Monday, April 24, 2017

Seven Companies Giving Their Owners A Raise

I look at the list of dividend increases every week, as part of my monitoring process. I then narrow the scope by focusing on companies that have increased dividends for at least a decade. I do this in order to focus on companies that have managed to raise dividends throughout a full economic cycle or two. I also focused my attention on the companies which have managed to grow dividends by more than a token amount. My next step involves reviewing trends in fundamentals over the preceding decade, in order to determine if the business is growing. I also try to determine if the dividend is sustainable and can grow in the future. I want dividends that increase due to increases in earnings power. I do not want dividends that increase merely because the payout ratio is being expanded.

Last but not least, I also like to review valuations. After all, even the best company in the world is not worth overpaying for. If you overpay for an investment, you may still lose money, even if the company excels on the operations level and meets its growth forecasts.

Over the past week, there were several companies that gave their shareholders a raise. The companies include:

Friday, April 21, 2017

Rent Versus Buy - How to decide which one is best for you?

People usually get emotional when the topic of rent versus buy is brought up. One group swears by owning a home, and believes that it is a good decision. The second group believes in renting for life, and brings a lot of arguments to support their decision. I have personally stayed in the "undecided" camp, right in the middle of it all.

We are rational people however, so we want to avoid emotions, and make the best decisions for our own situations. Owning a home is one part a lifestyle decision, and another part a financial decision.

There are pros and cons to buying and renting a home.

I believe that some people who rent may be wasting their money away if house prices in their areas are low. If home prices are high however, people who buy a home may be the ones wasting their money away. Home prices are low, if they are selling at a low multiple of home cost divided by annual rent expense. Home prices are high, if they are selling at a high multiple of home cost dividend by annual rent expense. I find a ratio about 15 or lower to be attractive. If that ratio is over 20, it may be a little bit too high.

Based on my research, if you manage to purchase a comparable unit to what you are currently renting, and you are mindful of costs, you may do better than renting over long periods of time ( exceeding ten years). On the other hand, if you pay a high price to rent multiple, and your monthly payment absorbs most of the funds you would have otherwise used to save to retirement,  you may not do as well with buying a home.

Tuesday, April 18, 2017

Loyal3 Brokerage to Shut Down in May

I just received notification that low cost broker Loyal3 is shutting down, effective May 22 2017. Loyal3 was a decent commission free alternative for beginning investors who wanted to slowly build positions in their favorite brands, without paying any commissions. The brokerage allowed you to invest as little as $10 per transaction, and allowed buying fractional shares. At one point, Loyal3 also allowed a brief arbitrage opportunity where you could invest using a credit card, and earn rewards points. Loyal3 also allowed many investors the chance to participate in IPO’s at the offer price. Sadly, it looks like its business model has not gained enough traction. Alternatively, low cost broker Robinhood offers access to all US equities for a zero rate and does it in real-time. This may have been one of the reasons for the failure.

There are several options to existing clients.

1) Do nothing, and have all securities be transferred to FolioFirst.

Monday, April 17, 2017

Procter & Gamble Raises Dividends for 61st Consecutive Year in a Row

The Procter & Gamble Company (PG) provides branded consumer packaged goods to consumers in North America, Europe, the Asia Pacific, India, the Middle East, Africa, and Latin America. The company operates through five segments: Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care.

Last week, this dividend king raised its quarterly dividends by 3% to 68.96 cents/share. This marked the 61st consecutive annual dividend increase for the dividend king Procter & Gamble.

However, it also continues the recent trend of sub-par annual dividend growth for this widely held dividend king. For anyone who has looked at the financial performance over the past decade, the slow rate of annual dividend growth should not have been a surprise.

Over the past decade, the company has been unable to grow earnings per share.

Friday, April 14, 2017

How I Use Frugality to Accumulate Wealth

In a previous article I discussed that I am on track to have my dividend income cover my expenses sometime around 2018. I received a few questions on how I am able to achieve that. I have mentioned before, that I do not like to talk about myself, because I personally find it a little tacky. (this statement in itself sounds like humble-bragging, which is also tacky)

I think I have taken for granted certain topics such as saving, and the power of compounding. I always assumed that it was common sense that people who came to this site would not be interested in learning how I drive a 15 year old car, how I graduated college without any debt but $2,000 in the bank and no debt, and that my frugality has helped me save enough to build my portfolio since 2007.

I also naively assumed that everyone who already saves money sees dividend growth investing as a tool to achieve their financial goals and objectives, be that traditional retirement, early retirement, financial independence or something else. Based on many interactions I have had over the years, I think that I was wrong in my assumptions on what constitutes common sense and what doesn’t. Given the rapid growth of the site readership since its inception in 2008, it is reasonable to expect that not everyone will be on the same page when it comes to various topics.

The first thing about investing is that in order to invest, you need to have money. In order to obtain that money, you need to utilize your most important asset to either find a job, or start a business. You then have to make sure that your expenses are less than what you earn. This surplus cash is then invested every month in dividend growth stocks. The formula to achieve wealth is really simple:

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