Dividend Growth Investor Dividend Growth Investor I will share my journey with you on my quest for achieving a sizeable passive income stream. I would achieve that by investing in dividend paying stocks which have the tendency to consistently increase their payments year over year.
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Alternative Streams of Income
2008-02-19 15:59:00 Alternative Streams of Income I am always looking for ways to increase my income. I have a good paying job, which required me to work hard at school and spend several years of my life learning to juggle multiple activities successfully. I like my job but I think that I could always do better money wise. There?s always the possibility that I could be laid off because the company is not doing ok, or because I do a lousy job and thus my main source of income would be cut off. In order to avoid this, I think that I should have multiple income streams that would make me relatively independent in the extreme case that one of them dries up. I was brainstorming and I came up with several alternatives. They are not ranked by importance, and the ranking is not representative of their relative importance.1 .Prosper/Lending Club lending and referralsI have already started experimenting with peer to peer lending on Prosper and Lending Club. I am looking to lend money to people with the best ... More About: Alternative
Analisys of Johnson and Johnson (JNJ)
2008-02-18 15:12:00 Johnson & Johnson engages in the manufacture and sale of various products in the health care field worldwide.The company is a dividend aristocrat as well as a major component in Dow Jones Industrials and S&P 500 indexed. Over the past 10 years the company has delivered an average total return of 9.76% annually to its loyal shareholders. One of the largest holders of JNJ stocks is no other than the Oracle of Omaha, who is one of the best investors in the world. The company has managed to deliver an impressive 14% average annual increase in its EPS.The ROE has been in a 22%-29% range for our study period, which is also an impressive number. Annual dividend payments have increased over the past 10 years by an average of 15% annually, which is slightly above the growth in EPS. A 15% growth in dividends translates into the dividend payment doubling every 5 years. If we look at historical data, going as far back as 1970, JNJ has indeed managed to double its dividend payments every... More About: Johnson , Johnson and Johnson
Dollar Cost Averaging
2008-02-15 19:59:00 The media is constantly bombarding us with news about the US housing bubble, rogue traders, recession, bear market and many other ominous headlines. Unless you are a day trader who watches the market tick by tick I would advise you to ignore the noise. Most advisers tell you instead to focus on the big picture and follow your long-term goals of adding a fixed amount of money into stocks, which are automatically deducted from your paycheck. By spreading your purchases over time, you are a buyer when the market is overvalued, but you are also a buyer when the market is severely undervalued. In the end it would all even out for you. Those advisers recommend to their clients that they do not purchase everything at once but follow a disciplined approach to investing by putting a certain amount of money over predetermined fixed periods of time like every 2 weeks or every month. I was really intrigued about this strategy, because supposedly it decreases your risk and makes you buy stocks... More About: Dollar , Cost
The pros and cons of selling covered calls on dividend paying stocks.
2008-02-14 17:14:00 Note: This post of mine has originally appeared on Dividend Guy's Blog as a guest post.Selling Covered Calls is a strategy in which an investor sells a call option contract while at the same time owning an equivalent number of shares in the underlying stock. It is considered to be one of the safest option strategies in the market. Typically it is performed over a short term period of time, since option contracts always have a finite lifespan. The typical strike price at which call options are sold is normally above the current price at which the stock is trading. Thus, if Pepsi stock is trading at 70, its shareholders could sell a covered call at $75 strike.The economic incentive for the seller for writing a covered call is that he collects options premium, which increases his income from the stock he owns. With the passage of time, the time value portion of the option's premium generally decreases - a positive effect for an investor with a short option position. In addition to th... More About: Stocks , Cons
Long term returns of S&P high-yield aristocrats versus the S&P 500
2008-02-13 14:53:00 In my previous article I discussed the performance of the S&P Dividend Aristocrats.We found that the list outperformed the S&P 500 index through good and bad years with a significantly lower volatility. The reality is that there is another list with dividend aristocrats generated by the S&P ? it?s the High Yield Aristocrats list, which picks the 50 highest yielding stocks in the S&P 1500 index that have increased dividends for at least 25 consecutive years.The index is weighted by yield, unlike the equally weighted Aristocrats, which accentuates the equity-income characteristics of the index. It was launched recently, and has been ?back tested? to a base value of 1000 on December 7, 1999. The High-Yielder?s offer an average 3.91% dividend yield which is more than a percent better than the Regular Dividend Aristocrats average of 2.93%. The index has significantly outperformed the S&P 500 index and even the regular dividend aristocrats since its launch in late 1999... More About: Versus , Long , Term
E-Trade Savings Account Bonus
2008-02-12 22:39:00 E-Trade still has an offer for their Complete Savings Account , which offers up to 8 times the national average.A $1 minimum deposit is required to open a new account. Withdrawal limits apply. Online statements required. $25 will be credited to your Complete Savings Account within 30 days of the account being funded with a minimum deposit of $1. Payments will be reported as interest income. Accounts must be opened by 3/31/2008 to quality for the $25 offer. Must be a new account opened with new funds. Offer applies to one new account per customer. Not good with any other offer. This offer is not valid for E*TRADE FINANCIAL employees.I signed up for my E-Trade savings account back in December. I deposited just one dollar. 30 days later I had 26 dollars in my account and I was happy. More About: Bonus
Carnivals
2008-02-11 17:22:00 My analisys of O was featured on the 75th festival of stocks, hosted by the stock market prognosticator.My article Why do I like to invest in dividend aristocrats? was featured on the Carnival of Personal Finance #139: Valentine Edition.I have noticed that my website description is too long with the current "Create Increasing Passive Income from stocks with above average dividend growth ". I am thinking about changing it to something like dividend growth investor or something like that. I am open for suggestions. E-mail me at sagitarius_d@yahoo.com ( no spam plase). More About: Carnivals
Cincinnati Financial ? An insurance stock to own
2008-02-11 14:57:00 Cincinnati Financial Corporation, through its subsidiaries, offers commercial, personal, and life insurance products to businesses and individuals in the United States. The company operates in four segments: Commercial Lines Property Casualty Insurance , Personal Lines Property Casualty Insurance, and Life Insurance. The Commercial Lines Property Casualty Insurance segment provides coverage for commercial casualty, commercial property, commercial auto, and workers' compensation. It also offers specialty packages, which include coverages for property, liability, and business interruption for specific industry classes, such as artisan contractors, dentists, garage operators, financial institutions, metalworkers, printers, religious institutions, or smaller, main street businesses. In addition, this segment provides machinery and equipment coverage, as well as contract and commercial surety bonds, fidelity bonds, and director and officer liability insurance. The Personal Lines Property... More About: Stock , Cincinnati
The number one reason why i don't chase high-yielding stocks
2008-02-08 14:49:00 During my early days as a dividend investor, I was focusing my attention to stocks which paid me a generous yield. I would be doing calculations, showing me that at a 10% annual yield I would be able to further compound my profits by reinvesting the dividends. One of the first stocks that I noticed was HYF, a closed-end high-yield bond fund which was paying a generous 10-11% annual dividend. I bought some stock immediately, and after several weeks I received my first dividend payment, which was equal to almost a one percent return per month. I was very excited by this opportunity, which allowed me to compound my gains monthly through the regular reinvestment of dividends. The fund didn?t appreciate by much; nor did it depreciate by much. It was trading in a range, which was perfect for me - I kept receiving and reinvesting my fixed monthly payments of 5.5 cents per share.After a while the price started decreasing, and I happily reinvested my dividends, realizing that now I would rec... More About: Stocks , Reason , High , Chase , Number
Is Realty Income (O) a good stock to own?
2008-02-06 15:16:00 I was browsing through yahoo finance, and I read an article about a real-estate investment company which has paid increasing dividends for 451 straight months. I looked at the monthly dividend payments over the past 10 years, and they looked promising for a real-estate investment trust. It looks very appealing to receive monthly dividend payments, as opposed to the quarterly ones that almost all dividend achievers worth their salt are paying these days. The dividend growth looked ok at an average of 5.21% annually over the past 10 years and an average of 6.46% annual dividend growth over the past 5 years. The major contributor for the growth is the 13% dividend hike in 2005. Without it, the growth would have been below my 5% dividend growth criteria. It also seems that the company is trying to raise its dividend three to four times per year, which is also a bonus.I was seriously considering adding this company to my portfolio until I looked into the 10 year trends in its balance she... More About: Stock , Income , Good , Realty
Carnival of Personal Finance
2008-02-04 15:11:00 My post with the criteria for my watchlist of stocks to follow was listed on the 138th carnival of personal finance. I read somewhere that submitting articles to blog carnivals is a good way to gain sizeable traffic. So far this has not happened, but I would keep on posting, since it allows me to better formulate my ramblings about investing and personal finance. More About: Personal , Personal Finance , Carnival , Finance
Why do I like Dividend Aristocrats?
2008-02-04 14:44:00 One of my favorite stock lists is the S&P?s Dividend Aristocrats and the S&P High-Yield dividend aristocrats. These lists contain companies which have consistently increased their dividends over the past 25 years, which is a big achievement. These companies have gone through several up and down economic cycles and shown superiority of rewarding their shareholders with increasing payments through dividend growth. The dividend aristocrats have averaged annual total returns of 12.93% per year since 1989, beating the S&P 500 total return of 11.66% by 1.3 annually. The dividend aristocrats outperformed S&P 500 in 9 out of the 18 years in this study. Investors in the dividend aristocrats suffered almost no losses during the 2000-2002 bear market; whereas the S&P 500 lost half of its value over the same period. While an 18 year period might not be representative of future performance, and future results might be very different, I still like the stocks in the list for th...
Dividend Increases in January
2008-02-04 14:43:00 Several Dividend Aristocrats have increased their dividends in January . The companies are:New Old ChangeAFLAC Inc ? Ticker AFL 0.96 0.82 17.07%Comerica Inc ? Ticker CMA 2.64 2.56 3.13%Consolidated Edison ? Ticker ED 2.34 2.32 0.86%Family Dollar Stores? Ticker FDO 0.50 0.46 8.70%McGraw-Hill Companies? Ticker MHP 0.88 0.82 7.32%From this list, the only company that fits my fundamental criteria is MHP, which has a one year dividend growth rate of 7.32%. In terms of changes within the index I expect that SNV might be removed from the dividend aristocrats list. The reason is that its shareholders have received shares in TSYS, which was completely spun off from Synovus in the transaction at the beginning of 2008. On paper the dividend will be cut, but in reality this reflects a spin off and I guess the dividend aristocrats committee does not take into consideration the cash that stockholders received. I believe that SNV would keep increasing its dividends over time. The same thing happene...
Outperform S&P500 with S&P500 futures, Part 2
2008-02-02 19:35:00 It is a well known fact that over time the stock market is in a long-term secular bull market. We do get potential hiccups like the Asian financial crisis in 1997-1998, as well as some major bear markets like the one after the 1929 crash, the1973-74 bear market and the 2000-2002 burst of the internet bubble. Since the stock market always seems to recover from any declines over any period of time, I believe that a long-only approach for holding a basket of stocks like the S&P 500 would be a profitable strategy in the long run. In my previous article (Outperform S&P500 with S&P500 futures, Part 1) we learned that an investor can participate in the upside or downside movements of the index with only a controlling stake ( the margin requirement) of 10% of the value of S&P 500 e-mini futures contract. So what could the result be if we try to enhance our S&P 500 exposure through investing in stock index futures? It is possible to achieve the 1.25, 1.5 or even 2 times t... More About: Futures
Outperform S&P500 with S&P500 futures, Part 1
2008-02-01 15:45:00 The S&P 500 futures contract comes in two sizes ? S&P500 (SP) or e-mini S&P500 (ES). The SP moves by $250 for every 1 point move in the underlying index, while the ES moves by just $50. Thus if the futures are trading at 1330, if you buy one SP contract you are basically buying 250*1330= $332,500 worth of stocks. When you buy one ES contract, you are basically controlling one fifth of the large contract or $66,500. Another major difference in both contracts is the fact that the large one is traded primarily on the floor of CME, while the e-minis are traded electronically, almost around the clock. The contracts always expire on the third Friday of each March, June, September and December. The futures do not pay dividends, but they also trade at a premium to the S&P 500 index, which declines as the index reaches its expiration day. The beauty behind trading the e-minis is that to trade one contract, you need to put only 4,000-5000 dollars in collateral. Thus, for less ... More About: Futures , Part
Carnival of Money Stories
2008-01-29 15:24:00 The 44th carnival fo Money Stories was hosted at http://beingfrugal.net/2008/01/29/carniva l-of-money-stories-44-the-circus-edition/ . My story about how I outperformed S&P 500 could be found there as well as many more interesting stories from my fellow PF bloggers. More About: Carnival
An alternative strategy to covered calls
2008-01-29 15:17:00 Instead of selling covered calls, I actually am considering selling put options on stocks for some extra income, which could work in some situations. First, when you are selling a naked put you are obligated to buy the stock from the put buyer, who has the right, but not the obligation to sell it to you at a predetermined strike price. If you invest a certain amount of funds each month into stocks for example, you are basically always buying at the market price. If you always invest 120-125 dollars per month in DIA you are trying to buy one share per month at a time, rather than all 12 at once, by using the power of dollar cost averaging. In this situation, if you sell a naked put on DIA at an in the money strike of say 122, you would be paid $3.10 for the obligation to buy DIA at $122. If DIA does fall below 122 at expiration, you most probably would have to buy it at the strike price. With this strategy you bring your cost basis significantly below the current market price of 122.... More About: Strategy , Alternative , Calls , Covered
Covered Calls for additional income
2008-01-28 16:17:00 A friend of mine suggested to me to sell covered calls on the dividend stocks that I own, in order to increase my income. Basically that means that I will sell an out of the money call option on a stock I already own at a given strike above the current price and collect the premium. This does sound appealing, because theoretically I could get two passive income streams from one stock. There are some risks with this strategy though, that make it less appealing to me:First, when you sell an out of the money covered call option, you are basically betting that your stock would not increase above the strike price at which you?ve written the options. Thus if I owned Pepsi at $69, share and I sell a February covered call at the $75 strike; I would be betting that the price of Pepsi would not increase over $75 over the period. And I always expect that my stocks would go through the roof in any period, otherwise I wouldn?t have bought them in the first place.Second, if the price rises to 80,... More About: Calls , Income , Covered
What?s a passive income from dividends?
2008-01-26 18:42:00 Among the popular internet media there?s a widespread belief that passive income is income which you receive without even moving a finger. Although the term passive income implies that you simply receive checks or that the money is simply directly deposited into your bank account without any effort on your side, I think that that?s not the case in reality. An example of passive income that comes to mind is interest on Bonds that is paid to the holder at a fixed period. Other examples include royalties from music sales, which was created by artists long after their bands have fallen off the charts, income from rental properties, income from online advertising and income from dividends.From these examples it is visible that passive income is a direct result of some economic activity or work, which created some good/service which society is still willing to reward the holder of the idea long into the future. If you buy stock in a corporation, you increase the liquidity of its shares, m... More About: Passive Income , Dividends , Income , Passive
Account Opening Bonus for OptionsXpress
2008-01-25 20:06:00 Optionsxpress has a $100 bonus for new customers that open an account with them and deposit at least $500 by March 31, 2008. That's what their website says: To receive $100 bonus, account must be funded with at least $500 cash orsecurities transferred from a brokerage firm other than optionsXpress. $100bonus will be deposited into the new optionsXpress account by April 30,2008. You need to have your account open for at least 6 months and your account balance should not fall below $500 unless you have trading losses.http://www.optionsxpress.com/promo s/free.aspx More About: Opening , Bonus , Account
Some Charts to watch
2008-01-25 02:54:00 Even though this blog focuses on achieving long-term dividend income, I think that sometimes it might be ok to satisfy my readers who have a shorter term objective at trading/investing than me. For a short-term trader it is imperative to look at charts in order to analyze the situation tick by tick, trade by trade. I myself used to focus on very short term trends ( 1-2 days) before I embraced the dividend growth strategy that I write about in this blog. If you look at the daily charts of SPY and DIA, two well-known exchange traded funds that follow the S&P 500 and Dow Joned 30 indices, you will notice the smaller than average trading range today. It looks as if the market is at crossroads right now - trying to decide whether to go up, continue moving down or just move sideways for a while. If I were short-term trading this market, my orders for tomorrow for SPY would be: Buy Stop X amount of shares @ 135.47 , stop loss @ 133.30 and trail your stop loss upward for every penny th... More About: Watch , Charts
My Current Watchlist
2008-01-25 02:28:00 The two lists that I am concentrating right now is the S&P 500 Dividend Aristocrats and the S&P High Yield Dividend Aristocrats Index. I created custom lists in Yahoo! Finance in order to summarize the two groups of dividend achievers by a variety of criteria such as Symbol, Yield, P/E , Div/Shr, Last Price,EPS (ttm) ,PEG Ratio ,Dividend Payout, 5 and 10 year dividend growth rates. What I did was first exclude any stocks which had a dividend payout ratio of more than 50%. That gives me some reasonable assurance that the company is less likely to cut its dividends. I also look at P/E ratios, since I do not want to overpay for a company. Anything with a P/E of over 20 is out of my watchlist. I also look for the PEG ratio but just to find stocks which might be expensive in terms of their growth prospects. A third thing that I look for is a dividend yield of at least 2%, which is a little bit over than the current yield of 1.89% that SPY is rewarding its shareholders. The last b... More About: Current
My Goals
2008-01-23 15:21:00 My personal goal is to have $8,000 in annual dividend income in 6 years. I would achieve that by investing an equal portion of my regular paycheck every month and reinvesting the dividend income. I would try to focus on high-yielding stocks, which increase their dividend payments over time. I try to cut my trading costs by switching to Zecco, which doesn?t charge you a commission once your account balance is over $2,500 and you don?t make more than 10 trades per month. Achieving $8,000 in income is feasible depending on the amount of money you have invested as well as the yield on invested capital that you can achieve. Assuming that I have about $100,000 invested in 6 years, I would have to own assets yielding/earning 8% annually. If I have $200,000 invested at the time I would only need a 4% annual yield. I believe that this is a very conservative goal since I will have two powerful allies that would help me reach this goal - dollar cost averaging and dividend compounding. I w... More About: Goals
The Fed Cut Rates by 0.75% this morning!
2008-01-22 15:53:00 The Federal Reserve Cut its rates by 0.75% today. I think that we have a pretty good opportunity to go long the market today, if the S&P 500 exceeds its 30 minuite high, with a stop loss at the 30 min low. However you should do this only for a trade and if entered into the trade, please trail your stop to cut your losses and/or protect some of any profits. Exit at the close if you are not stopped out. I expect further turbulence in the markets. Unfortunately fixed income is not going to yield as much so certificates of deposit would yield much less. I normally buy my CD's from Bank Midwest, which offers a competitive yield on their 9 month certificates. More About: Morning , Rates
$50 Sharebuilder Account Opening Bonus
2008-01-22 03:23:00 Sharebuilder has a $50 account opening bonus, if you open an account with them and do one purchase of a security. The disclaimer says that they will deposit the bonus amount in 4 weeks after you make your first purchase. You have to be a new account holder to qualify though. The offer does not apply to IRA or Educational Savings Account s.You can find the link here. Promotional code is SHARE50Full Disclosure: I won't earn anything form that offer. More About: Opening , Bonus , Sharebuilder
How I outperformed the market and how you can outperform S&P 500 in 2008
2008-01-21 23:39:00 After I graduated from college in May 2007, I started interviewing and finally got a real job in July. I never had any credit card debt or any student loans since I worked 20-30 hours/week during school, 70-80 hours/week during breaks, kept good GPA?s, campus involvement, won some scholarships (I didn?t have a full ride though) but most importantly lived frugally. My current employer pays me well, and I have all sorts of benefits. The problem for me was that I didn?t spend all the money that I earn, since I learned in college to live frugally. I wanted to buy index ETF?s like SPY, VEU, CWI or EEM. However, that involved risk, and after 4 years of rising stock prices, financial markets looked toppy. In addition the news always talked about how the housing market is crashing. Thus I started putting all my money in 9 Month Certificates of Deposit, yielding 5 ? 5.3% annually. I also put 5 % of my income in 401k, since my employer provides me with a 100% match on that amount. I bought my... More About: Market , 2008
A comparison of investing in high-yield, low dividend growth stock versus i
2008-01-21 03:25:00 I was asked before about the reasoning behind my statement that I would buy a stock whose dividend is increasing even by one percentage point per year, if it has a high yield, rather than invest in stocks which increase their dividend payment by at least 10% per year. To answer this question, lets me walk you through my calculations:Let?s say that you have 2 stocks- A and B in each of which we invest $100,000. We assume that both stocks will always trade at $10 for simplicity sake. Stock A is yielding 5% per year (50 cents per share), while Stock B is yielding 2% (20 cents per share). The dividend growth in Stock A is a meager 1%, while Stock B?s dividend is growing at 5% annually. We will look at two outputs ? total return and changes in annual income. It would take stock B 24 years to reach the same annual income level as stock A. In addition, it would take stock B around 40 years to achieve the same total dollar return as stock A. If however we had a growth stock C, which was yie... More About: Investing , Growth , Versus , High
My Strategy
2008-01-20 19:48:00 My strategy involves buying companies which have a history of consistently increasing their dividend payments going back over as many years as possible . Depending on the period that you are focusing one there's not a lot of companies that might fit your criteria. S&P has several lists which are worth focusing on - companies which have consistently increased their dividend over the past 10 years, S&P Dividend Aristocrats and S&P high-yield Dividend Aristocrats. The positive thing about the last two lists is that they show you stocks that have raised their dividends consistently over the past 25 years! Remember i do not just focus on high-yielding stocks. A stock which shows you a 10% dividend yield when the average yield out there is 2% is most likely a stock, for which the market is telling you that there is a very high chance that the dividend payment would be cut and your yield would decrease. I would rather buy a stock that pays me around 2-3% currently, at a time w... More About: Strategy
Are Dividend ETF's for you?
More articles from this author:2008-01-20 19:11:00 There is a variety of ETF's out there that focus on many different dividend strategies including but not limited to domestic and international dividend achievers, high-growth dividend achievers, aristocrats and even dividend weighted baskets of stocks. While there seems to be an advantage for the small investor with several thousand dollars to invest in buying a predetermined basket of dividend stocks in terms of paying less commissions for buying one ETF, versus paying commissions on buying separately each and every stock in the index, there are disadvantages as well. First of all some of these ETF's follow indexes which are updated only once an year. Thus, they might still be holding stocks which have failed to increase their dividend in the past year due to timing. Second, you might not want to buy certain sectors which you perceive as having further downside possibility. A weak sectors which comes to mind right now is financials, which seems to have a higher than average secto... More About: Dividend 1, 2 |
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