Tuesday, August 14, 2012

This Little-Known 7.5% Yielder Looks Ready to Move Higher

Today, I'm looking at a stock that is a great source of income and has the potential to deliver solid trading gains. It's the only publicly traded company involved in what is probably the best-performing investment category over the past 30 years: the taxi medallion market. And if you want to be part of this market, this stock is the only way to invest without buying a medallion that costs at least $700,000.

If you do not live in a large city, you may not know what a taxi medallion is. New York City and most other big cities limit the number of taxis with a licensing system, requiring each taxi to have a license, which is known as a medallion. A corporate taxi medallion sells for about $1 million in New York City, and an individual medallion is $700,000.

An analysis by Bloomberg News shows individual driver medallions have increased in value by more than 1,000% since 1980, beating gold, real estate and stocks as an investment.

Medallion Chart

For now, there are only about 13,000 taxi medallions in New York City, and NPR reports that number has been about the same since the 1930s. The City recently approved the auction of an additional 2,000 taxicab medallions, which may decrease the value of existing medallions but will benefit Medallion Financial (NASDAQ: TAXI), a specialty finance company that makes loans to finance the purchase of taxicab medallions, as well as business and consumer loans for other purposes. And the stock offers investors a 7.5% dividend yield. (more)

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