Are You Ready for a Financial Emergency?

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You never know when a financial emergency will strike. Whether you lose your job, experience the fallout from a market setback, end up in the hospital, or a natural disaster comes calling, a financial emergency is never fun. And, of course, it can leave your money situation in a shambles.

If you want your finances to survive as best they can in the face of a financial emergency, you need to prepare ahead of time. Here are some ways to prepare for a financial emergency:

Build Your Emergency Fund

One of the essentials to being ready is having an emergency fund. Your emergency fund can help you through when you need help paying bills, buying food, or for other purposes. Create an adequate emergency fund, you will likely have what you need to get by.

Get Your Finances in Order

You stand a better chance of weathering financial disaster if your money is set to rights. Take some time now to fix your finances, and get everything in order. Know what credit card numbers to call if they are lost or stolen, know where your insurance information is, and make sure you know which bank accounts and investments accounts are accessible.

Keep important information in a safe place. One of the best places to keep important documents, such as birth certificates, investment account information, insurance policies, passports, and emergency credit cards is a waterproof fire safe. A small one can be especially helpful, since it’s easy to just grab it go.

Build Up Home Food Storage

Another good idea to prepare for financial emergencies is to build up home food storage. If you have food at home, you won’t be as vulnerable if you lose your job. You will need less money to buy food if you already have what you need. Additionally, food storage can come in handy in a pinch during a natural disaster or similar emergency.

Other important items to have ready include a 72-hour kit that you can take with you for food, water, and First Aid, as well as extra blankets, alternative heat or fuel, and other emergency preparedness items. You never know when a financial emergency will coincide with some other type of emergency, and you should be ready to provide for yourself in your home, as well as be ready to evacuate if necessary.

Now is the time to prepare for financial emergencies that can arise at any time. Carefully build your emergency fund and prepare in other ways for an emergency. If you start now, and build up a little bit at a time, you will have a better chance of making it through almost any financial emergency life offers.

Are You Prepared for Another Market Setback?

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When it comes to the markets, many investors feel as though the current state of affairs is going to last forever. However, this is not the case. In the short term, volatility is a reality. Plus, when it seems like nothing will stop a market from rising, that’s about the time when a crash comes in to wreak havoc with your portfolio.

It doesn’t have to be like that, though. How you respond to a market crash has a great deal to do with your attitude. It’s important that you prepare for what’s next. Even if you think that things are going to keep getting better, you still need to shore up your finances. Here are some things to keep in mind:

1. Are You Properly Diversified?

One of the things that you have to remember is that you can reduce your exposure to risk and falling markets if you are properly diversified. Diversification can help you do well when the markets are struggling because you have other investments that do well in such a climate. Look for ways to diversify your holdings to prepare for the possibility of a market setback.

2. Do You Have an Emergency Fund?

Following basically good financial principles is important when it comes to being ready for anything. One of these principles is building an emergency fund. You want to have a good emergency fund available. If your dividend income is cut due to market and economic conditions, you’ll need to make up the difference. An emergency fund is a must, since it can back you up as you wait for your portfolio to recover.

3. Do You Have Ready Cash to Make Purchases?

Another important thing is to be ready to take advantage of the situation. While many people live in fear of a market setback, others see these occasional market crashes and drops as a way to get ahead. It’s possible to pick up bargain investments. You can get more bang for your buck when you buy investments when they are “on sale.” If you think that the market is heading for a setback, freeing up some money can be a good idea. This way, you have some capital available to take advantage of any opportunities.

Bottom Line

The important thing, though, is that you are ready. Plan ahead. During the good times, you need to prepare. Live within your means, and prepare for setbacks. Market crashes are a reality, and that means that you need to be prepared for them.

Chris Johnson’s Favorite Dividend Stocks for a Recovering Market

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I usually keep CNBC on while I’m working during the day and yesterday I overheard a commentator saying one of my favorite things to hear, “We like dividend paying stocks.”

The analyst being interviewed was Chris Johnson, chief investment strategist for Johnson Research Group and Director of research JK Investment group.  He has over 20 years of experience specializing in technical sentiment analysis and options strategies.

Johnson believes the market is in the 2nd of 4 stages.  The first stage is when the market bottoms out which has already passed.  The 2nd stage is where the recovery has begun but investors are skeptical.  The 3rd and 4th stages are where the market accelerates to point where value investors start to sell off stocks and take profits.  So naturally Johnson thinks now is a great time to be putting money to work.  He also cited the all of the investment capital that still remains on the sidelines.  He is expecting much of it to flow into equities later this year.

Towards the end of the interview Johnson highlighted a few of his best dividend picks.

Cincinnati Financial Corp (CINF)

Cincinnati Financial has a dividend yield of 4.6% and a 5 year dividend growth rate of 3.74%.  The company has increased its dividend for 51 consecutive years.  CINF is up 18% in 2012 and Mr. Johnson believes it has further to go.

Coca-Cola Company (KO)

Johnson sited Coke and the next company on the list, McDonalds because he favors consumer staple companies with growth and solid dividend yields. KO has a dividend yield of 2.7% and a payout ratio of 51%. It has increased its dividend for 49 consecutive years and has a 5 year dividend growth rate of 8.6% which gives it a DSO rating of 98/100.

McDonald’s (MCD)

McDonald’s had disappointing February sales numbers which drove the stock down a little in the last few days but Johnson still believes in the stock for its growth. MCD has a dividend yield of 2.7% and a 5 year dividend growth rate of 24.8%. It has a payout ratio of 50% and is one of the top rated stocks on our safe dividend list. Other global consumer brands that are similar to Coke and McDonald’s include Pepsi (PEP) and Kellogg (K).

Ross Stores (ROST)

Ross Stores has a very low dividend yield of just .8% which means it doesn’t make any list on our site but the company has demonstrated a commitment to increasing the dividend. It has raised the dividend for 17 consecutive years and has a 3 year dividend growth rate of 11% and a 5 year dividend growth rate of 16.6%. ROST has a very low payout ratio of 17%.

Costco Wholesale (COST)

Who doesn’t like shopping at Costco? I know I’m there all the time. Costco is another low yielding stock where the company at least appears to be committed to increasing the dividend. COST has a dividend yield of just 1.1%, with a 5 year dividend growth rate of 14.4% and a payout ratio of 29%. Costco has raised its dividend for 7 consecutive years.

If you are interested you can watch the full CNBC interview here.

What to Consider When Deciding on Asset Allocation

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One of the most important predictors of success as an investor is your asset allocation. The way you invest your money across asset classes makes a big difference in your future success. Stocks, bonds, cash, real estate, commodities, and other asset classes combine to provide you with returns. The right asset allocation can mean the difference between success – and big losses.

As you decide how to allocate your investment funds amongst asset classes, it helps to keep a few things in mind. Here are some items to consider as you determine your asset allocation:

  • Risk tolerance: Your first move is to decide on your risk tolerance. You need to think about how much risk your portfolio can handle, as well as what sort of emotional risk tolerance you have. The higher your risk tolerance, the more risky assets you can include in your portfolio. A lower risk tolerance requires that you choose less risky assets for your portfolio. If this is something you don’t feel qualified to tackle on your own considering talking to a qualified wealth management advisor.
  • Needed returns: Another consideration is needed returns. Some asset classes tend to offer the potential for higher returns in the long term. Stocks are thought to offer higher returns than cash or bonds in the long run. If you need to boost your portfolio growth, stocks are often thought of the way to do it.
  • Changing life milestones: Asset allocation isn’t static. It should change. As you reach different life milestones, your investing and financial needs change. Your risk tolerance also changes as you go through life. As you shift from an interest to growth to an interest in income, your asset allocation is likely to change. Make sure to evaluate your needs periodically and re-balance your portfolio.

Asset Allocation and Dividend Investing

It is worth noting that you can still use asset allocation principles when you are engaged in dividend investing. Indeed, there are income funds that pay dividends and include a variety of bonds as well as dividend paying stocks. You can add diversity to your income portfolio with the help of REITs, which can help you add real estate to your portfolio while providing you with dividends.

Before you consider that a predominant focus on dividends precludes a diverse asset allocation, it’s important to consider your options. There are ways to use principles of sound asset allocation to your advantage, even if you prefer high yield stocks. As you prepare for the future, don’t forget to consider asset allocation as part of your plan.

10 Utility Dividend Stocks with Consecutive Dividend Increases

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Its no secret that dividend increases drive total returns.  Increasing the dividend maintains the yield as the stock price increases.  Alternatively if a stock’s yield is increasing without the stock price rising investors buy up the stock driving ROI for shareholders.

Utility stocks were one of the most favored investments during the chaotic market conditions we faced in 2010 and 2011.  In the last few months we have see the market start to recover and investors have shifted their focus to other growth stocks.  That has left many of these utility stocks trading at a good value.  Each of these stocks has raised its dividend for 6 years or more and has a dividend yield over 3%.

Edison International (EIX)

Edison International is an electric utility company that has a dividend yield of 3% and has increased its dividend for 7 years.  The company has a 5 year dividend growth rate of 3.16% and a payout ratio of 43%. The company’s next ex-dividend date is March 28th, 2012.

Alliant Energy Corp (LNT)

Alliant is an electric utility company that has a dividend yield of 4.6% and has increased its dividend for 8 consecutive years.  LNT has a 5 year dividend growth rate of 8.5% and a payout ratio of 62%.  The company’s stock is up over 8% in the last 12 months and its next ex-dividend date will be in April, 2012.

South Jersey Industries (SJI)

South Jersey Industries is a gas utility company that has a dividend yield of 3% and a 5 year dividend growth rate of 10.2%.  The company has increased its dividend for 8 consecutive years and has a payout ratio of 50%.  The company’s 3 year net income growth rate is 5.1%.  Their next ex-dividend date is March 7th, 2012.

Chesapeake Utilities Corporation (CPK)

Chesapeake Utilities is a gas company that has a dividend yield of 3.4% and has increased its dividend for 8 consecutive years.  CPK has a 3 year net income growth rate of 25%  and a payout ratio of 46%.  The stock is mostly even over the last 12 months.

Dominion Resources (D)

Dominion is an electric utility company that has a dividend yield of 3.9% and has increased its dividend for 8 consecutive years. The company has a 5 year dividend growth rate of 7.3% and a payout ratio of 80%.  Dominion just had its ex-dividend date last week.

Wisconsin Energy Corp (WEC)

Wisconsin Energy has a dividend yield of 3.16% and has increased its dividend for 8 consecutive years.  The electric company has a large 5 year dividend growth rate of 17.7% and a low payout ratio of 47%.  The stock is up almost 20% in the last year.  Its next ex-dividend date will be in May.

PG&E Corporation (PCG)

PG&E Corporation an electric utility company that has a dividend yield of 4.33% and has increased its dividend for the last 6 years.  It has a 5 year dividend growth rate of 6.6% and a payout ratio of 86%.  The stock is down about 9% over the last year. The company’s next ex-dividend date is March 28th, 2012.

Xcel Energy (XEL)

Xcel is an electric utility company that has a dividend yield of 3.9% and has incraesed its dividend for 8 years.  It has a 5 year dividend growth rate of 3.1% and a payout ratio of 60%.  The company has increased its net income by 9% over the last 3 years and has an ex-dividend date coming up on March 20th.

Delta Natural Gas (DGAS)

Delta Natural Gas is of course a gas utility company that has a dividend yield of 3.7% and has increased its dividend for the last 7 consecutive years.  DGAS has a 5 year dividend growth rate of 2.5% and a payout ratio of 80%.  The stock is up over 20% in the last 12 months and just recently had an ex-dividend date last week.

AGL Resources (GAS)

AGL is a gas utility company that has a dividend yield of 3.4% and a 5 year dividend growth rate of 5.1%.  It has a payout ratio of 89% and has increased its dividend for 8 consecutive years.  AGL is down 5.7% year to date.