If you put a band aid on a gaping wound and tell the person that they are going to be all right, your actions have done more harm than good. In many ways this is what is happening with the TARP bail out. And like the old potato chip commercial, a lot of these banks can't stop at one - they are lining up at the TARP trough to feed again on public money.

Earlier this week CNBC reported that American International Group (AIG) and the U.S. government are engaged in talks, including the possibility of additional funds for the insurer and trading debt for equity. In case they do not reach a deal, AIG's lawyers at Weil, Gotshal & Manges LLP were preparing for the possibility of bankruptcy, CNBC said. It was said that AIG was too big to fail the first time around. Is that still true? If so, won't the government have to pony the needed funds this time, and next time, and next...?

When there is only one trough to eat at, you have to find new ways to keep the dining experience interesting and Citigroup (C) is doing just that. C has proposed to have the Treasury convert its preferred shares in the bank to common equity. This would bring its capital over the acceptable threshold. Once again, the taxpayers will generously pick up the tab. Under the terms reportedly offered by C, the Treasury would convert its preferred shares to common at a huge premium to Citi’s stock price. If the conversion took place at the current price, taxpayers would own 90% of C’s shares. Under C's proposal they would only end up with 40%. Some analysts complained that C was asking for terms far more generous than it would receive under the Treasury’s new program. “Another *&%# for taxpayers,” observed Henry Blodget on the financial website, Tech Ticker.

Now that C has all but wiped out its shareholders, who's next? It looks like it might be the bondholders. C's debt is trading as if the company were already in default. The bondholders face losses even more severe than the extraordinary hits shareholders have taken. As of Sept. 30, 2008, C had $393 billion of long-term obligations, much of which is unsecured and is owned by many of the world’s leading mutual funds and pension funds, as well as by other banks and insurance companies.

Finally, as if the banks didn't have enough problems. Labor is now targeting banks and the service sector in a big unionization push. I can see their slogan, "You've got problems, we got answers. Let us do for you what we did for the auto industry!" Ugh, never mind....

In every situation, there are winners and losers. Those with cash, such as Warren Buffett, are in a position to come out ahead, and those needing cash will promise or pay anything to get it.

Full Disclosure: No position in the above mentioned securities (whew!)


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Summary only...

In every field there are winners and there are champions. The difference is subtle, but very real. A champion is driven for success and will not let anything stand in its way. Some dividend stocks can be classified as champions. Not surprisingly, I went to the Dividend Champions list to find these ten dividend stocks that stand alone with 50+ years of consecutive dividend increases. They are presented here in descending rank:

#10. Integrys Energy Group (TEG) - 51 Years

This utility holding company serves about 485,000 regulated electric and 1,674,000 regulated gas customers. The company also operates an unregulated energy supply and services business. Yesterday, TEG increased its quarterly dividend 1.5% to $0.68. The current yield is 6.81%.

#9. 3M Company (MMM) - 51 Years

This diversified global company has operations in electronics, health care, industrial, consumer and office, telecommunications, safety and security, and other markets. Last week MMM declared a 2% quarterly dividend increase to $0.54/share. The current yield is 4.13%.

#8. Emerson Electric (EMR) - 52 Years

This company primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. EMR last increased its quarterly dividend 10% in November 2008. The current yield is 4.12%.

#7. Parker-Hannifin Corp. (PH)- 52 Years

This company is a global maker of industrial pumps, valves and hydraulics. Its products are used in everything from jet engines to trucks and autos and utility turbines. PH last increased its quarterly dividend 19% in November 2008. The current yield is 2.46%.

#6. Procter & Gamble Co. (PG) - 52 Years

This leading consumer products company markets household and personal care products in more than 180 countries. PG last increased its quarterly dividend 14% in April 2008. The current yield is 3.13%

#5. Genuine Parts Co. (GPC) - 53 Years

This company is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. GPC last increased its quarterly dividend 7% in March 2008. The current yield is 4.83%

#4. Northwest Natural Gas (NWN) - 53 Years

This U.S. gas distribution utility serves Oregon and southwest Washington. NWN last increased its quarterly dividend 5% in October 2008. The current yield is 3.60%

#3. Dover Corp. (DOV) - 53 Years

This company manufactures a broad range of specialized industrial products and sophisticated manufacturing equipment. DOV last increased its quarterly dividend 25% in August 2008. The current yield is 3.37%

#2. American States Water (AWR) - 54 Years

This utility primarily serves water customers in California, as well as in Arizona. It also provides electric service to a small section of San Bernardino County. AWR has not increased its dividend since November 2007. If it remains flat during 2009, AWR will lose its spot on this list. The current yield is 2.73%

And finally, the defending national champion of dividend increases...

#1. Diebold Inc. (DBD) - 55 Years

This company develops, makes, and services self-service transaction systems, electronic & physical security systems, and software used to equip bank facilities, voting terminals. This month DBD increased its quarterly dividend 4% to $0.26/share to keeps its streak alive. The current yield is 4.20%.

Earlier this month there were 11 companies eligible for this list. Unfortantely, Masco (MAS) cashed in a half century of excellence and cut its dividend.

This list is a great starting point for additional analysis. Over the next several weeks, I plan on prescreening those on the list I had not previously looked at. If any look promising, I will provide a more comprehensive evaluation in the future.

Full Disclosure: Long TEG, PG


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Read More...

Summary only...

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Below are the carnivals that I participated in this week, along with a link to my article:

• Carnival of Wealth, Money & Life published: Do As I Say, Not As I Do
  
• Festival of Stocks published: Stock Analysis: BP Plc (BP)
  
• Carnival of Personal Finance published: The Best Dividend Stocks In The World
  
• Carnival of Financial Planning published: Nine Companies Bucking The Trend And Raising Dividends
  
• Carnival of Money Hacks published: Do As I Say, Not As I Do
  

Articles I enjoyed reading included (in no particular order):

The DIV-Net Featured Articles

• The Div Guy presented Stock Screen: Oil and Gas Transport Plays
  
• Nurseb911 presented Sustainable Dividends
  
• Dividends4Life presented Stock Analysis: 3M Co. (MMM)
  
• The Dividend Guy presented 10 Steps to Improve Your Financial Future
  
• The Stock Market Prognosticator presented The Testimony Of Benjamin Graham
  
• Dividend Growth Investor presented Yield on Cost Matters
  

Articles From DIV-Net Members

• The Dividend Guy presented A Really Long Term Dow Jones Chart to Put Things in Perspective
  
• Dividend Growth Investor presented Should you follow Warren Buffett’s latest moves?
  
• the moneygardener presented good financial government
  
• The Div Guy presented The 20 Best Dividend Plays for 2009
  
• Disciplined Approach to Investing presented Investor Bullish Sentiment Continues To Fall
  
• Living Off Dividends & Passive Income presented Is A Global Financial Meltdown Imminent?
  
• Old School Value presented Reward-Risk or Risk-Reward?
  
• Triaging My Way To Financial Success presented Mail Bag: Manulife (MFC)
  
• Dividend Money presented The Misery Index
  
• Barel Karsan presented Protectionism In Recessions
  
• Everyday Finance presented GM - Not One to Say "I Told You So"
  
• Contrarian Value Investing presented Readers Of CVI Somewhat Bullish
  
• Buy Value presented Buffett's Biggest Mistake
  

The Wealth, Money & Life Network Featured Articles

• Dollar Frugal presented Had to Spend Money - Gag!
  
• How I Save Money presented Mailbox Freebies (Feb 14)
  
• Saving For A Home Of My Own presented In response...
  

Other Articles

• Dividend.com presented The Latest Mortgage Rescue Plan is Far from Fair
  
• The Globe and Mail presented Dividends school retired professor
  
• Business Week presented Follow the Juicy Dividends
  

There are some really good articles here, please take time and read a few of them.

(Photo: Sachin Ghodke)

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Summary only...

So, the company you work for is starting to lose money and the layoffs have begun. You hold your breath as the names are read. Then suddenly it dawns on you - it just the working stiffs that are being affected. Is there something wrong with this picture? Where's the equity in this? Not to fear, after careful research I have determined this financial downturn is so bad, that even the well-to-do are suffering - at least in there own way. Consider the following:

When President Obama announced a $500,000 salary cap on pay for executives at institutions receiving bailout funds this caused a great deal grief for our friends working in Manhattan. It was pointed out in a recent article just how difficult it is to live in the heart of NYC on a measly half-mill a year. With Harvard Club dues at $2,000 a year per couple, and Westchester County golf clubs typically charge $16,000; food and entertaining tabs are another $15,000, what's the well-to-do to-do on a paltry $500,000 per year?

Well at least those guys have a job. What about the poor Joe's (and Jane's) that spent a mint ($32k/year out of state) to attend at a top flight institution with hopes of landing a job on Wall Street? As this article points out, for decades, investment banking was a well-worn path to affluence for business-school graduates. As big banks including Citigroup (C), Bank of America (BAC) and Goldman Sachs (GS) cut tens of thousands of jobs, MBA students who just a few years ago would have been aggressively recruited by companies now expect to fight for the handful of positions available.

How about those those less-fortunate wealthy families - those only earning six-figures. As noted in this article, the Lower Hudson Valley's small, wealthy communities have not gone unscathed in the troubled economy. The six-figure household incomes earned by many residents in such places as Harrison, Mamaroneck, Yorktown and New City have declined or risen less than 5 percent since 2000 while mortgages and rents have risen by double-digit percentages in many of these communities.

Still not convinced the wealthy are having difficult times?

This Wall Street Journal article shows just how bad it has become for the upper-tier. “Rich people are getting hit, and they’re all expressing the need to curtail unnecessary spending,” said Russ Alan Prince, president of Prince & Assoc., a wealth-research firm based in Connecticut. “Lovers are part of the same calculation.” According to a new survey by Prince & Assoc., more than 80% of multimillionaires who had extra-marital lovers planned to cut back on their gifts and allowances. Still, only 12% of the multimillionaire cheaters said they plan to give up on their lovers altogether for financial reasons.

See, the wealthy are just like you and me. They are feeling the pain of this economic downturn, but they just haven't been here before. As I work on getting my tongue out of my cheek, I'll leave my wealthy friends with 21 Suggestions for Success to consider while they work on getting their lives back together.

Full Disclosure: No position in the aforementioned securities.


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Read More...

Summary only...

I couldn't begin to estimate how many different stocks are traded around the world on the various exchanges. Like everything else, there are many participants, but few players. Though the population of stocks may be large, there are only a precious few that are worthy dividend stocks. When spending my time looking for worthy investments, there are four primary places I look:

I. S&P 500 Dividend Aristocrats

These stocks are the best of the best - the blue blood stocks. S&P maintains the list. Here is a description from their site:

S&P 500 Dividend Aristocrats is designed to measure the performance of S&P 500 index constituents that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. This index is a member of the S&P Dividend Aristocrats index series.

Index constituents exhibit the following characteristics:

• Underlying Indices – S&P 500
  
• Weighting – Equally weighted; Constituents re-weighted quarterly
  
• Reconstitution – Reviewed annually in December
  

Members may be deleted during the December rebalance if calendar-year dividends did not increase from the previous year, or intra-year if the stock is removed from the underlying S&P 500.

Among others, Dividend Aristocrats include these highly recognizable names:

• Clorox Co (CLX)
  
• Coca-Cola Co (KO)
  
• Exxon Mobil (XOM)
  
• Johnson & Johnson (JNJ)
  
• McDonald's Corp (MCD)
  
• Procter & Gamble (PG)
  
• Wal-Mart Stores (WMT)
  

II. US Broad Dividend Achievers™ Index

This index is maintained by Idxis. Here is the description from their website:

The Broad Dividend Achievers™ Index is comprised of companies incorporated in the United States or its territories, trade on the NYSE, NASDAQ or AMEX, and have increased their annual regular dividend payments for the last ten or more consecutive years. In addition, Indxis requires that a stock's average daily cash volume exceed $500,000 per day in the November and December prior to the annual reconstitution date on the last trading date in January. The Index is calculated using a modified market capitalization weighting methodology and has been published by the American Stock Exchange under the ticker symbol DAA since December 5, 2003.

Select US companies with at least ten consecutive years of increasing regular dividends. US companies must be listed on the NYSE, AMEX or NASDAQ. US Companies must have a minimum average daily cash volume of US$500,000 per day for the November and December prior to each Annual Reconstitution Date.

Here are several prominent companies that are Dividend Achievers:

• Chevron Corporation (CVX)
  
• Donaldson Company (DCI)
  
• McCormick & Co. (MKC)
  
• Wells Fargo & Co. (WFC)
  

III. International Dividend Achievers™ Index

This index is maintained by Idxis. Here is the description from their website:

The International Dividend Achievers™ Index is designed to track the performance of dividend paying American Depositary Receipts and foreign common stocks trading on major US exchanges. To become eligible for inclusion in the International Dividend Achievers Index a stock must be incorporated outside the United States, trade on the NYSE, NASDAQ or AMEX, and have increased its annual regular dividend payments for the last five or more consecutive years. In addition, Indxis requires that a stock's average daily cash volume exceed $500,000 per day in November and December prior to each annual reconstitution in January. The Index is calculated using a dividend yield weighting methodology and is calculated by American Stock Exchange under the symbol DAT since August 1, 2005.

To become eligible for inclusion, a company must be incorporated outside of the United States. The companies must be have an American Depository Receipt or common stock trading on NYSE, NASDAQ or AMEX. Companies must have paid increasing regular annual dividends for five or more consecutive years. The average daily cash volume must exceed $500,000 in US$ in the November and December prior to reconstitution.

The International Dividend Achievers are filled with companies that touch our lives on a daily basis including:

• Toyota Motor Corp. (TM)
  
• Panasonic Corp (PC)
  
• Nokia Corp. (NOK)
  
• BP p.l.c. (BP)
  
• Canadian National Railway Company (CNI)
  

IV. The U.S. Dividend Champions

This list is maintained by Dave Fish of MoneyPaper is regularly updated and located at the The Drip Investing Resource Center. Here is a description from the spreadsheet:

The initial goal was to identify companies that had increased their dividend for at least 25 consecutive years, but, as explained below, the definition was broadened to include additional companies that had paid higher dividends without having increased the quarterly payout in every calendar year. I also decided to follow companies that had increased their dividend for 20-24 straight years, since they are likely to join the 25-year "Champions" soon. It was also necessary to resolve discrepancies between the streak claimed by the company and information from outside sources, which is why the "(Per Company)" sub-title is included.

All the U.S. Dividend Champions names may not be as familiar, but it includes some smaller companies not found on the other lists such as:

• Florida Public Utilities (FPU)
  
• Bowl America (BWL.A)
  
• Middlesex Water Co. (MSEX)
  
• Telephone & Data Sys. (TDS)
  
• Weyco Group Inc. (WEYS)
  

Bringing It All Together

The above four lists contain a significant number of companies, and unfortunately a great deal of duplication. I am in the process of building a single list that eliminates the multiple entries for the same company. It is my goal to eventually have a minimum amount of analysis on each company. To that end, I have posted an aggregated list as Stock Ideas under the Analysis section. It is still very rough around the edges, but keep checking in, it will get better as time passes.

Not every stock listed is a great dividend investment, but virtually all great dividend investments are on the list.

Full Disclosure: Long BP, CLX, CNI, CVX, JNJ, KO, MCD, PG, WMT

(Photo: ilker)


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Summary only...

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Below are the carnivals that I participated in this week, along with a link to my article:

• Festival of Stocks published: Stock Analysis: Lowe’s Companies, Inc. (LOW)
  
• Carnival of Personal Finance published: The Dividend Stock Life Cycle
  
• Carnival of Financial Planning published: Dividend Stocks: The Good, The Bad and The Ugly
  

Articles I enjoyed reading included (in no particular order):

The DIV-Net Featured Articles

• The Div Guy presented Are Dividends in Dire Straits?
  
• Buy Value presented Warren Buffett's Bad Deal
  
• Dividends4Life presented Stock Analysis: Paychex Inc (PAYX)
  
• The Dividend Guy presented The S&P Indices Versus Active Funds Scorecard
  
• the moneygardener presented These Firms Shouldn't Cut Part II
  
• The Stock Market Prognosticator presented Charlie Munger Speaks
  
• Dividend Growth Investor presented IBM Dividend Stock Analysis
  

Articles From DIV-Net Members

• The Dividend Guy presented The Dividend Guy Investment Process Part 11: Things I Won’t Do
  
• Dividend Growth Investor presented Seven Notable Dividend Increases in the news
  
• the moneygardener presented teenage dirtbag
  
• Stock Market Prognosticator presented Beating A Dead Horse
  
• The Div Guy presented The Tortoise Wins Again
  
• Disciplined Approach to Investing presented Near The Bottom If History Repeats Itself?
  
• Living Off Dividends & Passive Income presented Faber And Einhorn on Inflation and Gold
  
• Old School Value presented Mead Johnson Nutritionals Spinoff IPO
  
• Triaging My Way To Financial Success presented Always Coca-Cola
  
• Barel Karsan presented UTS Energy
  
• Everyday Finance presented 3 Corporate Bonds Yielding Over 10% that Aren't Financials!
  
• Contrarian Value Investing presented Magic Formula Stocks On The Move 2-07-09
  
• Buy Value presented The Best Month To Buy Stock
  

The Wealth, Money & Life Network Featured Articles

• Dollar Frugal presented Super-Savings Mode - Food on Travel
  
• Her Every Cent Counts presented Times are hard -- have some napkins
  
• How I Save Money presented Credit Card Craziness!
  
• Saving For A Home Of My Own presented First PoF date...
  

Other Articles

• Charles T. Munger presented How We Can Restore Confidence
  
• SmartMoney presented 5 Dividend Stocks for This Market
  
• TheStreet.com presented Top Dividend Stocks for the Week
  
• Rising Dividend Investing presented Mr. Geithner Giveth and Then Taketh Away
  
• Fox Business presented The 15-Minute Tip: Four Bargains in Blue-Chip Stocks
  

There are some really good articles here, please take time and read a few of them.

(Photo: Sachin Ghodke)

Read More...

Summary only...

I thought Bank of America (BAC) was strong enough to survive without cutting its dividend. It was better managed than Citigroup (C) and wasn't in near the dire straits that C was in when it was forced to cut its dividend. This all changed with the announced acquisition of Merrill Lynch. When a company such as Merrill is sold at a fire sale, there usually is a reason. BAC is now learning why Merrill was so favorably priced - they got what they paid for. Is this same situation playing out with Wells Fargo's (WFC) acquisition of Wachovia?

Once considered to be the best run bank in America by many analysts, WFC is starting to struggle. Did the WFC executives turn a blind eye to the underlying financial data and only focus on the prize they had been eying for some time? From an outsider looking in, this appears to be the case. After a much larger loss in the fourth quarter than expected, most analysts that follow the bank believe a dividend cut is inevitable and, like BAC, a second trip to the TARP trough could be in the works. Are the shareholders possibly looking at a $0.01 dividend in the future?

Analysts from Friedman, Billings, Ramsey & Co. in a January 29 note pointed out that WFC only remained “well capitalized” by regulators’ lights because of the government’s $25 billion TARP injection. WFC’s 7.88% capital cushion does not compare well with other troubled banks such as Citigroup (11.8%), J.P. Morgan (JPM) (10.8%) and Bank of America (10.7%).

Other warning signs include a sharp increase in the amount of assets held for sale $178 billion from $106 billion in the prior quarter. Goodwill climbed to $23 billion from $14 billion. In this environment, goodwill is a difficult asset to justify to the auditors and ultimately to the Securities and Exchange Commission (SEC). Could future impairments be in the works, as Wachovia did in it final days?

There is reason to be concerned. Though the actors are different, I have seen this play before and the outcome is tragic.

Full Disclosure: No position in the aforementioned stocks.


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Read More...

Summary only...

The renewing of life. There is nothing more natural than the live birth of a child. In this birth there is life, hope, unlimited potential, and yes, eventually death. Though we don't like to focus on it, death is just as natural as birth. In much the same way, it is natural for a percentage of dividend stocks to fail each year, either in not raising their dividend or literally ceasing to exist. As we plan for out own death by buying life insurance and making final arrangements, we must have a plan in place for when inevitable happens and we must sell an under-performing dividend investment.

Dividend investors are looking for solid companies that consistently grow their dividends. Last week Pfizer Inc. (PFE) cut its dividend by 50%, and as such is no longer suitable for my dividend portfolio. The quandary faced when selling a stock after a dividend cut is replacing the lost income without assuming undue risk. As with most stocks, PFE's price had declined over time and the stock was yielding over 7% prior to the dividend cut announcement. Immediately, after the announcement the stock dropped 7% and was only yielding around 4%. Fewer dollars are now available to replace income from the previous higher yield. So what do you do to replace this income without assuming unreasonable risk?

Fortunately, I had built up a risk reserve by purchasing lower risk stocks and trimming my positions in higher risk investments over the last several months. My portfolio was poised to take additional risk, but I limited the risk to the amount needed to replace the lost income. This was done in a two step process:

1. With the cash received from the PFE sale, I purchased shares of Eli Lilly and Co (LLY) to help preserve my sector allocation. At the time, LLY was yielding slightly over 5% and was rated less risky than PFE prior to the announcement. This dividend income from this purchase fell well short of that lost from the PFE sale.


2. With limited funds available, I had to assume additional risk to get yield needed to maintain the prior level of dividend income. To accomplish this, I opted to purchase a small block of CenturyTel Inc (CTL) yielding around 10%.
   

PFE and CTL were both classified as high risk stocks and each had the exactly same risk rating. With LLY classified as a medium risk stock, I now had fewer dollars in the higher risk category, thus the overall risk of my portfolio is now lower and I am earning slightly more dividend income. There are good and bad ways to increase your portfolio's return. As the old saying goes, when life hands you lemons, choose to make lemonade.

(Photo Credit)


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• The Dark Side of Dividends
  

Read More...

Summary only...

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Below are the carnivals that I participated in this week, along with a link to my article:

• Carnival of Wealth, Money & Life published: TARP Investment ROI Significantly Down
• Festival of Stocks published: Stock Analysis: Legg Mason, Inc. (LM)
• Carnival of Financial Planning published: Big Banks, Little Dividends: More Bad News For Large Banks

Articles I enjoyed reading included (in no particular order):

The DIV-Net Featured Articles

• The Div Guy presented Dividend Stock Review: Royal Bank of Canada (RY)
  
• Triaging My Way To Financial Success presented Leveraging Dividends
  
• Dividends4Life presented Stock Analysis: BP Plc (BP)
  
• The Dividend Guy presented Six Lessons from John Bogle of Vanguard
  
• the moneygardener presented These Firms Shouldn't Cut
  
• The Stock Market Prognosticator presented Quote Of The Day
  
• Dividend Growth Investor presented Barron's Dividend Aristocrats Video
  

Articles From DIV-Net Members

• The Dividend Guy presented Top 50 Investing Blogs
  
• Dividend Growth Investor presented My take on State Street’s dividend cut
  
• the moneygardener presented energy dividends going by the wayside
  
• Stock Market Prognosticator presented What Is The Real Story With The Senior Loan Officer Opinion Survey
  
• The Div Guy presented Stock Screen: Low-Beta Dividend Stocks
  
• Disciplined Approach to Investing presented Investor Sentiment Continues To Decline And Market Grinds Higher
  
• Living Off Dividends & Passive Income presented Peter Schiff: Dollar Is The Next Bubble To Collapse
  
• Old School Value presented Odds Update for EMAG Arbitrage
  
• Triaging My Way To Financial Success presented The Return of Capital
  
• Bullish Dividends presented Dividend Stock Analysis: Royal Bank Of Canada (TSE: RY)
  
• Barel Karsan presented Buffett's Stock Market Indicator
  
• Everyday Finance presented Caps on Wall Street Compensation - Dumb and Ineffective
  
• Contrarian Value Investing presented Why Wall Street Will Never Get It Right
  

The Wealth, Money & Life Network Featured Articles

• Dollar Frugal presented Groundhog Day Goals - February 2, 2009
  
• Her Every Cent Counts presented Mint.com and My Year-Over-Year Progress
  
• How I Save Money presented How My Flexible Spending Account Works
  
• Saving For A Home Of My Own presented Plenty of Fish
  

(Photo: Sachin Ghodke)

There are some really good articles here, please take time and read a few of them.

Read More...

Summary only...

The above editorial cartoon's humor is based on its underlying truth. It seems everyone has high ideals as to how others should behave, but somehow we (individually and collectively) always seem to be the exception.

Working in finance and accounting, I painfully remember the implementation of the Sarbanes-Oxley Act (SOX) several years ago. Our audit fees doubled, as did the number of internal and external auditors following me around all day asking questions. The new client/auditor relationship was based on the presumption that the company was guilty until proven innocent. How did this happen?

The accounting industry was given great power after failing to detect fraud in several high profile corporate failures (Enron, WorldCom, HealthSouth, et. al.) I found it ironic that those involved in the failure were given such authority in the aftermath. Another irony was the internal control of the accounting firms. After hearing of an internal control failure with our audit firm, I asked about the firm's documentation and control procedures and the response was shocking.

A manager-level auditor told me that it was a good thing their firm was a private company, it could never withstand the scrutiny they were putting us under. When our audit firm realized that they would be audited by the Public Company Accounting Oversight Board (PCAOB). They voiced many of the same objections corporations did when they fell under the SOX guidelines. So who's watching the government?

Periodically, U.S. public corporations will receive what is referred to as a "comment letter" from the Securities and Exchange Commission (SEC). The SEC letter is asking you to comment and defend positions taken in public filings. Non-compliance can lead to stiff penalties up to jail time. With this type of power the SEC must be a bastion of purity, right? Not hardly.

In a 2006 audit, the Government Accountability Office (GAO) found The SEC has its own set of problems over bungled books - with millions in cash slipping through the cracks, and a computer system so vulnerable that hackers can run wild inside Wall Street's watchdog agency. The audit stated the SEC has failed to maintain controls in three key areas - security of its computer system, handling of the cash paid in disgorgement and penalties, and keeping track of equipment and assets. So are we back to where we started with public corporations taking the high road?

Unfortunately not. Recently, a liberal acquaintance of mine pointed out the hypocrisy of most corporate leaders. She was right. As conservatives, we talk of personal responsibility and accountability, but when the government starts doling out the money we push our way to the head of the line so we can gorge ourselves. As my liberal acquaintance noted, the country is a democracy for people losing their house, but socialistic if you are a large corporation going broke.

For the most part, our choices led us into our present situation. Things are funny when it is 'those guys' doing it and not us. Who sent me the cartoon? The local partner of the Big-4 accounting firm that audits our books.

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This article originally appeared on The DIV-Net January 26, 2009.

Linked here is a detailed quantitative analysis of Lowe's Companies, Inc. (LOW). Below are some highlights from the above linked analysis:

Company Description: Lowe's Companies, Inc. and its subsidiaries operate as a home improvement retailer in the United States and Canada. The company offers a range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
   
2. 20-Year DCF Price
   
3. Avg. P/E Price
   
4. Graham Number
   

LOW is trading at a discount to all four valuations above. If I exclude the high and low valuations and average the remaining two, LOW is trading at a 39.5% discount. LOW earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:

1. Rolling 4-yr Div. > 15%
   
2. Dividend Growth Rate
   
3. Years of Div. Growth
   
4. 1-Yr. > 5-Yr Growth
   
5. Payout 15% of avg.
   

LOW earned three Stars in this section for 1.), 2.) and 3.) above. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. LOW has paid a cash dividend to shareholders every year since 1961 and has increased its dividend payments for 46 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
   
2. Years to >MMA
   

LOW earned one Star in this section for 1.) above. The NPV MMA Diff. of the $19,636 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as LOW has. If LOW grows its dividend at 20.0% per year, it will take 7 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 3.45%.

Other: LOW is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The the home improvement retail industry tends to be very cyclical and relies on economic growth. However, LOW is a strong player with opportunities for growth both domestically and abroad. Aging homes and relatively high home ownership rates are powerful long-term demographic drivers that should help mitigate the continued weakness in residential construction. Consumers viewing their homes as investments will continue to spend money on home improvement projects. Risks include a continued decline in the economy, a large rise in long term interest rates and failure by LOW to execute expansion strategy.

Conclusion: LOW earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a net total of five Stars. This quantitatively ranks LOW as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price could increase to $35.98 before LOW's NPV MMA Differential fell to the $3,000 that I like to see. At that price the stock would yield 0.92%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $3,000 NPV MMA Differential, the calculated rate is 13.6%. This dividend growth rate is substantially below the 20.0% used in this analysis, thus providing a margin of safety.

LOW has an S&P Quality Ranking of A+ from its consistent historical earnings and dividend growth. It has held up much better than its chief rival Home Depot (HD). I have followed LOW for some time, but have been hesitant to initiate a position in a cyclical company with such a low dividend yield. I calculate LOW's buy price at $33.11. For additional information, including LOW's dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I held no position in LOW (0.0% of my Income Portfolio) .

What are your thoughts on LOW?

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I am pleased to announce the official launch of Dividends Value. This new site will replace Dividends4Life as my flagship investing site focusing on dividend investing using a value-based approach. Dividends Value is a self-hosted site running on the latest version of WordPress (v2.7). All the historical posts from Dividends4Life, comments and the feed have been converted over to the new site. I think you will find the site much faster than Dividends4Life.

So what happened to Dividends4Life? Over the last 30 days I had some hosting issues that were difficult to resolve and determined that Dividends4Life had grown to point it was time to move to a self-hosted environment and take advantage of the numerous features offered by WordPress.

Why didn't you move the Dividends4Life domain to the new site? I considered this and weighed the pros and cons and determined there were more cons to moving it. Most of the cons related to site setup and the way Blogger defines URLs. I have been working on Dividends Value behind the scenes for the last month. There were a couple of deletes and start overs. This would have been difficult to do and try to maintain the continuity of blog.

What's going to happen to the old Dividends4Life site? It will live on in a lesser role. I plan to periodically post new material on it and will post the best of Dividends Value on it also. In addition, I will continue to write under the name Dividends4Life.

Why do some of the Dividends Value links still take me back to Dividends4Life? As mentioned above, WordPress uses a different URL format. I will have to manually change each link to point to Dividends Value. I have updated the items listed in the header menu above and am converting the posts starting with the most recent and working backwards in time. By maintaining Dividends4Life you will continue to have access to the older posts until I map the links to Dividends Value. WordPress uses the feed to convert the data, so if you see "Thank you for subscribing to Dividends4Life!" at the bottom of a post, that means I have not yet edited that post and updated it URLs.

What can I do to help? In many ways this is like starting over. If you have a blog that links to Dividends4Life, please consider also linking to Dividends Value at http://dividendsvalue.com/

I appreciate your patience through this transition. If something doesn't appear to be working, leave me a comment or send me an email.

Please take a few minutes to check out the new site. I would love to hear what you think of it!

D4L

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Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Below are the carnivals that I participated in this week, along with a link to my article:

• Carnival of Wealth, Money & Life published: Bank of America Headed Back to the TARP ATM
  
• Festival of Stocks published: Stock Analysis: Cullen/Frost Bankers, Inc. (CFR)
  

Articles I enjoyed reading included (in no particular order):

The DIV-Net Featured Articles

• The Div Guy presented Dividend Stock Review: Seagate Technology (STX)
  
• Dividends4Life presented Stock Analysis: Lowe's Companies, Inc. (LOW)
  
• The Dividend Guy presented Things to Ask When a Stock Buy Does not Work Out
  
• the moneygardener presented Canadian Railroad Earnings
  
• The Stock Market Prognosticator presented Net Current Asset Value Update
  
• Dividend Growth Investor presented Microsoft (MSFT) Dividend Stock Analysis
  

Articles From DIV-Net Members

• The Dividend Guy presented 3 Free Sources for Dividend Data
  
• Dividend Growth Investor presented Using Tax Loss Harvesting to Find Dividend Bargains
  
• the moneygardener presented recession reflections
  
• Stock Market Prognosticator presented Is It Time To Buy The Insurance Sector?
  
• The Div Guy presented Dividends being cut at fastest pace in 50 years
  
• Disciplined Approach to Investing presented Money Supply Causing Concern With Future Inflation
  
• Living Off Dividends & Passive Income presented Sam Zell Imparts His Wisdom
  
• Old School Value presented No Sale for ValueVision
  
• Triaging My Way To Financial Success presented Corporate Job Losses Mounting
  
• Bullish Dividends presented The Cup And Handle Chart Pattern
  
• Barel Karsan presented Unemployment Worse For Some
  
• Everyday Finance presented Tax Refund Loans a Ripoff - Not Worth the Rush
  
• Contrarian Value Investing presented High Quality Names Appearing On The Magic Formula Site
  
• Buy Value presented Why I Fired My Broker
  

The Wealth, Money & Life Network Featured Articles

• Dollar Frugal presented Fulfilling Dreams
  
• Her Every Cent Counts presented Lending Club: First Impressions
  
• How I Save Money presented Tweaked The Budget Again
  
• Saving For A Home Of My Own presented Tired...
  

Other Articles

• Rising Dividend Investing presented Timothy Geithner, the Law of Supply and Demand, and Better Days on the Horizon
  
• Dividend Tree presented Analysis Parameters for Dividend Stocks
  
• Magic Diligence takes a pass on Deluxe
  
• There was a great rating and review of online brokerages at Money Blue Book.
  
• The Intelligent Speculator analyzes Valueclick.
  
• Moolanomy.com talks about the very important issue of 401K and IRA funding limits.
  

There are some really good articles here, please take time and read a few of them.

(Photo: Sachin Ghodke)

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