocks

Of course, you are aware that we don't live in a static stock market world, so here are some of the factors that

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we need to be aware of and possibly would require adjustments to our retirement income plan.

dividend income will not grow as fast, but we will get those good feelings from looking at a bigger brokerage account value and can congratulate ourselves on being such brilliant investors. It’s a win-win in all market conditions, and WE DON'T WORRY ABOUT THE DIRECTION OF SHARE VALUES!

Many of the stocks in the Dividend Hunter portfolio will increase their quarterly dividend rates over time, so the portfolio will actually generate more cash, leaving more excess cash flow which can be reinvested.

The core of making this strategy work is to own a diversified portfolio of dividend stocks that generate an average yield greater than the withdrawal rate. These stocks must have secure dividend payments and offer the potential for, on average, modest dividend growth. That sounds a lot like the Dividend Hunter core investment strategy! If you have questions on what I covered here, I would be happy to respond to your email if you send one over to me.

You don't need to wait until the end of a year to buy more shares. If the market drops and there is excess cash above the near term income needs, it could be a good time to buy cheap and boost the portfolio's cash flow yield. Selling a stock and buying another will change the projected dividend income to either a slightly higher or slightly lower amount. It is possible that one or more of our portfolio stocks will reduce or eliminate its dividend payments. This is the biggest risk of this strategy. And it is probable that no matter how much we research and try to stick with the safest dividend stocks, there will be the occasional dividend rate reduction. I will cover how we handle such an event next month.

Who Owns New Residential Investment Corp? One question I like to ask when I make a presentation at an investor conference is "Who owns NRZ?" After two years of making a dozen presentations a year, I am still always surprised when I just get a couple of raised hands. Two years ago, there were zero hands, but now, with a couple of Dividend Hunter subscribers in the crowd, there might be two to three. The stock I am discussing is New Residential Investment Corp (NYSE:NRZ).

You might have noticed that there is no discussion about share prices. That is because this dividend-centric strategy allows us to hit the retirement income goals in both up and down markets. If share prices fall, we will buy more shares at lower prices and boost the portfolio dividend cash flow yield. If share prices rise, the

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New Residential has been a recommendation with The Dividend Hunter since the August 2014 issue. It has been a great high-yield stock and I expect it to continue to pay large dividends and increase them over time. The company's business involves investments in mortgage servicing related products and opportunistic high-yield investments as they are discovered. This time around I am not going to get into the details of how NRZ makes money. You can look at the chart on page 6 that shows NRZ’s portfolio of investments.

be increased either for this next payout or the following one that will be announced in September. Even though the NRZ share price is up a lot from the lows earlier in 2016, the 13% yield still shows that this stock is undervalued. I know of no other high yield stock that has done as good a job of generating growing cash flow and paying a very attractive dividend. I really cannot understand why NRZ is priced to yield 13%, but I am happy to keep adding to my position and locking in that high yield. This stock continues to be a relative secret that you, the Dividend Hunter community, should be taking advantage of.

What I want to focus on is the historic investment returns and future investment potential of NRZ shares. Since I first recommended the stock a few months short of two years ago, NRZ has produced a total return of 35.3%. Of that total 24.2% has been dividend payments. However, the share value peaked above $17 in late May of 2015, and the share value is now about 20% below that high. The drop is primarily due to the market associating New Residential into the same category as the residential mortgage security REITs, even though NRZ is a very different type of business. The share value decline has allowed us to buy more shares at lower prices and I recommended several times that Dividend Hunter subscribers pick up shares when it was in the $10's and $11's. From these results you can see that while the market may produce shorter-term negative results (such as the past 12 months negative total return) as we own NRZ for a longer period, the high yield and growing dividend will produce superior total returns. Even as the share price has declined over the last year, New Residential has actually been increasing its cash available for distribution per share. The company's business has been doing very, very well even if the stock market has not registered that fact. At the current $13.50 per share, NRZ yields 13.6%. The next dividend should be announced in mid-June with an end of the month record date and payment at the end of July. There is a good probability that the dividend will 7

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Portfolio Update In May, many of the stocks on The Dividend Hunter reported 2016 first quarter business and earnings results. The earnings came in almost all as expected, and it was a nice boring earnings season. Boring is good when we are investing in high-yield stocks. The dividends are our expected returns, and stability and dividend support make us happy investors. We did get one dividend increase during the month, Easterly Government Properties Inc (NYSE:DEA) increased its quarterly dividend by 5%, up $0.23 per share. This is the second increase in a year from this year-old REIT. I also want to point out that the Weekly Stock Recommendations have worked out well for buying The Dividend Hunter recommended stocks at good share prices. More and more I see the weekly stock pick as a good way to build a portfolio of income stocks one stock at a time. If you haven’t yet, read my report on the specialty finance company that pays a 7% and growing yield: Secret Savers 7% Acccount If you have any questions about the stocks in the portfolio or anything we covered in this month’s issue feel free to write to me directly. My personal email address is [email protected].

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Current Portfolio: Buy / Accumulate Stock

Entry Date

Entry Price

Recent Price

Status

Div. Earned

Current Yield

Cash Return

Communications Sales & Leasing (CSAL)

05/31/16

$24.98

$24.98

Buy

$0.00

9.6%

0.00%

Lamar Advertising Co. (LAMR)

04/29/16

$62.04

$65.05

Buy

4.6%

0.00%

Chatham Lodging Trust (CLDT)

03/31/16

$20.62

$21.69

Buy

$0.00 $0 $0.22

6.1%

1.07%

Easterly Government Properties (DEA)

03/01/2016

$17.50

$18.72

Buy

$0.22

4.9%

1.26%

VTTI Energy Partners LP (VTTI)

01/04/2016

$20.71

$20.30

Buy

$0.61

6.1%

2.96%

Jernigan Capital (JCAP)

12/01/2015

$15.37

$13.90

Buy

$0.70

10.1%

4.55%

Reaves Utility Income Fund (UTG)

11/02/2015

$29.95

$30.25

Buy

$1.05

6.0%

3.54%

Aircastle Limited (AYR)

9/30/2015

$20.61

$21.14

Buy

$0.72

4.5%

3.49%

Ventas, Inc. (VTR)

8/31/2015

$55.02

$66.33

Buy

$1.46

4.4%

2.65%

MLP Distribution Growth Leaders (YGRO)

7/30/2015

$14.60

$10.96

Buy

$0.53

6.2%

3.63%

Williams Companies (WMB)

5/29/2015

$51.10

$22.15

Buy

$2.51

11.5%

4.91%

Hercules Tech. Growth Capital (HTGC)

4/30/2015

$13.90

$12.28

Buy

$1.55

10.0%

11.15%

InfraCap MLP ETF (AMZA)

3/31/2015

$21.51

$10.94

Buy

$2.57

18.9%

11.95%

Blackstone Mortgage Trust (BXMT)

1/31/2015

$41.05

$28.19

Buy

$2.90

8.8%

9.93%

Stag Industrial (STAG)

12/31/2014

$24.50

$21.35

Buy

$1.94

6.5%

7.93%

EPR Properties (EPR)

10/30/2014

$55.64

$71.28

Buy

$6.28

5.4%

11.29%

New Residential Investment (NRZ)**

7/30/2014

$12.16

$13.58

Buy

$2.94

13.6%

24.18%

Main Street Capital (MAIN)

6/27/2014

$32.51

$32.16

Buy

$4.84

6.7%

14.90%

Starwood Property Trust (STWD)

5/30/2014

$24.39

$20.62

Buy

$3.36

9.3%

13.78%

Ship Finance International (SFL)

5/30/2014

$18.52

$16.03

Buy

$3.42

11.3%

18.47%

Macquarie Infras. Company (MIC)

5/30/2014

$61.48

$71.61

Buy

$8.61

6.7%

14.00%

Current Portfolio: Hold Lexington Realty Trust (LXP)

3/02/2015

$10.78

$11.70

Hold

$0.85

7.8%

7.88%

Kinder Morgan (KMI)

1/31/2015

$29.20

$18.08

Hold

$1.73

1.2%

4.21%

Arc Logistics Partners (ARCX)

7/30/2014

$25.10

$9.45

Hold

$3.37

7.0%

13.45%

Recent price is determined by the last "Ask" price at the closing of the market on the day before publication; most recent update 05/31/16

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Closed Positions Entry Date

Entry Price

Div Earned

Total Return

ONEOK (OKS)

12/01/14

$41.39

$39.06

05/17/16

$4.74

5.82%

11.45%

CyrusOne (CONE)

$29.45

Hannon Armstrong Sust. (HASI)

6/30/201 5 3/31/201 5 08/28/14

$40.44

03/31/16

$1.01

57.69%

3.43%

$31.31

$21.72

03/31/16

$1.32

-26.29%

4.22%

$14.69

$17.46

12/01/15

$1.26

29.19%

8.7%

Legacy Reserves (LGCY)

09/30/14

$29.68

$2.95

12/01/15

$2.06

-72.8%

6.9%

LinnCo LLC (LNCO)

04/30/15

$12.75

$1.68

12/01/15

$0.52

-82.74%

6.94%

Memorial Production (MEMP)

09/30/14

$22.02

$3.48

12/01/15

$2.50

-83.1%

11.4%

TCP Capital Corp. (TCPC)

10/30/14

$16.51

$16.22

05/29/15

$0.77

2.9%

4.7%

Ventas (VTR)

05/30/14

$66.80

$80.52

01/30/15

$1.45

22.7%

2.17%

Oaktree Capital Group (OAK)

05/30/14

$49.98

$54.14

02/09/15

$1.17

10.7%

2.3%

Salient Midstream & MLP Fund (SMM)

08/28/14

$31.23

$21.67

03/31/15

$0.93

-27.6%

3.0%

Stock

RLJ Lodging Trust (RLJ)

Close Price

Close Date

Cash Return

Notes: Entry price is determined by the last "Ask" price at the closing of the market on the day before publication. Recent price is determined by the last "Ask" price at the closing of the market on the day before publication; most recent update 05/31/16. Status denotes whether you should continue to accumulate shares, listed as “Buy” or should hold but not accumulated any more shares, listed as “Hold”. Annual Div is the dividend payment as declared by the company and made publicly available. It is as of the closing of the market on the day before publication. Current yield reflects the yield of the regular annual dividend payments (monthly or quarterly depending on the stock) in relation to its share price at thetime of publication. We make no guarantee that any company in the portfolio will continue dividend payments. For a more detailed look at the portfolio, log on at www.investorsalley.com. ** NRZ entry price adjusted for 1 for 2 split on 10/20/14. Original entry price on 07/30/14 was $6.08.

© 2016 Investors Alley Corp. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Investors Alley Corp., 41 Madison Avenue, 31st Floor, New York, NY 10010 or www.investorsalley.com. For complete terms and conditions governing the use of this publication please visit www.investorsalley.com.

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