Now that more than half the year is behind us, I thought it would be interesting to look at my top 5 performers through July 31, 2008. As dismal as the stock market has been this year, there are still some bright spots. One bright spot is that my top five performers have all achieved double-digit positive total returns since I owned them and positive returns in 2008. Here they are with comments:
#5 - McDonald's (MCD) + 4.4% Total 2008 Return
Last November, I bought this burger maker for $57 in spite of only paying one dividend per year. I was rewarded by MCD moving to quarterly dividends and a 2008 total return of 4.4% and 13.8% since my Oct/2007 initial purchase.
#4 - Johnson & Johnson (JNJ) + 6.4% Total 2008 Return
This is a company that I waited on a good entry point for a long time. In early February of this year a door opened and I snatched up some shares at $63. It has been well worth the wait with JNJ earning 6.4% this year and an annualized yield of 16.6% since my July/2007 purchase!
#3 - Health Care Property Investors Inc. (HCP) + 10.4% Total 2008 Return
HCP is a hold-over from my yield chasing days. With a July 31, 2008 yield of 5.05%, it keeps the quarterly cash rolling in. However, with a 10.4% total return for 2008, it is not just another pretty dividend stock. Since March 2005, when I opened my position, it has earned me a 15.3% annualized return.
#2 - Canadian National Railway Company (CNI) + 11.5% Total 2008 Return
On July 31, 2008 CNI had the lowest dividend yield of all my holdings. I had to swallow hard when I initiated a position in it last November at $47. Now, I am breathing easy with a 30.2% annualized return since my Nov/2007 initial purchase.
#1 - Wal-Mart (WMT) + 24.8% Total 2008 Return
WMT cut its dividend growth rate and accelerated its share price appreciation. Earlier this year I put it "On The Shelf" since it no longer met meet my minimum criteria for additional purchases. On July 31, 2008, WMT's life-to-date annualized yield was 20.5% and was up nearly $10 from my July 2007 initial purchase.
Unfortunately, not all of my holdings performed this well. For the every top, there is a bottom. Thursday, we'll take a look at my bottom five holdings.
Disclosure: Long in JNJ, CNI, HCP, MCD and WMT.
(Photo: Steve Woods)
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In a down-market when many people are rushing to buy gold, I already have mine. No, not that kind, but something much better! A growing stream of dividend income from solid companies. While everyone else is panicked about their portfolio's decline, I see a downturn as an incredible buying opportunity. Below are several select companies that recently announced dividend increases:
After running these companies through my D4L-PreScreen.xls model, none of the companies above warranted additional consideration based on their NPV of MMA Differential. ITW was the closet with a NPV of MMA Differential of $3,642, well short of the $7,500 I require from a company that is an Achiever, but not an Aristrocrat.
Disclosure: No position in any of the aforementioned stocks.
(Photo: sanja gjenero)
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Of all the Excel models, investing concepts, cash flow theories presented on Dividends4Life, none have been as misunderstood or caused more confusion than the money market account (MMA) rate. I have received many comments and emails inquiring about the rate. Most went something like "4.61%, are you out of your mind? Would you tell me where you found a MMA paying 4.61%?"
Inherently, financial valuations are forward looking. Unfortunately, the only hard data we have is historic, interest rates included. Theoretically, the MMA rate that I use is intended to represent the MMA rate that will be earned over then next 20 years. So how did I come up with the 4.61% that is currently being used?
I started the year at 5.11%, which was the rate that my highest MMA was paying. Then as rates began to fall I averaged the 5.11% with the current rate, limiting the change (plus or minus) to 0.5%, thus 5.11% - 0.5% = 4.61%. Given where rate are, this will not likely change this year.
What appears to be (and actually is) a 2-year MMA rate average that really should be 20-year projected rate really isn't that far off. I validate the rate by comparing it to the 20-year U.S. Treasury rate, which ironically was exactly 4.61% on August 1, 2008.
I don't really expect this will stop the questions and comments about my MMA Rate, but I now I have a post that I can point to to help explain what is happening.
(Photo: gerard79)
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It is very easy for a CEO to get on a conference call and talk about confidence in the future while communicating glowing projections, but do they really believe what they are saying? Are there any actions that would make you believe what they are saying? Senior management purchasing company stock is a strong indicator of confidence in the future. Another indicator is sticking with a dividend plan, including regular increases. Below are several select companies that recently announced dividend increases:
After running these companies through my D4L-PreScreen.xls model, none of them warranted additional consideration based on their NPV of MMA Differential. HGIC was the closet with a NPV of MMA Differential of $1,759, well short of the $7,500 I require from a company such as it.
MOLX was an interesting stock. It has aggressively grew its dividends since 2004 when it paid $0.10/share to a 2008 estimate of $0.54/share. Unfortunately, from 2001-2004 the dividend was flat at $0.10. There are too many good stocks out there to spend any more time on this one.
Disclosure: No position in any of the aforementioned stocks.
(Photo: sanja gjenero)
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These are the days that value and dividend investors long for. There have been times in the past where I struggled to find stocks worthy of purchasing. Now, the challenge is to pick the best available stocks that will maximize my chances of future success.
When looking for value priced stocks, the Price-To-Book (P/B) ratio is one that I like to focus on. It is calculated as share price divided by book value per share. Book value is most often calculated as Assets less Liabilities. However, some people conservatively calculate book value as Assets less Intangibles less Liabilities. I prefer the latter since it excludes goodwill and other intangibles which would be difficult to recover in a liquidation.
A low P/B ratio could indicate a stock is undervalued. Since GAAP accounting is mostly based on historical cost, a viable growing company will normally be worth more than its book value. However, there are times when good companies will be punished along with the bad. It is our job as investors to separate the good companies from those that have fundamental problems.
Fortunately, online stock screens make searching through a large number of companies quite simple. This MSN stock screen will identify companies in the S&P 500 with a P/B less than 1 and a dividend yield >3% (MSN screen will likely only work in Internet Explorer):D4L-Cheap Dividend Stocks
The screen produced 21 stocks on 8/3/2008 when I ran it. Some such as Fannie Mae (FNM) were stocks with obvious fundamental problems and not worthy of additional evaluation. Here are 8 familiar names I pulled from the list:
Criteria:
- S&p 500 Member
- Current Dividend Yield >= 3%
- Price/Book <= 1 Company (Symbol), Price/Book, Yield
CBS (CBS), 0.50, 6.76%
Lehman Brothers (LEH), 0.53, 3.65%
Capital One Financial (COF), 0.63, 3.61%
American Capital (ACAS), 0.72, 20.35%
Cincinnati Financial Corp (CINF), 0.83, 5.61%
Amer International Group (AIG) 0.84, 3.29%
SunTrust Banks (STI), 0.85, 7.33%
NiSource Inc (NI), 0.91, 5.49%
This screen is not a buy list, but something to be used to identify stocks that could potentially be a value play. Remember, when stocks go on sale, it is only a good deal when the value you receive is greater than the price you pay!
(Photo: sanja gjenero)
Full Disclosure: Long in ACAS and STI
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All in a matter of weeks we have gone from "the sky is falling" to dropping gas prices. People weren't happy before and they are not happy now. Is change and misery the only constants left in the world? Not from where I am sitting. Each week there is a steady stream of companies raising their dividends. Below are several select companies that recently announced dividend increases:
After running these companies through my D4L-PreScreen.xls model, only KIM with a NPV of MMA Differential of $6,509 warrants additional consideration. I have added it to my list of stocks waiting for a full evaluation.
MCHP has only paid dividend for six years - but it has been an impressive six year. Their 5-year dividend compound growth rate is 91.7%, 3-year is 52.5% and 1-year is 36.7%. I have been wanting to get a Tech company in my income portfolio for some time. Based on my very limited review, MCHP may be worth a second and more in-depth look. I have added it to my list of stocks to monitor.
Disclosure: No position in the aforementioned stocks.
(Photo: sanja gjenero)
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In an utopian world, the perfect dividend stock would be one that is both high-yield and provide a high dividend growth rate. Its share price would appreciate ratable with its increasing dividend. All of this would be driven by increasing earnings and cash flow. Ok, so much for my fantasies, the perfect dividend stock just may be a balanced compromise. Consider the following:
High Yield/Low Dividend Growth: When investors first consider dividend investing, High Yield is where they usually go first. I guess it is human nature to want it now and want a lot of it. Unfortunately, high yield stocks often carry higher than average risk - there is usually a reason that the stock yield is higher than average. It could be because the company is in a limited growth industry, is in a volatile industry, experienced recent financial problems and its share price has fallen, or shareholders perceive future financial problems. I have set aside a small portion of my portfolio to invest in these types of stocks. Examples of these stocks would include:
Low Yield/High Dividend Growth: After being burned on an over-allocation of high yield stocks, would be dividend investors normally start reading-up on the subject. The first thing that they learn is that Dividend Growth is more important than Dividend Yield. While Dividend Yield will stroke you today, Dividend Growth is much more important to long-term wealth creation. Companies in this category tend to be well established, dominate in their market and in industries less affected by cyclical geopolitical factors. However, it is important to note that these stocks carry a different kind of risk. Since your long-term return is dependent on the companies increasing their dividends over many years in the future, there is a real risk of something occurring that would prevent them from executing their strategy. Examples of these stocks would include:
Moderate Yield/Moderate Dividend Growth: This is a category that is not often discussed since most dividend investors focus on the other two categories above. I would classify stocks in this category with yields from 3.5% to 8.0% and a dividend growth rate between 5% and 15%. For some this defines the perfect dividend stock - good current payment with good future opportunity for growth. These companies' stories are varied. For some, they would normally reside in one of the other two categories, but hit a bump in the road. For others they normally reside here due to their growth and risk profile. Examples of these stocks would include:
As with all investments, risk can never be eliminated. However, to minimize risk I employ an asset allocation model. In addition, I limit my investments in each of the above categories.
The dividend growth rates quoted above are the average annual rates from 1998-2007.
Full Disclosure: At the time of this writing I was long in FR, ED, AFL, CNI, GE and USB.
(Photo: sanja gjenero)
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Like most financial company's, iStar Financial Inc. (SFI) has experienced a difficult time over the last several quarters. It has seen it share price collapse from a 52 week high of $40.55 to under $10. SFI's quarterly dividend is $0.87/share. Unfortunately, SFI has not earned its dividend the last four quarters, and it doesn't appear it will in Q2. In a July 18, 2008 earnings revision, SFI said it expects a second quarter non-GAAP loss of $1.55 to $1.45 per share with loan loss provisions of $275.0 million.
Ironically, SFI's cash has been growing over the last four quarters - from $88 million at Q2/2007 to $119 million at Q1/2008. Looking at the cash flow statement, this increase in cash has been funded via a net issuance of long-term debt. SFI's net issuance in 2007 was about $4.5 billion and in the first quarter this year it issued (net) a little over $100 million.
From an allocation standpoint, I was scheduled to purchase SFI in August. When I saw the 40+% dividend yield, a red flag went up and I began looking deeper into the company's financials. I have a small portion of my portfolio set aside for speculative stocks and SFI is by far my riskiest stock in that category.
As mentioned in my "On The Shelf" post, if a security is not performing at the desired level for additional purchases, but also is not performing badly enough to warrant a sale, then I will put it "on the shelf". By that I mean it will be set aside within my income portfolio with no additional purchases made until its outlook improves or deteriorates to the point it should be sold. SFI currently fits that description. As such I have put SFI on the shelf, until its financial condition changes for the good or bad.
Disclosure: Long in SFI
(Photo: Gabriel Doyle)
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If BAC was the good-guy bank this week, here are a few of bad-boys. Wachovia (WB) reports a Q2 loss of $4.20 and cuts its dividend to $0.05. KeyCorp (KEY) cuts dividend 50% to $0.1875; Regions Financial (RF) misses Q2 EPS by $0.03 and slashes its dividend. Another two dividend Aristocrats fall off the wagon. 
With Bank of America's (BAC) big announcement this week, there appears to be life after financial crisis. Will it last? Who knows. If you are a dividend investor, it doesn't matter. If the market goes up, you can enjoy your paper-profits on recent purchases. If it goes down, it provides more opportunities to pick up some value-priced bargains. Below are several companies that increased their dividends last week:
Disclosure: Long in BAC
(Photo: Steve Woods)
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You may think your greatest wealth building asset is the Chevron (CVX) stock you purchased 3 years ago. Even though your brilliant purchase has appreciated over 50% in the last 3 years in the face of a bear market, it is not your greatest wealth building asset.
Traditionalist would say your home is your greatest wealth building asset. This is getting closer, but it is not your greatest wealth building asset.
Others would say your income is your greatest wealth building asset. Thought there is a lot of truth to the statement, it is still not your greatest wealth building asset.
So, what is your greatest wealth building asset? Everyone is born with it. Few realize its importance until they lose most of it. The asset is so valuable it can't be bought. Your most valuable wealth building asset is time.
As a value/dividend investor, I have learned that time can cure many mistakes and provide enormous investment leverage. Consider these stocks:
Johnson & Johnson (JNJ): Let's say on August 25, 1987 you purchased 1,529 shares of JNJ at $6.539/share or about $10,000 worth. This was JNJ's closing high for 1987. By December 31, 1987, your investment was only worth $7,156 - a 28% drop. It wouldn't be until June 9, 1989 before you closed above your original purchase price. However, if you held this stock and spent the dividends (which I don't recommend), it would have been worth $103,238 at the July 21, 2008 mid-day price of $67.52. This is about a 12% compound annual return, excluding dividends.
General Electric (GE): Same scenario, on August 20, 1987 you purchased 1,821 shares of GE at $5.49/share or about $10,000 worth. This was GE's closing high for 1987. By December 31, 1987, your investment was only worth $6,696 - a 33% drop. It wouldn't be until January 2, 1990 before you closed above your original purchase price. However, if you held this stock and spent the dividends (which I don't recommend), it would have been worth $50,638 at the July 21, 2008 mid-day price of $27.80. This is about an 8% compound annual return, excluding dividends.
Bank of America (BAC): You know the drill. On August 25, 1987 you purchased 1,397 shares of BAC at $7.156/share or about $10,000 worth. This was BAC's closing high for 1987. By December 31, 1987, your investment was only worth $6,025 - a 40% drop. It wouldn't be until August 5, 1988 before you closed above your original purchase price. However, if you held this stock and spent the dividends (which I don't recommend), it would have been worth $40,960 at the July 21, 2008 mid-day price of $29.32. This is about an 7% compound annual return, excluding dividends, for a stock that is currently battered and beaten.
In all three examples above, the stock was purchased at its high before the 1987 crash/panic. Some recovered more quickly than others, but all recovered. The key is to buy good-solid companies, and be prepared to hold them through the good and the bad. All three of the companies above are S&P Dividend Aristocrats, or companies that have increased their dividends in each of the last 25 years. How long should you plan on holding a stock? That's easy, To Infinity and Beyond!
At the time of this writing, I owned JNJ, GE and BAC.
(Photo: peter mueller)
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One of the areas that I am looking to increase my allocation is in the international arena. As described in an earlier article "International ETF Dividend Investing", I planned to add an international ETF to my Income ETF portfolio to help accelerate my international exposure. On a preliminary basis I identified the following candidates (information from Morningstar and yields as of 7/11/08):
WisdomTree Europe Div Fund (DEB) - 2.51% Yield (Annual)
Expense Ratio: 0.48%
Premium/Discount: 0.32%
Inception: 06-16-06
Financial Services: 29.2%
U.S.: 0%
Rejected For: Annual dividend (not frequent enough)
WisdomTree DEFA Div Fund (DWM) - 1.51% Current Yield (Annual)
Expense Ratio: 0.48%
Premium/Discount: 0.73%
Inception: 06-16-06
Financial Services: 28.61%
U.S.: 0%
Rejected For: Annual dividend (not frequent enough)
SPDR S&P International Dividend (DWX) - n/a% Current Yield (Quarterly)
Expense Ratio: na%
Premium/Discount: 0.60%
Inception: 02-12-08
Financial Services: 18.61%
U.S.: 0%
Rejected For: Insufficient information (new fund)
IShares Dow Jones EPAC Slct Dvdnd IndxFd (IDV) - 8.08% Yield (Quarterly)
Expense Ratio: 0.50%
Premium/Discount: -0.07%
Inception: 06-11-07
Financial Services: 50.70%
U.S.: 1.7%
Rejected For: Insufficient track record (new fund)
First Trst DJ STOXX Slct Dvdnd 30Indx Fd (FDD) - na% Yield (Quarterly)
Expense Ratio: 0.60%
Premium/Discount: na%
Inception: 08-27-07
Financial Services: 50.17%
U.S.: 0.0%
Rejected For: Insufficient information (new fund)
PowerShares Intnl Dividend Achievers Ptf (PID) - 4.05% Yield (Quarterly)
Expense Ratio: 0.58%
Premium/Discount: -1.12%
Inception: 09-15-05
Financial Services: 34.18%
U.S.: 6.2%
A candidate for additional consideration
Since writing "International ETF Dividend Investing", I identified the following closed-end fund for evaluation:
Eaton Vance Tax-Advantaged Glbl Div Opp (ETO) - 6.96% Yield (Monthly)
Expense Ratio: 1.06%
Premium/Discount: -12.00%
Inception: 04-24-04
Financial Services: 16.74%
U.S.: 36.5%
A candidate for additional consideration
Looking at PID's and ETO's strengths and weaknesses:
PID
ETO
For ETO, I listed "selling at a significant discount" as both a strength and weakness. It is good to buy something at $0.88 on the dollar, unless it is only worth $0.70 per dollar. The discount is so high it makes me believe the fund is holding some illiquid assets. I am attracted by its lower financial services % and longer track record. Its high U.S. holdings are a disappointment.
PID is almost an inverse image. It is trading at a reasonable discount with a low expense ratio and U.S. holdings. Its higher financial services are a disappointment.
Historically over their common life, ETO has out-performed PID, but experienced higher volatility. So what's a guy to do? I took a lesson from my wife and bought them both. Together, they will offset some of the other's weaknesses. I will also continue to monitor some of the more interesting ETFs above.
At the time of this writing I owned ETO and PID.
(Photo: sanja gjenero)
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No, not that Financial Crisis but the one in my portfolio. Over the last quarter my investments in the financial sector stayed put at 10.8%, in spite of not buying any individual financial stocks. I didn't have to look far to find the problem. At the end of June I had the following ETFs and Closed-end Funds in my income portfolio:
Alpine Total Dynamic Dividend Fund - 16.29% Yield - (AOD)
Alpine Total Dynamic Dividend Fund (the Fund) is a diversified, closed-end management investment company. The Fund has an investment objective to invest in equity securities that provide high current dividend income. The Fund also focuses on long-term growth of capital as a secondary investment objective.
% Financial: 19.04%
SPDR S&P Dividend - 5.02% Yield - (SDY)
The Fund seeks to replicate as closely as possible, before expenses, the price and yield of the S&P High Yield Dividend Aristocrats Index. The Fund uses a passive management strategy designed to track the price and yield performance of the Dividend Index.
% Financial: 33.97%
Vanguard Financials ETF - 4.08% Yield - (VFH)
The Fund seeks to track the performance of a benchmark index that measures the investment return of financial stocks; specifically the MSCI U.S. Investable Market Financials Index. This is an index of stocks of large-, mid-, and small-size U.S. companies within the financials sector.
% Financial: 97.93%
Vanguard Dividend Appreciation ETF - 2.02% Yield - (VIG)
The Fund seeks to track the performance of the Dividend Achievers Select Index that measures the investment return of common stocks of companies that have a record of increasing dividends over time.
% Financial: 12.68%
Vanguard REIT ETF - 5.38% Yield - (VNQ)
The Fund seeks to track the investment performance of the Morgan Stanley REIT Index by investing at least 98% of its assets in stocks issued by real estate investment trusts.
% Financial: 0.00%
Vanguard High Dividend Yield - 3.65% Yield - (VYM)
The Fund seeks to track the performance of a benchmark index that measures the investment return of common stocks of companies that are characterized by high dividend yield.
% Financial: 23.83%
As you can see all the ETFs and closed-end funds above, except VNQ, include heavy allocations in the financial sector. Since I am targeting no more than 10% investment in the financial sector, this presents a problem. So what's the solution? Here is what I am going to do:
This exercise demonstrates the importance of knowing your asset allocation, including what is hidden in ETFs and funds. I have decided to take take this portion of my income portfolio in a different direction. Thursday, we'll look at its new focus and where it fits in my overall asset allocation.
(Photo: sanja gjenero)
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If you are a dividend investor, last weeks melt-down provided a great opportunity for buying dividend stocks. As the price goes down, the yield goes up. Many companies continued to increase their dividends giving investors something to be happy about. Below are several companies that increased their dividends last week:
After running these companies through my [D4L-PreScreen.xls] model none of them warranted additional consideration. MDT was the closest with a NPV of MMA Differential of $1,338.
At the time of this writing, I did not own any of the aforementioned stocks.
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To preserve the comparability, I do not like to make a lot of changes to my stock analysis template. However, I have identified a couple that I have considered and determined that they are worthy of being made. They are as follows:
Graham Number: In calculating the Graham Number I have traditionally used a trailing twelve months (TTM) EPS. it was suggested by some that I move to a trailing 36 months to mitigate the effect of any unusual item (positive or negative) over the last 12 months. A trailing 36 months would involve a lot of manual tracking. I have instead decided to err on the conservative side and use a minimum of the TTM or the last three full-year years average. Since I use tangible book value, my calculation of the Graham number is already more conservative than most. If a stock is selling below my version of the Graham Number it is a strong indication that it is undervalued.
NPV MMA Diff: In the past, I have made statement like "GE's NPV MMA Diff is less than the $10,000 I prefer. However, since GE is a Blue-Chip company with a long track record of success, I am comfortable with its NPV MMA Diff of $5,862." To bring a degree of consistency and order, I felt this needed to be quantified. Previously, a Star was awarded if the NPV MMA Diff was greater than $10,000. Now the $10,000 is lowered by $2,500 if the company is a member of the Broad Dividend Achievers™ (increased its annual regular dividend payments for the last 10 or more consecutive years). The $10,000 target is lowered an additional $5,000 if the company is a member of the S&P 500 Dividend Aristocrats (increased dividends every year for at least 25 consecutive years). Thus, a company that is both an Achiever and an Aristocrat, will only have to have a NPV MMA Diff of $3,000 to earn a Star. In effect this change is risk adjusting the target NPV MMA Diff. It will be higher for more risky companies and lower for those with a proven track record.
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One area that many portfolios are lacking is international exposure. Most people feel more comfortable buying the companies they are familiar with, which is understandable. However, we still need some exposure to international equities. I too need to bolster my position in non-U.S. equities.
In my Asset Allocation portfolio, I hold IShares MSCI EAFE Index Fund (EFA) as the international component. In my 401(k), there is an international fund that I am invested in. Certain other funds that I own have an international component. The remainder of my exposure comes from holding ADRs of international companies such as BP (BP).
Based on preliminary numbers, my allocation to international equities has increased about 1% from the end of Q1, but it is not where I would like it. To help accelerate the increase I plan on adding an international ETF to my Income ETF portfolio. I am in the preliminary stage of identifying candidates and here are the ones I have on the list to look at (yields as of 6/20/08):
DEB - WisdomTree Europe Div Fund - 2.48% Yield (Annual)
The Fund seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Europe Dividend Index. The WisdomTree Europe Dividend Index measures the performance of companies incorporated in 16 developed-market European countries that pay regular cash dividends on shares of common stock.
DWM - WisdomTree DEFA Div Fund - 1.49% Current Yield (Annual)
The Fund seeks to track the price and yield performance of the WisdomTree Dividend Index of Europe, Far East Asia and Australasia. The Index measures the performance of companies in developed markets outside of the U.S. and Canada that pay regular cash dividends on shares of common stock.
DWX - SPDR S&P International Dividend - 14.42% Current Yield (Quarterly)
The Fund seeks to replicate as closely as possible, before expenses, the price and yield performance of an index that tracks exchange-listed common stocks domiciled in countries outside the United States that offer high dividend yields.
IDV - IShares Dow Jones EPAC Slct Dvdnd IndxFd - 9.18% Yield (Quarterly)
The Fund seeks investment results that correspond generally to the price and yield performance of the Dow Jones EPAC Select Dividend Index. This Index is comprised of one hundred of the highest dividend-yielding securities (excluding REITs) in the Dow Jones World Developed-Ex. U.S. Index.
FDD - First Trst DJ STOXX Slct Dvdnd 30Indx Fd - 4.68% Yield (Quarterly)
The Fund seeks investment results that correspond generally to the price and yield of an equity index called the Dow Jones STOXX(R) Select Dividend 30 Index.
PID - PowerShares Intnl Dividend Achievers Ptf - 3.93% Yield (Quarterly)
The Fund seeks to match the performance of the International Dividend Achievers Index by investing at least 90% of its total assets in dividend paying common stocks of this index. This index tracks the performance of dividend paying American Depositary Receipts or ordinary stocks trading on the NYSE, NASDAQ or AMEX.
These will provide a good starting point for additional research. I will provide updates as I move forward with the research.
What securities are you using to provide international exposure?
At the time of this writing I held positions in BP and EFA.
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It seems lately that the headlines are dominated by companies dropping their dividends such as Fifth Third (FITB) from $0.44 to $0.15, KeyCorp's (KEY) Board expressed its intention to reduce its dividend 50% to an annualized dividend of $0.75/share, FairPoint Communications (FRP) lowering their dividend 35% and Crystal River Capital (CRZ) cutting its dividend from $0.68 to $0.30. Not all the news is bad.
Consider the following companies that recently announced double-digit dividend increases:
Unfortunately, after running these companies through my [D4L-PreScreen.xls] model none of them warranted additional consideration. CAT was the closest with a NPV of MMA Differential of (621) .
On June 19, 2008, BB&T Corporation (BBT) stated that the company's capital levels remain strong and management anticipates "some increase in the cash dividend during 2008."
And finally, sometimes good news is found in maintaining the status quo. According to Bloomberg, Bank of America's (BAC) CEO told Oppenheimer analyst Meredith Whitney the company's dividend was safe. With an effective yield between 8% and 9%, and trading less than book value, BAC could end up as one of the great steals of 2008. Time will tell.
At the time of this writing, I owned BAC and BBT.
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Addiction can be a powerful thing. According to Wikipedia, addiction is a term used to describe a devotion, attachment, dedication, inclination, etc. Nowadays, however, the term addiction is used to describe a recurring compulsion by an individual to engage in some specific activity, despite harmful consequences to the individual's health, mental state or social life.
I think it is safe to say a lot of people are addicted to micro-managing their portfolio. It's not that they check the results each day, but they'll keep their portfolio open in a browser to monitor it throughout the day. In the short-term, markets can behave very irrationally. If you are constantly watching your portfolio, this can lead you to act out of emotion - e.g. sell a good security at a bad price or buy a good security at a bad price.
The cure? Do your homework and select solid companies with a proven track record. Watching every up and down tick of good companies like Aflac (AFL), General Electric (GE) and Johnson & Johnson (JNJ) will not help your portfolio's long term-performance.
One test of addiction is can you walk away from something without withdrawal? During my vacation last week I thought it would be an interesting test to see what I could and couldn't walk away from. On the positive side, I did not check my portfolio a single time. I did not even watch the news to see what the markets did.
Being an admitted workaholic, I did check emails and voicemails multiple times a day. This was no surprise. However, I have identified a new addiction - my blog. In spite of having a full weeks worth of posts scheduled ahead of time, I checked my blog as much as I checked my work emails and voice mails.
Hello, my name is D4L and I am a blogaholic...
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In life there are precious few things that are lily pure in which nothing negative could rightfully be said about them. I am not foolish enough to believe that dividends are the ultimate panacea. Join me today as don myself in black and explore the the Dark Side of Dividends.
Here are the top five reasons for not paying a dividend:
Black is just not my color. I prefer my white hat (with a crimson script A, of course). Here are my five responses to the above:
Though not perfect, dividend distributions meet a very specific need for investors looking for a reliable and growing revenue stream. Not all companies that pay a dividend are good dividend investments. Investors must do their due diligence prior to purchase.
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