Roundup: Investment Picks

/in /by

Sometimes, it’s nice to know what others are choosing in terms of investments. Many great investment bloggers have some ideas of what’s coming. Here are a few of their ideas about what might make a good investment, and some of the issues surrounding popular investments:

  1. 5 Tech Titans Suitable for Every Income Investors Portfolio: The Dividend Pig offers a look at a few tech titans that can help you income portfolio. As you build your income portfolio, consider the options and think about adding these tech giants.
  2. Top 20 Dividend Stocks – May 2011 Edition: The Passive Income Earner lists the top 20 dividend stocks. Arranged by technical screening and by yield, you can get a good look at some great investing ideas.
  3. It’s Time To Buy Hewlett Packard: Buy Like Buffett thinks that now is the time to buy HP. An analysis of quarterly results and other factors is presented. Read the post, and see if you agree.
  4. Novartis (NVS) Dividend Stock Analysis: Dividend Monk takes a look at Novartis. Do you agree that it is an attractive investment. Read through the analysis, and see if you think you want to add NVS to your portfolio.
  5. Weekend reading: Grab those index-linked certificates: This great roundup from Monevator offers some investing ideas in the form of NS&I certificates. They might be just the thing you need.
  6. Will Oil & Gas Stocks Rise Again?: Beating The Index takes a look at oil and gas stocks. Before you buy energy stocks, it’s a good idea to consider what you think will happen next. This analysis looks at the market, energy and what could be around the corner.
  7. The College Education Bubble: The say that education is an investment. However, Expected Returns takes a look at this investment, and wonders about the education bubble. What happens when it bursts?

Building Your Income Portfolio: Showing Patience

/in /by

As I’ve started putting together an income portfolio that includes dividend stocks, I sometimes find myself feeling discouraged about the income that I receive. This frustration was further underscored when someone I know said that dividend stocks were a waste of time. “Getting 2 cents a quarter? What kind of income is that?” she scoffed. (Incidentally, she and her husband both plan to work for 30 more years in jobs they don’t particularly enjoy, relying on 401ks. This helped me get beyond her sneering remark.)

However, as I’ve kept with it, I’m becoming less frustrated. Sure, if you buy a few shares of a dividend stock, and then let it just sit there, you will never end up with anything approaching a stable income. A successful income portfolio often requires time to build up. Many of us don’t have the capital necessary to invest in dividend stocks and then enjoy a decent income.

Patience as Your Income Portfolio Grows

If you want success in your income investing efforts, you have to show patience. A portfolio needs to be built over time. Choose the investments you want in your portfolio, and then buy shares regularly in order to build it up. The more shares you have of a company, the greater your dividend will be when it is paid. Looking at statements, and watch my dividend rise, has been a great motivator.

Of course, you do need a plan. Right now, my income portfolio is growing rather slowly. This is because we have other obligations right now. However, it’s not as important to us to see big leaps and bounds in our dividend income. This is because we have a longer timeframe. I have my own home business, and my husband just finished his Ph.D. Up until this point, we have been expecting that our built up portfolio won’t need to provide substantial income for at least 15 more years. Now that my husband is done, though, we can start thinking about increasing what we put in, allowing us to speed up our timetable if we wish.

If you want income from your dividend stocks more immediately, you will have to increase what you put in now. Sit down and do the math. Decide if you can put more into building up your income portfolio now so that in five to 10 years you will be able to pay certain expenses with your dividend income.

Without a realistic plan, and a little patience, it can be tempting to just give up on your efforts to build an income portfolio. However, if you focus on the essentials, and stick with a good plan, you might be surprised at what you can accomplish.

Roundup: Strategy Session

/in /by

Every now and then, you need a strategy session as you assess your portfolio. The good news is that there are plenty of great bloggers out there that can offer some insights into strategies and how to use different dividend stocks. Have a look at what’s been going on in the blogosphere:

  1. ETF risk – a personal action plan: If you are interested in ETFs, it is a good idea to double check your strategy. There remains risk, and you need to be aware of it. The Accumulator at Monevator offers you ideas for a personal action plan to help limit your risk.
  2. Assessing Your Risk Tolerance: Need and Ability: As you put together your portfolio, you need to be aware of your risk tolerance. Mike, at Oblivious Investor, provides an overview of these two aspects of risk tolerance. A great primer.
  3. Book Review: The Ivy Portfolio: If you are looking for a great read, you might consider this book, reviewed by The Aleph Blog. The book offers a look at how you can invest like endowments do in order to limit your exposure to bear markets.
  4. RSI — Overbought, Oversold, or Overplayed?: Sometimes you have to ask yourself some tough questions about a particular investment. Kenny at the Market Club Trader’s Blog allows a guest post to analyze RSI. The illustration can be applied to other investments.
  5. Star of the Day – Rovi (ROVI): Get an idea of why ROVI might be a great addition to your portfolio. TraderMark at Fund My Mutual Fund goes through some of the pros and cons of this stock.
  6. Third Point Adds To Xerium Technologies (XRM) Position: Do you want to learn from fund managers? Market Folly offers a look at one of the latest additions to Dan Loeb’s fund. A look at the move, and resources to help you manage your own fund.
  7. How Microsoft Caused the DotCom Bubble and why their Skype ‘Hail Mary’ is irrelevant: Everyone seems to be talking about Microsoft and Skype. Barry Ritholtz at The Big Picture takes us through the deal — and why it may not matter.

3 Times to Consider Selling a Dividend Stock

/in /by

Many of us invest in dividend stocks for the long haul. We expect that we will hang on to the stock, either enjoying regular income from the payouts, or using DRIPs to help build up nest eggs for the future. Few of us think about selling our dividend stocks. However, at times, it is prudent to consider selling your dividend stocks. Here are 3 times when you might consider selling a dividend stock:

1. The Company Cuts Its Dividend – Or Eliminates It

One of the most obvious reasons to sell a dividend stock is if the payout is cut, or eliminated. After all, the point of owning a dividend stock is to receive the regular payouts. When a company cuts its dividend, it means things are going poorly. When a company gets rid of a dividend, it could mean something even direr, and be an indication that you should sell – and get what you can.

Of course, in some cases, the cut might be relatively small, and in response to the economic situation. If a dividend is cut in such circumstances, it might not be a bad thing to see if dividends recover as the economy does. However, if other companies in the sector are raising dividends again, and your stock is left in the dust, perhaps it’s more than just the recession holding the company back.

Also, watch out if the annual yield drops below 1%. That could be a warning sign that it’s time to sell.

2. Your Position is in the Stock is Down Significantly

While many dividend investors don’t worry much about the fluctuations in the stock when they are small, matters can become worrisome if a bigger drop is seen. Day to day, and even month to month, the stock market can be quite volatile. However, if you see a huge drop – perhaps by half or more – it might be time to move on. Even though you invest in dividend stocks for the payouts, you also have to think of your initial capital and your investment. If you are taking a beating that will take you too long to recover from, you might need to sell. Besides, with that kind of drop, a dividend cut probably isn’t too far behind.

3. The Company Changes Management or Ownership

This isn’t always a bad thing. But if it appears that there will be changes made in management or ownership, and you are unsure about the results, it might be time to sell. You might not have a high opinion of the company doing the buying, and that might be an indication that it is time to sell. And, of course, if the sale results in the company going private, dividends are likely to be non-existent anyway. Carefully consider your options in such a situation, and decide what would be prudent for you.

Roundup: Life Beyond Dividend Stocks

/1 Comment/in /by

Sometimes, the things that worry us, and what is going on in the larger economy, can have an impact on the way we invest — and the level of success we see with our investments. This week, some of the dividend investing blogs looked at what’s going on beyond the world of dividend stocks:

  1. Big Miss in ISM Non-Manufacturing at 52.8: TraderMark at Fund My Mutual Fund looks at today’s big disappointing economic news. With the ISM lower than expected, concerns about economic recovery — and the ability of the U.S. to outgrow its deficit — are on the rise again.
  2. Weekend Edition: Markets Hate Uncertainty: Before sharing a roundup, Beating The Index offers a great look at the uncertainty that may be coming. A look at recent disappointments in Canada and the U.S. shows that the markets may be unhappy soon.
  3. Make Sure You Aren’t Falling Behind: Andrew Hallam, The Millionaire Teacher, offers a look at where you should be with your portfolio. Are you falling behind?
  4. The New Reality: Retirement Planning For Your Children: It’s not always about you. Mark at Buy Like Buffett offers a look at retirement planning will be like for your children. Are you — and your children — ready for what’s coming?
  5. Bye bye Gilles Duceppe! Héléne Laverdiére NDP wins Laurier/Ste-Marie: Sunny at The Dividend Girl gets excited about the possible demise of Bloc Québécois in Canada. Whose in power can influence economic policy, after all.
  6. Holding Our Leaders Accountable: Over at Expected Returns, the case for holding leaders accountable is made. Looking at the debt ceiling in the U.S., and considering what is going on, there does seem to be a need for some level of accountability.
  7. Things That Worry Me: The College Investor has a lot to think about. Some of the things that are worrisome for that blogger, though, should be worrisome for you. What are some of your concerns for the economy?

Use Dividend Funds to Build Your Portfolio

/1 Comment/in /by

There are a number of people out there who like investing in funds. I’m one of them. I’m a big fan of index funds and ETFs. And, as I learn more about dividend investing, I have been excited to discover that there are dividend funds. You can find index funds and ETFs comprised of dividend stocks, providing you with a way to build your portfolio while enjoying income in the form of dividend payouts.

Funds: Instant Diversity and Income

One of the reasons that funds are so popular amongst some investors is that they provide almost instant diversity (if you pay attention to the investments in the funds and choose funds accordingly), and there is a certain expectation of better-managed risk with many funds.

If you combine an index fund or an ETF with dividends, then you have a dream from many investors who are somewhat cautious about the whole investing thing. Dividend funds are composed of investments that offer regular payouts. There are high dividend funds, funds comprising dividend aristocrats, and other specializations. Chances are, there is a dividend fund out there to designed to help you reach your goals.

And, of course, you can use your dividend fund as a source of income, or as a way to boost your portfolio building efforts. You can usually choose to receive regular payments from the fund, providing you with a regular stream of income, or you can decide to have those funds automatically reinvested. Reinvested dividends buy you more shares, helping you build future wealth a little bit faster.

Choosing Dividend Funds

If you decide that dividend funds are the way to go, you will need to choose which to include in your portfolio. When choosing dividend funds, one of the most important things to consider is the cost of fees. Many investors like index funds and ETFs because the have low costs. Additionally, you should find out what stocks are in the fund. Make sure that the stocks in the fund are in line with your goals. If your goal is diversity, choosing a sector fund may not help you reach that goal.

A number of brokers provide access to dividend funds. If you already have a broker, you can look through the dividend fund options, or perhaps open another account if someone else has what you are looking for. In many cases, you can use dollar cost averaging to get started, gradually building your portfolio. Whatever you decide, you might discover that dividend funds provide just what you need.

800 Dividends Started But Only 100 Remain

/in /by

A few days ago we built and published our new dividend lists for May. We started out with dividend stocks that met our criteria of a dividend yield of 2.9% or higher and removed any stocks that had a negative dividend growth rate. The result was just over 800 stocks.

From there we rate each dividend stock based on it’s yield, dividend growth rate, net income growth rate, payout ratio and one year return. Based on that criteria we are able to filter the list down to the top 100 dividend stocks.

Safe Dividend List

Stocks that make the safe dividend list get a few extra points in their rating because they have been raising their dividend for 25 years or more. There are 28 stocks on the safe dividend list that are rated 90 points or higher by our standards. 10 of these have a dividend yield of 3% or more.

Past Performance

Our dividend lists are based on past performance and not an indication of how any stock will perform in the future. Here are a few statistical averages for stocks on the most popular lists.

Top 100 Dividend Stocks (more)
Average Yield: 4.79%
Average 5 Year Dividend Growth Rate: 14.11%
Average 1 Year Return: 22.73%

Safe Dividend List (more)
Average Yield: 2.64%
Average 5 Year Dividend Growth Rate: 13.1%
Average 1 Year Return: 18.36%

High Growth List (more)
Average Yield: 5.9%
Average 5 Year Dividend Growth Rate: 27.42%
Average 1 Year Return: 22.85%

View all of the top dividend data here. Members can logon here . To become a member join here: Top Dividend Stocks.

Why Dividend Portfolio Diversification is Important

/1 Comment/in /by

When putting together a dividend portfolio, it is important to remember to diversity. In some cases, it can be tempting to chase the high dividend yields related to certain sectors. However, as many found out during 2008 and 2009, putting too many of your dividend eggs in one basket can create serious problems.

When a Sector Runs Into Trouble: Dividend Cuts

Some dividend sectors are popular due to their high yields. REITs, utilities and financials are good examples. Financials provide an especially apt example of the need for diversification in a dividend portfolio. Prior to the financial crisis, banks were viewed as Titans among dividend stocks. They paid reasonably high dividends (that always seemed to be rising), and they provide decent capital gains.

However, as trouble began brewing in 2007 and 2008, dividend increases slowed to a crawl. After the financial crisis, which hit banks quite hard, dividends were slashed in 2008 through 2009. For those heavily invested in bank stocks not only saw huge losses in terms of capital as stock prices dropped, but they also saw a reduction income as dividends dwindled away.

Of course, this is something that can happen in any sector. As a result, it is important to consider diversity in your dividend portfolio Consider ways to include dividend stocks from a variety of sectors, and consider including a health mix of dividend aristocrats. This way, if one sector verges on complete collapse, you aren’t as devastated by the results. You are especially vulnerable if you count on dividends for income.

Diversifying Your Dividend Portfolio

As you diversify, make sure that you are considering quality stocks, and that you include a mix that will help you meet your goals. Pull from different sectors of the market, and you can also add diversity with dividend funds and foreign dividend stocks. There are a number of ways that you can add a little diversity to your portfolio and still enjoy a stable income stream and limited risk.

Be sure to do your research and analyze the stocks you include. You want good quality stocks in your dividend portfolio, ensuring that you have solid choices that are unlikely to see big drops in payouts at the first sign of trouble. If you have a little extra room for the risk, though, it might not be a bad idea for your diversity to include some good growth dividend stocks with a little more risk. Just make sure that you are balanced out elsewhere so that if your bet turns out to be a bad one, you aren’t devastated.

Dividend News: Plenty of Profits — Are More Dividend Increases on the Way?

/in /by

Today, with the stock market closed for the Good Friday holiday, it’s a good time to reflect on the events of the past week, and on earnings season. First quarter earnings reported by a number of companies have so far been rather positive. Included in the earnings bonanza was dividend aristocrat Johnson & Johnson, a company that beat estimates and increased it forecast for the coming year.

Other companies also reported solid earnings, including Intel and Wynn Resorts. Banks also showed good profits this week, including Citi, which is recovering from its near collapse following the 2008 financial crisis. Indeed, as Citi shareholders questioned the plans of Citi executives, a promise was made: A higher dividend in 2012. The company cited profitable quarters all through 2010, and a good profits in the first quarter of 2011 as evidence that its plans were working.

Last week saw a number of announcements related to rising dividends, and the prospect of improved profits and cautious optimism that recent housing market and employment news will mean a pick-up in the economic recovery has many hoping that more good news is on the way.

However, before anyone gets too excited about the return of increasing dividends, it is important to note that there are still some hurdles to overcome. U.S. companies and foreign companies may be turning profits right now, but the situation is far from stable in the financial markets. The euro zone remains on the verge of a meltdown, high oil prices are likely to hinder economic recovery, and we can’t ignore the budget battle brewing as politicians try to remain popular while solving the nation’s budget woes ahead of the 2012 election year.

The positive earnings news of this past week may have caused investors to forget the downgrade to the U.S. sovereign debt outlook at the beginning of the week, but it is something that still needs to be considered going forward.

The Highest Dividend Yields aren’t Always the Best

/in /by

Sometimes, when building a dividend stock portfolio, it can be tempting to chase the highest dividends yields. However this is not always the best idea. Indeed, many recommend that a yield target of 4% to 6% is ideal, and even that 2% to 3% is acceptable. That can sometimes seem a little low, especially when you consider that there are yields of more than 8% – and even yields of more than 13%.

One of the reasons that some companies offer such high dividends is to encourage others to invest in shares. There are some smaller companies or start up companies that offer high yields in order to try and get more investors. If you are looking for something short term, this might not be a bad idea in some instances. You could see high yields, and make money. However, if you are looking for a long term investment or stable income, higher yields aren’t always the best answer.

Issues Associated with High Dividend Pay Outs

There are some issues that you have to be aware of when you see high dividend pay outs. When a company pays high dividends, it is paying a portion of its profits. Making high dividend payments cuts into the cash that a company has available. Companies may not be able to sustain such high payments for an extended period of time. If you are counting on dividend payments for regular income, you might be disappointed if the company can’t sustain high pay outs for a long period of time.

Another problem is that sometimes high dividends are used as a way to attract investors – even though the company isn’t stable. Sometimes, high dividend yields can be a cover for a company that is crumbling. You could find yourself invested in stock that turns out to be worthless later.

Finally, you might be wary of dividends that fluctuate. You might see high dividends for a couple years, and then see a dividend cut later. If dividends fluctuate regularly, it can be difficult to set up a regular income portfolio. High dividend stocks, even those that fluctuate, can be interesting additions if you are looking for growth instead of income (especially if you reinvest), but you may not be able to rely on them for regular income.

Screening Dividend Stocks

A good way to filter out bad dividend payers is to look for stocks that have a solid dividend history of raising dividends. Our safe dividend list has stocks that have been raising their dividends for 25 years or more. You should also pay attention to the payout ratio and dividend growth rate. We like stocks that have a payout ratio under 60 and a dividend growth rate of 5% or more. Take a look at the top dividends list for more info.

Even if you do use high yield dividend stocks as part of your strategy, it is wise to be careful, and to keep an eye on the news about the companies involved so that you can sell your stock at signs of trouble.