Many income investors think that Goldman Sachs (GS) is a good investment. However, the yield on the stock is only 1.4%. Investors looking for a higher yield might want to consider the Goldman Sachs Notes, often called Minibonds, Microbonds, exchange traded bonds, or exchange traded notes. These are low priced bonds and notes, usually trading around $25, that trade on the major exchanges.
These are very similar to preferred stocks, except that the payouts are considered interest and not dividends, which of course precludes the ability to take advantage of individual or corporate dividend tax benefits.
However, these securities do have some benefits over common stock. First, in the event of company liquidation, they have priority over the common and any preferred stock of the company. Second, they do have a maturity date, so at some point they would be paid of at par value. Third, they have small denominations. Fourth, the payout is fixed and not subject to fluctuation, unlike the dividends on common stocks.
These mini bonds do have some risks. First, the interest rate risk. If rates go up, these will drop in value. Also, unlike regular bonds, sellers who sell between distribution dates will not receive accrued interest. Since they trade flat, the accrued interest should be reflected in the sale price, but may not necessarily be.
So lets look at the Goldman Sachs mini bonds. First, there is the Goldman Sachs Group 6.125% Note due 11/1/2060 (GSF). The note closed at 25.64 today, giving it a yield of 5.97%. The first call date is November 1, 2015. The note has average daily volume of 105,000 which is pretty decent liquidity for one of these notes.
The other one is the Goldman Sachs Group 6.5% Note due 11/1/2061 (GSJ). This traded at 26.47 at the end of the day, which makes the distribution rate of 6.14%, with a first call of November 1, 2016. This note has much lower liquidity with an average daily volume of 46,000.
So if you are wiling to take the interest rate risk and you want to receive a high income from one of the largest investment banks in the world, you may want to consider these Goldman Sachs mini bonds. If you are interested in investments like this, your should check out the free stock lists at WallStreetNewsNetwork.com.
Disclosure: Author didn't own any of the above at the time the article was written.