Dividends4Life: February 2008

Dividends4Life: February 2008

Weekly Carnival and Article Review - Feb. 29, 2008

Posted by D4L | Friday, February 29, 2008 | carnival | 4 comments »

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: Rev-up Your Portfolio With Asset Allocation
Festival of Stocks published: Dynamic Dividend Investing - Feb/08 Update

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

Father Sez presented How I intend to help my daughters secure jobs they would like - Part 1
I’ve Paid For This Twice Already presented Perfection is the Enemy of Progress
The Honest Dollar presented Avoid the Wealth Effect
Contrarian Value Investing presented 5 Defining Moments In Value Investing History
Dividend Money presented 10 Commandments of Value Investing
Monevator.com presented The secret to investing when stock markets are falling

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

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My Dirty Little Secret

Posted by D4L | Thursday, February 28, 2008 | commentary | 6 comments »

What is your single largest asset?

For some reason having my house referred to as "my single largest asset" always grated me. I guess it was because the people that made that statement usually were trying to sell me something I really didn't want.

When one of my holdings finally exceeded the value of my house, I took great pleasure in that. However, this holding kept growing and growing and I couldn't do anything about it. Normally, that would be a good thing, but not necessarily in this case. That holding was my employer's company stock.

I have never purchased a single share of my company's stock. I have accumulated it through my company's 401(k) matching contribution and long-term incentive awards (stock options, performance shares, restricted stock, etc.) Below are the percentages of my company's stock to my total portfolio for the last five years (at December 31st):

2003 35%
2004 32%
2005 40%
2006 46%
2007 42%

Early 2007 my company's stock hit its all-time high. Applying that price to my year-end portfolio the percentage would have been 55%! I don't have the data to verify, but I suspect the percentage may have been higher earlier in the year. My current weighting is 44%. Even though my company's share price has declined since 12/31/2007, this was more than offset by several layers of stock options vesting on 1/1/2008 and last week's issuance of performance shares.

How did I get in this situation? Below are the circumstances that led me here:

Until a few years ago, employees were not allowed to move their 401(k) company-match out of company stock.
Given my position in the company and access to material non-public information, I am considered an insider, thus I can only trade in legally prescribed windows (usually four per year).
For much of the last five years I was prohibited from trading during these window due to being in possession of material non-public information relating to acquisitions and divestitures.
Greed and inertia. My company's stock usually outperforms the S&P, I had become complacent in letting it grow over the years unchecked.

As noted in the Bankrate.com article "Too much company stock in your portfolio?" most experts recommend having no more than 15-25% of your company's stock as a percentage of your total portfolio. What am I going to do about this?

I spent 20+ years getting into this situation. Here is my 5-year plan for correcting it. I plan to systematically lower my exposure to my company's stock to these target percentages:

2008 40%
2009 35%
2010 30%
2011 25%
2012 20%

While my trading window is open, I will take my first step today and take 1/4th of what is needed to get me to a 40% allocation by year-end. I will continue to do this each quarter until year-end.

I am curious, what percent of your total portfolio is your company's stock?

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Tracking Yield On Cost

Posted by D4L | Wednesday, February 27, 2008 | models | 0 comments »

As noted in my articles Yield on Cost: Measuring for Success and Investing Goals, I consider Yield on Cost (YOC) an important metric. As such, I track it on each of my individual dividend income investments.

In the article The Winning Score - Part 2 of 2, I extracted from my two massive financial spreadsheets a sample model [it is linked on the tools page as D4L-Portfolio.xls] from the portfolio section. This model contains several elements worthy of discussion. Today we will focus the Yield On Cost (YOC) calculation.

YOC is tracked in columns Q and R. Rows 1, 2 and 3 provide a color-coded key for your reference. Cell Q11 contains the investment's most recent yield, R11 provides a weighted-average YOC for all the shares of the investment held.

Moving down one row, cell Q12 displays what the BAC's yield was on 4/22/2005, when I purchased 34 shares. In this case it was 4.01%, based on a quarterly dividend of $0.45, as shown in cell R13. Since I purchased BAC on 4/22/2005, the quarterly dividend has increased to $0.64 per share. Cell R12 contains the YOC for the 4/22/2005 purchase. You can see the dramatic effect of the three dividend increases, taking the initial yield of 4.01% to a 5.71% YOC.

In cells Q14, Q20, and Q27, you can see BAC has had some impressive dividend increases of 11.11%, 12.00% and 14.29%, respectively. On the date of each subsequent purchase of BAC, the per share price and current yield (col. Q) were higher than my initial purchase. This means the dividend per share was rising faster than the share price - From 04/22/2005 to 07/05/2007 the share price increased 10.8% while the dividend increased 42.2%.

The date in cell A1 has been hard-coded to =DATE(2008,2,4). If you decide to use some variation of this model, you will want to change the formula in cell A1 to =NOW(). This will populate the cell with the current date, which in turn will constantly update the YTD and LTD IRR calculations.

As always, I hope you find this model entertaining and useful.

Disclaimer: This model is for illustrative and educational purposes only. The author and Dividends4Life makes no claims or assertions as to the model's accuracy, completeness, appropriateness of use, or any other claim or assertion. You should not rely on this model or base any financial decisions on it.

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Morningstar Dividend Leaders Index

Posted by D4L | Tuesday, February 26, 2008 | commentary | 0 comments »

Recently a reader left a comment noting that I should consider First Trust Morningstar Dividend Leaders Index (FDL). My initial review of it was promising. Below is a description from Morningstar's FAQ web page:

The Morningstar Dividend Leaders Index captures the performance of the 100 highest yielding stocks that have a consistent record of dividend payment and have the ability to sustain their dividend payments. Stocks in the index are weighted in proportion to the total pool of dividends available to investors.

FDL began trading on 3/15/2006, thus does not have a lot of history. Below is its dividend history:

21-Dec-07 $ 0.263 Dividend
21-Sep-07 $ 0.220 Dividend
21-Jun-07 $ 0.200 Dividend
23-Mar-07 $ 0.200 Dividend
21-Dec-06 $ 0.200 Dividend
25-Sep-06 $ 0.200 Dividend
23-Jun-06 $ 0.200 Dividend

When comparing FDL to my ETF/closed-end income investments for the period of 3/15/2006 (when FLD began trading) to 2/23/2008, the performance ranking were as follows:

Note that VYM and AOD's inception date is after FDL's (shown in parenthesis). For these investments, the relative performace calculation is based on the comparative time-frame since their inception.

Based on back-testing through 12/31/2007, the Dividend Leaders Index underperformed the S&P 500 in the 1, 3 and 5 year periods, but the index outperformed the S&P 500 in the 10 year period. I was troubled to see just how far the Dividend Leaders Index underperformed the S&P in the 1 year period (-10.24% vs. 5.49%).

For now, FDL is one that I continue to evaluate from the sidelines.

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Stock Analysis: Procter & Gamble Co. (PG)

Posted by D4L | Monday, February 25, 2008 | analysis | 3 comments »

Linked here is a PDF copy of my analysis of Procter & Gamble Co. (PG) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: The Procter & Gamble Company (P&G) is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries.

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. PG is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuation, and average the remaining two valuations, PG is trading at a 12.9% premium. Since PG is trading at a price in excess of a 5% premium, a Star is deducted.

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. PG earned Stars in 3.) Years of Div. Growth above - it has increased its dividend for 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. PG did not earn any Stars in this section. In fact, one Star was deducted since the NPV MMA Diff. was ($900) negative. This means for every $1,000 invested, on a net present value basis (NPV), you would be $900 better off by investing in a MMA at earning 4.61%.

Other: PG is a well-managed company that produces consumer staples. PG's ability to consistently grow its dividend over different economic cycles has made it a staple in most dividend investors portfolio.

Conclusion: PG lost one Star in the Fair Value section, earned one Stars in the Dividend Analytical Data section and lost one Stars in the Dividend Income vs. MMA section for a total of Minus-One Stars, which is one below my scale's floor of zero, which rates it as a 0-Star Avoid stock.

PG is one of those Blue-Chip stocks that I would love to have in my portfolio, but not at this price. Using my D4L-PreScreen.xls model I determined that the dividend growth rate would have to increase to 11.7% for PG's NPV of MMA Differential to reach $1,000. Alternatevely, the share price would have to fall an additional 18% for PG's NPV of MMA Differential to reach $1,000. Near-term, I see neither happening. I will continue to monitor PG for buying opportunities.

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 do not own shares of PG (0.0% of my Income Portfolio).

What are your thoughts on PG?

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Coming Up on the D4L Channel - Feb/24/08

Posted by D4L | Sunday, February 24, 2008 | tease | 0 comments »

We've seen Rocky and the Johnson boys rise up and prevail against insurmountable odds. Could another comeback kid step into the limelight and claw his way back to prominence? Only one way to find out... Stay tuned.

Making her return this week is the vivacious super-model Excel. We always look forward to her calculated enchantment.

It's going to be a memorable week. Don't risk missing a minute of it. You can have it all packaged and delivered directly to you by clicking here and subscribing to the D4L Channel.

While waiting for this week's feature presentations, you may want to tune in to a few of these classic episodes:

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Stock Analysis - Additional Information

Posted by D4L | Saturday, February 23, 2008 | analysis, process | 0 comments »

In the past, I have described in depth how many of the items in my stock analysis are calculated. In some instances, such as the dividend growth rate, I have provided models that allow the reader to see and duplicate the calculation found in my stock analyses.

I have made passing references that all the quantitative calculations in the attached PDF file are totally mechanical, including the final 1-5 Star ratings. This was well illustrated in the Sometimes Things Aren't As They Appear series, where the quantitative analysis ranked C as a 5-Star Strong Buy, but at the time I was avoiding the stock. In the same series, I reviewed GE and the quantitative analysis ranked it a 0-Star Avoid stock, yet I was adding to my position.

As noted in the post, a Quantitative Analysis is mechanical and inherently driven by historical results, while a Qualitative Analysis is more subjective and is the most difficult part of the overall evaluation process. Simply put, a Qualitative Analysis investigates the why and how of decision making (forward-looking), as compared to what, where, and when of quantitative research.

The bottom line: All stock analyses presented are quantitative, including the Star recommendation, and are backward looking. They assume the stock will perform in the future as it has in the past. This is generally never true. I will sometimes interject some Qualitative thoughts, which are my opinion only, but none of this should be considered a buy or sell recommendation. As always, before buying or selling a security, you should do your own research and reach your own conclusion.

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Weekly Carnival and Article Review - Feb. 22, 2008

Posted by D4L | Friday, February 22, 2008 | carnival | 2 comments »

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: It Was An Odd Odyssey
Festival of Stocks published: Stock Analysis: Johnson & Johnson (JNJ)
Carnival of Everything Finance published: The Winning Score - Part 2 of 2
Carnival of Financial Planning published: Charlie Munger’s 10 Rules for Investment Success
The Dividend Guy presented my Stock Analysis of RY as a guest post

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

Dividend Growth Investor presented Dollar Cost Averaging
Million Dollar Journey presented Ask the Readers: Talking about Money?
My Two Dollars presented You Are Not Your Stuff, Your Stuff Is Not You
Retire Happy presented 9 Retirement Killers? Try Only Three!
The Simple Dollar presented Nine Techniques for Developing Patience
The Dividend Guy presented Watch Out For These 6 Slick Mutual Fund Marketing Tricks
Become Successful presented Can Success Make You Happy?
fivecentnickel.com presented Lessons Learned From Average Net Worth Values
The Digerati Life presented 5 Hot Tips for First Time Investors

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

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Investment Dating Before Marriage

Posted by D4L | Thursday, February 21, 2008 | commentary, process | 4 comments »

What is the best way to begin accumulating a new security? There are probably as many approaches as there are investors. I have seen where some people jump in and immediately purchase the entire block needed to complete their asset allocation. While others use a more gentle approach of buying-in at predetermined amount and time. As an example, I have seen where some will buy 1/3 of the desired weightings every four months, so that they are fully invested in one year.

The approach I take is less mechanical. As noted in some past articles (Dynamic Dividend Investing, It Was An Odd Odyssey, Is It Time To Upgrade Your Portfolio?, etc.), I like to initiate a small position in a company (or fund) to get to know it better - kind of like dating before marriage. By having a stake in the company, this forces me to get to know the investment, its management and its behavior in the market. If I like what I see, I usually purchase another small block; otherwise, I end the relationship. Over time, this dating process can lead to full commitment (marriage) where the investment is an integral part of my portfolio.

In most instances, I will wait at least three months between purchases of additional shares. In addition to learning more about the company, waiting three months allows time to see the next dividend declaration. Usually between nine months and a year, I determine if this is a company I want to make a long-term commitment to. Once I make that determination, I aggressively increase its allocation to my desired allocation level.

How do you initiate a position in a stock?

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Rev-up Your Portfolio With Asset Allocation

Posted by D4L | Wednesday, February 20, 2008 | classics, commentary, process | 5 comments »

Asset allocation describes how an investor distributes their investments among various classes of investment options (e.g., stocks and bonds). Most successful investors will tell you that asset allocation is the most important decision you make in determining how well your portfolio performs. As noted in my recent article Charlie Munger's 10 Rules for Investment Success, he pointed out "Allocate assets wisely: Proper allocation of capital is an investor's No. 1 job."

The conceptual foundation of asset allocation is the premise that the best-performing asset(s) will vary from year-to-year and is not easily predictable. By spreading your investments across various asset classes, some will be over-performing while under-performing - Don't put all your eggs in one basket. With fixed percentages on each of the asset classes you reallocate out of the better performing assets into the under-performing assets - Buy Low, Sell High.

Examples of asset allocation classes include, by asset type: Cash, Bonds, Stocks, Real Estate, Currencies, Natural Resources, Precious Metals, Collectibles, etc.

When looking at equities they can be sub-divided into additional asset classes grouped by:

Size such as: Large-Cap, Mid-Cap and Small-Cap
Style such as: Growth, Blend and Value
Sector such as: Financial, Consumer, Industrial, Health-care, etc.
Other such as: REITS, International, Emerging Markets, Life Settlements

Individuals determine which mix of assets to hold in their portfolio based largely on their time horizon and ability to tolerate risk. Time horizon is the expected period of time (months, years, or decades) you will be investing to achieve a particular financial goal. Risk tolerance is your ability and willingness to lose some or all of your original investment in exchange for greater potential returns. When it comes to investing, risk and reward are often directly related. Over 20 years you will likely not lose any money investing in a federally insured money market account (MMA), but you will likely earn less than you would in an S&P index fund. Though in any given year the index fund could lose money, and over the 20 years will likely have several years in which it loses money - No pain, no gain.

There are a lot of tools available on the web to help you determine your asset allocation. Here are three, one very simple and the other two a little more comprehensive:

Once your asset allocation is set, it is not changed often. The most common reason for changing your asset allocation is a change in your time horizon. As you approach your investment goal, such as retirement, you may want to reevaluate your risk profile. It is important to note that savvy investors typically do not change their asset allocation based on the relative performance of asset categories.

As described in my article "Process Overview and Asset Allocation", I currently allocate assets broadly by the type of investment (mutual funds, ETFs, dividend stocks) with some attention given to sectors within my dividend stocks. I am currently working on refining my process and will discuss this in future posts.

If you are interested in learning more about asset allocation, The U.S. Securities and Exchange Commission (SEC) has a good primer on asset allocation titled "Beginners' Guide to Asset Allocation, Diversification, and Rebalancing".

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Dynamic Dividend Investing - Feb/08 Update

Posted by D4L | Tuesday, February 19, 2008 | commentary | 0 comments »

Back in December, I posted an article titled "Dynamic Dividend Investing" that discussed a strategy that allows you maximize annual dividend income while taking into account the effect it will have on your taxes. In the article I focused on Alpine's Total Dynamic Dividend Fund (AOD), a closed-end fund that employs this strategy.

In keeping with this week's high-flier theme, I thought it would a good time to check in and see how AOD has done. After my initial review, I decided to purchase a small quantity to get better acquainted with AOD. My initial purchase of AOD was at $18.93/share on 12/7/2007. Since then the shares have dropped 11% to $16.86 (as of 2/15/2007). When you take into account the dividends paid, including the December 2007 special dividend of $0.54/share, AOD's decline is 6.80%.

On February 11th, AOD announced that it would pay $0.18/share monthly dividend for March, April and May. It has paid $0.18/share since May 2007. My yield on cost (YOC) is 11.4%. With the recent decline in share price, AOD current yield is currently 12.8%. I would rate AOD as my 2nd riskiest holding. However, at 1.45% of my dividend income portfolio, I feel comfortable slightly increasing my position in March.

It will be interesting to see if AOD increases its dividend in May. I'll report back then.

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Stock Analysis: American Capital Strategies, Ltd. (ACAS)

Posted by D4L | Monday, February 18, 2008 | analysis | 2 comments »

Linked here is a PDF copy of my analysis of American Capital Strategies, Ltd. (ACAS) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: American Capital Strategies, Ltd. is a principal investment firm specializing in management and employee buyouts, recapitalization, special situations, middle market, and growth capital investments.

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. ACAS is trading at a discount to 2.) and 4.) above. If I exclude the high and low valuation, and average the remaining two valuations, ACAS is trading at a 2.0% premium. ACAS gets a Star for being fair 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. ACAS earned Stars in 3.) and 4.) above.

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. ACAS earned a Stars for 1.) and 2.) above. The NPV MMA Diff. of $129, 403 is astounding.

Other: As noted in ACAS's February 13, 2008 news release, the company is forecasting a 13% dividend increase in 2008. I used my D4L-PreScreen.xls model to run some sensitivities. By dropping the dividend growth rate to 0.5%, the NPV MMA Diff. decreased to $24,771, which is still quite robust. Using the company's projected dividend of $4.19 for 2008, the NPV MMA Diff. increased to a jaw-dropping $156,128.

Conclusion: ACAS earned one Star in the Fair Value section, 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. In the near-term, I will continue to add to my position in ACAS.

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 ACAS (2.5% of my Income Portfolio).

What are your thoughts on ACAS?

Recent Stock Analyses:

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Up Next on The D4L Channel....

Posted by D4L | Sunday, February 17, 2008 | tease | 0 comments »

Some are born to live life on the edge. This high-flyer knows no fear! He can be as steady as the old masters, yet still produce a chest-thumping, testosterone-laden, double-digit adrenaline rush. You better check your fears at the door, because this is not for the faint of heart. But for those willing to strap it on... prepare for the paradoxical ride of your life!

Are you looking for excitement in your life? You can have all the exhilaration you need delivered directly to you by clicking here and subscribing to the D4L Channel.

While waiting for this week's thriller. You may want to tune in to a few of these classic episodes:

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Updating the MMA Rate

Posted by D4L | Saturday, February 16, 2008 | admin, analysis, tools | 0 comments »

You may have noticed the Money Market Account (MMA) rate that I am using in my stock analyses has been dropping. It ended the year at 5.11% and is currently 4.61%. As noted in my Dividend Income vs. MMA post, I have historically used the highest rate of the MMAs that I personally own (realistic opportunity cost).

Ideally, the correct rate would be the effective rate over the next 20 years. I think using the current rate as a proxy for the next 20 years is fraught with errors. In periods of high rates, certain investments would be precluded due to the above average rate; while in periods of low rates, undeserving companies would potentially qualify as a buy.

Long-term I suspect the rate will average around 5%, but I currently have no empirical evidence to support this. The available historical rates are "national averages", which are substantially lower than the actual rates I have personally experienced.

Given all the above, I have opted to build my own average going forward. Since 2007 ended with a rate of 5.11%, which is close to estimated long-term rate, I will use it as my first data point in building a long-term average. To minimize variability in the early years, I will limit swings in the rate to 0.5% (50 basis points) from the prior year's calculated average. Thus, applying this methodology will define a 2008 range of 4.61% to 5.61%.

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Weekly Carnival and Article Review - Feb. 15, 2008

Posted by D4L | Friday, February 15, 2008 | carnival | 2 comments »

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: Tech Stocks in a Dividend Portfolio?!
Festival of Stocks published: The Winning Score - Part 1 of 2

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

Free Money Finance presented Struggling on a Six-Figure Income
FIRE Finance presented Investing - The Mistake Of Timing The Market
The Digerati Life presented Why Most Investors Don't Make Money In The Stock Market
The MoneyGardener presented What Makes a Stock Defensive? The Ultimate Defensive Stock as a guest post on The Dividend Guy
Quest For Four Pillars presented Why ETFs Are Better Than Mutual Funds

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

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Charlie Munger's 10 Rules for Investment Success

Posted by D4L | Thursday, February 14, 2008 | commentary | 4 comments »

Charlie Munger, Warren Buffett's friend and partner, is quite an investor in his own right. A recent Motley Fool article "Charlie Munger's 10 Rules for Investment Success" details Munger's 10-step investment checklist from his book Poor Charlie's Almanac. Here are the steps:

Measure risk: All investment evaluations should begin by measuring risk, especially reputational.

Be independent: Only in fairy tales are emperors told they're naked.

Prepare ahead: The only way to win is to work, work, work, and hope to have a few insights.

Have intellectual humility: Acknowledging what you don't know is the dawning of wisdom.

Analyze rigorously: Use effective checklists to minimize errors and omissions.

Allocate assets wisely: Proper allocation of capital is an investor's No. 1 job.

Have patience: Resist the natural human bias to act.

Be decisive: When proper circumstances present themselves, act with decisiveness and conviction.

Be ready for change: Accept unremovable complexity.

Stay focused: Keep it simple and remember what you set out to do.

I am sure each of us can relate to one or more of these. I am particularly drawn to #3 and #5, but #8 is tops with me. I am driven to find that jewel in the rough that was missed by the herd. You can't beat the head by following it!

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It Was An Odd Odyssey

Posted by D4L | Wednesday, February 13, 2008 | commentary | 4 comments »

Snake-bit, Jinxed. Murphy's Law, et al. Our language is full of terms to describe bad fortune and things that continue to go wrong. Ironically, I couldn't think of a lot of descriptive words or phrases to described a series events when things just went right. This post is about the latter.

The last two days we have looked at JNJ and yesterday I revealed that I initiated a position in the stock last week, but I'm getting ahead of myself, let me start from the beginning.

Residential construction has taken it on the chin for the last few years. Beginning early last year, I began watching D.R. Horton (DHI), the largest U.S. home-builder, looking for a good entry point. DHI had a phenomenal dividend record after being flat in 1998. Its dividend growth had been no less than 20% per year since 1999.

On 11/12/2007 I initiated a position in DHI at $12.31, near its 12-month low. Based on the above, I used funds designated for dividend investing, but I really was looking at it as a value play. On 12/12/2007, I doubled my position.

As I do each year end, I reviewed the stocks I held, their performance and why I held them. DHI was not a stock I really felt great about, but I opted to continue holding it even though it had now fell to around $11. I do not watch my investments on a daily basis, so I forgot about DHI.

Last week I noticed they announced a flat dividend for the 6th quarter in a row. Then I began to question whether this was really a good dividend investment so I checked the price. To my amazement, it was well over $16 - I was up over 25% in absolute terms. Not wanting to lose this gain, I entered a stop loss at $16, which would preserve a gain at a little over 20%. By the end of the day the stop loss had executed resulting in a 21.5% gain (175.5% annualized).

Now that I had cash in my account, the question was "what to buy?" There are a handful of top tier stocks that I am always looking for an entry point. JNJ was one of those stocks. As noted in yesterday's post, I came to the conclusion this was a good time to initiate a position in JNJ. I used approximately 40% of the proceeds to purchase JNJ with the remaining 60% split between two REITs.

Having so many things fall the right way did make for an odd odyssey. Lest I grow high-minded, there is balance in the universe - all three stocks have since fell. :)

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JNJ vs. JNJ

Posted by D4L | Tuesday, February 12, 2008 | analysis, commentary, models | 6 comments »

In yesterday's Stock Analysis on JNJ, I stated that for some time now, I have been looking for an entry point to purchase JNJ. The overall rating of two Stars has not changed since my first review on 11-21-2007. However, many of the metrics I look at have changed and here's a break-down the differences between now and then:

Price:
11-21-2007: $67.75
02-11-2008: $62.03 (Good!)

P/E:
11-21-2007: 19
02-11-2008: 17.3 (Good!)

Yield:
11-21-2007: 2.48%
02-11-2008: 2.64% (Good!)

Avg. P/E Price:
11-21-2007: Unfavorable
02-11-2008: Favaorable (Good!)

Years to MMA:
11-21-2007: 14
02-11-2008: 11 (still one more than I prefer as a maximum, by 1 year)

NPV MMA Diff:
11-21-2007: $471
02-11-2008: $2,517 (More than 5 times the November 21st amount)

Since new dividend data was available, I used my model D4L-PreScreen.xls to update some of the above analysis. I input the following data:

Symbol: JNJ
Year: 2007
Current Yield: 2.64%
Calc. Div. Growth: 11.0%
MMA Yield: 4.86%
Max Div. Growth: 20.0%
Override Div. Gro: 0.0%

Dividends:
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
1.62 1.46 1.28 1.10 0.93 0.80 0.70 0.62 0.55 0.49 0.43

The calculated NPV MMA Diff only changed slightly. I determined that it would take a dividend growth rate of 11.7% to get the Years to MMA down to 10 (the maximum I like to see). Since I use a conservative method of estimating the dividend growth rate, a 11.7% is not unrealistic given the 11-year average is 14.0%. Using the Override Div. Gro. field I entered 14.0% to see what that did to the NPV MMA Diff - it increased to $8,132. I entered 5,000 in cell C25 then pressed the button in D12 to backsolved for the growth rate needed to give me a NPV MMA Diff of $5,000. It was 12.6% which is not unreasonable.

My conclusion: Buy. Like General Electric Company (GE), JNJ is one of those boring predictable companies that finds its way into most every dividend investor's portfolio. JNJ is a well-managed, well-run company and has been that way for decades. I like owning companies like JNJ and GE because it offsets some of my more riskier investments, but I will not buy in at just any price. I purchased a small block of JNJ and will continue to watch it for opportunities to add to my position.

Full Disclosure: At the time of this writing, I proudly own shares of JNJ.

Tomorrow: What did I sell to buy JNJ and why?

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Stock Analysis: Johnson & Johnson (JNJ)

Posted by D4L | Monday, February 11, 2008 | analysis | 10 comments »

Linked here is a PDF copy of my detailed analysis of Johnson & Johnson (JNJ). Below are some highlights from the above linked analysis:

Company Description: Johnson & Johnson engages in the manufacture and sale of various products in the health care field 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. JNJ is trading at a discount to 1.), 2.) and 3.) of the four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, JNJ is trading at a 12.9% discount. JNJ 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. JNJ only earned one Star in this section for 3.) above - it has grown dividends for 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. JNJ did not earn any Stars in this section. I would have to own JNJ for 11 years before it would pay what I am currently earning in a MMA, and after 20 years the net present value of what I earned in excess of the MMA would only be $2,517 per $1,000 invested.

Other: JNJ is a well run company that has a long track record of raising dividends. It is a member of S&P Dividend Aristocrats and The Broad Dividend Achievers. JNJ sells products that are, for the most part, immune from economic cycles.

Conclusion: JNJ earned one Star in the Fair Value section, one Star in the Dividend Analytical Data section and no Stars in the Dividend Income vs. MMA section for a total of Two Stars, which rates it as 2-Star Weak. For some time now, I have been looking for an entry point to purchase JNJ. The overall rating of two Stars has not changed since my first review on 11-21-2007. However, many of the metrics I look at have changed. Was it enough to make me buy? Check back tomorrow and I will break-down the differences between now and then and reveal whether I bought or walked.

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 may have owned shares of JNJ.

What are your thoughts on JNJ?

Recent Stock Analyses:

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This Week on the D4L Channel...

Posted by D4L | Sunday, February 10, 2008 | tease | 0 comments »

It looked like he was down. It looked like he was out, washed up, never to be seen again. This week on the D4L Channel it is the epic story of the steady old master trying rise again, while the faddish construction worker refuses to move out of his way. It's a war of wills. Who will win? Lose? Or could everyone come out ahead? Stay tuned...

You can't TiVo this story, or any of the others on the D4L Channel. There is only one way to ensure you don't miss a one them, and that's by clicking here and subscribing to the D4L Channel.

Thanks for watching the D4L Channel!

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Like Milk, Stock Analyses Have a Shelf Life

Posted by D4L | Saturday, February 09, 2008 | admin, analysis | 0 comments »

What is the shelf life of a stock analysis? It can be anywhere from a few seconds to days, months or even a year in some extreme circumstances. Dividends4Life has been up and running for a little over 3 months with my first stock analysis posted on 11-03-2007. I considered just deleting the old analyses after they reached a certain age, but decided it might be interesting to see how a stock's metrics change over time.

I don't plan to review the validity of each posted stock analysis. Instead, it is my intention to periodically move the older analyses to an archive page. To that end, I have created an archive stock analysis page and I will move the oldest analyses to this page at the beginning of each month. The plan is to have the most recent two months of analyses available on the main analysis page, with a link on that page to the older analyses.

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Weekly Carnival and Article Review - Feb. 8, 2008

Posted by D4L | Friday, February 08, 2008 | carnival | 1 comments »

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: Passing the Torch - Part 1 of 2

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

My Dollar Plan presents Investment Snowflaking
Lazy Man and Money presents Your Personal Finance Football Team
Dividend Money presents Understanding Mortgages
The Div Guy presents Tracking Net Worth
Quest For A Million presents The Paradox of Thrift
Five Cent Nickel presents 12 Commonly Missed Tax Deductions

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

Finally, as we wind down the week-long celebration of winning and champions, I would be remiss not to congratulate the New York Giants on their Super Bowl win. Also, I want to recognize my beloved Crimson Tide. This past Wednesday was National Signing Day. On this day high school seniors sign the papers declaring which college they will play football for. As mentioned in The Winning Score - Part 1 of 2, our society competes in and scores virtually everything, and National Signing Day is no exception. I am pleased to report that the University of Alabama's signing class finished #1 in both major services that track high school recruiting. Now let's go out and get it done on the field. Roll Tide!

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The Winning Score - Part 2 of 2

Posted by D4L | Thursday, February 07, 2008 | commentary, models | 0 comments »

As discussed in yesterday's post, one of the metrics that I use to score an individual stock's performance is Internal Rate of Return (IRR). In simple terms, IRR is the interest rate you would need to earn to make the same money off of an interest bearing account assuming the same investment.

I have extracted out of my two massive financial spreadsheets a sample model [D4L-Portfolio.xls] from the portfolio section. This model contains several elements worthy of discussion, but today we will focus on how to calculate an IRR for an individual stock investment.

First some general notes. At the top of the Portfolio tab is a summary section were I summarize each investment on a single line. Within the summary section, the inputs are in columns H and L. Specifically for BAC the most recent price is entered in cell I7 and the annual dividend is entered in cell L7. In my spreadsheet these are linked to another tab where I cut and paste information from my MSN portfolio.

Go to cell Q31 if there is a #VALUE! or #NAME? error you likely do not have the the Analysis ToolPak add-in activated. For instructions on activating this add-in, please refer to the Analysis Toolpak Help tab within the spreadsheet. Once the add-in is functioning, the value in cell Q31 will be 0.72%.

Pressing [F2] with the cell pointer in cell Q31 reveals the following formula:

=XIRR(P12:P31,O12:O31)

The XIRR function calculates an IRR with uneven cash flows and periods - kind of the way life happens. The syntax for XIRR() is as follows:

XIRR(Values,Dates,Guess[optional])

Values: A series of cash flows with additions (purchases) of the security shown as positive, and reductions (including dividends) shown as negatives.

Dates: The date of the cash flow using the Excel Date(year,month,day) function.

Guess: your best guess at what the answer will be. This is optional and meant to speed up the calculation.

Cell Q31 calculates the life-to-date (LTD) IRR, while cell U31 calculates the year-to-date (YTD) return. These calculated values are also shown in cells F7 and E7, respectively. To get a feel for what will happen as the share price changes go to cell I7 and enter some values:

At $50 - YTD return = 601.45%; LTD Return = 7.79%
At $40 - YTD return = -26.98%; LTD Return = -4.69%

Note that in cells Q16, Q22 and Q29 I hardcoded the LTD return at that point in time. In cells U16, U22 and U29 I hardcoded the YTD return at the end of each year prior to rolling to the new year. This allows me to go back and quickly review the performance of each of my securities.

I hardcoded the date in cell A1 to =DATE(2008,2,4). If you decide to use some variation of this model, you will want to change the formula in cell A1 to =NOW(). This will populate the cell with the current date, which in turn will constantly update the YTD and LTD IRR calculations. To see the effect of time on the IRR, edit A1 to =DATE(2008,12,4). All other things being equal, this drops the YTD return to 0.49% and the LTD return to 7.56%.

As always, I hope you find this model entertaining and useful.

Disclaimer: This model is for illustrative and educational purposes only. The author and Dividends4Life makes no claims or assertions as to the model's accuracy, completeness, appropriateness of use, or any other claim or assertion. You should not rely on this model or base any financial decisions on it.

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The Winning Score - Part 1 of 2

Posted by D4L | Wednesday, February 06, 2008 | commentary, models, quotes | 0 comments »

In this week's celebration of winning and champions, I thought it would be appropriate to see what one of the NFL's most inspirational coaches had to say about winning:

If winning isn't everything, why do they keep score?
-- Vince Lombardi

There is a lot of truth in that statement. We live in a highly competitive world that extends well beyond the sports field. Employers are competing for the best employees so they can better compete for your business. A better business then allows them to compete in the financial markets for your investing dollars. As investors we pit one investment against another when deciding what to add to our portfolio and it shouldn't stop there. Once an investment makes it into your portfolio, it should continue to compete with other investments to keep its spot.

To compete you must keep score. One of the metrics that I use to score an individual stock's performance is Internal Rate of Return (IRR). The IRR is the discount rate that equates the present value of an investment's cash flow to its initial cost and subsequent investments and withdrawals. In simple terms, it is the interest rate you would need to earn to make the same money off of an interest bearing account assuming the same investment.

I have extracted out of my two massive financial spreadsheets a sample model from the portfolio tab that demonstrates how to calculate an IRR for an individual stock investment. Tomorrow I will post a link to the model and describe how to use it.

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Stock Analysis: LOW-Lowe's Companies, Inc.

Posted by D4L | Tuesday, February 05, 2008 | analysis | 3 comments »

Linked here is a PDF copy of my analysis of Lowe's Companies, Inc. (LOW) (alt.1, alt.2). 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 and 4.) Graham Number. LOW is trading at a discount in 3 of the 4 valuations listed above - 1.) Avg. High Yield Price, 2.) 20-Year DCF Price and 3.) Avg. P/E Price. If I exclude the high and low valuation, and average the remaining two valuations, LOW is trading at an astounding 55.9% discount. LOW 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. LOW earned 2 of the 4 available Stars in this section - 2.) Dividend Growth Rate and 4.) 1-Yr. > 5-Yr Growth. However, one Star was deducted since LOW has only grown its dividend for 3 consecutive years, leaving a net of 1 Star in this section.

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. LOW earned no Stars in this section.

Other: Over the last few years LOW has made significant stides to close the gap with HD. LOW has focused on understanding their customers as noted in this 2004 article "How Lowe's Hammers Home Depot".

Conclusion: LOW earned one Star in the Fair Value section, a net of one Star in the Dividend Analytical Data section, and no Stars in the Dividend Income vs. MMA section for a total of Two Stars, which rates it as a 2 Star-Weak stock.

LOW has got its shots in, scored several knock-downs and stunned the champion; but having flat dividends in 2005, 2003, 2002, 2000 and 1999, LOW just doesn't have the stamina to stand toe-to-toe with HD. In a unanioumous decision, the winner is HD. However, given LOW's performance over the last several years, a rematch is inevitable! Stay tuned...

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 do not own shares of LOW.

What are your thoughts on LOW?

Recent Stock Analyses:

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Stock Analysis: RY-Royal Bank of Canada

Posted by D4L | Monday, February 04, 2008 | analysis | 0 comments »

This article originally appeared on The Dividend Guy's Blog on February 17, 2008 as a guest post.
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Linked here is a PDF copy of my analysis of the Royal Bank of Canada (RY) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: Royal Bank of Canada (RBC) offers a range of banking and financial services in North America 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. RY is trading at a discount in 3 of the 4 valuations listed above - 1.) Avg. High Yield Price, 2.) 20-Year DCF Price and 3.) Avg. P/E Price. If I exclude the high and low valuation, and average the remaining two valuations, RY is trading at a 7.3% discount. RY 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. RY earned 2 of the 4 available Stars in this section - 1.) Rolling 4-yr Div. > 15% and 2.) Dividend Growth Rate. 1.) 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 (1998-2001, 1999-2002, 2000-2003, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%.

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. It was a home run for RY in this section earning both available Stars. RY's NPV MMA Diff. was an eye-popping $199, 376. That means if the historical dividend growth rate were to continue into the future, the NPV of RY's dividend income in excess of what could be earned on a 4.6% MMA over 20 years would be $199,376 per $1,000 invested.

Other: RY is a stock that I would likely have never discovered if it were my Canadian friends made as a result of blogging. The only blemish on RY's quantitative analysis is a dividend drop in 1999 ($0.29 from $0.30). With an after-tax writedown of C$160 million in October related to subprime debt-backed securities, it appears that RY's overall exposure to these risky assets is much less than the large U.S. banks.

Conclusion: RY earned one Star in the Fair Value section, 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.

The historical DCF value for RY was based on an 18.4% EPS growth rate and a 20% dividend growth rate. These will likely be difficult to sustain over the next 20 years. Assuming a pro-rata relationship between the EPS growth rate and the dividend growth rate, the current share price of $51.75 could be justified with a 12.1% EPS growth rate and a 13.1% dividend growth rate. At that dividend growth rate the NPV MMA Diff. would still be a sporty $20,308.

In summary, I have been buying RY and will continue to buy until its fundamentals change.

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 RY.

What are your thoughts on RY?

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Stock Analysis: HD-The Home Depot, Inc.

Posted by D4L | Monday, February 04, 2008 | analysis | 5 comments »

Linked here is a PDF copy of my analysis of The Home Depot, Inc. (HD) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: The Home Depot, Inc. operates as a home improvement retailer primarily in the United States, Canada, and Mexico.

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. HD is trading at a discount in 3 of the 4 valuations listed above - 1.) Avg. High Yield Price, 2.) 20-Year DCF Price and 3.) Avg. P/E Price. If I exclude the high and low valuation, and average the remaining two valuations, HD is trading at a jaw-dropping 43.3% discount. HD 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. HD earned 3 of the 4 available Stars in this section - 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate and 3.) Years of Div. Growth. Dividends will double every 5 years if they grow by 15%. A Star was earned for 1.) above since dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1998-2001, 1999-2002, 2000-2003, etc.)

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. HD earned 1 Star in this section for 1.) NPV MMA Diff. HD's NPV MMA Diff. was an impressive $81,874. That means if the historical dividend growth rate were to continue into the future, the NPV of HD's dividend income in excess of what could be earned on a 4.6% MMA over 20 years would be $81,874 per $1,000 invested.

Other: HD is the reigning champion of the home improvement super stores. However, it has recently taken some body blows from the economic downturn in housing and from its leading competitor, Lowe's. Many analysts are projecting 2008 to be a difficult year in this sector. A recurring criticism on HD has been poor customer service compared to its rival Lowe's. The company has taken steps to improve its customer service. Though I am a shareholder of HD, I am a customer of LOW - I continue to drive by a HD to shop at LOW.

Conclusion: HD earned one Star in the Fair Value section, three Stars in the Dividend Analytical Data section, and one Star in the Dividend Income vs. MMA section for a total of Five Stars, which rates it as a 5 Star-Strong Buy.

HD is expected to increase its dividend in an announcement later this month. I am currently treating HD as a "hold" pending its dividend announcement.

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 HD.

What are your thoughts on HD?

Coming up tomorrow in round 2, the contender: LOW-Lowe's Companies, Inc.

Recent Stock Analyses:

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The D4L Channel Celebrates Champions...

Posted by D4L | Sunday, February 03, 2008 | tease | 0 comments »

It may be Super Bowl Sunday on that other network, but here on the D4L Channel we plan to crown our own champion and celebrate winning all week...

Only two heavy-weights remain. The reigning world champion and the contender go head to head in a "man's more-power" bout this Monday and Tuesday.

Joining us in the studio Wednesday, we'll have in live digital print one of the all-time Super Bowl greats. He'll share his insights on winning and we'll apply it to dividend investing.

The average ticket price to the Super Bowl is more than $4,000. Save your money! For the price of dust in the desert, you can subscribe to the D4L channel by clicking here.

Stay with us, we're the D4L Channel!

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Progress Update - Jan. 2008

Posted by D4L | Saturday, February 02, 2008 | progress | 5 comments »

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%)

The USB purchase was the only one that raised YOC, but it was not enough to offset the other purchases. I continue to expect YOC to drop monthly since most new investments will yield less than my current YOC, and dividend increases will not be sufficient to offset it. The drop will be tempered with an occasional purchase of a high-yield security.

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%)

Sales: As discussed in my Stock Analysis: KO article, KO was no longer performing at the level I required. I opted to liquidate by position in KO during January. This resulted in a decline of dividend income of $27 and increased my YOC by 0.04%. Hopefully, there will not be much to talk about in this category in future posts.

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