In my last post on this topic (https://www.valueforum.com/forums/show.mpl?keywords=1474383632.38.17&so=201609) I provided Bruce Miller screen results for each of his major income groups.  In the Insurance group Amtrust Financial topped the list with a dividend safety score of 23:


Insure (Insurance companies):

Schwabís stock screening tool was used with these selection criteria:

Universe: Domestic; Market Capitalization: Small Cap, Mid Cap, Large Cap; Sectors and Industries: Insurance; Annual Dividend Yield: 2.0 - 3.0%, 3.0 - 4.0%, 4.0 - 6.0%, > 6.0%; Increasing or Decreasing Dividends - YOY: Increasing; 3 Year Dividend Growth Rate: 0 - 5%, 5 - 15%, 15 - 25%, 25 - 50%, > 50%;

This was US only


Top stocks, sorted by Dividend Safety Score* out of 31 results

*Note: See bottom of post for column explanations and definitions.  

Left side of table:


Right side of table with ticker column repeated:


After this screen AFSI was definitely on my watch list, although the dividend yield is pretty low at 2.3%. As it turns out Amtrust is a prolific issuer of preferreds with yields in the 7% range. Shortly after my screening post, lumpygravy pointed out that Amtrust was now offering a new preferred that was about to start trading on the gray market with a yield of 6.95% (https://www.valueforum.com/forums/show.mpl?keywords=1474456948.25.07&so=201609). A review of their other preferreds and track record indicated that these preferreds seem to be pretty safe, particularly since the company has plenty of cash flow to cover their regular 2.3% dividend as well as debt obligations (only 11.8% of cash flow is used to pay dividends and 5.7% is used to pay interest on debt). So the risk of AFSI not paying a preferred dividend (itís non-cumulative) is pretty low.  There is no hope of any capital appreciation with the preferred, but thatís OK, because we income-only investors are looking for income, not capital appreciation (which would be icing on the cake).  


This preferred will ultimately be listed with the ticker AFSI-F, but you can buy it now on the gray market using the temporary ticker AMTRP. Starting on Monday I ventured into the gray market and managed to pick up some of the AMTRP shares for 25.20. It turns out buying on the gray market involves a fair amount of luck.  I had bids at various prices & was frustrated to see numerous trades below my bid. This happens because the gray market relies heavily on telephone calls between dealers, making it easy for your bid to get missed by a potential buyer.  Yesterday I finally succeeded only by bidding near the latest high trade.


This brings my yield to call down slightly below 6.95%, and Iíll have a $0.20 capital loss when the shares are ultimately called in at par.





If you want some of this income stream, be prepared to bid on the high side of the trades and be patient. Based on their other preferreds, I would expect this one to trade in the 25.50 or above range once it is listed on the major exchange.


I suggest you go here (http://www.dividendyieldhunter.com/insurers-sell-preferreds/) to start your due diligence.


It turns out that building an income-only portfolio ala Bruce Miller is easier than one might think. You just need to be patient and let the opportunities come to you.

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