Johnson & Johnson Analysis

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Johnson & Johnson is a member of the Dividend Aristocrat list, meaning they have paid and increased their divided for 25+ Years consecutively.  As a dividend investor - this is only phenomenal news as your cash flow stream from owning their stock has a consistency of getting yearly raises!

To start the analysis, I would like to look at their price: as of December 27th 2010 at 1:33 PM they are trading at $61.96.   Their 52 week high is $66.20, giving a 6.8% chance of appreciation on the pricing giving its most recent high.  Their low is just a tad over $56 over the prior 52 weeks.  Therefore, it is somewhere in between.  I believe with JNJ (Johnson & Johnson), price is not necessarily the most important thing as you invest for cash flow, and their cash flow always grows every year.  Basically, invest into JNJ for Cash flow, DRIP it and you will see a marvelous performance throughout the years of owning the stock.

Price to Earnings Ratio:  JNJ has a current 12.73 P/E ratio, well below the S&P average and according to Morning star it is below the 14 P/E for the industry average.  Therefore, JNJ's stock is relatively cheap to its earnings and is currently undervalued against the average of both the industry and S&P index.

Dividend Yield: My favorite part.  Their current dividend yield when trading at $61.96 is 3.49%.  I know, you may be thinking that is small and not an extremely large dividend yield, but I think it is just perfect.  You would be getting a greater payout than the current government treasury yield, which is what I always look for.  Also, as stated in the very first paragraph, JNJ has consistently paid an increasing dividend for over 25 years!!  This is the most important part, because not only are they constantly increasing their dividend every year, but their share price continually goes up, therefore keeping their dividend yield at lower levels.  In fact, their dividend yield growth rate is an astounding 14.58%!  Therefore, you get (on average) a 14.58% increase yearly to your dividend cash flow from JNJ.  How many jobs have you had that give you a 14.58 increase every year on average?

Payout Ratio:  Their dividend is $2.16 per year and their EPS is $4.87.  Therefore, 2.16/4.87 = 44.25%, a perfect payout ratio.  It falls right in between my preferred 40-60% payout ratio, showing that it keeps some earnings for growth but gives a nice portion in dividends.

Conclusion:  Johnson and Johnson is a great first stock to place in your portfolio.  They are one of the most consistent stocks giving their aristocrat status, their brand recognition and the soundness of the company.  They are a great stock to own for its cash flow as they have recorded past history of amazing returns on their stock price and once placed into a Dividend Reinvestment Plan account, you can increase your cash flow dramatically year after year.  At the given price, I would start a position in Johnson and Johnson based on their dividend growth alone.

-Lanny B.

Disclosure: I do not hold nor recommend anything.  This is actual data, analysis, however I base no investor recommendation.  However, I personally would add/start a position on this firm, however my direction is different from anyone else's.  Thank you for your understanding.

Dividend Tax Rates Extended Through 2012

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As you are all hopefully aware, the Bush Tax cuts will be extended another 2 years and also the amount employees pay into Social Security will be reduced to 4.2% from 6.2%, but our focus is on the Dividend Tax Rate extension.

Another reason why Dividend investing is a great way to fuel your investment portfolio is the tax treatment.  Qualified Dividends are taxed at 0% (aka non-federally taxed) when your income level is in the 10-15% tax bracket - hint to all of you low-income earners, college students : )   It then is maxed at 15% tax rates for all higher level brackets above the 15% income bracket.  What is a qualified dividend you ask:

In order to qualify:
1. The dividend must have been paid by an American company or a qualifying foreign company.
2. The dividends are not listed with the IRS as dividends that do not qualify.
3. The required dividend holding period has been met. (Compliments to Investopedia.com)
How great of a way for a beginner investor to have qualified dividends in their portfolio?  You could potentially pay 0 in taxes on these dividends as your portfolio grows due to a Dividend Reinvestment Plan!  All other Non-Qualified Dividends are taxed at your ordinary income tax levels.  The big goal is that 3rd requirement of holding period.  Therefore, the hold and reinvest dividends is key.

Dividend Investing Tax Rates will be extended through the 2012 Calendar year.  You can possibly use that extra 2% per paycheck if you an employee to invest into more dividend paying companies (Think before you spend that extra 2%; buy assets!)  Thus, Dividend Investing is still extremely tax efficient and is a great way to grow your portfolio.  However, these rates as of right now will go back to ordinary income levels for all dividend at the start of 2013; hopefully something changes by then.

I hope you all enjoyed the holidays, seeing family & friends and eating many deserts and delicious foods!  Market opens tomorrow - anyone making any end of the year tax moves?  Talk to you all soon!

-Lanny B

Bank of Montreal Analysis after their Downturn

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Bank of Montreal (BMO on the NYSE) is a large financial institution that has recently undergone an acquisition of M&I Corporation, thus pushing their stock price down.  As a little side note - when a company acquires a company, typically (but not always) the acquirer's (BMO in this case) stock usually drops due to the possibility that the acquirer overpaid on acquiring the acquireee (M&I).



The last 2 official trading days Bank of Montreal (BMO) has plunged from $61.66 on Thursday December 16th to $55.58 as of market close on December 20th.  This marks a 9.86% decline in their stock price, thus raising their dividend yield.  Their dividend per share is $2.80 per year and they have a 26.9% annualized dividend growth rate!  Using my basic tools, I will analyze Bank of Montreal.

Payout Ratio:  Their dividend per year, as stated, was $2.80/year per share.  Their Earnings Per Share (EPS) is at $4.94.  Thus: 2.80/4.94 = 56.68%, which falls in between my 40 and 60% preferred payout ratios.

P/E Ratio: Since they trade at $55.58 and their earnings per share is $4.94, the Price to Earnings ratio is - 55.58/4.94 = 11.25 P/E ratio.  This falls well below my preference for an under 15 P/E ratio.  This is also below the industry average, according to Morningstar.com, of 14.8.

Current Dividend Yield: Their current dividend yield, when trading at $55.58, is 4.98%.  This is higher than the S&P Average and higher than my preference for an above 3.5%.

Conclusion: They are solid when compared to the industry, they offer a higher yield than the S&P average and offer one of the highest in the financial service areas.  They have recently gone on sale due to the plunge of 9.86% and have payout ratio within my range.  They are a large company with a market capitalization of over 30 billion.  I personally would create a position in this company, as their dividend yield is favorable, they are an extremely large company with a similar amount of customers, have always paid a consistent dividend, have a high annualized dividend growth rate and the possibility for appreciate is there.  This is my basic analysis when seeing if a stock fits my portfolio, given the need for a financial institution.  Thank you for reading, please feel free to leave a comment or message below!

-Lanny B.

Disclosure: I do not hold nor recommend anything.  This is actual data, analysis, however I base no investor recommendation.  However, I personally would add/start a position on this firm, however my direction is different from anyone else's.  Thank you for your understanding.


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You Can Always Upgrade

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Another great benefit to being a dividend investor is the ability to upgrade your cash flow from your holdings.  How does one "upgrade your cash flow"?  I will begin my lecture...

First, when I purchase a stock for its dividend cash flow, I will typically buy it when it is undervalued/cheap compared to its historical share prices, its industry and top competitors.  Therefore, I hope to get the prime time for the dividend cash flow.  As we know, dividend yield is calculated as this: Dividend Per Share/ Price Per Share.  Therefore, if you get $1.00 per year in Dividends and the price is $10 per share, you are yielding 10% off your stock.  If the stock jumps to $20 per share, you only yield 5%.  This segways into my next step.

So you have bought that great, consistently paying dividend-stock at a special undervalued price.  Now when that price per share starts to rise, the yield/interest is in reverse - it lowers (all else remaining constant, such as dividend payment).  In the meantime, you have noticed another great/sound company that has always paid a strong, consistent dividend that has had their stock hit due to an external factor the company couldn't control.  Therefore, their share price drops and their yield rises.  In fact, their yield now is higher than your price-appreciated stock you currently hold.


Therefore, you have a few options when it comes to dividend investing.  If you have extra cash to invest, you can obviously place it into that new company that you do not current own yet.  If you do not have access to extra funds, you therefore can do this: Sell your stock that you held, which had risen in share price thus has a lower yield.  Then, you can purchase the new company who has had their stock hit and now has a higher dividend yield, thus would provide you more cash flow.  This, in my book, is upgrading your cash flow.  An explanation of the benefits...

The benefits:  You have taken advantage of the stock appreciation from your first purchase.  Therefore, say the stock price you bought in with $1000 was at $10 per share, owning 100 shares that each produce $1 in dividends per year; thus giving you a $100 per year cash flow.  Then, the price jumped to $20, displaying a $2000 market value investment, still owning 100 shares, still having that $100 cash flow.  In the meantime XYZ corporation has had their stock plummet from $20 per share to $10 per share, with each share providing a $1 per year cash dividend.  Therefore, you sell your 100 shares for $2,000.00 (of course brokerage fees and either LT/ST capital gain taxes play in effect) and simultaneously buy XYZ Corporation stock for $10 per share.  This gives you 200 shares at $10 per share and increases your cash flow to $200 per year.  That is a 100 percent return/increase to your cash flow.

Now that is called Upgrading Your Cash Flow.  It does take guts, timing and investor preference to take these actions.  Please consult yourself, your advisers and any other sources of information before making a decision to do such an action as stated above.  I hope that this article has helped explain some techniques that are used in the market that one can possibly take advantage of.  Thanks for your attention and feel free to comment or message if you have any questions.

-Lanny B.


Disclosure: I do not recommend anything that you do not feel comfortable with, as this is your sole decision.  This is actual data, analysis, however I base no investor recommendation.  My direction is different from anyone else's.  Thank you for your understanding.


Picture Source: http://two.leasingnews.org/Placards/index.htm

Dividend Increases

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Today, Pfizer increased its Dividend payout by 11%.  This brings its dividend per share, per quarter to 20 cents.  The reason this excites me is because I hold it in my portfolio and it stems a new lesson that I would like to talk about: Dividend Payout Increases

As we all know, there are two ways we can get a return from stock that we own - Dividends and Capital Appreciation (though you would have to sell your stock to even feel the benefit).  How would you like a cash flow stream from a company's stock that you own, to give you raises every year?  That is basically why I tend to hold Dividend paying Company's stock in my portfolio.  It just makes sense...

For Example: Say if you did own Pfizer and your Dividends normally received from them was $1,000 per year.  Now, from their new dividend increase, you receive $1,110 per year, a nice little $110 raise.  How much work did you have to do for that dividend raise?  Well, if your a small shareholder - besides the research and checking on the company every now and again you really haven't done much work for it.  Also, if you continue to reinvest those dividends, you are now putting more back into your portfolio and owning more of these dividend-paying and dividend-increasing shares; thus adding more to your cash flow.  Another tid-bit, typically when a firm increases their dividend payout - the share price will raise by the annual raise: Example - Pfizer increased their Dividend by 8 cents annually, therefore share price should increase by 8 cents at least (as of market close today 12/13/10 Pfizer finished up 17 cents for a 1% gain).  Therefore, you receive capital appreciate as well from an increase in dividend payout, which fulfills both shareholder returns.

Lessons Described Here: Dividend Paying and Dividend Increasing Companies will further add and grow your cash flow, effortlessly (Less research and keeping up to date with company) growing your portfolios value and possibly raising the value per share in terms of stock price.  The key terminology in the business world is Cash Flow, because that is what primarily determines the value of an asset.  I suggest doing research and finding those great dividend paying company's that annually/frequently increase their dividend payouts.

Disclosure: I do not hold nor recommend anything.  This is actual data, analysis, however I base no investor recommendation.  My position is LONG PFE.  Thank you for your understanding.

To Begin a Dividend Portfolio...

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To Begin that Cash Flowing Dividend Portfolio - A great way to start is through a Dividend Aristocrat that is paying a higher yield than the S&P is on average, which is currently 1.85% and has a lower Price to Earnings Ratio (P/E: Which can show undervaluation if low, low among competitors and industry) than the S&P average, which current mean is 16.38.  

What is a Dividend Aristocrat? - "Companies that have had an increase in dividends for 25 consecutive years." Thanks to Investopedia.com for that : )

What a better way to start a portfolio than with a company that has always paid a dividend, and not only that, but has INCREASED their payments for 25 years +.

Here is a list of a few companies that have had astounding presence in the world, have a yield larger than the S&P500 average yield and also produce an extremely phenomenal (above 10%) growth rate in their dividend yield

Johnson and Johnson (JNJ): Current Yield: 3.50%; Dividend Growth Rate Annualized: 14.58%; Dividend Payout Ratio: 44.35%; Price/Earnings: 12.82.  If you would have invested $1,000.00 on 12/1/1985:

Investment Date:	Original Shares:	Original Value:	Current Shares:	Current Value:	Percent Return:
Dec 1, 1985	20	$ 1,000.00	534	$ 32,887.96	3,188.80%

Source: JNJ Investor Relations






Abbott Laboratories (ABT): (Actually just did a huge investor analysis on this company along with 2 big competitors!) Current Yield: 3.80%; Dividend Growth Rate Annualized: 12.89%; Dividend Payout Ratio: 58.09%; Price/Earnings: 15.85
If You would have invested $1,000.00 on 11/30/1990 (As far as their Investors page allowed) Source: Abbott Investors: 

Date Requested	11/30/90
Closing Price	$10.25
Split Adjustment Factor	4.2562:1
Shares Today	975.64
Investment Value	$45,864.76
Percent Change	358.65

Cincinnati Financial (CINF): Current Yield: 5.30%; Dividend Growth Rate Annualized: 9.80%; Dividend Payout Ratio: 52.63%; Price/Earnings: 10.13; If you would have invested $1,000.00 on 11/29/1985.  Sources: CINF Investors:

Date Requested	11/29/1985
Closing Price	$5.10
Shares Today	1,959.32
Investment Value	$60,366.67
Percent Change	503.6

WOW!  The power of compounding and starting early pays off tremendously, especially in evidence from these 3 company's above.  These 3 are just some great examples that show undervaluation compared to the S&P 500 as a whole, a greater dividend yield than the market on average and also shows how consistent their dividend growths have been for over 25 years.  The reason I display these to possibly start a portfolio, is because they have extreme history on consistency and helps to possibly lower investor risk.  If you are looking for cash flow to build up over time, these dividend paying firms have proven their ability to do so.  Like I said, if you have one of these stocks in a DRIP (Dividend Reinvestment Plan), you will reap the benefits.  I hope you enjoyed this article and please do not hesitate to contact me and/or comment below.

-Lanny B.

Disclosure: I do not hold nor recommend anything.  This is actual data, analysis, however I base no investor recommendation.  However, I personally would add/start a position on these firms, however my direction is different from anyone else's.  Thank you for your understanding.
 
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As the Market Crumbles...

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Hey Everyone! As we have seen, the market has been stumbling, crumbling, falling, well - you know the rest. This is due to the European Bailout of Ireland and other talks across the world regarding different issues happening. What does that mean for an investor? Well - Bargains! This has been great for investors to pick up discounted stocks that produce even higher yields than before due to the decline. Who do I have my eyes on?

LMT: Lockheed Martin: Currently Trading at $68.20, it just boosted its dividend this quarter, and has done so for the last 10 years Plus! The dividend per share is at $3.00, giving it a 4.40% dividend yield. They are near their 52 week low and are actually a few dollars away from their 5year+ Low! Price to Earnings (P/E) is only 9.63 (I like something below 15 or the average of the S&P 500 Index) with an incredible earnings per share of $7.08. With a $3.00 dividend divided by a $7.08 earnings per share, this gives LMT a payout ratio of 42.4% (I like somewhere between a 40 an 60% range). This shows that they retain earnings for growth opportunities, but also love to give back to their shareholders. Lockheed Martin is in the aeronautics, defense, security sector, with its biggest competitor (according to Google Finance) being Boeing. Now why don't I talk about Boeing? I have nothing against them, but as a dividend investor, Lockheed provides a greater dividend yield and does have proof of incredible dividend growth over the longterm.

I will continue to keep my eye on Lockheed Martin Corporation (LMT) and also a few other companies such as Nokia (NOK) and Banco Santander (STD - Bank in Madrid Spain, has been hit hard due to the fact it is apart of the European Union countries, etc).

Disclosure: I do not make recommendations. This is simply full analysis of Companies. However, Lockheed Martin Corporation is priced right for me and I would consider placing a large investment into them, holding a Long Position. All information is from Google Finance as of 6:00 PM on 11/29/2010.  Thank you.

My Dividend Portfolio as of November 27, 2010

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Today I will display my holdings for individual stocks, their yields and annualized incomes from the stock. (The annualized portion is based on the amount of shares I own X the annual dividend per share.)
I will be displaying this on a frequent basis to show growth in my portfolio from DRIP and other purchases and analysis' that I make.  I am using this as a tool, also, for myself to see how my portfolio is growing.

Symbol Yield Current ShP Annual Income PFE 4.37% $16.49 38.04 CIM 17.73% $4.06 32.51 NGG 7.84% $45.24 62.93 V 0.79% $75.48 3.35 HRB 4.70% $12.77 9.48 ANH 14.08% $6.96 7.84 HIMX 11.57% $2.16 8.25 PRGN 4.26% $3.52 1.50 SHMR 5.83% $13.78 8.04 TOTAL 6.19% 171.93

As you can see, I have a mix of stocks, some speculative some very sound, but it is getting diverse.  I have been choosing individual stocks for about 6 months now and am seeing dramatic results in terms of share price return as well as dividend income growth.  I currently stand at $171.93 in dividend income per year and will post again in December to see if that number has grown - to which I will describe the growth: Dividend Reinvestment or New Funding from my own pocket for growth.

From seeing this simple chart, I see that Visa is a relatively low yield, to which I am not happy.  I purchased them in the mid-upper $60 range and will wait to see what the price does.  They did raise their dividend by 20% for this recent quarter from 12.5 cents to 15 cents per share.  I know it doesn't seem like a lot, but a 20% growth rate is phenomenal.  The reason why I hold on to them is because I feel there is more price appreciation that is there and I want to see if they will continue to make this growth pattern.

Pfizer: PFE, will be paying me dividends this December, as well as Visa (V), and Paragon Shipping (PRGN).  Thus, with dividend reinvestment, this should automatically raise my annualized dividend income, just as long as they continue to make at least the same dividend payment next quarter; this is due to the fact through Dividend Reinvestment I will be owning more shares.

I will report back on another analysis, enjoy the rest of Thanksgiving Break everyone!

-Lanny B.

Disclosure: I do not recommend any particular company. I am therefore Long on all stocks above, but do not provide this chart as a recommendation of any sort. Do your due diligence and find what is suitable for you. Thank You : )

Why Am I "Dividend Investing"?

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Why am I exactly "Dividend Investing" as most call it?

As of right now, my cash flow isn't that strong.  I am a dividend investor because, depending on which broker you use, I can REINVEST my dividends back into the company that provided them to me.  Therefore, I can make more contributions in a company without having to find a way to make that money.  I simply just click a check mark under Dividend Reinvestment online through my broker's website and the dividends are automatically reinvested for me.

What are my goals as a dividend investor one may ask?  To be honest, it is to someday have enough cash flow from dividends alone that they at least equal my monthly expenditures, so that I will not have to work the rat race any more aka the 9 - 5.  I know that it is a risk to rely on dividends, but that is what analysis is for and to always keep up with the companies or funds that you own.

Other reasons why I enjoy dividend investing are the tax benefits (hopefully to be extended after November of this year).  You are taxed either 0 or 15% for Qualified dividends, depending on your tax status (0% for tax brackets up to up to and including the 15% ordinary tax bracket).  Therefore, it's advantageous for dividend investing.

Also, depending on the market, you can receive more shares when you reinvest those dividends if the share price has dropped.  Which hinders back on my last post saying that, virtually if its a good/sound company, you want that share price to drop so that the company paying the *consistently Increasing* dividend can then be reinvested into more shares.

I will post later when they strike my mind on why else I dividend invest.  I will also analyze companies to see if they are worth investing into and post my responses.  Again, This is not advice.  Just merely what I do, Why I do and How I do things.  Thank you.

-Lanny B

What is Dividend Investing?

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For my first post I want to simply introduce the realm of dividend investing.  What is a dividend?  A dividend is simply a portion of the earnings a company pays to its shareholders, either monthly, quarterly, semi-annually or annually.  My main focus will be on common shareholders ( I won't get into preferred shareholders etc.).

There are three dates that every investor needs to know:
"Declaration date: The declaration date is the day the Board of Director’s announces their intention to pay a dividend. On this day, the company creates a liability on its books; it now owes the money to the stockholders. On the declaration date, the Board will also announce a date of record and a payment date.
Date of record: This date is also known as “ex-dividend” date. It is the day upon which the stockholders of record are entitled to the upcoming dividend payment. According to Barron’s, a stock will usually begin trading ex-dividend or ex-rights the fourth business day before the payment date. In other words, only the owners of the shares on or before that date will receive the dividend. If you purchased shares of Coca-Cola after the ex-dividend date, you would not receive its upcoming dividend payment; the investor from whom you purchased your shares would.
Payment date: This is the date the dividend will actually be given to the shareholders of company."

(Compliments to Dividend 101)

Just to get that out of the way.  Why would you want dividends?  No brainer - they provide you with a Cash Flow.  Cash flow is key.  Appreciation = bonus in the end.  I only invest for cash flow or potential future cash flow.  Example, Say you are investing for the "Long Term" why they hell (pardon my language) would it matter if your stock/mutual/reit etc price rose today or dropped today?  If you are a 22 year old man, why the hell would it matter if your share price of Coca Cola dropped $20 today alone?  Answer: It wouldn't matter especially if it was due to irrational behavior or difficult economic times, such as what we have experienced lately. In fact, if it's a stable company and nothing is truly wrong, you'd want it to decline in price, so you can buy more shares while it is "discounted".  It is a huge bonus if they pay a consistent dividend, and even that much better if they always increase in good and bad times.  

Bottom line: Dividend Investing is investing into companies, funds, etfs, reits that provide a consistent yield during the year that can provide you a source of cash flow.  What you do with that cash flow is up to you.  It merely breaks down into 3 options: Keeping the cash for yourself to spend (One).  Reinvesting the dividends back into more shares from that company (Two).  Using the dividend to purchase shares of ANOTHER company (Three).  I will explain in later posts on these 3 options.

Welcome to the world of Dividend Investing.  I will hopefully be able to show you the amazing upside that investing in this manner has and the wonders it may bring.  

Welcome to the Blog!

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Hey Everyone!  Welcome to my new blog based on Dividends from Investment Securities.  I am extremely passionate about preparing for the future, lowering your retirement age and finding a great means to do so.  There are many options to perform this goal, but I have been extremely eager and anxious to talk and learn more about dividend investing.

On this blog I will talk to you about the pros, the cons, facts, assumptions, estimates, companies etc., (the list goes on!) on dividend investing.  I want to take the time to state this:  This blog IS NOT a means to provide advice or action for you to take.  I am simply providing information and knowledge that I have on the matter and am not providing professional advice.  Please consult your advisor or broker if need be.

Sorry, had to get that out of the way to cover myself!  I cannot wait to get started on the miraculous investment vehicle that I like to call: Dividend Investing.  I will consider myself the Young Dividend Guy, as I am 22 years old and am extremely enthused to embark on my own journey using this vehicle.  I have done much research for the past few years on the matter and am ready to share my insight with you.  Thank you for stopping by and I hope that you learn a great deal.  Enjoy : )

-Lanny Berlingieri