Dividends Value » T

Why Dividend Stocks Are Evil *

D4L — Wed, 30 Mar 2011 07:30:15 +0000

I can’t carry on anymore. The secret has become too much of a burden and it must be shared with the masses. This will shock some and enrage others, but it must be said, and I should be the one to say it. Dividend stocks are evil and they will eventually lead to the collapse of western civilization as we know it. There, I said it and here is why I believe it…

Dividend Stocks Empowers People

By starting early in life and building a portfolio of dividend growth stocks, people are empowering themselves and taking charge of their future. At first blush, this may not sound like a bad thing but consider the consequences. Lord Acton saw the problem more than a century ago when he stated “All power tends to corrupt; absolute power corrupts absolutely.” Power is meant for the government, not people. The government has a much more experience with corruption than individuals.

Dividend Stocks Weakens The Need For Government

Power is like mass, it can not be created or destroyed. Any gains in power in one area must be offset by a loss in another. When people make wise financial decisions and are empowered with a secure and independent future, this power must come from somewhere, and in this case it is to the detriment of our beloved government. The foundation of our modern government is a needy society beholden to its benevolent hand. If the masses aren’t relying on the government to sustain their meager existence in retirement, how can we continue to justify our current behemoth governmental infrastructure and expenditures. And even worse, a shift of power to the people could go to their heads and eventually lead to them demanding accountability from their elected officials. This is sacrilege!

Dividend Stocks Will Destroy The World Economy

If individuals start making wise financial decisions and investing in dividend stocks instead of buying “stuff” produced around the world. The world economy could collapse. Imagine what would happen if we stopped buying plastic stuff made in China – their government would not be able to fund all their military endeavors. This would leave them open to another student up rising in Tiananmen Square, and this time the government may not be able to silence the people.

7 Dividend Stocks To Bring Down Financial System

The financial system does not like radical change. Responsible behavior and fewer imports could lead to lead to smaller government and less debt. Less debt would keep interest rates low as buyers bid up the price of the remaining debt. Perpetually low interest rates would stimulate the economy and cause stress on the financial institutions as they tried in vain to keep up with a robust economy.

You’ve been warned. You will set in motion a cataclysmic chain of events if act responsibly and buy good dividend stocks such as these:

Abbott Laboratories (ABT) | Yield: 4.0%
Abbott Laboratories is a diversified life science company and is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics.

Cincinnati Financial Corp. (CINF) | Yield: 4.9%
Cincinnati Financial Corp. markets primarily property and casualty coverage. It also conducts life insurance and asset management operations.

Colgate-Palmolive Co. (CL) | Yield: 3.0%
Colgate-Palmolive Company (Colgate) is a major consumer products company that markets oral, personal and household care, and pet nutrition products in more than 200 countries and territories.

ConocoPhillips (COP) | Yield: 3.5%
ConocoPhillips Co. is the fourth largest integrated oil company in the world, and the second largest in the U.S.

Kimberly-Clark Corporation (KMB) | Yield: 4.3%
Kimberly Clark Corp. is a global consumer products company that produces tissue, personal care and health care. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.

Pepsico, Inc. (PEP) | Yield: 3.0%
PepsiCo, Inc. is a major international producer of branded beverage and snack food products.

AT&T, Inc. (T) | Yield: 6.1%
AT&T Inc. provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless). AT&T Corp. was acquired in late 2005 and BellSouth in late 2006.

Now that the secret is out, what are you going to do? Will you continue to buy these evil stocks and build an independently secure future and allow our government and world economy to fail? As for me, I plan on spending the next couple of days digging my tongue out of my cheek and preparing for Friday’s holiday!

Full Disclosure: Long ABT, CINF, CL, COP, KMB, PEP, T. See a list of all my income holdings here.

(Photo Credit)

February 2011 Pocket Change Portfolio Performance Update *

D4L — Tue, 22 Mar 2011 11:30:23 +0000

The Pocket Change Portfolio (PCP) was first introduced on September 13, 2008 as a real money dividend income portfolio funded by the “pocket change” earned from my various online endeavors. Each month I report on the portfolio’s progress and update its holdings.

Dividends Received

Total dividends received during the month were $350.13, consisting of:

$96.32 AT&T, Inc. (T)
$42.40 Cincinnati Financial Corp. (CINF)
$ 9.43 Nucor Corporation (NUE)
$54.56 Abbott Laboratories (ABT)
$33.92 Colgate-Palmolive Co. (CL)
$36.65 Procter & Gamble Co. (PG)
$76.85 CenturyLink, Inc. (CTL)

Securities Purchased

The following securities were purchased during the month:

32 Shares Cincinnati Financial Corp. (CINF) providing $51.20 in annual dividend income
106 Shares CenturyLink, Inc. (CTL) providing $307.40 in annual dividend income

Annualized Dividend Income

Including the above purchases, my annual PCP dividend income is now $3,714.41 at the current dividend rates. This is up $367.82 from last month’s $3,346.59 amount. The PCP has never experienced a monthly decline in annualized dividend income.

Portfolio Returns

Month: 1.53%
Year-to-date: 0.83%
Life-to-date: 14.85% (annualized)

My PCP holdings are always available by selecting the Holdings option from the menu in the header. The next PCP update will be mid-April.

Full Disclosure: Long all the aforementioned securities. See a list of all my income holdings here.

(Photo: Arcelia Vanasse)

13 Dividend Stocks Headed In The Right Direction *

D4L — Wed, 23 Feb 2011 07:30:59 +0000

A photograph captures a moment in time. Seconds after the flash dims a tree could have fallen on the object of the photo or the sad looking man in the photo could have been told he just won a million dollars. In much the same way a dividend stock analysis is a snapshot in time, but the real question for the savvy dividend investor is ‘where is the stock headed?’ Here are four important directional metrics that I look for when updating my stock database…

1. Declining Shares

Many companies sell stock to raise cash. The important question is what is the company going to do with the cash? Is it for an acquisition or “general corporate purposes?” The latter is code for the business is not generating enough cash to stay afloat on its own. I am wary of a company that consistently has more shares outstanding in the current year when compared to the prior year. As I enter updates to my database, equal or lower shares outstanding is a sign of a healthy business.

2. Declining Debt

When companies need to raise cash and selling shares is not a good option, they often will issue debt. Once again, the important question is what is the company going to do with the cash? Like issuing shares, debt for a strategic acquisition is much more palatable than for “general corporate purposes.” I am wary of a company that consistently has more debt outstanding than the year before. As I enter updates to my database, I make note of companies with a declining debt balance and see that as a sign of a healthy business.

3. Rising Equity

Changes in shareholder’s equity are a result of earnings, dividends paid, treasury stock purchased, stock options exercised and stock issued. If shares outstanding aren’t increasing, and equity is rising then the business is generating sufficient earnings to cover dividends and share repurchases. Increasing the value of the company by running the business well is a sign of a healthy company.

4. Rising Free Cash Flow/Share

Ultimately, we want our investments to generate more free cash flow so they can pay us higher dividends. Free cash flow is an important metric in that it excludes cash generated from issuing stock or issuing debt or selling off parts of the business. Free cash flow is limited to only the cash generated from running the business.

Dividend Stocks Headed In The Right Direction

Combining the equity and debt metrics, I looked for companies with a declining Debt to Total Capital ratio, and combining the free cash flow and shares outstanding metrics, I looked for a rising free cash flow per share. Below are several companies I noted that exhibited each of the above characteristics:

Automatic Data Processing Inc. (ADP) is one of the world’s largest independent computing services companies, providing a broad range of data processing services.
Debt to Total Capital | 2005: 1%, TTM: 1%
Free Cash Flow/Share | 2005: $2.10, TTM: $3.06
Yield: 2.84%

Cullen/Frost Bankers, Inc. (CFR) is one of the largest multi-bank holding company headquartered in Texas, has more than 110 offices in various cities in the state.
Debt to Total Capital | 2005: 30%, TTM: 15%
Free Cash Flow/Share | 2005: $2.13, TTM: $5.23
Yield: 2.98%

Erie Indemnity Co. (ERIE) provides sales, underwriting, and policy issuance services to the policyholders of Erie Insurance Exchange in the United States.
Debt to Total Capital | 2005: 0%, TTM: 0%
Free Cash Flow/Share | 2005: $4.33, TTM: $6.93
Yield: 2.77%

Genuine Parts Co. (GPC) is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products.
Debt to Total Capital | 2005: 16%, TTM: 15%
Free Cash Flow/Share | 2005: $2.03, TTM: $3.57
Yield: 2.97%

Owens & Minor Inc. (OMI) is a leading domestic distributor of medical and surgical supplies to the acute care market, a health care supply chain management company, and a direct-to-consumer (DTC) supplier of testing and monitoring supplies for diabetes.
Debt to Total Capital | 2005: 29%, TTM: 20%
Free Cash Flow/Share | 2005: $1.75, TTM: $3.08
Yield: 2.25%

The Procter & Gamble Company (PG) is a leading consumer products company that markets household and personal care products in more than 180 countries.
Debt to Total Capital | 2005: 38%, TTM: 33%
Free Cash Flow/Share | 2005: $2.65, TTM: $3.46
Yield: 3.00%

RPM International Inc. (RPM) makes specialty coatings and products for the structural waterproofing and corrosion control markets, as well as products for the consumer, do-it-yourself, and hobby markets.
Debt to Total Capital | 2005: 44%, TTM: 43%
Free Cash Flow/Share | 2005: $0.81, TTM: $1.34
Yield: 3.47%

J.M. Smucker Co.’s (SJM) products include coffee, fruit spreads, peanut butter, shortening and oils, ice cream toppings, health and natural foods, and beverages. The Folgers coffee business was acquired in November 2008.
Debt to Total Capital | 2005: 21%, TTM: 19%
Free Cash Flow/Share | 2005: $1.84, TTM: $3.69
Yield: 2.61%

Sonoco Products Co. (SON) makes paper and plastic packaging products serves various industries and markets in more than 85 countries.
Debt to Total Capital | 2005: 38%, TTM: 29%
Free Cash Flow/Share | 2005: $0.98, TTM: $1.68
Yield: 3.10%

Suburban Propane Partners LP (SPH) is a limited partnership that markets propane gas and other refined fuels to residential, commercial, industrial, and agricultural customers.
Debt to Total Capital | 2005: 88%, TTM: 44%
Free Cash Flow/Share | 2005: $0.33, TTM: $3.67
Yield: 5.88%

AT&T Inc. (T) provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless). AT&T Corp. was acquired in late 2005 and BellSouth in late 2006.
Debt to Total Capital | 2005: 42%, TTM: 39%
Free Cash Flow/Share | 2005: $2.10, TTM: $2.50
Yield: 5.88%

V.F. Corp. (VFC) is a global apparel company, with leading shares in denim and daypacks. It is transforming itself into a designer and marketer of lifestyle apparel brands.
Debt to Total Capital | 2005: 22%, TTM: 20%
Free Cash Flow/Share | 2005: $4.11, TTM: $9.46
Yield: 2.71%

Verizon Communications Inc. (VZ) offers wireline, wireless and broadband services primarily in the northeastern United States. It acquired MCI Inc in 2006 and has since sold or spun off non-core assets. Alltel was acquired in early 2009.
Debt to Total Capital | 2005: 50%, TTM: 39%
Free Cash Flow/Share | 2005: $2.37, TTM: $6.07
Yield: 5.22%

Businesses can pay dividends with cash generated from many sources. They can generate cash by issuing shares, which dilutes our ownership. They can generate cash by issuing debt, which burdens the company with interest payments. Or, they can generate cash by running the business well, which neither dilutes the current shareholders’ interest or burdens them with future cash payments. Which would you rather have?

Full Disclosure: Long ADP, GPC, OMI, PG, T. See a list of all my income holdings here.

(Photo Credit)

10 Higher Yield Dividend Stocks *

D4L — Wed, 26 Jan 2011 07:30:15 +0000

It’s human nature for new income investors to focus on yield. Many eventually learn that above average yields often carry an above average risk of a dividend cut, loss of invested capital or both. People involved in extreme sports/hobbies, such as base jumping, hang gliding and shark diving, do things to minimize risk and protect themselves. In much the same way those investing in high yield dividend stocks, can do certain things to increase their chance of success…

Evaluate High Yield Stocks Carefully

When a stock carries a high yield, there is an underlying reason. Here are some questions to consider to help you understand the stock:

- Is the high yield a result of a sudden drop in price?
- Is the high yield above the industry average?
- Is the high yield above the stocks average?
- Is the high yield a result of a widespread economic downturn?
- Is the high yield a result of a company specific problem?

Be Honest In Your Evaluation

They say statistics can be used to prove anything. In the same vein, if you are determined to buy a stock, an analysis can be constructed to support the position. Instead of trying to find a reason to buy the stock, look for all the reasons NOT to buy the stock. Then weigh the positives against the negatives. Does the stock still look as appealing?

Start With List of Higher Quality Stocks

If you are looking for high yield, the temptation is to use a stock screen to search for yield and apply it to the entire universe of stocks. As this screen demonstrates, yield is easy to find. Add in growth and sustainability, then the list will dramatically shrink. Currently, I track 198 dividend growth stocks. The list is made up of Dividend Aristocrats, Achievers, Champions and few other dividend stocks for good measure. Below is a list of the stocks from my database yielding more than 5% and with 15 more years of consecutive dividend growth:

Investors Real Estate Trust (IRET)
Yield: 7.7% | Years of Growth: 36
The REIT engages engages in the ownership and operation of income-producing real estate properties in the United States.

CenturyLink, Inc. (CTL)
Yield: 6.9% | Years of Growth: 37
CTL acquired larger telecom peer Embarq in a stock deal in July 2009. Combined, the company provides voice service to 6.7 million customers and Internet service to 2.4 million customers in rural towns as well as larger cities such as Las Vegas.

Universal Health Realty Income Trust (UHT)
Yield: 6.7% | Years of Growth: 24
UHT, a real estate investment trust (REIT), invests in healthcare and human service related facilities.

National Retail Properties, Inc. (NNN)
Yield: 6.1% | Years of Growth: 19
This REIT invests in high-quality, freestanding retail properties subject to long-term net leases with major retail tenants.

AT&T Inc. (T)
Yield: 5.9% | Years of Growth: 27
AT&T Inc. provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless). AT&T Corp. was acquired in late 2005 and BellSouth in late 2006.

Buckeye Partners LP (BPL)
Yield: 5.7% | Years of Growth: 15
BLP is one of the largest independent U.S. pipeline common carriers of refined petroleum products, with over 5,400 miles of pipeline.

Mercury General Corp. (MCY)
Yield: 5.6% | Years of Growth: 23
Mercury General Corp. is an insurance holding company, operating primarily in California, writes a full line of automobile coverage for all classifications of risk.

Old Republic International (ORI)
Yield: 5.4% | Years of Growth: 29
The company writes property and liability, mortgage guaranty, title and life, and disability insurance.

Vectren Corporation (VVC)
Yield: 5.2% | Years of Growth: 51
Vectren Corp. delivers gas and/or electricity to more than one million utility customers in Indiana and Ohio, and offers other energy related products and services.

Realty Income Corp. (O)
Yield: 5.1% | Years of Growth: 16
O is a real estate investment trust that owns a diversified portfolio of 2,339 retail properties as of Dec. 31, 2009.

The above yields aren’t nearly as eye-popping as those from the screen. You will notice the above list is heavy in REITs (interest rate risk), telecommunications (technology risk), financials (equity and interest rate risks), along with MLPs and utilities (slow growth). Ultimately, we want to determine if the yield is sustainable. If we go looking for high yield, we will find it, but it may not be what we really want.

Full Disclosure: Long CTL, UHT, NNN, T, O. See a list of all my income holdings here.

(Photo: Gravity X9)

AT&T Inc. (T) Dividend Stock Analysis *

D4L — Mon, 24 Jan 2011 07:30:03 +0000

This article originally appeared on The DIV-Net January 17, 2011.

Linked here is a detailed quantitative analysis of AT&T Inc. (T). Below are some highlights from the above linked analysis:

Company Description: AT&T Inc. provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless). AT&T Corp. was acquired in late 2005 and BellSouth in late 2006.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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
4. Graham Number

T is trading at a discount to only 3.) above. Since T’s tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 7.2% premium to its calculated fair value of $26.52. T did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

T earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. T earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 27 consecutive 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.
2. Years to > MMA

T earned a Star in this section for its NPV MMA Diff. of the $1,224. This amount is in excess of the $800 target I look for in a stock that has increased dividends as long as T has. The stock’s current yield of 5.91% exceeds the 3.9% estimated 20-year average MMA rate.

Memberships and Peers: T is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. The company’s peer group includes: CenturyLink, Inc. (CTL) with a 6.5% yield, Qwest Communications International Inc. (Q) with a 4.3% yield and Verizon Communications Inc. (VZ) with a 5.4% yield.

Conclusion: T did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks T as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $32.81 before T’s NPV MMA Differential decreased to the $800 minimum that I look for in a stock with 27 years of consecutive dividend increases. At that price the stock would yield 5.12%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $800 NPV MMA Differential, the calculated rate is 0.9%. This dividend growth rate is below the 2.9% used in this analysis, thus providing a margin of safety. T has a risk rating of 1.50 which classifies it as a low risk stock.

In spite of a poor economy, T has performed well over the past year. The company should continue to see near-term gains in consumer wireless. Declines in landlines will continue to pressure T, but gains in consumer wireless and broadband should help to offset these. The company has a strong balance sheet and good free cash flow, and it enjoys brand loyalty and long-term customer relationships. I will continue to strategically increase my position in T when it is trading below my buy price of $26.52 and as my allocation allows. For additional information, including the stock’s dividend history, please refer to its data page.

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 was long in T (4.1% of my Income Portfolio). I also held a position in CTL. See a list of all my income holdings here.

Related Articles:

- Nucor Corporation (NUE) Dividend Stock Analysis
- AFLAC Incorporated (AFL) Dividend Stock Analysis
- Cincinnati Financial Corp. (CINF) Dividend Stock Analysis
- McDonald’s Corporation (MCD) Dividend Stock Analysis
- More Stock Analysis

What Will Your Dividend Income Be When You Retire? *

D4L — Wed, 19 Jan 2011 07:30:23 +0000

We all want a secure retirement where we don’t have to worry about making ends meet. After spending 30 or more years in the workforce, its time to kick back and enjoy our golden years. Unfortunately, many people don’t plan for retirement and just assume that their company pension, 401(k) or Social Security will take care of them. That’s a dangerous assumption and a recipe for disaster.

Here are some eye-opening statistics from saperston.com:

The latest census figures indicate that only one in every ten Americans today is financially prepared to retire when they reach age 65. Here are a few other facts on retirement gathered from a variety of sources.

* Forty-seven percent of U.S. households are not covered by either a defined benefit or defined contribution plan (The WEFA Group). Twenty-five percent of employees who qualify for 401(k) plans do not contribute to them (an estimate from Buck Consultants).

* At the end of WWII, there were 42 workers paying into Social Security for each person receiving benefits. Today, barely three people contribute for each recipient. Projections are that by 2030, when most baby boomers will have retired, just two working people will contribute for each person receiving benefits (Social Security Administration, Trust Funds Report, 1992).

* Social Security benefits will replace only 16% of the income of married couples earning $50,000 to $100,000 and only 9.5% of the income of married couples earning $100,000 and only 9.5% of the income of married couples earning $100,000-plus (Office of Research and Economic Analysis, Pension and Welfare Administration).

* Sixty-nine percent of American adults aged 25 to 44 expect to retire in the “traditional” sense of spending retirement in leisure. But reality hits home as they near retirement-63% of 45- to 54-year-olds expect a retirement of leisure, and only 49% of those 55 or older say the same (Aetna Life Insurance and Annuity Co.).

* Working people tend to think their retirement lifestyle will be better than their current lifestyle, but retirees report their standard of living has declined. Example: Twenty-six percent of workers say they are “just making ends meet,” but only 16% think they will live this way in retirement. Of retirees, 20% are “just making ends meet,” while 16% describe their pre-retirement lifestyle this way (Employee Benefit Research Institute).

* A Baby Boom Retirement Savings Index, published each year by Merrill Lynch, shows that as of November ’94, baby boomers were saving only 38.2% of what they will need to maintain growth-adjusted living standards in retirement. The index is basically unchanged in the three years the index has been published (Merrill Lynch Strategic Planning).

It doesn’t have be this way. A little knowledge and planning will get you on the road to financial security. Often the first question is ‘what will I make in retirement if I start saving today?’ This can be difficult to answer given all the uncertainties in the future. However, I have made it easy for you by setting up a Google Documents Retirement Calculator Spreadsheet that can be used to model your projected retirement income from dividend stocks. Please do NOT edit the spreadsheet, only enter values in the yellow cells and leave the calculator usable for the next person. For those with access to Excel or Open Office, you can download the spreadsheet here.

The spreadsheet is really easy to use. It has three relevant tabs: 1.) Input, 2.) Results and 3.) Details. Let’s work through a simple example. On the input tab enter:

Current Age: 20
Retirement Age: 65

Income Stocks Current Value: 5000
Income Stocks Cost Basis: 4000 (What you paid for the stocks)
Income Stocks Annual Dividend Income: 225
Annual Contribution: 1200 (or $100 per month)

Dividend Growth Rate: 6%
Contribution Growth Rate: 4% (e.g. your annual raise from your employer)
Inflation Rate: 3% (important, but often overlooked)

Enter this in then go to the Results Tab. Here you will see what things will look like at retirement if all your assumptions are correct. In this case:

In 45 years when you retire at age 65:

- Your portfolio’s market value will be: $2,334,233
- Your portfolio’s cost basis will be: $1,061,365

- Your portfolio’s current yield will be: 4.50%
- Your portfolio’s yield-on-cost will be: 9.90%

- Your portfolio’s annual income will be: $105,040
- The above income In today’s dollars will be: $27,777

The 4.5% yield may seem high, but it is an average yield. Consider the following basket of stocks that would give you about a 4.5% yield and 6% dividend growth rate:

	Current	Growth
Company	Yield	Rate
Abbott Labs (ABT)	3.67%	8.27%
Colgate (CL)	2.59%	12.48%
CenturyLink, Inc. (CTL)	6.55%	3.57%
Harleysville Grp (HGIC)	3.65%	8.00%
J&J (JNJ)	3.37%	8.42%
Leggett & Platt (LEG)	4.62%	2.96%
Procter & Gamble (PG)	2.94%	6.96%
AT&T, Inc. (T)	5.91%	2.44%
Universal Health (UHT)	6.61%	1.47%
Average	4.44%	6.06%

A $2 million dollar portfolio paying me $105 thousand a year sounds pretty good, but look at the last line. Could you live on $27,777 today? With 3% annual inflation that $105 thousand in 45 years has the same purchasing power as $27 thousand dollars today. Ouch!

It sounds bad but the reality is that if you know this is coming you can plan for it. After the kids are out of college and your house is paid for you will have a lot more disposable income to put toward retirement. The problem is that many people don’t realize they have a problem and that disposable income goes toward European trips, vacation homes, bass boats, et. al. Also, there will likely be other retirement income sources, such as a pension, 401(k), social security, etc.

Remember, everyone has a retirement plan – some have a thoughtful roadmap that they are following, while the others, by default, are planning to fail. Which group are you in?

Full Disclosure: Long ABT, CL, CTL, HGIC, JNJ, LEG, PG, T, UHT. See a list of all my income holdings here.

(Photo: Steve Woods)

2 Dividend Stocks Building Future Yield and 10 Going Ex-Dividend in January *

D4L — Fri, 07 Jan 2011 07:30:53 +0000

Driven by computers that cost more than the average person will earn in their lifetime the investment markets move at light speed. To keep pace hedge funds, mutual funds, institutional investors and multi-billion dollar money managers spend large sums of money on high-tech tools to give them an edge. So, what chance does a small individual investor have?

Not much of a chance if you let the Wall Street players define the rules. However, you might just slay the giant if you define the rules and focus on quality blue chip dividend growth stocks and long-term, buy-and-hold and investing strategy.

Below are two companies building future yield with increased cash dividends for their shareholders:

Spectra Energy (SE) in an integrated natural gas holding company engaged in gas gathering and processing, and gas transportation and storage, in the U.S. and Canada, and provides retail gas distribution to 1.3 million customers in Ontario, Canada. January 3rd the company increased its quarterly dividend 4% to $0.26/share. The dividend is payable on March 14, 2011, to shareholders of record at the close of business on February 11, 2011. The ex-dividend date is February 9, 2011. The yield based on the new payout is 4.2%.

Bank of the Ozarks (OZRK) owns Bank of the Ozarks, which provides retail & commercial banking products and services via 70 banking and two loan production offices in AR, TX, NC (Dec. 31, 2007). January 3rd the company raised its quarterly cash dividend 6.25% to $0.17/share. The dividend is payable January 21, 2011 to shareholders of record as of January 14, 2011. The Company has increased its quarterly dividend in four of the last five quarters. OZRK is a Dividend Achiever and has raised its dividend for 16 consecutive years. The yield based on the new payout is 1.5%.

In addition to the above, the following stocks are will go Ex-dividend in January:

- Urstadt Biddle Properties (UBA) went Ex-dividend on 1/3/2011, Yield: 5.1%
- Erie Indemnity Company (ERIE) went Ex-dividend on 1/3/2011, Yield: 3.1%
- ABM Industries Inc. (ABM) went Ex-dividend on 1/4/2011, Yield: 2.1%
- AT&T Inc. (T) went Ex-dividend on 1/5/2011, Yield: 5.8%
- Sysco Corp. (SYY) went Ex-dividend on 1/5/2011, Yield: 3.5%
- NSTAR (NST) went Ex-dividend on 1/5/2011, Yield: 4.0%
- Universal Corp. (UVV) went Ex-dividend on 1/6/2011, Yield: 4.8%
- Graco Inc. (GGG) will go Ex-dividend on 1/14/2011, Yield: 2.1%
- Hormel Foods Corp. (HRL) will go Ex-dividend on 1/20/2011, Yield: 2.0%
- Pentair Inc. (PNR) will go on Ex-dividend on 1/27/2011, Yield: 2.1%

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends or are ex-dividend in January; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: Long T, SYY. See a list of all my income holdings here.

(Photo Credit)

6 Stocks Giving The Gift of Dividend Growth *

D4L — Fri, 24 Dec 2010 07:30:43 +0000

Christmas is a time of giving. Families and loved-ones give gifts to each other. People give money to the needy and charities, while others give their time to help those that are not quite as fortunate. It seems that everyone is involved in giving this time of year, even corporations. Dividend growth stocks give a gift that keeps on giving – ever increasing dividends!

Here are several companies sharing their holiday spirit by giving their shareholders a gift of increased cash dividends:

Andersons (ANDE) operates in the agriculture and transportation markets in the U.S. It operates in five Groups: Grain & Ethanol, Rail, Plant Nutrient, Turf & Specialty, and Retail. December 17th the company increased its quarterly dividend 22% to $0.11/share. The dividend is payable January 24, 2011, to shareholders of record on January 3, 2011. The ex-dividend date is December 30, 2010. The yield based on the new payout is 1.3%.

Dominion (D) is an energy holding company’s whose principal subsidiaries include Virginia Electric & Power Co. and Consolidated Natural Gas. December 17th the company raised its annualized dividend 7.7% to $1.97/share. The first quarterly dividend of $0.4925/share is payable in March 2011. The yield based on the new payout is 4.6%.

AT&T (T) provides telephone and broadband service and holds full ownership of AT&T Mobility. December 17th the company increased its quarterly dividend 2.4% to $0.43/share. The dividend is payable on Feb. 1 to shareholders of record on Jan. 10. The ex-dividend date is Jan. 5. The company also announced that it will buyback up to 300 million shares of the stock. T is a Dividend Achiever and has raised its dividend for 27 consecutive years. The yield based on the new payout is 5.88%.

Norwood Financial (NWFL) is a one-bank holding company that operates 11 offices in Wayne, Pike and Monroe Counties, Pennsylvania. December 20th the company raised its quarterly quarterly dividend 3.6% to $0.29/share. The dividend is payable February 1, 2011 to shareholders of record as of January 14, 2011. The ex-dividend date is January 12, 2011. The yield based on the new payout is 4.3%.

Washington Federal (WFSL) owns Washington Federal Savings, which provides financial services in Washington, Oregon, Idaho, Arizona, Utah, Nevada, New Mexico and Texas. December 20th the company increased its quarterly dividend 20% to $0.06/share. The dividend will be payable on January 14, 2011 to common stockholders of record on December 31, 2010, with an ex-dividend date is December 29, 2010. The yield based on the new payout is 1.6%.

Alliant Energy Corp. (LNT) provides electric and natural gas utility services, and also has various unregulated energy, freight transportation, and other investments. December 21st the company raised its annual dividend 7.6% to $1.70/share. The yield based on the new payout is 4.6%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: Long T. See a list of all my income holdings here.

(Photo Credit)

11 Higher-Quality, High-Yield Dividend Stocks *

D4L — Wed, 01 Dec 2010 07:30:44 +0000

A successful dividend growth investor must start young enough to allow time for dividend growth to occur. What happens when a person waits too late in life to start investing and they need immediate income? Many times the person will invest in high-yield, high-risk stocks and lose their savings. If income is needed immediately and you want to mitigate the risk (to a degree), there are some things that can be done, such as…

Start With a High-Quality List of Stocks

If you are looking for a higher-quality dividend growth stock, you have to go where they can be found. For me this is my Stock Ideas page. It consists of:

S&P 500 Dividend Aristocrats: is designed to measure the performance of S&P 500 index constituents that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. These stocks are the best of the best – the blue blood stocks.

Broad Dividend Achievers: is comprised of select US companies with at least ten consecutive years of increasing regular dividends. US companies must be listed on the NYSE, AMEX or NASDAQ. US Companies must have a minimum average daily cash volume of US$500,000 per day for the November and December prior to each Annual Reconstitution Date.

U.S. Dividend Champions: includes companies that had paid higher dividends for at least 25 consecutive years. The list includes some smaller companies not found on the other lists. This list is maintained by The Drip Investing Resource Center and is available on their website in an Excel spreadsheet.

Look For Sustainability

High-yield isn’t free. There is usually a reason one stock’s yield is higher than another and it is normally tied to risk. With all things being equal, the income investor would always select the higher yield stock, but all things are not equal. It is our job to identify what is driving a stocks yield up and determine if we are willing to accept the additional risk. When making this decision some of the things I consider are free cash flow, debt level, business model, among others.

Higher-Yielding Stocks To Consider

Putting it all together, I have identified 11 stocks that yield at least 5% and have grown their dividends for at least 5 years. They are:

Leggett & Platt, Inc. (LEG) makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as diversified products for non-furnishings markets.
- 5.16% Yield
- 36.76% Debt To Total Capital
- 57.89% FCF Payout
- 38 Years of Dividend Growth

Urstadt Biddle Properties (UBA) is a real estate investment trust that acquires, owns and manages commercial real estate properties primarily in the northeastern United States.
- 5.17% Yield
- 30.87% Debt To Total Capital
- 58.27% FCF Payout
- 16 Years of Dividend Growth

Hudson City Bancorp Inc. (HCBK) operates over 100 branches in the New York metropolitan area. It caters to high median household income counties and focuses on jumbo mortgage loan funding, largely through time deposits.
- 5.26% Yield
- 72.57% Debt To Total Capital
- 52.23% FCF Payout
- 10 Years of Dividend Growth

Cincinnati Financial Corp. (CINF) markets primarily property and casualty coverage. It also conducts life insurance and asset management operations.
- 5.31% Yield
- 15.05% Debt To Total Capital
- 46.87% FCF Payout
- 50 Years of Dividend Growth

PP&L Corporation (PPL) is a holding company for PPL Utilities and a utility in the U.K.
- 5.53% Yield
- 37.55% Debt To Total Capital
- 99.92% FCF Payout
- 9 Years of Dividend Growth

National Retail Properties, Inc. (NNN) invests in high-quality, freestanding retail properties subject to long-term net leases with major retail tenants.
- 5.74% Yield
- 1.92% Debt To Total Capital
- 82.18% FCF Payout
- 19 Years of Dividend Growth

Verizon Communications Inc. (VZ) offers wireline, wireless and broadband services primarily in the northeastern United States. It acquired MCI Inc in 2006 and has since sold or spun off non-core assets. Alltel was acquired in early 2009.
- 5.94% Yield
- 38.59% Debt To Total Capital
- 31.49% FCF Payout
- 6 Years of Dividend Growth

AT&T Inc. (T) provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless). AT&T Corp. was acquired in late 2005 and BellSouth in late 2006.
- 6.02% Yield
- 41.67% Debt To Total Capital
- 61.14% FCF Payout
- 27 Years of Dividend Growth

Suburban Propane Partners LP (SPH) markets propane gas and other refined fuels to residential, commercial, industrial, and agricultural customers.
- 6.08% Yield
- 43.49% Debt To Total Capital
- 88.83% FCF Payout
- 11 Years of Dividend Growth

Kinder Morgan Energy Partners LP (KMP) is one of the largest pipeline master limited partnerships (MLPs) in the U.S.
- 6.14% Yield
- 63.92% Debt To Total Capital
- 76.11% FCF Payout
- 14 Years of Dividend Growth

CenturyLink, Inc. (CTL) acquired larger telecom peer Embarq in a stock deal in July 2009. Combined, the company provides voice service to 6.7 million customers and Internet service to 2.4 million customers in rural towns as well as larger cities such as Las Vegas.
- 6.74% Yield
- 44.56% Debt To Total Capital
- 75.39% FCF Payout
- 37 Years of Dividend Growth

As note earlier, yield comes with a cost. Each of the above stocks carries some level of additional risk higher than the average Aristocrat, Achiever or Champion. Ideally, we will start building our income portfolios years before we need the income, but if that is not possible, diversifying and focusing on higher quality stocks should help reduce our overall portfolio risk.

Full Disclosure: Long LEG, NNN, CTL, T, CINF. See a list of all my income holdings here.

(Photo Credit)

Pocket Change Portfolio – October 2010 *

D4L — Sat, 20 Nov 2010 07:30:45 +0000

Dividends Received

Total dividends received during the month were $218.33, consisting of:

$29.04 The Coca-Cola Company (KO)
$7.57 Vanguard Intermediate-Term Bond ETF (BIV)
$11.48 Genuine Parts Company (GPC)
$14.96 Automatic Data Processing, Inc. (ADP)
$31.68 Kimberly-Clark Corporation (KMB)
$27.00 Leggett & Platt, Incorporated (LEG)
$24.00 Cincinnati Financial Corp. (CINF)
$38.00 Sysco Corp. (SYY)
$4.90 PowerShares Emerging Mkt Debt (PCY)
$29.70 Medtronic, Inc. (MDT)

Dividend Stock Purchases

The following securities were purchased during the month:

30 Shares Johnson & Johnson (JNJ) providing $64.80 in annual dividend income
50 Shares Harleysville Group Inc. (HGIC) providing $72.00 in annual dividend income
58 Shares AT&T, Inc. (T) providing $97.44 in annual dividend income
40 Shares Automatic Data Processing, Inc. (ADP) providing $54.44 in annual dividend income

Also, I liquidated my position in Vanguard Intermediate-Term Bond ETF (BIV).

Annualized Dividend Income

Including the above purchases, my annual PCP dividend income is now $2,494.16 at the current dividend rates. This is up $293.84 from last month’s $2,200.32 amount. The PCP has never had a monthly decline in annualized dividend income.

Portfolio Returns

Month: 2.31%
Year-to-date: 11.98%
Life-to-date: 15.30% (annualized)

My PCP holdings are always available by selecting the Holdings option from the menu in the header. The next PCP update will be mid-December.

(Photo: sanja gjenero)