Friday, September 22, 2017

Share Buybacks and Dividends Are Not The Same Thing

Share buybacks have gained prominence in the past twenty years. The amount corporations spend on buybacks exceeds the amount they spend on dividends. Plenty of investors mistakenly believe that dividends and share buybacks are equivalent.

They are not.

I prefer dividend payments. When a company declares and pays a cash dividend, this is yours to keep. You can do anything with that cash. The dividend represents a return on investment, and an instant cash rebate on your original purchase back. Every shareholders receives the same treatment per each share they own. Plenty of investors these days hate dividends, because of their tax inefficiency. When you earn dividend income, and you are in the high tax brackets, you can pay over 20% to the government. These investors forget that most stock in the US is now held in retirement accounts, where taxes are either deferred for decades or they are tax-exempt. So the easy solution for most investors in the US is to buy stock in retirement accounts.

When a company declares a buyback, not all shareholders are impacted the same way (this example of course assumes that the company indeed follows through with the buyback, which is not always the case). When a company declares and executes a buyback, and you do not sell, you won’t have to pay a dime in taxes. Plenty of people love this idea, and focus on the tax efficiency aspect above everything else. However, the investors who sold their shares back to the company have to pay taxes on any gains, assuming they held the shares in a taxable account. By the way, if an index fund holds the stock, it needs to sell a portion of the shares, because the float is reduced from the share buyback.

Wednesday, September 20, 2017

My Favorite Pick Right Now

This is a guest post written by Mike McNeil, author of the Dividend Guy Blog and co-founder of Dividend Stocks Rock. Mike is currently investing $100,000 in a 100% dividend growth portfolio as the market trades at an all-time high.

Regardless where I look these days, I read alarming news about the stock market. Government debts are through the roof, there are tensions among many countries, debt is “too cheap” and we make a bad use of it, interest rates are climbing up and the stock market doesn’t listen to reality, like Icarus reaching for the sun. As Icarus’s story, once our wings will be burned by the sun, the fall will be fatal. This is obvious; everything is set to have the market crashes and burns.

I recently quit my job as a private banker to work full-time on my investing website Dividend Stocks Rock (DSR).  This is how I received $108,000 as a lump sum for my pension. What am I going to do with this new money? What should I do as a dividend investor? Should I keep money aside and wait for a correction?

This could be argued to be an interesting strategy if you think you can time the market. However, for a dividend growth investor, we should all know that time in the market is a lot more important than market timing. We should ignore the noise and keep investing. This is what I’m doing anyway. I decided to invest it all in the stock market now; because when the stock market goes down like this:

Monday, September 18, 2017

Three High Yielding Dividend Machines Rewarding Shareholders With a Raise

Over the past several weeks, there were three high yielding dividend growth stocks that raised distributions for shareholders. I am going to do a quick review on all three, using my criteria for evaluating dividend growth stocks.

I review the list of dividend increases every week. I then narrow the list down based on a variety of criteria such as minimum streak of annual dividend increases. The end result from the list today includes three high yielding companies that raised dividends over the past two weeks. The companies include Philip Morris International Inc., Realty Income Corporation and Verizon Communications.

Plenty of retirees I have gotten in touch with over the years seem to own those dividend machines. The question is, are those still good ideas today for accumulation?

Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes, other tobacco products, and other nicotine-containing products. The company raised its quarterly dividend by 2.90% to $1.07/share. This marked the 9th consecutive annual dividend increase for PMI. The new annualized dividend payment is $4.28/year. This is a decent rate of growth from the annualized dividend payment of $1.84/share in 2008.

Friday, September 15, 2017

My Take on Real Estate Crowdfunding

I have been reading about real estate crowdfunding platforms over the past several months. Many of these platforms seem to market to investors, showcasing high dividend yields in the 8% - 10%/year range.

I was intrigued, and tried researching those. After all, if I can obtain 10%/year investing in real estate easily, I can just retire and call it a day.

I read the following two articles in my research:

Investing with RealtyShares – see how I’m doing with real estate crowdfunding by Joe Udo

How To Invest In Real Estate Without Owning Real Estate by Mr 1500 Days.

I essentially posted the following comment on both blogs:

I believe that all of those platforms are still relatively untested. And probably giving those platforms a try could be worth it with what many refer to as “play money”.

Perhaps I do not understand these well enough and need to do more research. However, why would individual investors like you and me get a cut out of lucrative Fundrise/Mogul real estate deals, when other REITs (like the ones in VNQ) could be easily taking on those projects? I keep wondering whether those private placement real estate platforms just include mostly higher risk projects that more established players have passed up on, and may not deliver the total returns we want. The real test would be how these platforms would perform during the next recession. It would be interesting to check these out in a decade, and compare notes on how things progressed.

A decade ago, P2P loans were a new thing. Many people invested in them through Prosper & Lending Club, and the forward results were not good.

Wednesday, September 13, 2017

The Magic Dividend Cocktail

This is a guest post by Mr Tako, who writes about investing and financial independence over at Mr Tako Escapes. The author is a financially independent dividend investor, who focuses his time on his family, investing and blogging. Mr Tako is living off dividends in retirement, which is the ultimate goal for most of us.

The dream of dividend growth investing is a dream about passive income -- An ever growing stream of passive income that lasts for decades and requires very little work to maintain.
That was my dream anyway, and for the most part I achieved it.

Unfortunately, the dream of passive income is easier to dream about than it is to achieve.  It takes work.  Dividends don't just keep growing out of "thin air" -- Companies have to actively make the right moves to keep those beautiful dividends growing.

This means investors must also find the right companies to stay invested in -- the ones with dividends that grow faster than inflation for long periods of time.

How does an investor find companies like these?  One great place to start is by identifying the four methods by which companies grow dividends...

Monday, September 11, 2017

19 Dividend Champions For Further Research

One of the most important factors that separate winning investors from losing investors is the ability to develop a process that you stick to no matter what happens. When you have a process, you take guesswork out of investing, and you stick to the plan through thick or thin.

Ever since I started focusing on dividend growth investing a decade ago, I have been able to invest my savings regularly, using my process. My process for identifying companies is very simple:

1) I start with the list of dividend champions, which includes companies that have raised dividends each year for at least a quarter of a century. This requirement ensures that I focus on quality companies with lasting business models

2) I eliminate companies that sell at high P/E ratios above 20. I believe that even the best company in the world is not worth overpaying for. I would much rather buy a quality company at a favorable valuation, than overpay for future growth. Valuation is important.

3) I eliminate companies with high dividend payout ratios. Dividend safety is very important, which is why I want to have a margin of safety in order to lower the likelihood that dividends will be cut during the next recession. Since I plan to live off dividends in retirement, I only want to focus on the companies that can deliver dependable dividend income for me.

4) I also focus on companies that have managed to boost dividends by at least 3%/year over the past 5 and 10 years. We want companies whose dividend payments will at least match inflation.

5) Last but not least, we evaluate the ten year trends in company’s earnings per share. We want companies that grow earnings per share. This provides fuel for future dividend increases and increases the likelihood that the intrinsic value of the business grows over time.

Thursday, September 7, 2017

The dumbest argument against dividend paying stocks

One of the dumbest arguments against dividend growth investing is showing a single investment that failed, and thus implying that the strategy is not good. An opponent of dividend growth investing would usually use a company like Eastman Kodak (KODK), General Motors (GM), or one of the major banks like Citigroup (C) as an example of type of stocks that investors believed to be buy and hold forever.

There are several logical flaws with this argument.

The first issue stems from the fact that only some of the banks used in this argument have ever been dividend growth stocks at the time of their demise. General Motors, which was one of the bluest of blue chips for decades, had never been a dividend growth stocks, because of the cyclical nature of its distributions. Eastman Kodak was a dividend achiever once, having raised dividends for 14 years in a row through 1975, when the Board of Directors elected to freeze distributions. This was over 37 years before the company declared bankruptcy. Since 1975, the company had raised dividends off and on, but never for more than five consecutive years in a row. After the company cut dividends in 2003 however, no objective dividend investor should have held on to the stock.

Tuesday, September 5, 2017

Index Investing versus Dividend Growth Investing

One of the largest debates I have seen involves the debate on index investing versus dividend growth investing. Plenty of individuals who have already made a commitment to a strategy argue fiercely why their choice is superior.

An index investor will tell you that their way is superior to your way of investing.

A dividend growth investor will tell you that their way is better.

As usual, it is important to step back, and determine what drives those debates in the first place.

I believe that those debates are ego driven and not that useful for your ability to invest to reach your goals. Both sides may resort to bending statistics and facts to their liking, in order to “win” an argument. This is a dangerous exercise, because these individuals are actually learning how to justify their preexisting biases, rather than think objectively. When you double down on your position on a certain topic, you are focusing on your side of the argument, but ignore anything else. The debate is further driven down the drain by interested parties whole sole livelihood depends on selling you index fund portfolios or selling you dividend stock services.

Thursday, August 31, 2017

How to never run out of money in retirement

Here is the simple answer: live off dividends

Here is the longer answer –when you live off the income that your portfolio produces, the chance that you will ever run out of money is greatly reduced. If you have to sell portions of your portfolio and thus rely on finding someone else to sell at higher prices than you bought, then you have a higher chance of outliving your money.

It is very easy to monetize a pile of cash, and convert it into a neat dividend machine, which will deposit cold hard cash into your brokerage account regularly. You can then use that cash to either spend or to reinvest into more dividend paying stocks, paying even more cash.

As I discussed earlier, there are largely two types of dividend growth investor investors. The first group are those who have been putting money mostly in dividend growth stocks regularly, reinvested dividends, and maintained their portfolios. The second group include those who are trying to convert a nest egg accumulated over a lifetime of hard work, or an inheritance or another pile of cash received recently as a lump-sum. Those are the ones who want to learn how to pensionize their assets, and live off that pile, while also minimizing the risk of loss to the minimum.

Monday, August 28, 2017

Altria Delivers Dependable Dividend Growth and High Total Returns

Altria Group, Inc.(MO), through its subsidiaries, manufactures and sells cigarettes, smokeless products, and wine in the United States.

The company recently raised its quarterly dividend by 8.20% to 66 cents/share. Altria has delivered dependable dividend increases for 48 years in a row. Over the past decade, this dividend champion has managed to boost distributions at a rate of over 8%/year.

This dividend growth stock has delivered dependable dividend growth, and exceptional total returns to shareholders for decades. In fact, the company managed to become the best performing stock in the S&P 500 between 1957 and 2003.

Since then, the company spun-off Kraft foods in 2007 and Phillip Morris International in 2008. Kraft foods was further split into two companies in 2013 – Mondelez and Kraft. The latter merged with Heinz to form Kraft Heinz (KHC). An investor who bought Altria in 2003, and held on to all spin-offs, while reinvesting dividends, still managed to do much better than the S&P 500.

Thursday, August 24, 2017

Sequence of returns matters in retirement planning

One of the important truths about investing for retirement is that the sequence of returns matters greatly. In order to be successful in retirement, you want your money to outlive you. In order to achieve that, you do not need to identify the best performing investment over the next 20 years.

Rather, your goal should be to identify the investments which can generate reliable and consistent returns on live off. This is why I focus my attention to investments that pay me a reliable dividend which also grow over time. Dividends are always positive, they tend to be more stable than capital gains, and they are more reliable than capital gains. This is why we focus on the reliable dividend income in retirement planning. Share prices and corresponding capital gains or losses on the other hand are almost impossible to forecast. With dividend stocks, the randomness of total returns are smoothed out by dividends.

This is why we focus on living off dividends in retirement. Dividends are more stable and dependable as source of returns than capital gains. The industries that tend to produce the best dividend payers in the world also tend to be more mature and dependable.

I will illustrate the importance of consistent returns with an example.

Imagine that it is the year 1999, and you have $1 million to invest. You want to retire immediately, and enjoy the fruits of your labor. You require $40,000/year in annual expenses for your modest lifestyle. You can only choose between two companies – Amazon.com (AMZN) or Realty Income (O). The only other piece of information you are given is that a $1 million investment in Amazon will be worth $16,698,870 in 2017, while the same investment in Realty Income will be worth $14,455,380. Not a bad return for either investment.

Which investment would you choose, given those constraints?

Monday, August 21, 2017

Five Tips to Avoid Dividend Cuts

This is a guest post by Brian Bollinger from Simply Safe Dividends. Brian is a CPA and was an equity research analyst at a multibillion-dollar investment firm prior to founding Simply Safe Dividends. Simply Safe Dividends is a one-stop shop for dividend investors, providing online tools, research, and data designed to help generate safe retirement income from dividend stocks, while saving you the high fees associated with other financial products and advisors.

Have you ever held a stock that eventually cut its dividend?

Or do you worry that a company you own might have to reduce its dividend in the future?

If so, you aren’t alone.

Most of the dividend investors I know are focused on building a safe income stream (typically for retirement) and want to preserve their capital.

Avoiding dividend cuts can help with both objectives, and in this article I will explore five techniques that can help identify companies with the best potential of delivering safe, growing dividends over time. 

But first, I want to thank Dividend Growth Investor for letting me share with you.

His blog has been an inspiration and a wealth of quality information for dividend investors for nearly a decade, and it’s an honor to be part of it today.

Let’s take a look at five of the most important factors you can use to understand the safety of a company’s dividend and make better informed investment decisions.

Friday, August 18, 2017

An update on my fixed income exposure

A couple of years ago, I shared with you that I am increasing my fixed income allocation by buying individual bonds, CD’s and bond funds. I made some calls stating that I am increasing my fixed income exposure. Well, after an year and a half, I ended up selling most of these fixed income instruments. I got out of them over the past three months or so.

I purchased fixed income, in order to have an allocation to an asset class that would zag when stocks zig. I wanted to be protected in the event of a deflation, which would torpedo economies and business profits. The super low expected returns were the price to pay for that protection. I take diversification seriously.

When I purchased these fixed income instruments, I also had a vague idea that I may be needing that money within the next five years or so. Conventional wisdom is to place money that you will need within five years or so in fixed income. On the other hand, I also wanted to get some diversification away from equities. The results from the past two years show that I achieved diworsification in this portion of my assets.

As I reviewed what I was doing, I realized that these instruments were not generating good expected returns. While diversification is great in theory, I was essentially diversifying my future expected returns away instead. As someone in their early 30s, who will likely end up generating income for most their lives, I have decades ahead of me. So having a 15% - 20% allocation to fixed income is probably too much for me, based on future expected returns. In addition, as I now have ten years of good earnings under my Social Security history, I also can expect to see a decent retirement check several decades from now. That future stream of social security checks is an asset that is part of my long term fixed income exposure.

Wednesday, August 16, 2017

The Blueprint for Successful Dividend Investing

This is a guest post by Nick McCullum from Sure Dividend. Sure Dividend uses The 8 Rules of Dividend Investing to systematically identify and rank high-quality dividend growth stocks suitable for long-term investment.

Dividend growth investing is one of the most straightforward and powerful ways to build long-
term wealth. It can also seem highly complicated to those without experience in this investment strategy.

Fortunately, one of the best things about dividend growth investing is its ease of implementation. This makes it well-suited for a wide variety of investors.

Additionally, dividend growth investing stands the test of time. This investment strategy has been studied/written about since at least 1934, when Security Analysis (arguably the most famous book on investing) was published:

“The prime purpose of a business corporation is to pay dividends regularly and, presumably, to increase the rate as time goes on.”
– Benjamin Graham in Security Analysis

Clearly, something is special about dividend growth investing.

With that in mind, this article will describe four easy-to-understand principles that form the blueprint for successful dividend growth investing.

Invest in Consistent Dividend Growers

Monday, August 14, 2017

Tanger Factory Outlets (SKT) Dividend Stock Analysis

Tanger Factory Outlet Centers, Inc. (SKT) is an owner and operator of outlet centers in the United States and Canada. This REIT which focuses on developing, acquiring, owning, operating and managing outlet shopping centers. As of December 31, 2016, its portfolio consisted of 36 outlet centers, which contained over 2,600 stores representing approximately 400 store brands. Tanger Factory Outlet Centers is a dividend achiever, which has rewarded shareholders with a raise for 24 years in a row.

Tanger has maintained a high occupancy rate over the past 20 years. The rate usually dips to 96% during a recession, and then bounces back to 98% - 99%, before going down during the next recession. Currently, Tanger has a low occupancy rate, as if we are in a recession.

You can see Tanger's largest tenants listed below. Most of those are branded companies, which sell merchandise such as apparel (clothes) to the masses. I do believe that these tenants could face more pressure than those for Realty Income and National Retail Properties. This is where I could conclude that perhaps Tanger is slightly riskier than Realty Income and National Retail Properties. That being said, I believe that each of those retailers has a chance of implementing a dual online/brick and mortar strategy for accommodating customers. Having some brand equity associated with specialty merchandise and exceptional quality, can also be a plus. Another plus is having a type of merchandise that is unique to the customer. For example, purchasing shoes or clothes requires the need for some physical trial and error, until you find the one that fits right. Buying certain items like shoes online could be trickier, because it may create extra hassle of mailing things back if they are not as advertised. The other nice thing to consider is that the properties are easy to reconfigure in order to accommodate new tenants.

Thursday, August 10, 2017

Dividend Growth Investing Promotes Long-Term Thinking

Dividend growth investing encourages long term buy and hold investing. With dividend growth investing you buy a company with a rising dividend at the right price, and you then hold on to it for as long as the dividend is at least maintained. You ignore all the noise out there, and keep holding.

If you keep your emotions in check, you may find yourself holding companies for decades to come, while enjoying rising dividend income. This passive approach keeps investment costs low, which means that you get to keep your fair share of investment returns. It is easier to practice dividend investing through the difficult times, because you are getting paid to hold the worlds best quality companies.

With dividend growth investing, all we do is buy future income streams. With every $1,000 that I invest, I end up generating $30 - $40 in annual dividend income. This income can be used to pay for my expenses in retirement. If I earned $20/hour, I am essentially buying back 1.5 - 2 hours of freedom with every $1,000 invested. The goal is after several years of saving and investing, to replace your paycheck with the dividend income from your portfolio.

For example, if you invest $1,000 in Altria (MO) today, you will earn an annual dividend of $37/year. This sounds like a small amount of money that many will laugh at you for. But you should not despise the days of small beginnings. As the company earns more, it will pay more dividends. If earnings per share double over the next decade, and dividends follow along, your stake will be earning $74/year ( without factoring in dividend reinvestment). As you save more money, you can buy more shares in other companies. Perhaps you will add $1,000 in Tanger Factory Outlets (SKT), which will add $52 to your annual dividend income. You may also keep adding stakes in more promising dividend growth companies at attractive valuations that you stumble upon on your journey. They will generate more dividend income for you over time.

Monday, August 7, 2017

Ten Companies Rewarding Shareholders With Regular Dividend Increases

As part of my monitoring process, I review the list of dividend increases regularly. This helps me to monitor the performance of companies I own. It also helps me to identify promising companies for further research.

I typically focus on companies that have raised dividends for at least a decade. I rarely violate this principle, but when I do, I have found out to have mixed success.

I also evaluate trends in earnings, dividends and look at valuations in order to determine whether a company is worth researching further today. In general, dividend growth investors want to acquire shares in a quality company with a long record of annual dividend growth, which also sells at an attractive valuation. The goal is to invest in such a company that can grow earnings over time. This provides the fuel behind future dividend increases, which pay for expenses in retirement.

Over the past couple of weeks, there were several notable companies raising dividends to shareholders. The companies include:

Thursday, August 3, 2017

Why I Use Dividend Growth Investing to Get Wealthy

Mark Seed is passionate about personal finance and investing and is the blogger behind My Own Advisor. Mark is currently investing in dividend paying stocks on his journey to financial freedom. He is almost halfway to his goal of earning $30,000 per year in tax-free and tax-efficient dividend income for an early retirement. You can follow Mark on his path to financial freedom here.

I wasn’t always a dividend growth investor. In fact, for a good part of my 20s, I wasn’t much of an investor at all. As a young Canadian kid fresh out of university having secured my first full-time (real) job at a major pharmaceutical company, I didn’t think very much about my financial future. Sure, I knew enough to “pay myself first” (and I did) to the tune of about $50 per month in my registered investment account, similar to a 401(k), but I was focused on living for today. And who isn’t for the most part in their 20s – you only live once right?

The reality check
As you get older in life, you realize more and more you don’t know what you don’t know. You also figure out when it comes to investing in particular, by owning some pricey mutual fund investments, you’re paying steep money management fees for products that have no chance to outperform the market over time. You also learn the fees paid in money management fees is money you’ll never see again. It’s a massive double-whammy that occurs in Canada, and the United States, and pretty much anywhere around the world. This is part of the reality check that led me to dividend growth investing.

Monday, July 31, 2017

How to Use Real Estate to Create Dividend-Like Income

This is a guest post from Chad Carson from CoachCarson.com. Chad started with only $1,000 in the bank and was able to build up a real estate empire that now consists of over 90 units

Thank you to Dividend Growth Investor for letting me share with you today. It's an honor!

Over the last 15 years, I've used real estate investing as a vehicle to achieve financial independence. Everyone has their own idea of life after financial independence, but in my case, it involves my family and travel to other countries.

Currently my wife, two young daughters, and I are living in Ecuador in South America for 14 months. We're having new experiences, my daughters are enrolled in local Spanish speaking schools, and we're all learning and growing together.

And relevant to this article, real estate income pays for it all!

In the rest of this article, I'll share lessons that have helped me get to this point using real estate. I can assure you my journey has been far from perfect, but I hope my successes and failures will help with your own journey.


Dividend Growth Investing vs Rental Properties

Thursday, July 27, 2017

Dividend Growth Investing My Way To Financial Freedom

About the Author: FT is the founder, editor, and blogger behind Million Dollar Journey (est. 2006). Through various financial strategies outlined on MillionDollarJourney.com, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014 - at the age of 35. Since 2014, he has been on a new mission of growing his passive income through dividend growth investing to the point of exceeding his recurring expenses within the next couple of years.


Hello DGI readers, it's an honor to write for a site dedicated to dividend growth investing. When I started my blog in 2006, I was a few years out of school and was getting serious about building wealth. I dabbled in real estate investing, online trading, and even buying and selling online. While those can be some lucrative strategies, what really worked for me was the simple strategy of saving and investing the proceeds, which is what ultimately as grown our net worth the most over the years.

There are many methods of saving money and I have probably tried most of them. However, I have learned to focus on the strategies that have the biggest impact. For us, it was delaying lifestyle inflation as much as possible while banking those raises. The act of keeping life simpler than our peers allowed us to generate healthy monthly cash flow. We initially used the cash flow to pay off debt (student loans and mortgage) but after, we focused on investing. Although we eventually upgraded our housing and even our vehicles when we had kids, we continue to live below our means and build our net worth.

After reaching millionaire status when I was 35, I shifted focus from growing net worth to growing passive income sources. Having the choice to work at something that I'm interested in without having to worry about how much I'm going to be paid resonates with me. Not worry about money? How is this possible you say? Through creating stable and predictable passive income streams that require very little work. For some, it may be a real estate rental business, or some other type of business. I've tried a lot of different strategies and I've discovered that dividend investing works the best for me.

Why Dividend Growth Investing

Monday, July 24, 2017

J.M. Smucker (SJM) Rewards Shareholders With a Raise

The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company is a member of the dividend achievers index. The company’s largest competitors include Conagra (CAG), Kraft Heinz (KHC) and Hershey (HSY).

The Board of Directors approved a 4% dividend increase last week, bringing the quarterly payment to 78 cents/share. This marked the 20th consecutive annual dividend increase for this dividend achiever.

This was the slowest dividend increase since the 4.70% dividend hike in 2015. Over the past decade, this company has managed to boost annual dividends at a rate of 9.80%/year. A small dividend hike shows that management is cautious about near term prospects for the business.

The company has managed to grow earnings per share from $3/share in 2008 to $5.10 in 2017. Analysts expect J. M. Smucker to earn an adjusted EPS of $8.35 per share in 2018. In comparison, the company earned an adjusted $7.72/share in 2017, which was down from the adjusted $7.79/share in 2016.

National Retail Properties (NNN) Dividend Stock Analysis

National Retail Properties, Inc. (NNN) is a publicly owned equity real estate investment trust. The firm acquires, owns, manages, and develops retail properties in the United States.

Last week, National Retail Properties raised its dividend by 4.40% to 47.50 cents/share. This marked the 28th consecutive year of annual dividend increases for this dividend champion. This is an impressive track record that is a testament to the stability and defensibility of the company’s business model. National Retail Properties is one of only four publicly traded REITs and 94 publicly traded companies in America to have increased annual dividends for 28 or more consecutive years.

National Retail Properties has managed to raise dividends at a rate of 3%/year over the past decade. Unlike many other REITs that cut distributions during the Global Financial Crisis however, this blue chip REIT managed to grow the dividend no matter what.


The annual dividend rose from $1.40/share in 2007 to $1.78/share in 2016. I like the slow and steady approach to growing the distribution to shareholders over time. This is one of the guidelines I look for when evaluating real estate investment trusts.

Thursday, July 20, 2017

How to earn 5% on your savings

One of my favorite personal finance blogs is written by Jonathan Ping over at My Money Blog. Jonathan writes on a broad topic of finance items of interest to me, and has had great recommendations on products, books and services that I have benefited from. I wanted to share this resource with you, and also share that savings account that can generate 5% yields for readers. (which I learned from him)

Perhaps a couple of years ago, I read about several accounts that offered 5% yields on your cash. I was extremely skeptical at first, because the highest yields I could get on my cash was the 1% I could get at Ally Bank.

I did some research, and figured out that these are legitimate ways to earn a good yield on any spare cash I have. I found the company Insight Visa, in my research. The company Insight Visa offers a prepaid debit card, which comes with an FDIC insured savings account that yields 5% on your first $5,000. The interest is paid out quarterly. I will detail below the steps I took to earn that interest rate.

In order to earn the interest, I signed up for an Insight Visa prepaid debit card online. This step includes the usual things like address, Social Security Number etc.

The next step was to activate my card after receiving it through the mail. I set up an online profile, where I linked my checking account with the debit card. The verification only took a couple of business days.

Monday, July 17, 2017

Four Dividend Paying Companies Raising Dividends. Which ones are worth a closer look?

I review the list of weekly dividend increases as part of my monitoring process. Over the past week, there were several companies that raised dividends to investors. I am going to discuss how I came up with the list of companies that raised dividends this week. I will then also discuss the quick review process I go through.

This is a useful exercise for many reasons, but also as an educational exercise on the process I use to quickly narrow down any list of prospective dividend growth stocks down to a more manageable level.

I focused my attention to companies that have managed to increase annual dividends for at least ten years in a row. We do this in order to focus out companies which have managed to boost distributions throughout at least one or two economic cycles. In addition to that, we focused on companies whose recent dividend increases over the past year was more than a token increase.

The next step I the process involved reviewing valuation. I usually weed out companies where P/E ratios were below 20. Due to the large number of one-time accounting hits to earnings, I use forward earnings as a shortcut way to go through a lot of companies quickly.

We also weed out companies where earnings per share or funds from operations didn’t grow over the past decade.

Thursday, July 13, 2017

Should I invest in AT&T and Verizon for high dividend income?

Most readers are probably aware that it has been getting more difficult to find decent values in the current environment. When I ran my screens for valuation, I stumbled upon AT&T (T) and Verizon (VZ), which are telecom behemoths in the US.

AT&T (T) has increased dividends for 33 years in a row. In the past decade, it has managed to increase dividends by 3.70%/year. Between 1984 and 2016, the company has managed to increase dividends by 4.40%/year. The stock trades at 12.70 times forward earnings and yields 5.30%. The dividend is adequately covered with a dividend payout ratio of 67.60%, based on forward earnings. Check my previous analysis of AT&T for more information about the company.

Verizon (VZ) has increased dividends for 12 years in a row. In the past decade, dividends grew by 3.40%/year. Between 1984 and 2017, the company has managed to increase dividends by 3.30%/year. The stock trades at 11.60 times forward earnings and yields 5.30%. The dividend is adequately covered with a dividend payout ratio of 61.70%, based on forward earnings. Check my analysis of Verizon for more information about the company.

The telecom industry in the US is very competitive. Companies like AT&T (T) compete with the likes of Verizon (VZ), Sprint and T-Mobile. In the past, almost all of the profits have been made by Verizon (VZ) and AT&T, at the expense of smaller competitors. An investment in AT&T and Verizon today would presume that the status quo would remain unchallenged, and that Sprint and T-Mobile would be kept weak forever. The service that telecom companies is essentially a commodity. Telecom companies are not utilities, because there is the possibility for switching the provider. Try moving to Saint Louis, Missouri, and then switching your gas, water or electric utility – you can’t. But anywhere in the US, you can switch to another wireless carrier, plus you have other alternatives and very low customer loyalty. There is nothing to stop a customer from switching to another carrier after their contract expires.

Tuesday, July 11, 2017

Dividends Unlock Value For Shareholders

After observing companies for a decade now, I have come to the conclusion that dividends unlock value for shareholders. Let me start off with an actual example.

A few months ago, Costco (COST) announced that it would be paying a special dividend to shareholders.This event alone unlocked hidden value for shareholders.

On April 26, 2017 Costco announced special dividend of $7/share to shareholders on record from May 10, payable on May 26, 2017. The stock price rallied to 178.05/share at the opening and closed at $176.80/share on April 26, which was up from the close of $172.68/share on April 25. The stock closed at $172.64 on the ex-dividend date of May 8, and it had closed at 180.20 on May 5. In this case, the special dividend unlocked hidden value in the enterprise for shareholders.

That amount of money was locked in the business, and was not put to productive use for shareholders. This is why the company’s rational management decided to distribute the money to shareholders. This is the rational thing to do, when you are showered with cash, and you do not have a lot of high ROI projects to invest into. That $7/share were sitting in cash, but were not fully baked in the stock price, until the announcement unlocked this hidden value for shareholders.

I went back to look at the history of prior special dividends for Costco. I was stunned that every single special dividend ended up unlocking value for the shareholders. What I mean by “unlocking value” is the fact that the share price increased as a result of the special dividend announcement. So shareholders were better off as a result of the special dividend in every single case.

Wednesday, July 5, 2017

Two Dividend Growth Companies Rewarding Shareholders With a Raise

I like to check the pulse of dividend growth companies by monitoring dividend increases. This is helpful as part of my monitoring process. Two recent increases caught my eye. These are two companies I have owned for many years. These companies seem to have different expectations about the future. The first one is optimistic, and this has been fueled by rising earnings. The second company seems to be running out of space to raise dividends, due to stagnating profits. As dividend investors we are looking for the companies in the first camp. Of course, a long investing career will surely bring in some investments that show initial promise, but ultimately may turn out to be duds. Our goal is to manage our portfolios to reach our goals, despite having the occasional dud, and keep staying the course.

The companies that recently raised their dividend include:

Medtronic plc (MDT) manufactures and sells device-based medical therapies worldwide. The company raised its quarterly dividend by 7% to 46 cents/share. This marked the 40th consecutive year of an increase in the dividend payment for this dividend champion. Medtronic's dividend per share has nearly quadrupled over the past decade and has grown at a 17 percent compounded annual growth rate over the past 40 years.

Tuesday, July 4, 2017

Happy Financial Independence Day

Before I begin my message, I wanted to wish all my readers a Happy 4th of July. And I wanted to thank all of those military members for keeping us safe and able to enjoy our independence and freedom.

For the past seven and a half years, myself and my readers have been on a quest to achieve financial freedom with dividend growth stocks. So I wanted to take some time and reflect the accomplishments that we have all achieved in the past nine years.

Financial independence is the point at which the passive income exceeds expenses. People who achieve financial independence have the freedom to live their lives true to themselves. Most importantly, financially independent people have options in life. These options could include:

1) Working in a field they are passionate about
2) Caring for a child or a relative
3) Engaging in non-profit work, volunteering or charity
4) Writing a book
5) Traveling the world
6) Fill in the blanks (this is your passion so you have to decide what you want to do)

Thursday, June 29, 2017

Two Dividend Growth Stocks On Sale

Everyone loves a good sale. When quality merchandise is available at a discount, people get very excited.

However, when stock prices go down, many investors get terrified and refuse to invest.



Today I am going to discuss two promising companies, which are selling at attractive valuations. Both of those companies are retailers. As you know, retailers are in a tough spot today, because the story goes, online will eat their lunch. It is very true that retail is very difficult business, which is under constant threat from new innovators. However, some retailers are still doing well.

These two retailers have been increasing the number of locations over the past five to ten years. In addition, they have plans to further grow their location footprint in the US and worldwide. This is a good indication of growth. As I discussed before, a growing number of retail locations is one of the indicators we talked about in how to select winning retail stocks.

Each of those dividend achievers has managed to increase dividends for over 20 years in a row. Looking at a long streak of annual dividend increases is the first step in the process however.

Tuesday, June 27, 2017

Investing in the Dividend Aristocrats from 2007

Last week we saw how a $1 million investment in the original Dividend Champions did over the past nine years. Today, we are going to discuss how a similar passive investment in the Dividend Aristocrats at the beginning of 2008 would have done.

Introduction

S&P 500® Dividend Aristocrats® measure the performance S&P 500 companies that have increased dividends every year for the last 25 consecutive years. The Index treats each constituent as a distinct investment opportunity without regard to its size by equally weighting each company.

I first became fascinated with the list of Dividend Aristocrats in 2007/2008, just as I was beginning my dividend investing journey. This is what I wrote in an article from February 2008:

“One of my favorite stock lists is the S&P’s Dividend Aristocrats and the S&P High-Yield dividend aristocrats. These lists contain companies which have consistently increased their dividends over the past 25 years, which is a big achievement. These companies have gone through several up and down economic cycles and shown superiority of rewarding their shareholders with increasing payments through dividend growth.”

It made sense that solid blue chip companies, which have managed to grow dividends for 25 years in a row, are worthy of consideration. The requirement to grow dividends for a quarter of a century, or longer, weeds out a lot of the speculative companies out there. This requirement results in a list of quality companies with stable business models, which have withstood the test of time. It didn’t hurt that these companies had done phenomenally for their investors, while showering them with more dividends every year. Getting a rising dividend check, while also generating strong total returns in the process, is one example where you can have your cake and eat it too.

Thursday, June 22, 2017

Investing in the Dividend Champions from 2007

Imagine if you had $1 million dollars at the end of 2007. You decide to invest this money in the list of the original dividend champions companies. How would you have fared if you had invested that money in the dividend champions  almost a decade ago?

I have thought about the answers to this question many times. A few weeks ago I decided to start doing the work to answer it for myself. I always enjoy doing the hard work myself in order to form my opinions.

I used the information from David Fish and Robert Allan Schwarz in my data gathering phase. I wanted to determine how a passive investor in the original dividend champions from late 2007 to early 2008 would have done.

I was also inspired to do this research after observing those who always try to scare people away from dividend investing. The usual scare tactic involves mentioning one instance of a dividend cut, from the worst time for dividends during the 2007 – 2009 financial crisis, in order to trigger feelings of irrational fear. This low probability event is used to scare people away from dividend investing. Somehow, these doom and gloomers tend to focus on a once in a lifetime level of dividend cuts which has happened only during major financial collapses in 1929 – 1932 and 2007 – 2009. Otherwise, they do tend to ignore the 95% of the time when dividends are either up or flat for the year in aggregate.

I decided to accept the challenge, and offer proof that dividend growth investing works wonderfully even during a period that was extremely challenging for almost any strategy.

I decided to test how an investor in the original dividend champions from late 2007/early 2008 would have done through the end of 2016. The beginning period is right at the start of the Global Financial Meltdown, which supposedly decimated all dividend portfolios. Using data, and logic, I am going to refute the irrational fears against dividend growth investing.

Tuesday, June 20, 2017

Where are the Original Dividend Champions today?

The list of dividend champions was created by David Fish in 2007. It lists companies which have managed to boost dividends for 25 years in a row. David painstakingly maintains and updates the list every month on dripinvesting.org. In latter years, he has also added a list of dividend contenders and challengers ( companies raising dividends for more than 10 and more than 5 years respectively)
I first stumbled upon the list of dividend champions in early 2008, when I was starting my site from scratch. I have utilized the file in my research and investing, and have used it to gain insights into my investing.

In my research, I have also leveraged the historic compilation of the Dividend Champions, on the site of Robert Allan Schwartz. This collection of files has been instrumental in compiling the research on the original dividend champions.

There were 138 dividend champions in January 2008.

By the end of 2016, 78 of those original dividend champions are still on the list.

Monday, June 19, 2017

Eight Dividend Companies Increasing Dividend Payouts and Returns to Investors

As part of my monitoring process, I review the list of dividend increases every single week. I usually focus on companies that have raised dividends for at least a decade, in order to narrow down the list of companies to review. In order to be successful at dividend growth investing, you need to identify companies that can grow earnings, dividends and intrinsic values over time, which you can also purchase at an attractive valuation. I write these reviews in order to educate dividend investors about the quick way I use to look at companies before deciding whether to pursue further research or to discard them for the time being.

The companies that raised dividends last week, include:

Realty Income Corporation (O) is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. The firm makes investments in commercial real estate. The REIT raised its monthly dividend to 21.15 cents/share. Realty Income is a dividend achiever, which has rewarded shareholders with rising dividends for 23 years in a row.

Friday, June 16, 2017

This is why you shouldn't overpay for stocks folks

You have probably read the news that Amazon is going to acquire Whole Foods Market (WFM) in cash for $42/share. This will increase competitive pressures in the grocery business, which has sent shares in companies like Target (TGT) and Wal-Mart (WMT) lower. Even retailers such as Ross Stores (ROST) and TJX Companies (TJX) are taking a beating. This decline could provide an opportunity to acquire quality merchandise at lower prices.

However, the issue I am going to discuss briefly deals with valuation. If you look at the chart of Whole-Foods over the past five years, you can see that the share price routinely sold above $42/share.

Whole Foods earned $1.26/share in 2012, and roughly $1.50/share every year through 2016. Therefore, anyone paying more than $30/share was likely overpaying for the stock. The company is worth $42/share in a going private transaction. However, if the buyout hadn't materialized, a discount to that price would have been warranted.

Thursday, June 15, 2017

Can you research everything about a company?

I have researched dividend paying companies for a decade. As a result, I have built a large database of dividend stock analyses that supported each of my decisions. I can afford to look back years after making an analysis, and seeing what worked, and what didn’t. I can also look back at my buying decisions, selling decisions, or the decisions to not do anything about a company, and see if these were smart or dumb in retrospect. I believe that every investor should evaluate their investments at least once per year, in order to improve themselves. It also helps to keep a diary of investment decisions, in order to see room for improvement over time. Regular reviews of my transactions have uncovered a lot of helpful tips for improvement. These reviews have also shattered a lot of my pre-existing beliefs.

I have found that I do not know in advance what the best performers will be. For example, I have been a big supporter of certain companies over others. However, the companies I was most confident about did not do as well as the companies I added without much confidence. This is why it is important to create fail-safe mechanisms that will propel the portfolio forward, even if you make mistakes. And believe me, you will make mistakes, which will be evident but only in retrospect.

The best lesson is that my basic analysis of quantitative factors have delivered better results than my analyses where I would review annual reports and press releases. In general, my evaluation of decisions uncovered that increasing the amount of information about a company did not add any incremental benefit. There has been a point of diminishing returns for me.

Monday, June 12, 2017

Two Dividend Machines Rewarding Shareholders With A Raise

As part of my monitoring process, I review the list of dividend increases every week. I focused my attention on companies with a ten year track record of annual dividend increases. I then also focused on companies that manage to grow dividends by more than a token rate. We generally want companies which can grow earnings over time, which then results in growth in dividends. The next requirement is to purchase those quality companies at attractive price.The following two dividend growth machines have high distribution growth rates, which are supported by strong growth in earnings per share.

Lowe’s Companies, Inc. (LOW) operates as a home improvement company in the United States, Canada, and Mexico. It offers a line of products for maintenance, repair, remodeling, and decorating. The company raised its quarterly dividend by 17.10% to 41 cents/share. This marked the 55th consecutive annual dividend increase for this dividend king.

Thursday, June 8, 2017

The Four Hour Dividend Investment Plan

If you are like most readers on this site, chances are you have a decent job, which allows you to have a certain lifestyle and to save money to invest. You are also likely to have other obligations including family, fixing the house or the car, plus a few other activities scattered around your schedule. It is very likely that you are starved on time. You are interested in dividend investing, but probably are hesitating to start it, because you do not believe you have the time to do all the work involved in it.

Well, there are a few solutions for you, if you want to go the self directed investor route. I would show you how you can be a dividend investor by spending less than four hours per week.

In order to achieve that, you need to be very efficient with your time. You need shortcuts to get the information you need, in order to make decisions. You would have to rely on the work and information presented by others, and should be ok with it. You should be ok that this information might include material omissions, some inaccuracies or might include an element of bias. Many believe that the best scenario for any investor is to immerse him/herself in the company they are studying by reading annual reports, industry publications, and try to get experience with the products/services offered. However, this takes time that you do not have, which is why the shortcuts are the way to go for you. Studies have shown that having too much information may actually lead to poor decision making. There is also point of diminishing returns when it comes to company information. In other words, it is unlikely that spending 100 hours studying the ins and outs of a particular security will result in better decision making over a couple of hours of research on the company for the average investor. (from the framework of having a diversified portfolio of course)

Tuesday, June 6, 2017

This Is How This Successful Dividend Investor Turned $1,000 Into $2 Million

I love reading stories of ordinary everyday folks, who manage to accumulate a multi-million dollar fortune that is donated for a good cause. I recently read the story of  the Chicago based dividend millionaire Russ Gremel, who donated $2.1 million dollar’s worth of Walgreen (WBA) stock to a wildlife refuge. Walgreen is a dividend champion, which has raised its dividends for 41 years in a row. You can read the story at the Chicago Tribune here.

Mr Gremel had accumulated the shares approximately 70 years ago, and had a cost basis of $1,000. The company kept growing and expanding over that long period of time. Mr Gremel never sold a single share during that stretch of time. Walgreen's had split the original shares to a cool 28,000 shares worth approximately $2.1 million by the time he made his donation in the past year. The amount of stock generates $42,000 in annual dividend income, which is equally impressive. In other words, the long-term investor receives his original cost basis back every single year, 42 times over. The article does not discuss whether dividends were reinvested into more stock over the years. However, using the limited amount of information available, it looks like this investment compounded at a cool 11.50%/year for 70 years. This is an impressive record. Compounding is a powerful force, especially when you stretch it over long period of time.

Thursday, June 1, 2017

Thirty Dividend Champions to Consider

I have written about my dividend investing journey for almost a decade now. One of the most common question I get asks how I identify companies for further research. In today’s post I will discuss the simple steps I use to obtain a manageable list of companies for further research. These are all used for potential additions to my dividend portfolio. Investing does not have to be complicated, and this simple process attests to this fact.

The first step I take is to start with the list of the US dividend champions, which is maintained and updated by David Fish every single month. To be a dividend champion, a company must have been able to increase its annual dividends per share for a minimum of 25 consecutive years. Only a company with a defensive business model can afford to grow the business, while also raising the dividend annually for a quarter of a century. Being a dividend champion is an indication of quality.

The second step I take is to focus on valuation. I look at the companies which sell at a P/E of 20 or lower. We look at valuation, in an effort to avoid overpaying dearly for an investment. Even the best company in the world is not worth overpaying for. When you buy at a lower price, your future expected returns are higher than buying at a higher price. I typically use Yahoo Finance’s trailing 12 months earnings for the earnings portion of the Price to Earnings calculation. However, I have found that one-time items have made it very difficult to determine the correct earnings power. This is why I use P/E based on forward earnings as a quick trick to scan a large group of companies, without getting bogged down in researching 100 one-time hits/gains to earnings.

Tuesday, May 30, 2017

Travelers Companies (TRV) Dividend Stock Analysis

The Travelers Companies, Inc., through its subsidiaries, provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally. The company operates through three segments: Business and International Insurance, Bond & Specialty Insurance, and Personal Insurance. The company is a dividend achiever, which has increased distributions for 13 years in a row.

Back in April 2017 the Board of Directors approved a 7.50% increase in the quarterly dividend to 72 cents/share. The largest competitors for Traveler’s Companies include Allstate (ALL), Progressive Corp (PGR) and Cincinnati Financial (CINF).

Over the past decade, this dividend growth stock has delivered an annualized total return of 8.60% to its shareholders.



Thursday, May 25, 2017

The Real Risk With Dividend Growth Investing

There are risks to many strategies. Some risks include permanent impairment of capital, due to an investment that ends up going to zero. Some companies would usually cut or eliminate dividends a long time prior to going under. This usually serves as a last warning sign to long-term investors like myself that something is broken in the business. But dividend cuts are not the biggest risk to dividend growth investing. This is not the risk I will discuss today.

The other risk includes mistakes of omission, where you fail to pull the trigger on a company because of fear. Then another risk is that you have identified an asset that has potential, purchased it at the right price, and it ends up meeting or exceeding your projections. However, you are not around to enjoy the full benefits of your analysis. While many cite dividend cuts as one of the biggest risks behind dividend growth investing, I believe that getting my shares acquired to be a much larger long-term risk to investment returns.

One way this could happen is if you sell a perfectly fine company. Some end up selling due to fear of the unknown. Ironically, share prices fluctuate much more than the changes in underlying fundamentals. This is why I try to focus mostly on companies that have stable earnings streams. A cyclical company with more volatile earnings streams is much tougher to value, and therefore I might be expected to receive more price volatility for each dollar of potential earnings power ( which in itself is a moving target). If you are good at timing your purchases, you may make a lot of money. If you are like almost everyone else however, chances are that exposure to cyclicals is best to be taken in a way that encourages doing nothing.

Tuesday, May 23, 2017

Merrill Edge Offers Commission Free Trades for Dividend Investors

I have reviewed a lot of brokerages throughout the years. All of the reviews have been based on my personal experience with the services. The personal experience and ideas is a main point of what I write about on this site too. I try to spread out my assets between several brokerage accounts, for additional diversification and peace of mind.

Over the past few years, I have opened and maintained an account with Merrill Edge. After a few years of contributions, the balance is set to exceed $50,000 for the first time. Why is that important?

Well for starters, Merrill Edge will provide me with 30 free trades per month, provided that I have at least a $50,000 combined balance between my Merrill Edge brokerage account and my Bank of America checking account. You need to have a Bank of America checking account, in order to take advantage of this bundled deal. When you have a checking account, the fees are waived, as long as you still have at least $50,000 in combined assets. Once you reach $50,000 in assets for three months in a row, you become part of their platinum preferred rewards tier. The value of your stocks, bonds and ETFs/funds counts towards that combined balance calculation.

Wednesday, May 17, 2017

Three REITs Approaching Value Territory

There are several REITs which seem to be punished excessively as of lately. A few, which have caught my eye are listed in more detail in the article.

There is a risk that retail is going down the drain, which would result in bankruptcies and vacancies for landlords. Depending on your beliefs, real estate investment trusts are either bargains today or they are value traps which are destined for mediocrity. Rather than fall for broad generalization, I decided to look at top tenants for each REIT I analyzed in this article, in order to determine the degree to which the business is subject to destruction from online. I also believe that while many retailers will have a harder time earning profits, the landlords that own the real estate have some margin of safety due to the long-term lease contracts. In addition, those landlords could always sell or repurpose those locations.

The other risk for retailers includes potentially higher interest rates, which would make many projects more expensive. Higher interest rates will reduce FFO and cash available to pay dividends to shareholders. The contra-argument to the rising interest rates thesis has been that rising rates are an indication of increased economic activity, which should bode well for landlords. The other contra-argument is that most of the REITs below have staggered maturities, and are mostly capitalized by equity rather than debt. The third contra-argument is that existing debt is already taken at low fixed interest rates. Rising interest rates should affect debt refinancing and profitability spread for new properties. Of course, everyone has been expecting rising interest rates for almost a decade now. Noone can predict the future.

As I mentioned before, I analyze REITs using the guidelines listed in this post. The guidelines include focusing on:

Monday, May 15, 2017

Five Dividend Paying Companies Rewarding Shareholders With A Raise

I review the list of dividend increases every week, as part of an effort to monitor my holdings and review promising companies in action. I usually focus on the companies with a minimum ten years of annual dividend increases. I then narrow the list down to companies which are raising distributions by more than a token amount. After that, I review the trends in earnings, dividends/distributions, and decide whether a company is worth it for further research or not. Reasons for not recommending myself to do further research on a company also involves high valuations. This exercise is helpful for my monitoring process, since it provides me with the discipline to go out and do the monitoring work.

Over the past week, there were five of companies that met the above mentioned requirements and raised dividends last week. The companies, along with my commentary are listed below:

The Clorox Company (CLX) manufactures and markets consumer and professional products worldwide. It operates through four segments: Cleaning, Household, Lifestyle, and International. The company raised its quarterly dividend by 5% to 84 cents/share. This marked the 40th consecutive annual dividend increase for this dividend champion. Over the past decade, Clorox has managed to raise dividends at a rate of 10.50%/year.

The rate of dividend growth has been slowing down over the past decade however, as the payout ratio increased from 37% in 2007 to 63% in 2016.

Thursday, May 11, 2017

Why Magellan Midstream Partners Is the Best Dividend Growth Opportunity for 2017

Energy output has boomed across the country, and this little-known dividend stock could make investors a fortune.

New technologies have unlocked billions of barrels of oil and gas, even at prices that were once unthinkable. Traders betting the farm on drilling stocks over the past few months earned themselves overnight windfalls.

But when it comes to energy investing, the real money isn’t always in the firms doing the grunt work. “Pick-and-shovel” businesses provide the vital tools and services to a booming industry. Rather than taking the “all-or-nothing” route of searching for the next big strike, selling rigs, gear, and equipment can be a safer (and more lucrative) way to profit.

One of my favorites? Magellan Midstream Partners, L.P. (NYSE:MMP). This partnership owns pipelines, terminals, and processing plants across the country. And while it doesn’t get a lot of interest in the press, it’s one of my top dividend growth stocks for a couple of reasons.

Tuesday, May 9, 2017

J. M. Smucker (SJM) Dividend Stock Analysis

The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company is a member of the dividend achievers index, and has boosted distributions for nineteen years in a row.

The company’s last dividend increase was in July 2016 when the Board of Directors approved an 11.90% increase to 75 cents/share. The company’s largest competitors include Conagra (CAG), Kraft Heinz (KHC) and Hershey (HSY).

Over the past decade this dividend growth stock has delivered an annualized total return of 14.10% to its shareholders.

Monday, May 8, 2017

PepsiCo (PEP) Dividend Stocks Analysis for 2017

PepsiCo, Inc. (NYSE:PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The company operates in four divisions: PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), PepsiCo Europe, and PepsiCo Asia, Middle East and Africa (AMEA). The company is a dividend champion, which has increased distributions for 45 years in a row.

Last week, the Board of Directors approved a 7% increase in the quarterly dividend to 80.50 cents/share. PepsiCo's largest competitors include Coca Cola (NYSE:KO) and Dr Pepper Snapple Group (NYSE:DPS).

Over the past decade, this dividend growth stock has delivered an annualized total return of 5.20% to its shareholders.


Thursday, May 4, 2017

Robinhood Offers Free Stock Trading for Dividend Investors

Robinhood is a new broker, who lets customers purchase US stocks for no commission. Yes, that is true, customers pay no commissions when they purchase stocks using Robinhood.

The service is available for customers with iPhone's or Android phones. I believe Robinhood could provide much lower fees to many beginning investors. To me, it would be much nicer to be able to allocate $2,000 - $3,000 into shares of 10 – 15 companies every month without paying commissions, rather than be limited to 2 – 3 investments for that month. Long-time readers know that I do not want to pay more than 0.50% in commissions on my purchase amount, and I also rarely sell. Your assets at Robinhood  are also SIPC insured, meaning that your assets are protected for amounts under $500,000.

There are several appealing factors behind Robinhood:

- Zero commissions on US Stocks
- No account minimums
- No Inactivity Fees
- No Deposit/Withdrawal fees
- Trades are executed right away at good prices
- Investor assets under $500,000 are insured by the SIPC

The items I don’t like are:

- Only available for a limited number of people
- Has not existed long enough
- Only available using an app
- Does not allow opening IRA accounts
- Does not allow automatic dividend reinvestment
- Does not allow purchasing fractional shares

Monday, May 1, 2017

Twelve Dividend Growth Stocks Rewarding Shareholders With A Raise

As part of my monitoring process, I look at the list of dividend increases every single week. I then narrow the list down by focusing on companies that have raised distributions for at least ten years in a row. The next step of the process includes a quick evaluation of company fundamentals, along with valuation and a brief comment about my current take on the company.

There were twelve companies that met the above criteria, and raised distributions over the past week. The companies include:

Johnson & Johnson (JNJ) researches and develops, manufactures, and sells various products in the health care field worldwide. It operates through three segments: Consumer, Pharmaceutical, and Medical Devices. This dividend king raised its quarterly dividend by 5% to 84 cents/share. This marked the 55th consecutive annual dividend increase for Johnson & Johnson. Over the past decade, the company has managed to raise annual dividends at a rate of 8%/year. Earnings per share rose from $3.63 in 2007 to $5.93 in 2016. The company is expected to earn $7.10/share in 2017. Currently the stock is attractively valued at 17.40 times forward earnings and yields 2.70%. If you are a more conservative investor, the company would be a decent idea on dips below $119/share, which is equivalent to 20 times last year’s earnings. Check my analysis of Johnson & Johnson for more information about the company.

Friday, April 28, 2017

Altria is more expensive that you think

I usually run a screen using my entry criteria over the list of dividend champions regularly. I do this in order to find attractively companies for further research, which could then be added to my portfolio. I ran the screen a few weeks ago for the dividend champions list, which identified approximately fourteen companies for further research. One reader asked me why I hadn’t included Altria (MO) in the list. Check my latest analysis of Altria for more information about the company.

This was a very good question. So good, I decided to write a short post about it.

If you look at a place like Yahoo Finance, or Google Finance, you can see that Altria has a P/E ratio of 11. So this means that this amazing company is cheap, doesn’t it?

 Source: Yahoo Finance
Source: Google Finance


Well, not so fast. As part of our evaluation of company fundamentals, we review trends in earnings per share, dividends per share, revenues and payout ratios over the past decade. A quick review of the ten year trends in earnings per share shows a bump in 2016. The curious dividend investor would then search for the driver behind the discrepancy.

Wednesday, April 26, 2017

Stockpile Brokerage Review

As many of you know, brokerage Loyal3 is closing down in May. I received a lot of responses from readers, who shared their disappointment about the close. I did receive one response, which notified me of another broker that was similar to Loyal3, and which has no account minimums. This broker is called Stockpile, and I will be sharing my observations about it today.

Stockpile is an online broker which lets investors buy and sell shares in their favorite companies. It is aimed at newer investors with less experience. The appealing part for me was the fact that it offers the ability to open accounts for kids/teens. This is a feature that may be helpful to anyone who wants to buy stock for children/grandchildren or nieces/nephews, and teach them by example the powerful concepts of investing from an early age. The broker site could be accessed from this link.

The brokerage account at Stockpile is SIPC insured up to $500,000 for stock ( and $100,000 for cash).

Opening an account is a fairly easy and straightforward process. You need to have your social security number, address, bank information etc.This is a fairly standard procedure.

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