Friday, October 21, 2016

How to Grow Dividend Income Much Faster With Tax Advantaged Accounts

When I was doing my taxes for 2012, I realized that tax expenses were larger than my living expenses. I realized that in order to correct this, I need to legally minimize as much of taxes today as possible. I achieved that by maxing out all tax deferred accounts within my reach.

Since my epiphany in 2013 on the benefits of tax-deferred accounts, I have plowed most of my dollars into my 401 (k), Heatlh Savings Account (HSA), Roth IRA and SEP IRAs. I have noticed that since those moves, my dividend income and net worth increased much faster than before. This was not simply due to the bull market we experienced. It was because I just dutifully put money to work every two weeks or so, and let it sit there without touching it. In addition, the tax incentives really increased my net dividend income, and the amount I have to reinvest back.

For example, assume that all I can invest is $21,000/year. If I invested that in dividend stocks yielding 3%, I would generate $630 in annual dividend income. The types of dividend growth stocks that could make up this portfolio could include the likes of:

Wednesday, October 19, 2016

Can Apple become a dividend growth stock?

Apple Inc. (AAPL) designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players to consumers, small and mid-sized businesses, education, and enterprise and government customers worldwide. The company is the largest publicly traded company in the US by market capitalization. The company started paying a dividend in 2012, and has been raising it every year since then.

The company has done really well to its shareholders over the past decade, compounding at 27.62%/year for its shareholders. This performance is unlikely to be repeated over the next decade.

This was due to the fact that popularity for its products was exploding, and the company was unveiling new premium products to satisfy consumer needs. Examples include the iPhone and the iPad. All of this resulted in massive growth in earnings per share from 32 cents in 2006 to $9.22/share in 2015. The company is expected to earn $8.25/share in 2016 and $9.02/share in 2017.

Monday, October 17, 2016

Two Dividend Growth Stocks Showering Investors With More Cash

I believe in a bottom up method of evaluating each individual holding separately, and then if it holds up, not worrying about the portfolio as whole. Each week I monitor the list of dividend growth stocks that raise dividends. I use this as one of the procedures for monitoring my dividend portfolio holdings. Other ways to monitor your dividend growth holdings includes reviewing trends in earnings per share, dividend payout ratios, returns on equity and checking the story for major news such as acquisitions, mergers, divestments etc. In general, if you purchase a security at attractive valuations, you avoid overpaying for it, and that security grows earnings per share over time, it will deliver dividend growth and it will likely increase in intrinsic value. This is how a business owner evaluates a business by the way.

There were two companies that managed to raise dividends over the past week, which had at least a ten year track record of annual dividend increases. The companies include:

Friday, October 14, 2016

The Best Broker for Dividend Investors: Interactive Brokers

For the first three to four years of my transformation into dividend growth investing, I managed to develop a process of identifying attractive companies with prospects for further increases in passive dividend income. I managed to pay very little in commissions, since I was using brokers such as Zecco, which offered approximately 10 free trades every month. Since then, I kept adding money to other brokers, but was not able to find another company which offered low costs for me. This resulted in limitation on number of companies I can invest in every single month, despite the fact that I usually had more than 15-20 ideas at all times. I felt limited in the number of companies I can purchase every month, given that most brokers:

1) charge somewhere between $5 and $10 per online trade these days,
2) the fact that I do not want to pay more than 0.50% in commission costs per each transaction, and
3) the fact that I have a limit on the amount of funds I can contribute each month,

I believe that looking for great investments is important, but so is keeping costs to the minimum. Dividend investing is a business, and as the business owner my job is to keep expenses to the bone.

Wednesday, October 12, 2016

Two Dividend Growth Stocks On My Radar

In the past few days, I have noticed that a couple of dividend growth stocks have been selling at lower prices than before. Those are companies that have managed to grow earnings, and dividends over time. These companies are usually overvalued, but recent weakness has brought them closer to fair value territory. I would be interested in each one of those companies on dips below 20 times earnings. The companies include:

V.F. Corporation (VFC) engages in the design, production, procurement, marketing, and distribution of branded lifestyle apparel, footwear, and related products in the United States and Europe.
This dividend champion has increased dividends for 43 years in a row. Over the past decade, it has managed to boost dividends at a rate of 17.10%/year.

The company earned $2.85/share in 2015, and is expected to grow earnings to $3.20 in 2016 and $3.57 in 2017.

Currently, the stock is selling for 17.10 times expected earnings and yields 2.40%. Check my last analysis of V.F. Corporation for more information about the company.

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