Linked here is a PDF copy of my detailed analysis of First Industrial Realty, Inc. (FR) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: First Industrial Realty Trust, Inc. operates as a real estate investment trust. The company engages in the ownership, management, acquisition, sale, development, and redevelopment industrial real estate in the United States and Canada.
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 and 4.) Graham Number. FR is trading at a premium to all of the four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, FR is trading at a 130.0% premium. FR has a Star deducted for trading at a premium.
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 and 5.) Payout 15% of avg. FR earned two Stars in this section for 3.) it has grown dividends for 10+ years and 4.) its one year dividend growth rate is greater than its 5 year compound annual growth rate.
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. and 2.) Years to >MMA. FR earned one Star in this section for 2.) since its 8.12% dividend yield is well in excess of the current MMA rate.
Other: FR lost money in 2005 ($0.61) and 2006 ($1.42) before recovering in 2007 (+$2.42 est). FR is positioned as one of the largest providers of industrial real estate in the U.S., with a diversified portfolio of long-term customers. In an effort to increase efficiency, companies are increasingly concentrating their business among larger providers such as FR.
Conclusion: FR had a Star deducted in the Fair Value section, two Stars added in the Dividend Analytical Data section and one Star added in the Dividend Income vs. MMA section for a total of Two Stars, which rates it as 2-Star Weak. It is important to note that while FR lost money in 2005 and 2006, it continued to increase its dividend in those years. The ability to not only sustain, but to increase its dividend in the face of adversity is an important attribute of a quality dividend company. Given all the above, along with my current allocation of real estate and this stock, I am neither buying nor selling FR at this time.
Disclaimer: As always this is only my opinion and you should not rely on it. 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 own shares of FR.
What are your thoughts on FR?
Recent Stock Analyses:
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Earlier this week we looked at my top 5 high fliers for 2008. Unfortunately, for every up, there is a down and that is certainly true for my portfolio. As before, we will look at results through July 31, 2008. Here they are my cellar dwellers with comments:
#5 - General Electric (GE) -19.3% Total 2008 Return
Of my cellar dwellers, GE is the one I am most bullish on. I liked it at $38 when I bought my first tranche in July/2007, and liked it even more at $29 when I bought my last tranche this month.
#4 - First Industrial Realty, Inc. (FR) -22.3% Total 2008 Return
This was my first ever dividend investment. It was purchased in December/2003. FR has consistently raised it's dividend since then; and unfortunately, its share price has consistently fell since then. FR has more lives than a cat - each time I give it up for dead, FR raises its dividend.
#3 - SunTrust Banks, Inc. (STI) -31.8% Total 2008 Return
Until recently, STI wore the cellar dweller crown. It very well could be the next bank divested, if it cuts its dividend.
#2 - American Capital Strategies, Ltd. (ACAS) -31.9% Total 2008 Return
ACAS has long been one of my favorite stocks. I have been in and out of it since February/2004 and still have a positive 2.2% life-to-date annualized return. ACAS continues to raise its dividend, but at some point it operating results will have to turn around.
#1 - iStar Financial Inc. (SFI) -63.8% Total 2008 Return
SFI is on a breathing machine and short of an immaculate recovery it likely will not make it to the end of the year. It's 14.6% yield on cost will be missed, while its double-digit share price collapse will not.
I take solace that even with these poor performers, I am still ahead of the S&P 500 for the year. In dividend investing, you can't focus too much on the good or bad. You learn from each and keep your eye on the long-term.
Disclosure: Long in GE, FR, STI, ACAS and SFI.
(Photo: Steve Woods)
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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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Each Friday I highlight the Carnivals I participated in over the past week, along with any notable articles that I come 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 Personal Finance published: Reaching Your 10-Year Investing Goal
- Carnival of Smarter Investing published: Stock Analysis: FR
- Investing in 2008: 3 Mistakes to Avoid by The Honest Dollar
- 10 Ideas on How To Retire On Less by Pinyo
- you might be a personal finance redneck if… by Brip Blap
- My Daughter Shocked Me With A Credit Card Question by Free From Broke
- Looking Back at Our First Cash Only Christmas by Finance and Fat
- Very Wealthy People's Characteristics... by Life Liberty and the Pursuit of Money
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Linked here is a PDF copy of my analysis of Sysco Corp (SYY) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for food service industry in the United States and Canada.
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 and 4.) Graham Number. SYY is trading at a discount to two of the four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, SYY is trading at a 9.8% premium. SYY gets a Star for being fairly valued. However, since it is trading at a premium, there are some mixed signals here.
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 and 5.) Payout 15% of avg. SYY scored a grand-slam home run in this section, earning all 4 available Stars. This is the type of performance I look for in my dividend stocks.
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. and 2.) Years to >MMA. SYY earned a Star for 1.) above with a $19,472 (per $1,000 invested) 20-year NPV differential to a MMA earning 5.11%.
Other: SYY raised its dividend in 2008 to $0.22/share from $0.19/share in 2007. This is a 15.8% increase. I like to see increase in excess of 15% - at that level a stock's yield on cost will double every 5 years. From S&P: We expect results of this leading U.S. food distributor to include both internal growth and additional acquisitions, with SYY increasing its market share. Over time, we look for SYY's profitability to benefit from an increased amount of consolidated purchasing, the addition of regional distribution centers, improved management of freight costs, and better inventory management.
Conclusion: SYY earned one Star in the Fair Value section, a perfect four Stars in the Dividend Analytical Data section and one Star in the Dividend Income vs. MMA section for a total of Six Stars, one more than my scale allows, which rates it as a 5-Star Strong Buy. Even at these valuations, I plan to add to my position in SYY during 2008.
Disclaimer: As always this is only my opinion and you should not rely on it. 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 own shares of SYY in my IRA.
What are your thoughts on SYY?
Recent Stock Analyses:
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Linked here is a PDF copy of my detailed analysis of The Coca-Cola Company (KO) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: The Coca-Cola Company engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates and syrups worldwide.
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 and 4.) Graham Number. KO is trading to at a premium to all four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, KO is trading at a 65.1% premium. A Star is deducted due to the high premium.
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 and 5.) Payout 15% of avg. KO only earned one Star in this section for 3.) above - it has grown dividends for at least 10 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. and 2.) Years to >MMA. KO did not earn any Stars in this section. In fact it had a Star deducted since the NPV of MMA Dif. is negative. That means for every $1,000 invested KO will earn $1,919 less than a MMA earning 5.11%.
Other: KO is a member of the S&P 500, is an Aristocrat and an Achiever. In addition, Berkshire-Hathaway (Warren Buffet's company) has long-held a significant stake in KO.
Conclusion: KO lost a Star in the Fair Value section, picked up one Star in the Dividend Analytical Data section and was deducted another Star in the Dividend Income vs. MMA section for a net total of negative 1 Stars, one less than my scale allows, which rates it as a 0-Star Avoid stock. Sometimes Avoid means Avoid, and this is one of those times. I suspect there is a reason Buffett is no longer buying KO, and I won't be either until something changes.
Disclaimer: As always this is only my opinion and you should not rely on it. 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 own shares of KO.
What are your thoughts on KO?
Recent Stock Analyses:
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Understand Your Goal
What is your portfolio trying to accomplish? As odd is it may seem, many investors never define this and their overall goal. Are you buying stocks like First Industrial Realty Trust, Inc (FR) with a 22% yield, Capstead Mortgage Corporation (CMO) with a 17% yield, Annaly Capital Management, Inc. (NLY) with a 16% yield or Apollo Investment Corp. (AINV) with a 12% yield? If your goal is short-term income these might work, and then again they might not.
Before buying buying any stock you should write down your investing goal and determine if purchasing that stock will bring you closer to your goal or take you further away. My goal is to generate an ever-increasing income stream from dividends. Thus, I will sacrifice some current income in favor of future growth and income stability.Understand and Measure the Risk
No stock is 100% safe. Each stock has its own set of risks that need to be considered. The stocks listed above are considered high risk. In exchange for above average current income, you may encounter above average dividend cuts and/or loss of capital.
Gauging the relative risk of one stock compared to another is important when deciding which stock to buy or how much to weight a stock within your portfolio. I prefer lower risk stocks such as Johnson & Johnson (JNJ) [Analysis], Procter & Gamble Co. (PG) [Analysis]and Wal-Mart Stores, Inc. (WMT) [Analysis].A Disciplined Approach
For me and my income portfolio, I have have chosen to follow a conservative and disciplined approach. This means I will seek out dividend stocks with a proven track record and good future prospects. These stocks will have a long history (10 or more years) of consecutive dividend increases, low debt, low free cash flow payout and excellent other dividend metrics. In addition, I will follow time proven valuation techniques to select an entry point that will provide a good value.Stay The Coarse
There is always a temptation to stray from a disciplined approach of selecting good dividend stocks. Often I receive questions like, 'AT&T Inc. (T) is making a fortune off the iPhone, why aren't you buying it?' or 'Kraft Foods Inc. (K) is a great consumer staple, why aren't you buying it?' The short answer is that neither currently can pass the entry exam to gain access to my income portfolio.
It is easy to become caught up with the current hot stock that everyone loves. The key to success is to buy before everyone else falls in love with it. Selecting good dividend growth stocks is not difficult, being disciplined enough to do it is difficult for many investors.
Full Disclosure: Long JNJ, PG, WMT. See a list of all my income holdings here.
(Photo Credit)
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When I add a stock to my dividend portfolio, it is my intention to hold the stock forever. However, sometimes selling a stock is the right thing to do. In determining when to sell a dividend stock, I have one hard and fast sell rule: When an individual stock held as a dividend investment lowers its dividend, immediately sell it. This rule has served me well. Since I have begun chronicling by investments online, there have been several stocks I sold immediately after a dividend cut. Here is a list of those stocks with my exit price and a recent price:Symbol Date Sold Sell
PriceRecent
Price% Washington Mutual Inc. (WM) 12/11/2007 $18.11 $0.00 100% Wachovia Corporation (WB) 4/15/2008 $25.89 $5.54 79% iStar Financial Inc. (SFI) 10/3/2008 $2.32 $1.09 53% Bank of America Corporation (BAC) 10/7/2008 $28.50 $3.14 89% SunTrust Banks Inc (STI) 10/28/2008 $36.43 $9.36 74% First Industrial REIT (FR) 11/4/2008 $10.22 $2.51 75% American Capital Ltd (ACAS) 11/11/2008 $6.50 $0.59 91% Pfizer Inc (PFE) 1/27/2009 $15.64 $12.73 19% General Electric Co (GE) 2/27/2009 $8.59 $7.06 18% US Bancorp (USB) 3/4/2009 $12.70 $8.82 31%
The "%" column is the percentage decrease between the "Sell Price" and "Recent Price". As you can see, each of the stocks continued to fall after it was sold. That adds substantive evidence that my sell after a dividend cut rule is the correct thing to do. With that said, I have begun to question if there were other indicators that should have led me to an earlier sale. Four of the above stocks have one other thing in common - they froze their dividend before cutting it. The table below shows those stocks and the price on the dividend freeze date (declaration date), along with the three stocks I currently hold with a frozen dividend:Symbol Date Froze Freeze
Price"Sell
Price"% Bank of America Corporation (BAC) 7/23/2008 $30.64 $28.50 7% Pfizer Inc (PFE) 12/15/2008 $17.36 $15.64 10% General Electric Co (GE) 9/25/2008 $25.25 $8.59 66% US Bancorp (USB) 9/16/2008 $33.34 $12.70 62% Home Depot Inc (HD) 11/15/2007 $29.07 $18.00 38% M&T Bank Corp (MTB) 7/23/2008 $68.51 $31.85 54% Royal Bank of Canada (RY) 8/28/2008 $45.68 $22.99 50%
The "Freeze Price" is the closing price the first trading day after the dividend freeze was announced. The "Sell Price" for the first four (those that I have already sold), is the actual price I sold it for and for the three I still hold it is a recent price. Based on the above, it appears the prudent thing to do would be to sell a stock after it freezes its dividend. Like a dividend cut, an investment with a froze dividend is no longer aligned with my dividend portfolio’s goal of building an ever-increasing source of dividend income.
Care should be taken in considering that not only have the above stocks fell over the last year or so, but virtually every other stock has fell. So what appears to be hard and fast rules in this market, will need to be evaluated under different phases of the cycle. But for now, selling after a dividend cut or a dividend freeze appears to be a prudent rule to follow. However, I do not see the dividend freeze rule as stringent as the dividend cut rule. Each situation needs to be evaluated and sometimes an immediate sale is not warranted. Considering all this, I would phrase my dividend rule as such:When an individual stock held as a dividend investment freezes its dividend, this is a strong sell indicator. The specific facts and circumstances should be immediately evaluated and continuously monitored until the stock is either sold or it increases its dividend.
If it is decided not to sell the stock, the pressure to sell should increase as time passes. Another strong indicator to sell would be if the dividend freeze persists long enough to incur a flat dividend year-over-year. Dividend freezes need to be monitored closely. In many instances they are the first step to a dividend cut.
Full Disclosure: Long HD, MTB, RY
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It is easy to be captivated with a top performer. Everyone loves a winner. During the 80's and 90's when Jack Welch ran General Electric (GE) the company was a well-oiled machine that routinely beat the streets expectation and the ever-increasing stock price reflected its performance. I once said that if I could only buy one stock for the rest of my life, it would be GE.
Then there's the first-love dart - that first stock that you bought. For some reason there is often an emotional attachment for the first of anything. Some business owners frame the first dollar they earn, while some investors have a hard time letting go of the first stock they purchased, especially if the stock performed well for an extended period of time. For me it wasn't the first stock I purchased (I can't even remember what it was), but instead it was the first stock I purchased for its dividend that held a special place. That stock was a REIT, First Industrial Realty Trust Inc. (FR).
So what happened? Both stocks cut their dividends and I immediately sold them. To achieve our long-term investing goals we must remove emotion from the equation. It is a recipe for disaster when we make investing decisions based on a past relationship with a stock that is contrary to the current fact pattern.
That is not to say I am not fond of certain stocks. For example, I currently like or admire these dividend stocks:
Johnson & Johnson (JNJ) - Yield: 3.30% - Analysis
Johnson & Johnson engages in the manufacture and sale of various products in the health care field worldwide.
Nucor Corp. (NUE) - Yield: 3.10% - Analysis
Nucor Corporation is engaged in the manufacture and sale of steel and steel products. As the largest minimill steelmaker in the U.S., Nucor has one of the most diverse product lines of any steelmaker in the Americas.
United Technologies Corp. (UTX) - Yield: 2.60% - Analysis
United Technologies Corp. is an aerospace-industrial conglomerate with a portfolio including Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators and Carrier air conditioners, among other products.
McDonald's Corp. (MCD) - Yield: 3.60% - Analysis
McDonald's Corporation is the largest fast-food restaurant company in the world. Its restaurants serve a varied, yet limited, value-priced menu in more than 100 countries around the world.
3M Co. (MMM) - Yield: 2.80% - Analysis
3M Co. is a diversified technology company with a presence in various businesses, including industrial & transportation, healthcare, display & graphics, consumer & office, safety, security & protection services, and electro and communications.
Not all of the above stocks are on my current buy list, but they are some of the ones that I keep a close eye on for good opportunities to add to my position.
Full Disclosure: Long JNJ, NUE, UTX, MCD, MMM. See a list of all my income holdings here.
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January has come and gone and that means it is time for a goals/progress update. My goals were defined in this December 1, 2007 Investing Goals post. Below is an updated version of the table found in the original post.
| Description | Dividend Income Annualized | Yield on Cost |
|---|---|---|
| 2027 Goal | 110,000 | 20.00% |
| 2017 Goal | 30,000 | 10.00% |
| 2008 Goal | 4,000 | 4.90% |
| Jan/2008 | 3,280 | 4.99% |
| Purchases | 212 | -0.11% |
| Div. Changes | 41 | 0.06% |
| Sales | (27) | 0.04% |
| Dec/2007 | 3,054 | 5.00% |
| Net Changes | 228 | 0.12% |
| Nov/2007 | 2,826 | 4.88% |
For the month dividend income increased $226, while Yield on Cost (YOC) declined 0.01%. These changes were driven by new purchases, divided changes and sales. Let's examine each of the these categories:
Purchases: The $212 increase in annual dividend income and 0.11% decrease in YOC related to the following purchases (yield at the time of purchase):
- $71 USB (5.48%)
- $36 PAYX (3.46%)
- $32 GE (3.37%)
- $43 VFH (2.90%)
- $30 SYY (2.89%)
Dividend Changes: The $41 increase in annual dividend income and 0.06% increase in YOC related to the following dividend changes (a=dividend stated in annual terms, q=quarterly, m=monthly):
- $21 SDY (ETF - 1.77a>2.76a - 0.03%)
- $6 GE (0.28q>0.31q - 0.01%)
- $7 FR (0.71q>0.72q - 0.01%)
- $1 O (0.136125m>0.13675m - 0.00%)
- $6 CNI (correction .01%)
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Linked here is a PDF copy of my detailed analysis of General Electric Company (GE) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: General Electric Company (GE) is a diversified industrial corporation.
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 and 4.) Graham Number. Of the four valuations listed above, GE is only trading at a discount to 3.) Avg. P/E Price. If I exclude the high and low valuation, and average the remaining two valuations, GE is trading at a 32.8% premium. A Star is deducted due to the high premium.
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 and 5.) Payout 15% of avg. GE only earned one Star in this section for 3.) above - it has grown dividends for at least 10 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. and 2.) Years to >MMA. GE did not earn any Stars in this section. It will take 10 years before GE's dividend earnings are equal to that of a MMA earning 5.11%.
Other: GE has long been considered one of the best managed companies in the U.S.
Conclusion: GE earned no Stars in the Fair Value section, a net of zero Stars in the Dividend Analytical Data section and had no Stars in the Dividend Income vs. MMA section for a net total of Zero Stars, which rates it as a 0-Star Avoid stock. This looks like a pretty clear cut decision on what to do with this stock, at least it was for me. I added to my position in GE last week! I will explain why in the third post in this series.
Disclaimer: As always this is only my opinion and you should not rely on it. 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 own shares of GE.
What are your thoughs on GE?
This post is the second in a three part series. [First Post]
Recent Stock Analyses:
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The decrease in RY was due to currency conversion resulting from a strengthening U.S. dollar compared to the Canadian dollar.
Once again it is time for a goals/progress update. November brought more dividend cuts, but I am pleased to say that my annualized dividend income still managed to eek out an increase for the month. This kept alive the string of 12 consecutive months of increases dating back to December 2007 when I began tracking it. December 2008 could be a challenge to keep the string going. Several stocks that I hold could eventually cut their dividend.
My goals were defined in this December 1, 2007 Investing Goals post. Below is an updated version of the table found in the original post.Description Dividend
Income
AnnualizedYield
on Cost2027 Goal 110,000 20.00% 2017 Goal 30,000 10.00% 2008 Goal 4,000 4.90% December/2007 3,054 5.00% Purchases YTD 4,187 1.01% Div. Changes YTD 28 0.06% Sales YTD (1,687) -0.56% November/2008 5,582 5.51% Purchases 951 0.46% Div. Changes (18) -0.02% Sales (843) -0.31% October/2008 5,492 5.38%
The above information covers the current month and year-to-date through the current month.
Click here for a Detailed Historical Progress Table.
For the month, annualized dividend income increased $90, and Yield on Cost (YOC) increased 0.13%. These changes were driven by new purchases, dividend changes and sales. Let's examine each of the these categories:
Purchases: The $951 increase in annual dividend income and 0.46% increase in YOC related to the following purchases (yield at the time of purchase):
In November, I had higher than normal funds to invest due to the sale of the two stocks described below. All the above purchases, except CAT and KO increased my YOC. As noted in earlier updates, I generally expect YOC to drop each month since most new investments will yield less than my current YOC, and dividend increases will not be sufficient to offset it.
Since both of the securities sold were in my risky category, I was comfortable spreading the funds over several risky investments (CTL, NNN, VNQ and ETO).
Dividend Changes: The ($18) decrease in annual dividend income and (0.02%) decrease in YOC related to the following dividend changes (a=dividend stated in annual terms, q=quarterly, m=monthly):
That's it for this time. The next monthly progress update will be on Saturday, January 3rd. On Saturday December 27th, I plan to update my goals including a goal for 2009.
(Photo: sanja gjenero)
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Increasing dividends over time will pull up the share price of a stock. High yield and regular dividend growth gives income investors the most consistent gains out of any strategy. REITs like the five in today’s article can play a key role in those consistent returns. The strategy of buying shares of companies that will produce above average dividend growth rates should produce above average total returns through both the up and the down cycles in the stock market.
One group to start with is companies that have announced significant increases in the past year. This can be an indication that management believes the growth is sustainable. Then you can dig into current financials and management guidance to make your own judgement concerning future dividend increase rates. Here are five REITs that have announced big dividend boosts over the last 12 months: Hudson Pacific Properties Inc (HPP), First Industrial Realty Trust, Inc. (FR), PS Business Parks Inc (PSB), Empire State Realty Trust Inc (ESRT) and American Tower Corp (AMT).
Source: InvestorPlace
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Linked here is a PDF copy of my analysis of Citigroup Inc. (C) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Citigroup, Inc., a multibank holding company, provides various financial services to customers in the United States and internationally.
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 and 4.) Graham Number. Grand Slam Homerun! C is trading at a discount to ALL four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, C is trading at an astounding 46.7% discount. C gets a Star for being fairly valued.
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 and 5.) Payout 15% of avg. C scored a double in this section, earning 3 of the 4 available Stars, missing out only on 4.) above. Also, C failed the 5.) payout test since it's latest full-year payout % was 15 points (15%) higher than the latest 10-year average.
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. and 2.) Years to >MMA. Yet another strong performance for C. It earned the maximum two Stars available in this section.
Other: C, like most large banks, has suffered as a result of the sub-prime meltdown. I will not rehash it here today.
Conclusion: C earned one Star in the Fair Value section, a net of two Stars in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a total of Five Stars, which rates it as a 5-Star Strong Buy. Am I buying? No way, I have recently sold! I will explain why in post three of this series.
Disclaimer: As always this is only my opinion and you should not rely on it. 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 own shares of C in my IRA.
What are your thoughts on C? Are you buying, selling or holding?
This post is the first in a three part series.
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