Friday Night Round Table

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Greetings everyone!  Today marks the end of the last official week of January and I wanted to share my thoughts on currently "big" companies that are undervalued or the stock price has taken a large hit recently, thus offering a higher yield than usual.  To begin my brief discussion we will start with:

Johnson and Johnson (JNJ): A dividend Aristocrat, their stock has dropped around $3 due to recalls on products, lawsuits being filed as well as a decrease in revenue and profits, year over year.  However, from a company standpoint - keeping your investors happy is what they need to do in this situation, thus their dividend, in my opinion, still stands strong and they have excess cash in storage.  Their price at $60.01, brings their yield to 3.60%; which based on my analysis 4 weeks ago, they had a yield of 3.49%.  Thus, it is an even more attractive investment for new/current shareholders.

Intel (INTC): Even after their stock price surged close to $22 after they announced their stock buyback plan and dividend increase, they had a pullback today, thus finishing off at $21.46 per share with a current yield of 3.37%.  With my previous article about INTC, their yield was 2.99%, thus it is much higher.

WWE (WWE): You read it.  The World Wrestling Entertainment has taken a beating due to disappointing earnings guidance.  However, with a dividend yield of 12.03% and the Royal Rumble coming and Wrestlemania, my brothers (die hard fans) say that this should help the company's revenue and that the loyal fan base is still there.  It will be interesting to see what will happen.  They are priced at $11.97, which is around $2 - $2.50 less than what it has normally traded at over the last 52 weeks or so.

AT&T (T): This is difficult.  Despite solid results, Verizon (VZ) and the Apple's (AAPL) iPhone seem to extremely threaten good old AT&T.  Their price has plummeted as well, finishing the week off at $27.49, pushing the yield to an astounding 6.26% (I analyzed them earlier when their yield was at 6.05%).  Does ATT last?  They are making now a bigger push for android phones, which is obvious due to the "non" exclusivity of the iPhone.  I know we are all about cell phone's and wireless coverage - but AT&T still has Cable, Internet, Land Line, U-Verse etc.  - question I have is - are these products of old age and are on a decline as well?  Being in the Dow 30, AT&T has to have something.

Lorillard (LO): They have dropped, in the last month, about $8 - roughly from mid $82 to $74.65, thus pumping the yield to 6.03% (According to google finance).  They are a cigarette company, and I know some people may be upset for me writing about them, but their yield is very strong.  I may do a further evaluation in the upcoming weeks on them.

Hudson City Bancorp (HCBK): They have dropped tremendously as well to $10.98 due to low mortgage interest rates and the uncertainty of these rate fluctuations in the future.  Their yield currently stands at 5.48%.

What do all of you think of these stocks?  Any other High dividend yielders that look attractive going into the weekend?

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.

J.M. Smucker Company Stock Analysis

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The JM Smucker Company (SJM) has paid dividends now for over 10 years.  They did extremely well during the great recession as they had the acquisition of Folgers and also they are a staple in everyone's homes with their vast array of product offerings - I mean come on, I think I eat peanutbutter everyday and my mom loves their coffee : ) 

To start the analysis, I would like to look at their price: as of January 27th 2011 (Before the market opens) they are trading at $62.34. Their 52 week high is $66.28, giving a chance of a 6% upside on the pricing giving its most recent high. Their low is $53.27 over the prior 52 weeks.  It is more towards their 52 week high at this point, which I would like to see it a dollar or two lower.  

Price to Earnings Ratio: SJM has a current 14.74 P/E ratio, below the S&P average and according to Morning star is below the 16.2 P/E for the industry average. Therefore, SJM's stock is a cheaper option according to its earnings and is currently undervalued against the average of both the industry and S&P index.

Dividend Yield: Let us take a look at Smucker's dividend yield.  Their current dividend yield when trading at $62.34 is 2.57%.  2.57% is still much higher than the average of the S&P 500 index, and they have had consecutive raises in their dividend policy.  Also, their dividend yield growth rate currently stands at 9.61% since their first issuance back in November of 2000.  Last year's increase was over 13%, from 2008 to 2009 (Excluding their special dividend) was 8.7%, and from 2007 to 2008 was about 7%.  

Payout Ratio: Their dividend is $1.60 per year and their EPS is $4.23.  Therefore, 1.6/4.23 = 37.8%, actual a low ratio.  Compared to their earnings, they are retaining over 60% of those for their business, building up their cash supply for possible future acquisitions I am sure (One allows me to think that, because of the big Folgers deal they pulled off) and this retaining of earnings could be used for further, future dividend increases.  This shows me that they have room to provide increases and consistently pay that dividend.  

Conclusion: From what we all experienced over these last 3 years from the "great recession", one can bet that Smucker's was a great pick as most consumers would buy peanutbutter (Jif) for cheaper meals and make their own coffee at home (Folgers) than going to a cafe and paying a few dollars for a cup.  As it is a great staple for your cupboards and countertops, I believe it is a great staple for your investment portfolio.  I currently do not have a position in SJM, but am highly considering starting a position, as over time with a DRIP in place, this investment could pay off mightily.  

I recommend doing your own due diligence before purchasing any investment, however, and I do not make a recommendation to anyone - I simply describe how I feel about the topic at hand.  Thanks for reading!

-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.

My Dividend Portfolio as of 12/31/2010

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My Dividend Portfolio:

Symbol	Yield	Current ShP	Annual Income
PFE	4.57%	$17.51	42.70
CIM	16.79%	$4.11	31.15
NGG	6.31%	$44.38	49.66
V	0.85%	$70.38	3.35
HRB	5.04%	$11.91	9.60
ANH	13.86%	$7.00	7.76
HIMX	10.59%	$2.36	8.25
PRGN	5.83%	$3.43	2.00
SHMR	5.85%	$13.75	8.04
LMT	4.29%	$69.91	87.00
TOTAL	5.17%		249.51

This marks a 45.12% increase in my annual divided cash flow from my November 27th posting regarding my holdings.  This is due to a few reinvestments from stocks that I own and also a new addition of Lockheed Martin Corporation (LMT), which I purchased Thursday, December 30th.  I have set many goals for this year, to which I will use my recent action on Thursday as one for the new year.  I set goals with my friend who is an auditor in Chicago, who was in town and we decided to really set goals and strategize on how to accomplish these.

My goals for 2011:
Invest $7,500.00 (minimum) into DRIP (Dividend Reinvesting) stocks (Update: I have done $2,000)
Maximize my Roth IRA contributions of $5,000.00 for year 2011
Create other Passive Income Streams (which one can see from my Passive Income Online blog)
Start Positions in Speculative/Micro Cap stocks
Accomplish my education and certification goals for 2011 (MBA-Finance graduating May 2011 and CPA exam August 2011)

With these goals, more specifically the investment goals, I hope to add to my dividend income stream.  I will continue to reinvest my dividends from my holdings, which will thus provide me more shares of that stock, thus increasing my dividends annually (all else held constant such as a stable dividend etc).

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 : )

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

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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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