The Div Guy

New Dividend Stock Purchase: AT&T (T)

2009-11-20T05:00:00.011-06:00

After analyzing communication stocks from Monday's screen, I decided to purchase shares of AT&T (T).

Company Description

AT&T is the dominant local phone company in 22 states, serving about 55 million local phone lines and 15 million high-speed Internet users. The firm also provides phone and data services, such as Web hosting and data transport, to businesses nationwide, notably large corporations. AT&T owns 100% of AT&T Mobility, the second-largest U.S. wireless carrier with 77 million customers. The firm also owns a directory publishing business and a handful of international investments.

AT&T has been growing it's wireless revenue with help from iPhone and continues to roll out of U-verse fiber-based network which offers video and faster-speed broadband services. U-verse has higher profit margins and is increasing the companies profitability.

Strong Brand and Dividend Income

AT&T still has strong brand loyalty and an improved balance sheet. The 6% dividend yield is a big bonus as well. The dividend payout was 52% of the $13.9 billion of free cash flow which should provide ample cushion for continued dividend payments.

Disclosure: The Div Guy owns shares of T at the time of this post.

Americans Not Saving For A Rainy Day

2009-11-19T05:00:00.006-06:00

I just read an article on NPR.org that talked rain day funds. About half of Americans don't have $2,000 for a rain day fund. I find it amazing and sad that so few people can save money. Here are the highlights of "Americans' Savings Offer Little Shelter For Rainy Day" by Marilyn Geewax.

For nearly two years, the U.S. economy has been struggling with a recession brought on by excessive borrowing, both for home mortgages and consumer purchases. Economists say many people have learned a lesson; the personal savings rate is inching back up as more Americans embrace the "new frugality."

Still, half of U.S. households don't have even modest savings, according to a new study conducted by TNS Group, a market researcher, with help from professors at the Harvard Business School and Dartmouth College.

The researchers conducted a survey to see how many households could round up $2,000 within 30 days to cope with an emergency, such as having a car breakdown or needing a major home repair. About half said that even if they turned to relatives for help, they could not come up with $2,000 for a "rainy day," the study found.

The tougher credit environment makes it even more important for households to have their own savings to handle emergencies, according to one of the researchers, Dartmouth economics professor Annamaria Lusardi. The personal savings rate has crept back up from zero to about 3 to 4 percent, but is still about half the norm of a generation ago.

Lusardi says most Americans continue to live with what she calls "financial fragility." That is, families may be living a middle-class lifestyle, but are one job loss, or even one car breakdown, away from tumbling into real financial trouble.

She said many consumers don't study the interest rate and fee terms of their credit cards, and suffer from "financial illiteracy." That is, they don't realize just how expensive it is to borrow money — and how important it is to have cash available for unexpected expenses.

She recommends that families save in a "slow and steady" manner, always setting aside some cash each week to create a "rainy day" fund of at least $2,000.

Americans Cashing out of 401(k) Funds

2009-11-18T05:00:00.003-06:00

I just read an interesting CNNMoney story about 401(k) plans. Millions of US workers cash out their 401(k) plans when they lose their job or change jobs. How sad is it that almost half of all people who lose their job or change companies take their retirement plan in cash. Many of these same people will be struggling during their retirement years.

Here are some highlights of the article by Ben Rooney. Unemployed tap their 401(k)s

Hewitt Associates, a global human resources consulting firm, said 46% of employees who left their job last year took a cash distribution from their 401(k) plan.

The "alarmingly high" number, which was based on a study of 170,000 401(k) participants, has remained virtually unchanged since 2005, the group said.

Pamela Hess, Hewitt's director of retirement research, said employers and policymakers need to work together to change employee behaviors and reduce 401(k) cash-out rates.

"Otherwise, millions of Americans who rely on defined contribution plans will find themselves unable to achieve a financially secure retirement," Hess said in a statement.

Among the workers who did not cash out their plans, 29% left their savings in their prior employer's 401(k) plan, while 25% rolled over their money into an IRA account or other retirement plan.

The study also showed that younger workers were more likely to take the money and run. Six out of ten workers in their 20s took a cash distribution from their 401(k) last year, compared with just one-third of employees in their 50s.

Hess said the high cash-out rate among young workers is troublesome because those employees are missing out on "decades-worth of tax-deferred growth on their investments."

Not surprisingly, the study found a correlation between 401(k) plan balances and cash-out rates.

Only 8% of workers with 401(k) balances of $100,000 or more cashed out their plans last year. That compares with 85% of workers with a balance of $1,000 or less who did take a cash distribution.

Book Review: Top 10 Distinctions Between Millionaires and The Middle Class

2009-11-17T05:00:00.005-06:00

I just finished reading 'The Top 10 Distinctions Between Millionaires and The Middle Class" by Keith Cameron Smith. Nothing earth shattering in this book and most distinctions are common sense but they are good to review. Here is a summary of the book.

10. Millionaires think long term. The middle class thinks short term. The goal of the poor is survival, middle class is comfort and rich is freedom. What would you like your life to be like ten years from now? Think about it and start planning for it. Think long term in every area of life.

9. Millionaires talk about ideas. The middle class talks about things and other people. There are three types of people, those who make things happen, those who watch things happen and those who say what happened. Ideas are the most valuable asset in the world. Money is powerful but ideas are even more powerful.

8. Millionaires embrace change. The middle class is threatened by change. Millionaires embrace change because they know it always brings an opportunity for growth.

7. Millionaires take calculated risks. The middle class is afraid to take risks. If you take risk out of life, you take opportunity out of life. Risk management: What is the best thing that could happen?; What is the worst thing that could happen?; What is the most likely thing to happen? Three primary fears that stop the middle class from taking actions that create success are the fear of failure, the fear of rejection and the fear of loss.

6. Millionaires continually learn and grow. The middle class thinks learning ended with school. Success is a process, millionaires are students for life. The secret to being a lifelong learner is to study what you love.

5. Millionaires work for profits. The middle class works for wages. Wages will always limit your income, if you earn profits the sky is the limit.

4. Millionaires believe they must be generous. The middle class believes it can't afford to give.

3. Millionaires have multiple sources of income. The middle class has only one or two. The power of intentional congruence is getting each source of passive income to support the others.

2. Millionaires focus on increasing their net worth. The middle class focuses on increasing its paycheck. Millionaires make their money work hard for them. The middle class works hard for its money. Increasing your net worth with assets that produce passive income is a skill and skills require time to develop. Wisdom is the application of knowledge. Millionaires apply knowledge they gain and continually increase their knowledge.

1. Millionaires ask themselves empowering questions. Middle class people ask themselves disempowering questions. Learn to ask yourself questions that stretch you beyond your current levels of experience. Questions you ask yourself determine the results you get in your life.

Dividend Stock Screen: Communication Companies

2009-11-16T05:00:00.001-06:00

I am looking to add a communication company to my portfolio. I have created a stock screen using S&P data. I am looking for 4 and 5 star rated stocks that are paying a dividend of 2% or more. The screen comes up 8 stocks which are listed below. I will need review these stocks and select one to purchase this week.

I also need to review and trim some of my current stocks in the new year. I am going to take a close look at the stocks that are not paying dividends and stocks that are not leaders in their industries.

As always do your own research before making any investments.

Symbol Company Dividend Yield
T AT&T Inc. 6.25%
CTL CenturyTel 8.08%
FTR Frontier Communications 13.76%
NTLS NTELOS Holdings 7.35%
ERIC Telefon Ericsson 2.17%
TEF Telefonica S.A. (ADR)5.11%
VZ Verizon Communications 6.31%
WIN Windstream Corporation 10.05%

Disclosure: The Div Guy does not own any of these stocks at the time of this post.

Top 20 Stock Holdings

2009-11-04T05:30:00.010-06:00

Here are the top 20 stocks in my Dividend Portfolio as of 10/31/09 ranked by size of holdings.

1. Kinder Morgan Energy (KMP) USA
2. Barclays PLC (BCS) UK
3. DCP Midstream Partners (DPM) USA
4. HRPT Properties Trust (HRP) USA
5. Penn West Energy Trust (PWE) Canada
6. Procter & Gamble (PG) USA
7. Johnson & Johnson (JNJ) USA
8. General Electric Company (GE) USA
9. American Capital (ACAS) USA
10. Exxon Mobil Corporation (XOM) USA
11. Banco Santander (STD) Spain
12. GlaxoSmithKline (GSK) UK
13. Deutsche Bank (DB) Germany
14. Diana Shipping Inc. (DSX) Greece
15. Aircastle Limited (AYR) USA
16. Cooper Tire & Rubber (CTB) USA
17. ONEOK, Inc. (OKE) USA
18. Newell Rubbermaid Inc. (NWL) USA
19. Seagate Technology (STX) USA
20. Duke Energy Corporation (DUK) USA

Since I am a fan of the Tweedy Browne Funds, here is an update of the Tweedy, Browne Worldwide High Dividend Yield Value Fund as of 10/31/09.

1. Total SA France
2. Muenchener Rueckver Germany
3. Glaxosmithkline PLC UK
4. Unilever NV Netherlands
5. CNP Assurances France
6. Novartis AG Switzerland
7. Pearson PLC UK
8. 3M Co USA
9. Philip Morris Int’l USA
10. Diageo PLC UK
11. Emerson Electric Co USA
12. Vodafone PLC UK
13. Conocophillips USA
14. Genuine Parts Co USA
15. Eni Spa Italy
16. Coca Cola Co USA
17. Johnson & Johnson USA
18. Embotelladoras Arca Mexico
19. AT&T Inc USA
20. Akzo Nobel NV Netherlands

October Dividend Income Update

2009-11-03T05:30:00.003-06:00

My Annualized Dividend Income as of the end of October increased to $5,381 from $5,378 for the month. This means my dividend stocks will pay $5,381 in dividends over the next 12 months.

I made a few small dividend stock purchases over the past month from dividend distributions. It looks like the economy is showing some signs of stabilizing and we will have fewer dividend cuts for the rest of the year.

My Dividend Income Goal for 2009 was $7,000 in yearly dividend income but due to the poor economy and dividend cuts, I will have to review that goal. I think $5,500 would be a much more realistic and challenging goal over the next few months.

Most of my stocks are held in my Zecco Trading account and the rest are DRIPs. The dividends from my stocks are reinvested but I am keeping track of the amount of income I could receive once I retire or choose to receive the dividends in cash.

I will post my Top 20 Stock Holdings on Wednesday.

October Dividend Income Update

2009-11-02T05:30:00.004-06:00

As of the end of October our Net Worth decreased to $747,078 from $755,013 for the month which is a 1.05% decrease. For now the markets look like the have settled but we will have to wait and see if the economy slowly starts to recover.

The breakout is as follows:
ASSETS
Retirement Accounts $366,513
Taxable Accounts $116,147
Cash $18,358
Home $205,000
Cars $9,000
Personal Property $3,000
Kids 529 Accounts $29,060

Here is the summary for this month:

Our Net Worth decreased the past month due mostly to the drop in the stock market. We are now debt free since we paid off our credit card debt. We will continue to use our credit cards for rewards but payoff the balances each month. I received around $100 in dividends for the month and have used the cash from these dividends to make additional stock purchases of our dividend stocks but I have not been adding much extra money.

We will be building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. I continued funding our Roth IRA's each month.

I will post my Dividend Income Update on Tuesday.

Value manager John Osterweis is buying high-yielding stocks

2009-10-08T05:30:00.002-05:00

Value manager John Osterweis has been focusing on high-yielding stocks in the current weak economy. Mina Kimes of Forture Magazine has a recent portfolio update with John Osterweis. Here are the highlights: Funds that are way up: Osterweis

A true bottom-up investor, John Osterweis doesn't make big sector bets -- so it's not surprising that his winning stocks this year were a varied bunch, including garbage collector Republic Services (RSG), security software maker Websense (WBSN), and publisher McGraw-Hill (MHP).

The San Francisco-based manager's fund, which has about $700 million in assets, has returned about 10% annually since its 1993 inception, four points better than the S&P 500.

Like many value managers these days, Osterweis currently has a large chunk of his portfolio -- about 23% -- in health-care stocks. But while he likes drugmaker Valeant Pharmaceuticals (VRX) and hospital chain Healthsouth (HLS), he says those are individual bets, not a sector play.

Nevertheless, the manager does look for some themes. One of his favorite types of investments is a turnaround story, or a company whose low operating margins belie its growth potential. That's why he bought shares of American Water Works (AWK), an underperforming utility that has undergone management changes. "With the shift, this company should start growing and get back on track," Osterweis says.

Another turnaround bet is consumer foods giant Unilever (UL), whose 12% profit margin is four points lower than rival Nestle's. "They're a company with strong brands and a national presence," says Osterweis. "They brought in a new CEO last year to get the company's margins on par with its competitors'."

While Osterweis has picked up some deep values this year, he has also boosted his cash position to 23% of his portfolio from 10%. He is skeptical about the strength of the economic recovery, which he thinks will be "anemic" by historical standards. He expects profit growth to be slow, and he's wary of banking stocks, having written in July to shareholders that bank balance sheets "remain suspect."

Osterweis says the continued deleveraging of the consumer and financial sectors will slow a rebound. "In an environment like that, stock market returns will be less robust than what we've seen in prior cycles," he says.

He does see one area of opportunity. "Getting total returns from dividends makes a lot of sense," says Osterweis. He prefers high-yielding stocks not only because they have stable returns, but also because they tend to belong to companies with better balance sheets.

In pursuit of dividends, Osterweis has bought shares of pipelines like Energy Transfer Equity (ETE, Fortune 500), a master limited partnership that has a 7.7% yield. He also added spirits maker Diageo (DEO), which has a 4.6% yield.

"We don't go whole hog into any one theme, but dividends will be prominent in what we doing going forward," he says.

Disclosure: The Div Guy owns shares of Unilever (UN) at the time of this post.

Top 20 Stock Holdings

2009-10-06T05:30:00.004-05:00

Here are the top 20 stocks in my Dividend Portfolio as of 9/30/09 ranked by size of holdings.

1. Kinder Morgan Energy (KMP) USA
2. Barclays PLC ADR (BCS) UK
3. DCP Midstream Partners (DPM) USA
4. HRPT Properties Trust (HRP) USA
5. General Electric Company (GE) USA
6. Johnson & Johnson (JNJ) USA
7. Procter & Gamble (PG) USA
8. American Capital (ACAS) USA
9. Penn West Energy Trust (PWE) Canada
10. Aircastle Limited (AYR) USA
11. Exxon Mobil Corporation (XOM) USA
12. Deutsche Bank (DB) Germany
13. Banco Santander (STD) Spain
14. Cooper Tire & Rubber (CTB) USA
15. GlaxoSmithKline (GSK) UK
16. Diana Shipping Inc. (DSX) Greece
17. ONEOK, Inc. (OKE) USA
18. Newell Rubbermaid Inc. (NWL) USA
19. Seagate Technology (STX) USA
20. Duke Energy Corporation (DUK) USA

Here are the top 10 holding of the Vanguard International Value Fund as of the end of 8/31/09.

1 Vodafone Group PLC
2 Sanofi-Aventis
3 Barclays PLC
4 Eni SpA
5 BP PLC
6 Nokia Oyj
7 E.On AG
8 Samsung Electronics Co., Ltd.
9 GlaxoSmithKline PLC
10 Novartis AG

September Dividend Income Update

2009-10-02T05:30:00.006-05:00

My Annualized Dividend Income as of the end of September increased to $5,378 from $5,361 for the month. This means my dividend stocks will pay $5,378 in dividends over the next 12 months.

I made a few small dividend stock purchases over the past month from dividend distributions. It looks like the economy is showing some signs of stabilizing and we will have fewer dividend cuts for the rest of the year.

My Dividend Income Goal for 2009 was $7,000 in yearly dividend income but due to the poor economy and dividend cuts, I will have to review that goal. I think $5,500 would be a much more realistic and challenging goal over the next few months.

Most of my stocks are held in my Zecco Trading account and the rest are DRIPs. The dividends from my stocks are reinvested but I am keeping track of the amount of income I could receive once I retire or choose to receive the dividends in cash.

I will post my Top 20 Stock Holdings on Monday. Have a great weekend!

September Net Worth Update

2009-10-01T05:30:00.002-05:00

As of the end of September our Net Worth increased to $755,013 from $715,629 for the month which is a 5.5% increase. For now the markets look like the have settled but we will have to wait and see if the economy slowly starts to recover.

The breakout is as follows:
ASSETS
Retirement Accounts $373,359
Taxable Accounts $119,385
Cash $15,981
Home $205,000
Cars $9,000
Personal Property $3,000
Kids 529 Accounts $29,288

Here is the summary for this month:

Our Net Worth increased the past month again due to the stock market increase and I also received $13,000 from a discontinued pension plan that was rolled over into my Vanguard IRA. We are now debt free since we paid off our credit card debt. We will continue to use our credit cards for rewards but payoff the balances each month. I received around $200 in dividends for the month and have used the cash from these dividends to make additional stock purchases of our dividend stocks but I have not been adding much extra money.

We will be building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. I continued funding our Roth IRA's each month.

I will post my Dividend Income Update on Friday.

Easy Way to Calculate Your Nest Egg

2009-09-17T05:30:00.002-05:00

BusinessWeek has this online under Retirement.
Brett Hammond, TIAA-CREF's chief investment strategist, has designed an easy way for employees to check on retirement readiness based on their asset-to-salary ratios at different points in their career. "The big problem is that there is no magic number for the amount of money you need," Hammond says. "This is an attempt to address the needs of real people. If you tell me your assets, income, and age, I can tell if you're on track for retirement."

Hammond's calculations start with one of the basic tenets of retirement planning—that people need at least 70% of their pre-retirement income during post-working years. He states corporate employees with higher income might need 60% from their 401(k)s, with Social Security filling in the extra 10% gap. The wealthier you are, the smaller the percentage of retirement income Social Security will contribute.

How will you know if your nest egg will cover 60% of pre-retirement income once you stop working? If you're 35 and plan to retire at 65, you need 2.1 times your salary to be on track. By 45, you had better have 3.6 times. At 55, the multiple rises to 5.4 times. And by the time you retire, you'll want it to be 7.7 times.

Of course, there are some assumptions built in to Hammond's formula. He assumes a 10% contribution rate, including any employer matching contributions; 4% salary growth, a bit ahead of inflation; a 6% return on investments; and a 25-year retirement period to finance, which would be paid for by purchasing a low-cost annuity at retirement. Those are relatively conservative assumptions—except, perhaps, the 10% contribution rate.

So for example if you are earning $100,000 and are 45 years old, you should have $360,000 in retirement saving to be on track for retirement. According to this calculation I am on track for retirement but I am planning on saving even more to better my chances of a successful retirement.

How is your nest egg doing?

Top 20 Stock Holdings

2009-09-03T05:30:00.012-05:00

Here are the top 20 stocks in my Dividend Portfolio as of 8/31/09 ranked by size of holdings.

1. Kinder Morgan Energy (KMP) USA
2. Barclays PLC ADR (BCS) UK
3. DCP Midstream Partners (DPM) USA
4. HRPT Properties Trust (HRP) USA
5. Johnson & Johnson (JNJ) USA
6. Procter & Gamble (PG) USA
7. General Electric Company (GE) USA
8. Penn West Energy Trust (PWE) Canada
9. American Capital (ACAS) USA
10. Aircastle Limited (AYR) USA
11. Exxon Mobil Corporation (XOM) USA
12. Diana Shipping Inc. (DSX) Greece
13. Banco Santander (STD) Spain
14. Deutsche Bank (DB) Germany
15. GlaxoSmithKline (GSK) UK
16. Cooper Tire & Rubber (CTB) USA
17. ONEOK, Inc. (OKE) USA
18. Newell Rubbermaid Inc. (NWL) USA
19. Seagate Technology (STX) USA
20. Duke Energy Corporation (DUK) USA

Here are the top 10 holding of another money manager I admire Tom Forester and his Forester Value Fund as of the end of 6/30/09.

1. Microsoft Corp (MSFT) USA
2. Johnson & Johnson (JNJ) USA
3. 3M (MMM) USA
4. Altria Group (MO) USA
5. Kraft Foods (KFT) USA
6. Hewlett-Packard (HPQ) USA
7. Heinz (HNZ) USA
8. Bristol Myers Squibb (BMY) USA
9. AT&T (T) USA
10. Travelers Companies (TRV) USA

August Dividend Income Update

2009-09-02T06:00:00.009-05:00

My Annualized Dividend Income as of the end of August increased to $5,361 from $5,302 for the month. This means my dividend stocks will pay $5,361 in dividends over the next 12 months.

I made a few dividend stock purchases over the past month from the dividend distributions of KMP and DPM. Hopefully the dividend cuts will slow down for the rest 2009 as the economy is showing some signs of stabilizing.

My Dividend Income Goal for 2009 was $7,000 in yearly dividend income but due to the poor economy and additional dividend cuts, I will have to review that goal. I think $5,500 would be a much more realistic and challenging goal over the next few months.

Most of my stocks are held in my Zecco Trading account and the rest are DRIPs. The dividends from my stocks are reinvested but I am keeping track of the amount of income I could receive once I retire or choose to receive the dividends in cash.

August Net Worth Update

2009-09-01T06:00:00.005-05:00

As of the end of August our Net Worth increased to $715,629 from $697,342 for the month which is a 2.62% increase. For now the markets look like the have settled but we will have to wait and see if the economy slowly starts to recover.

The breakout is as follows:
ASSETS
Retirement Accounts $342,413
Taxable Accounts $113,367
Cash $13,660
Home $205,000
Cars $10,000
Personal Property $3,000
Kids 529 Accounts $28,189

DEBT
Credit Card $0

Here is the summary for this month:

Our Net Worth increased the past month again due to the stock market increase and we paid off all our credit debt. We will continue to use our credit cards for rewards but payoff the balances each month. I received around $1,000 in dividends for the month and have used the cash from these dividends to make additional stock purchases of our dividend stocks but I have not been adding much extra money.

We will be building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. I continued funding our Roth IRA's each month.

I will post my Dividend Income Update on Wednesday.

Highest Dividend Yields of Dow Stocks

2009-08-25T06:00:00.002-05:00

CNBC by Giovanny Moreano, Market Data Analyst

Dividend yields in the Dow index are down about a quarter of a point since early June and 165 basis points since early March, as equity markets continue to trend higher, pushing yields lower.

The current average yield among the 30 Dow components stands at 2.85%, compared to an average yield of 3.11% in early June, and 4.5% in early March.

Despite of a decline in dividend yields, various Dow components continue to reward investors with lofty payouts. A review of the Dow index reveals that about half of its components have a dividend yield above the current average.

Since early spring, AT&T [T] continues to be the highest yielding stock on the Dow, while Verizon [VZ] has moved ahead of DuPont [DD] for second and third place.

Here is a look at the dividend yields of all 30 Dow components:

Looking for Warren Buffett Stocks to Purchase Now

2009-08-19T06:00:00.002-05:00

John Reese of Validea.com wrote a recent post on what Warren Buffett would be purchasing now at current market prices. Here are some highlights of the article.

Falling In And Out Of Favor With Warren
If you're looking for some current "Buffett-type" individual stocks, scanning through Berkshire's holdings can of course offer some ideas, but it can also be problematic. One reason is that, while Buffett may have bought some of the firm's current holdings at good prices, they may now have risen to the point that they're still worth holding onto, but not worth buying new shares of.

Since last fall, my Warren Buffett-based guru strategy (a computer model I developed that mimics the approach Buffett used to build his fortune) has been high on Becton Dickinson (BDX). Now, it appears my model isn't alone. In Berkshire Hathaway's (BRK) recently filed second-quarter holdings statement, Buffett's firm revealed that it had taken an $85.6 million stake in the New Jersey-based medical technology firm.

My Buffett-based strategy doesn't always anticipate moves that Buffett himself will make. It's designed to emulate the quantitative aspects of the approach Buffett used to find winning stocks in the past.

Here are the five that my models think are the best Berkshire-owned bets:

Becton Dickinson (BDX): Becton makes a variety of medical equipment, ranging from drug injection systems to products used in Pap testing to technologies used in diagnosing infection. It has a market cap of almost $16 billion, and in the last year it has taken in more than $7 billion in sales.

Johnson & Johnson (JNJ): This pharmaceutical and health care giant makes a broad array of drugs and other health care products, including those sold under big brand names like Tylenol, Band-Aid and Neutrogena. Based in New Jersey, it has a $166 billion market cap and has taken in more than $61 billion in sales over the past 12
months.

Coca-Cola Company (KO): This Atlanta-based giant is one of the most recognizable companies in the world, and its 2,800-plus products include such big names as Sprite, Minute Maid, PowerAde, Nestea, Dasani, Fanta, and, of course, the cola that bears its name.

Sanofi-Aventis (SNY): Headquartered in Paris with operations in more than 100 countries, Sanofi makes a wide array of drugs, including Allegra (allergies), Ambien CR (a prescription sleeping aid), and Plavix (used to prevent blood clots). The $89 billion market cap firm has taken in more than $41 billion in sales in the past year.

Procter & Gamble Company (PG): Based in Cincinnati, P&G owns a number of well-known consumer product brands, including Pampers, Tide, Crest, Pantene, Bounty, Pringles, Charmin and Downy. The firm, which has operations in about 80 countries, has a market cap of more than $152 billion, and has taken in more than $79 billion in sales in the past year.

As always, do your own research before making any investments.

Disclosure: The Div Guy owns shares of BDX, JNJ and PG at the time of this post.

US Tire Maker Stocks

2009-08-14T06:00:00.004-05:00

I am in the market for a new set of tires for my car as I have gone 60,000 miles on my original Bridgestone tires. This got me to thinking more about my stock investment in Cooper Tire & Rubber (CTB). I bought CTB as a value play with a good dividend to boot. When I originally made the purchase, I was looking at a one to two year holding period.

As I look around at tires, there seems to be much more foreign competition offering very good tires. I feel the tire markets will get more competitive and see even more low cost producers getting into the market in the coming years. I still feel good about CTB in the next year or so but long term I am not sure how they will handle the increased competition of cheap foreign producers. They have increased their foreign production the past couple of years but with the increase of competitors this will mean tighter profit margins for all companies. I think the larger companies that have more money to spend on R&D and keep their costs low will perform well in the long run and I an not sure if that will be Goodyear or some of the foreign companies such Michelin or Bridgestone.

Bottom line, I have an average cost on my CTB shares of $7.50 with gain of about 40% in the past year. I look to hold this stock until early next year and then take another review of the stock to see if I still want to be in the tire business.

I found an interesting article from Moringstar about CTB, Goodyear and the tire industry. Here are some highlights.

Are Tiremakers Gaining Traction? by Joung Park
Few industries have felt the bite of the recession as acutely as tire manufacturing. However, we believe the short-term outlook for tire manufacturers is brightening given the potential release of pent-up replacement tire demand as drivers notch up more miles, drastic capacity cuts across the industry, and easing raw-material costs. Also to be considered is the proposed tariff on imported Chinese tires, which is a wild card. If approved, this tariff could have mixed effects on the U.S. tiremakers, such as Goodyear (GT) and Cooper (CTB), which we will cover in more detail shortly.

Adverse Conditions
In response to the presently dismal demand environment, tiremakers across the industry have pared capacity, with Goodyear and Cooper proving no exception.

We view this disparity as evidence that beleaguered U.S. consumers are deferring tire replacements, and we believe that this pent-up replacement-tire demand will be released in the near future, likely in 2010 and 2011. We believe this confluence of contracting supply and rebounding demand for replacement tires will provide a temporary spike in profitability for Cooper and Goodyear by raising plant-utilization rates, tightening tire availability and thereby supporting pricing. In addition, falling raw-material costs could provide an additional boost to industry bottom lines.

The Better Tire for the Road Ahead
Although we are now more bullish on the short-term outlook for both Cooper and Goodyear, we are much more inclined to bet on Goodyear over the long haul than Cooper. Goodyear boasts stronger and more diverse distribution channels than Cooper, which has traditionally relied on small independent retailers, which are slowly losing market share to larger national chains.

In addition to its distribution advantage, Goodyear is already strongly entrenched within the premium-branded tire market, which commands more attractive margins and is better protected from the onslaught of cheap imports. Cooper, on the other hand, still generates about half of its sales from private-label tires, which has steadily lost market share to cheap imports. Moreover, its branded tires are not as well-recognized as Goodyear's, which boast a strong lineup of innovative offerings. As competition intensifies within the important North American market, we believe Goodyear's advantage over Cooper in distribution channels and premium tires will shine through.

Disclosure: The Div Guy owns shares of CTB at the time of this post.

Stock Dividends Make a Difference

2009-08-12T06:00:00.000-05:00

I just came across a good artilce By Dave Kansas from WSJ. The article has some good reasons to invest in dividend stocks and why investors now getting back in the market may want to take a look at dividend paying stocks. Here are some highlights.

As the stock market continues to recover, more investors are easing back into the market. While stocks have had a good run, they remain well off their record levels reached in 2007.

Given the carnage of the past two years, it's unsurprising that some people are hesitant to invest in the stock market. One strategy to consider when wading back in is to look at dividend-paying stocks. Such stocks, or mutual funds that focus on dividend-paying stocks, often called "equity income" funds, provide you with an income (the dividend) while giving you a chance to benefit from capital appreciation of the stock.

Beyond the dividend income, there are several reasons for investing in dividend-paying stocks. One, companies that can maintain or even increase their dividend payouts in the current environment are proving their strength. Also, in the wake of
various accounting scandals, a steady dividend is proof that a company is actually making the money it says it is making. While accountants can fudge lots of numbers in a quarterly financial statement, they can't conjure up the cash required to make dividend payments.

Blue Chips Keep Paying
Despite the brutal economic downturn, a number of blue-chip companies, such as General Mills, Colgate-Palmolive and Lockheed Martin, have managed to maintain or even increase their dividends.

Also, bond yields remain at very low levels, making dividend yields competitive on a historical basis. Given the frailty of the U.S. economy, most economists expect bond yields to remain low for quite some time.

Brian Belski, market strategist at Oppenheimer, also thinks that with bond yields likely staying low for some time, retiring baby boomers may decide to focus on dividend-paying stocks to sustain their income.

Under current tax law, most dividend income is taxed at a maximum rate of 15%, while interest income from bonds is taxed as regular income. Another advantage for dividends: They tend to rise over time, while interest payments from bonds remain fixed for the duration of the bond.

Investing in dividend-paying stocks means looking for a stock that pays a good yield. The yield is calculated by dividing the annual dividend by the share price. Thus, manufacturer 3M pays an annual dividend of $2.04 and its share price is about $72, giving it a yield of around 2.8%.

In looking for good dividend picks, using the dividend yield of a major average is a good starting point. The Dow Jones Industrial Average has a dividend yield just above 3%; the Dow Jones Utility Average's yield is nearly 4.5%. That would make 3M a slightly below-average dividend-paying stock. Pharmaceutical company Merck, another DJIA component, has a 5% dividend yield.

Some critics argue that investing in dividend-paying stocks comes at the cost of growth. That, however, is not always the case. Since 1990, the top 20% of companies that have increased their dividends over time have had an annualized price return of 11.9%, compared with a 2.4% annualized price return for the bottom 20% of dividend growers, according to Oppenheimer research.

Mr. Belski recently screened dividend-paying stocks in search of strong dividend payers. Among the stocks that fit his screen: H&R Block, railway operator CSX, United Technologies and Johnson & Johnson.

While dividend-paying stocks are usually sturdy and stable, that isn't always the case. For instance, during the recent financial crisis many companies, such as General Electric, slashed their dividends to preserve cash. Often, just ahead of a dividend cut, a company's dividend yield will balloon to huge, usually unsustainable levels.

No Guarantees
Also, paying a good dividend doesn't guarantee safety. Financial companies have historically been healthy dividend payers. But the fact that Lehman Brothers, Bear Stearns and Merrill Lynch all paid decent dividends ultimately had little bearing on the safety of those stocks.

Indeed, some money managers think dividends are an overrated and inefficient way to invest. "Dividends are fine, but they can go down or even go away," says Ethan Anderson of Rehmann Financial in Grand Rapids, Mich. "I'm not saying great stocks don't pay dividends. I'm saying a great dividend does not mean a stock is great. In my opinion, dividends are like stock splits -- good for marketing."

Disclosure: The Div Guy owns shares of JNJ and GE at the time of this post.

Dividend Stock Screen: High Quality Stocks with High Yields

2009-08-10T06:00:00.010-05:00

I enjoy creating stock screens as a way to find stocks not already on my watch list. I ran a quick S&P stock screen for dividend stocks that are Strong Buys (5 star) and have a yield of 4% or higher. I am taking a look to see if there are some high quality stocks with high yields that I may want to purchase. This is a good place to start and I will do some additional research to see if I will add any to my portfolio. I need to take a look at some of the communication stocks to add to my portfolio. Currently I have too many banks and no communication companies and just one tech stock, Seagate.

Company Dividend Yield
Altria (MO) 7.23%
AT&T (T) 6.40%
Bristol Myers Squibb (BMY)5.66%
ConocoPhillips (COP) 4.27%
Dominion Resources (D) 5.21%
DPL (DPL) 4.65%
Genuine Parts Company (GPC) 4.45%
Kinder Morgan Energy Partners (KMP) 7.96%
Microchip Technology (MCHP) 5.13%
ONEOK (OKE)4.91%
TOTAL (TOT) ADR 5.95%
Windstream (WIN) 11.35%

Disclosure: The Div Guy owns shares of KMP and OKE at the time of this post.

Airplane Leasing Stocks Fly On Earnings

2009-08-09T06:00:00.003-05:00

Aircastle (NYSE: AYR - News) soared after beating estimates to cap off airplane leasing earnings season.

Stamford, Connecticut-based Aircastle reported its earnings this morning, topping expectations for earnings per share and revenue. Adjusted net income for the second quarter was $26.9 million or 34 cents a share on $136.9 million in revenue. All of the company's aircraft were on lease at the end of the quarter, but CEO Ron Wainshal said the company expects the lease market to "remain challenging through the winter." Shares are up by 20%, leading the airplane leasing sector on a strong rally to end the week.

As a whole, the Airplane Leasing Stocks Index is up by 7.2% today. It has now outperformed the S&P 500 by 16.7% over the last month.

AerCap Holdings (NYSE: AER - News) reported a -12% decline in second-quarter revenue before the bell yesterday. The company earned $56.6 million or 67 cents a share during the period, down from $68.6 million or 81 cents a year ago. However, after adjusting for certain items, EPS came to 46 cents for the quarter. Investors were happy with the report, and the stock is adding another 6% to its 19% weekly rally.

Babcock & Brown Air (NYSE: FLY - News) also pleased the Street yesterday, reporting $14 million of net income in the second quarter. Earnings per share were 46 cents, up from 33 cents in Q2 2008. Chief executive Colm Barrington noted that "all but one aircraft was on lease during the quarter," but remained cautious for the remainder of the year. He continued, "we continue to monitor our lessees very carefully as many airlines are facing liquidity problems as a result of the current declines in global air traffic and yields." The stock is on pace to end the week up 18%.

Genesis Lease Limited (NYSE: GLS - News) reported its second-quarter performance figures on July 30. The company lags its peers over the last week despite a 9% gain for the period. Earnings per share came in at 19 cents in Q2, a nickel below estimates. Genesis CEO John McMahon praised the company's balance sheet in a press release, "Genesis had a healthy financial position at the quarter-end with more than $66 million of unrestricted cash, significant credit capacity and no immediate refinancing requirements."

Mutual Funds for New Investors

2009-08-07T06:00:00.002-05:00

I enjoy helping younger investors get started with investing. One of the first things they ask is how do you get started investing. Most young investors I talk to are looking for an easy plan to follow. Mutual funds offer a great way to start a pretty simple investment plan. As investors get more experienced may want to add stock to their portfolios but mutual funds provide a good base to build on.

Here are a couple of mutual fund options I recommended for someone getting started. These funds are for investors seeking maximum long-term growth of capital and with a long-term investment horizon of at least five years.

1. Young investors who are willing to take more risk should take a look at the Vanguard LifeStrategy Growth Fund. The fund invests in other Vanguard mutual funds with an allocation of approximately 80% in stocks and 20% in bonds. The minimum to start an account is $3,000 with additional investments of $100. Expense ratio is .27%

2. Don't have $3,000, Take a look at the Vanguard Star Fund which has a minimum of $1,000. The STAR Fund invests in a diversified group of other Vanguard mutual funds and follows a balanced investment approach by placing 60% to 70% of its assets in common stocks through eight stock funds; 20% to 30% of its assets in bonds through two bond funds; and 10% to 20% of its assets in short-term investments through a short-term bond fund. Expense ratio is .35%

3. Can't come up with $1,000, can you find $25? The AARP Mutual Funds allow you to open an account with an investment of $25 if you sign up for a monthly contribution of $25 or you can set up an account with a single investment of $100. Additional investments to the account can be made at any time with a minimum of $25. The AARP Aggressive Fund as it has a nice balanced portfolio including some international exposure. The funds are managed by State Street Global Advisors and has an allocation of approximately 75% in stocks and 25% in bonds. Expense ratio is .91% but is currently capped at .50%.

I am not saying these investments are right for everyone but for someone just starting out and looking to invest, these funds are a good place to start. Check the mutual fund objective and make sure if matches yours before investing. These funds can be used for a taxable account or for a Roth IRA.

Disclosure: The Div Guy owns some Vanguard Mutual funds and the AARP Aggressive Fund for my children.

Top 20 Stock Holdings

2009-08-05T06:00:00.005-05:00

Since I have not posted in a while, I thought it would be good to give a current update of my stock portfolio. Here is my top 20 stocks in my Dividend Portfolio as of the end of 7/31/09 ranked by size of holdings.
1. Kinder Morgan Energy (KMP) USA
2. Barclays PLC ADR (BCS) UK
3. DCP Midstream Partners (DPM) USA
4. Johnson & Johnson (JNJ) USA
5. Procter & Gamble (PG) USA
6. HRPT Properties Trust (HRP) USA
7. American Capital (ACAS) USA
8. General Electric Company (GE) USA
9. Penn West Energy Trust (PWE) Canada
10. Diana Shipping Inc. (DSX) Greece
11. Exxon Mobil Corporation (XOM) USA
12. Banco Santander (STD) Spain
13. Deutsche Bank (DB) Germany
14. Cooper Tire & Rubber (CTB) USA
15. GlaxoSmithKline (GSK) UK
16. Aircastle Limited (AYR) USA
17. ONEOK, Inc. (OKE) USA
18. Duke Energy Corporation (DUK) USA
19. Newell Rubbermaid Inc. (NWL) USA
20. Pfizer Inc. (PFE) USA

Since I am a fan of the Tweedy Browne Funds, here is an update of the Tweedy, Browne Worldwide High Dividend Yield Value Fund as of the end of 6/30/09.
1. CNP Assurances France
2. Glaxosmithkline PLC UK
3. Philip Morris Int’l USA
4. Heineken NV Netherlands
5. Muenchener Rueckver Germany
6. Diageo PLC UK
7. Novartis AG Switzerland
8. 3M Co USA
9. Eni Spa Italy
10. Johnson & Johnson USA
11. Total SA France
12. Pearson PLC UK
13. Unilever NV Netherlands
14. Embotelladoras Arca Mexico
15. Coca Cola Co USA
16. Emerson Electric Co USA
17. AT&T Inc USA
18. Genuine Parts Co USA
19. Conocophillips USA
20. Telefonica SA Spain

July Dividend Income Update

2009-08-04T06:00:00.003-05:00

My Annualized Dividend Income as of the end of July decreased to $5,302 from $5,887 in January. This means my dividend stocks will pay $5,302 in dividends over the next 12 months.

I made a few dividend stock purchases over the past few months but my stocks have had a number of additional dividend cuts. Hopefully the dividend cuts will slow down for the rest 2009 as the economy is showing some signs of stabilizing.

My Dividend Income Goal for 2009 was $7,000 in yearly dividend income but due to the poor economy and additional dividend cuts, I will have to review that goal. I think $5,500 would be a much more realistic and challenging goal over the next few months.

Most of my stocks are held in my Zecco Trading account and the rest are DRIPs. The dividends from my stocks are reinvested but I am keeping track of the amount of income I could receive once I retire or choose to receive the dividends in cash.