Based on an experience I had recently with a local hospital, I’m surprised more people aren’t going belly up.

My birthday is in September, and I usually schedule all of my annual medical checkups around it. This year’s rounds included a trip to a cardiologist.

My visit to the heart specialist was preventative in nature. High cholesterol runs in my family, and mine has been a little high most of my adult life. I wanted to be certain that, despite my high bad cholesterol numbers, my arteries were clear.

We did an EKG and the usual blood tests, which were actually good for a change, and I asked the doctor if he felt it was necessary to do a stress test. I hadn’t had one since I was 50.

The cardiologist explained to me that because I did not have a history of heart disease or heart attacks, the insurance company would not pay for a stress test and the total cost would run into thousands of dollars.

What he did recommend was a CT scan that would measure any calcium buildup in my arteries. But he assured me my insurance would not pay for that either.

His nurse informed me it was about a $300 procedure, and I said if the doctor thought it was necessary I would pay for it out of pocket.

He did, and the appointment was scheduled.

As I was leaving the office, the office manager told me to be certain to speak to the billing department at the hospital before I went in for the procedure to make certain of the total cost.

It seems some of their patients came out of the scan and were handed bills in the area of $2,000.

That wasn’t going to happen to me.

So the next day, I got on the phone with the billing department at the local hospital to nail down the costs. That was Thursday. The following Tuesday, I still couldn’t get anybody to tell me what the total number would be.

What I could get out of them was that the scan would cost around $300… But there would also be bills for the doctor in attendance, lab tests and a reading by a radiologist.

The problem was no one knew who the radiologist would be or what his services would cost – or whether there would be a doctor in attendance and what he or she would cost. And no one – no one – had any idea what the lab fees would be.

It became abundantly clear how a $300 procedure could add up to $2,000.

“So,” I said to the people on the phone (all 10 or 15 I spoke to trying to get answers), “you essentially want a blank check. Is that correct?”

And the answer was always the same. “Your insurance will take care of it.”

“No,” I explained again and again, “insurance will not cover it. That’s why I’m trying to figure out what this is going to cost.”

If you know anything about me, you already know I canceled the appointment for the CT scan. As I told a judge once in court for a traffic violation, “I’m short, not stupid.” Nobody’s getting a blank check from me.

Eventually, I know I will get a firm number and I will have the procedure done. But it won’t be on the hospital’s terms.

Our health has to come first, but we also need to ask questions before handing out blank checks for medical care. Based on my experience, I wish you luck getting a firm number – you’re going to need it.

Between increasing medical costs, lower incomes, fewer pensions, and the copays, deductibles and unlimited out-of-pocket costs associated with Medicare, we’re in a real pickle. Make sure you take care of yourself first.

Good investing,

Steve

The post Think Twice Before Handing Healthcare Providers a Blank Check appeared first on Wealthy Retirement.

The culprit is the fact that Uniti’s largest customer, Windstream (Nasdaq: WIN), filed for Chapter 11 bankruptcy protection.

Uniti Group provides infrastructure and capital to the telecommunications industry, and it is set up as a REIT.

Uniti was spun off from Windstream in 2015. Its CEO is the brother of Windstream’s CFO. And Windstream makes up about 60% of Uniti’s revenue.

So there’s that.

Prior to the Windstream bankruptcy, Uniti’s dividend wasn’t in terrible shape.

Funds from operations (FFO), a measure of cash flow for REITs, has risen each year since the spinoff. In 2018, Uniti is expected to log $392 million in FFO while paying out $425 million in dividends.

That’s not great, but FFO had been expected to rise to $430 million in 2019, which would have covered the dividend.

Uniti has consistently paid a $0.60 per share quarterly dividend since 2015 – so it has a very short track record but no cuts.

Normally, this would add up to a “C” rating. But this isn’t “normally.”

Normally, your largest client doesn’t declare bankruptcy.

Uniti’s management delayed the fourth quarter earnings release while it tries to figure out the effect of the Windstream bankruptcy. It expects to announce results by March 18.

On Monday, Uniti announced that it would lower its dividend. In an SEC filing, the company stated that its 2019 dividend would be “limited to approximately $250 million,” down from more than $400 million last year.

It also said that it may agree to new limitations under its credit agreement as to how much it is allowed to pay in dividends. The new restrictions would almost certainly lower the dividend further.

Prior to the Windstream bankruptcy, Uniti’s dividend had some risk to it. Now a dividend cut is a sure thing, and another one is quite likely.

Uniti is a good example of why companies need diverse revenue streams. When one company is responsible for the majority of another’s revenue and that first company runs into problems, the dividend of the second will almost surely be lowered.

Dividend Safety Rating: F

If you have a stock whose dividend safety you’d like me to look at, please leave the ticker symbol in the comments section.

Good investing,

Marc

The post Say Goodbye to This 25% Yield appeared first on Wealthy Retirement.

A preferred stock is like a combination of a stock and a bond. Technically, it is a stock, but it often trades more like a bond.

Here’s how it reflects properties of both stocks and bonds.

Like a Stock

• Preferred stocks trade on the New York Stock Exchange and the Nasdaq.
• Prices can change due to supply, demand and company fundamentals.
• Preferred stocks pay dividends.

Like a Bond

• Payouts to shareholders are fixed and will not change.
• Preferred stocks can be callable and/or have maturity dates.
• They have priority over common stock when it comes to paying investors and managing a bankruptcy.
• Preferred stocks have a par value.
• Preferred stocks are subject to interest rate risk.

While preferred stocks trade on a stock exchange, and while prices move according to supply and demand, they also have a par value: Most preferred stocks are issued at $25 per share.

While they can and do trade above and below $25, they usually won’t trade more than a few dollars above $25. That’s because preferreds are usually bought for their yield. If the price goes too high, the yield will be too low to be attractive.

For example, a preferred stock with a 6% yield at $25 pays an annual dividend of $1.50. If the stock price rises to $50, that $1.50 dividend now represents a 3% yield.

Some preferred stocks can be called away from investors at a specific date, usually at par value or slightly higher. In other words, you could buy a preferred stock today, and if it has a callable date of January 1, 2020, you’d know that at any time on or after the callable date that your stock could be bought from you for $25. Knowing this, you may not be willing to pay $27 for the stock.

Like bonds, preferred stocks also have interest rate risk because the income you receive is fixed. Think of it this way: You may be willing to pay $25 for a preferred stock with a 6% yield when a risk-free 10-year Treasury yields 2.6%. But would you be willing to pay the same $25 if you could get 4% for a risk-free investment? Probably not.

You’d want a higher yield to make up for the higher risk. In order for that preferred stock that yields 6% to be more attractive to investors in a higher interest rate environment, the stock price would need to fall to increase the yield. Remember, the payment is never going to change, so the stock price has to adjust to change the yield.

Lastly, if the company runs into trouble, it must pay preferred shareholders their dividends before paying common shareholders. In many cases, if the company missed any dividend payments, preferred shareholders have to receive all of their missed dividends before payments to common shareholders can start again.

And if there is a bankruptcy, preferred shareholders come after bondholders but before common stockholders in order of who receives funds.

Many of the companies that offer preferred stocks are financials and real estate investment trusts – so even if you love preferreds, be careful about not getting too overweight in the sector.

If you want exposure to preferred stocks but don’t feel comfortable selecting the stocks yourself, you can always choose an exchange-traded fund (ETF).

For example, Virtus InfraCap U.S. Preferred Stock ETF (NYSE: PFFA) yields 9.5% and pays dividends monthly.

Preferred stocks can help investors get more income and boost yield in their portfolios – but be sure understand the potential risks and rewards of owning them.

Good investing,

Marc

The post Preferred Stocks: What You Need to Know appeared first on Wealthy Retirement.

When the Mega Millions hit $1.6 billion, I was behind an elderly person in line at a 7-Eleven who spent $50 on tickets.

To say she didn’t appear to be able to afford that much money for tickets is an understatement. She was obviously well above retirement age, she didn’t appear to be doing too well and she drove home the reality of the statistics I have seen about lottery players and winners.

Twenty-one percent of adult Americans buy a ticket each week. They spend more than $70 billion per year on a 1 in 300 million chance of winning the big one.

Those odds are just stupid! And the Mega Millions recently rewrote the rules for the drawing to make it more difficult to win.

The annual interest alone on that kind of money is more than $4 billion. This is the best thing we can think of to do with our money?

The American Red Cross could be funded for two years with $5.5 billion. That’s worthwhile.

The chances of just breaking even in any of the lottery games are about 37 to 1. If you’re willing to play those odds, you should be selling options.

You decide: Do you want to take your chances on the lottery? Or profit from a defined options strategy? I’m not an options guy. I like the 94 to 99 out of 100 odds that my bonds offer.

But let’s suppose I’m wrong and you hit the big one. Here’s what you can look forward to if you win the lottery.

Here’s what you can look forward to if you win the lottery.

1. Seventy percent of big winners end up in bankruptcy.
2. Thirty-seven percent report they are less happy than before they won.
3. More friends and relatives than you knew you had will have their hands out.
4. Forty-four percent report that all the money is gone in five years.

If you typically spend $2 per week on tickets, save it and go out to dinner with your beloved every New Year’s. That $104 will buy a lot of good feelings from “Miss Special.”

There are so many better things you can do with your money besides giving it away to your state. Think it through. I’m sure you’ll see my rationale.

It would be fun to hit the big one, but it would be even better to see all that cash in your savings account. It isn’t $1.6 billion, but it is yours.

Good investing,

Steve

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