3 Reasons Not To Flee Dividend Stocks

I have been asked by many people lately if I am worried about a sell-off in dividend stocks because of the impending Bush Tax Cut expiration.  The potential dividend tax increase certainly sucks, but I'm not concerned about a selloff. In fact, if you look at previous years when Congress increased taxes on dividends, dividend paying companies typically outperformed the market as a whole. I had planned to write an article on this, but I came across one on SeekingAlplha that already explained it well.

The election night parties were barely over last week before investors started selling stocks. While renewed uncertainty over Europe did not help, the source of the volatility was closer to home: The fiscal cliff. Washington now has seven weeks to reach a compromise — a failure to do so will mean the largest fiscal drag in the post-World War II period and a possible recession.

Many investors are particularly worried that dividend stocks are vulnerable given the potential for a near tripling of the tax on dividends.  READ MORE

Trading vs Investing

I don't like Jim Cramer. I think he's a terrible person to listen to if your looking for financial advice. He's a great entertainer (which is why he has the job of hosting a television show) but he is not someone you should listen to if you're trying to build wealth. It's likely that the only person Jim Cramer will make wealthy is your stock broker because of all the buy and sell transactions he generates from his Mad Money show.

Of course, I'm not Jim Cramer's target demographic. He's not going to lose sleep at night if I'm not watching. And if you are a dividend growth investor, then he should not appeal to you either. The type of show like Mad Money will appeal to stock market traders. There are major differences between investors and traders.

MLPs and Retirement Accounts

If you're not familiar with Master Limited Partnerships (MLPs) I suggest reading my Boring Terms post for an overview. In that article I mentioned the pros and cons of MLPs and dividend investing. In short, MLPs are a great investment vehicle for generating dividend income, but because of their tax implications they aren't a great option for dividend reinvestment or retirement accounts. In fact, many brokers won't allow MLPs in retirement accounts. And that's a shame since the way MLPs are structured would make them a great choice for retirement accounts.

Ka-Ching! AFLAC just gave me a 6% raise

Another week, another raise... a guy can really get used to this. AFLAC (AFL), the supplemental health and life insurance company, increased its quarterly dividend 6.1% to $0.35 per share. The dividend is payable on December 3, 2012, to shareholders of record at the close of business on November 14, 2012. The yield based on the new payout is 2.8%

Now I'm not one to look a gift horse in the mouth, but I have to admit I'm a little disappointed in the size of this increase. Based on the very low free cash flow payout ratio of 6% and latest quarter's debt to total capital of only 21%, AFL could have easily increased the dividend by double digit percentages.

Pay Yourself to Wealth

It amazes me how many people think they "can't afford" to fund a stock portfolio. Even when I tell people I started with just $50 / month they act like that is too much. Of course these are the same people who don't think twice about spending that on dinner and drinks several times a month. Or they are the type who rush out to buy a newer car once they have their old one paid off.

I understand that it's fun to have new things. The excitement of owning something new is a powerful force and the American economy relies on it. But this force is also what holds a lot of people back from building wealth.

Ka-Ching! Phillips 66 just gave me a 25% raise

Phillips 66 (PSX) announced last week that it was increasing its quarterly dividend by 25% to $0.25 / share.  My position in PSX came from the split of ConocoPhillips (COP) this past April.  PSX now focuses on energy & chemical refining and transportation while COP focuses on the exploration side.

To be honest, I wasn't sure how I felt about PSX and considered selling it as its price increased 50% since May.  This recent increase and statement by their CEO has made me a believer in PSX's dividend growth future.

“This 25 percent increase reinforces our objective to provide competitive and growing dividends,” Phillips 66 Chairman and CEO Greg Garland said in a company statement. “Allocating capital to dividends and repurchases while continuing to invest in the growth of our business is fundamental to our philosophy of delivering shareholder value.”

Payout Appreciation: Some Investors Pile Into Stocks Likely to Keep Raising Dividend

Note: I'm going to be traveling the next couple of weeks so there likely won't be any original posts from me.  I'll be reposting articles I find interesting and applicable during this time though. Below is an article from the Wall Street Journal that points out how money management firms are now focusing on companies that pay and grow their dividends each year.  What an interesting concept!

Call them the new growth stocks.  After rushing into dividend stocks of all stripes this year, some investors are homing in on a more select group: stocks of companies that are likely to keep raising their dividends at a fast clip.

It is all part of the chase for better returns on the heels of the Federal Reserve's announcement last week of another round of bond buying aimed to keep interest rates at rock-bottom levels until the economy improves. As yields on the 10-year Treasury wallow at near-record lows and "junk"-bond yields also are sinking, investors are seeking anything that offers some extra income. READ MORE

Disclosure: I am long VZ, HAS.

TAGS: [VZ][T][SRE][MO][HAS][GCI][CSCO][AEP]

Ka-Ching! Microsoft just gave me a 15% raise

Joining its fellow IT sector leaders Intel (INTC) and Cisco (CSCO), Microsoft (MSFT) announced this week that it would reward its shareholders by increasing its annual dividend by 15%, from $0.20 per quarter to $0.23.  Armed with almost $62 billion in cash while generating nearly $30 billion in cash flow, its nice to see Microsoft continue their annual double digit dividend increases.

Microsoft faces a big catalyst in the coming months with the release of Windows 8. This will also be the platform for their latest entry into the mobile market. Despite failing to make much headway thus far in mobile, Windows 8 Phones have had positive reviews.  The main focus will be on their cash cow though, the PC.  Recent softness in the PC market has scared some investors and analysts, but the new release of Windows 8 may be what that market needs.  If successful, that growth will help continue to drive Microsoft's dividend higher in the coming years.

Below are some more companies, including McDonald's (MCD), that are sending more cash to their shareholders.

Dividend Income Analysis: Leggett & Platt (LEG)

I always enjoy coming across lesser-known companies who have stellar dividend track records. Although I had heard of Leggett & Platt (LEG) and briefly skimmed over the stock in the past, I did not appreciate its impressive dividend history until doing this analysis. A mid-cap ($3.5 billion) company that has been paying a dividend for 73 years and increasing that dividend for 40 years deserves more attention. Well LEG, you've caught my attention. READ MORE


Related Posts:
MCD Dividend Growth Analysis
HAS Dividend Income Analysis
LLY Dividend Income Analysis
UPS Dividend Growth Analysis

TAGS: [LEG]

Stock Sale: Intel (INTC)

Those of you who have followed me know I'm a big fan of Intel (INTC).  I've made it known on several occasions that it is my biggest dividend growth holding.  I've been allocating Intel off and on since 2008 and was lucky enough to load up during the crash in March 2009.  The main reason it's my biggest holding though is because, despite reporting solid earnings throughout the years and steadily increasing its dividend by double digits each year, the stock price continues to be cheap.  I find it hard to pass up a good deal, and Intel has been a good deal for quite some time.

The stock had a nice run from the beginning of the year and into May touching a 52 week high of $29.  Since then it has bounced around the $26 and $27 level.  But the past couple weeks the stock has dropped to below $25 and has piqued my interest once again. So why did the stock drop nearly 5% in the past couple weeks?