6 Dividend Stocks for Current Income

Most novice dividend investors typically are under the impression that successful dividend investing entails finding and purchasing the highest yielding stocks. This strategy is flawed, because it does not take into account the sustainability of the dividend. A company which yields 20%, might generate a much lower yield on cost over time.

I purchased American Capital (ACAS) in 2008 when this business development company was trading at $30 and was yielding 13%. Just a few months later the company suspended its dividend payment, and I sold it immediately. The thing to learn from this example is that investors have to check the sustainability of distributions in light of cash flows generated by the business, the amounts of debt relative to total assets and the amounts of interest expenses. If you find a high yielding stock, which generates enough cash flow growth and has limited amounts of debt, then it could be a buy on the next dip.

While companies are not contractually obligated to share profits with shareholders, it is nice to see when boards increase dividends and declare stock buybacks. This typically sends positive signals about management’s confidence in projected cashflows, generated by the business.

In my portfolios I like to hold stocks with different yield/dividend growth characteristics. I do tend to focus mostly on the sweet spot of dividend investing, where yields are somewhere between 3% and 5% and dividend growth is in the upper single digits or in the double digits.

I do realize however that some investors are interested mostly in current income generation, and not so much about future dividend growth. Thus recommending Wal-Mart (WMT) with its 2% dividend yield to an investor who wants to generate as much income as possible now might sound ridiculous. Just because one wants to generate as much income as possible however, doesn’t mean that they should throw caution away with the wind. Sustainability of the dividend should be evaluated, in addition to sustainability of the dividend growth. A stock with a sustainable but unchanged dividend, which yields 9% on cost, would produce a lower inflation adjusted income level over time.

In addition to that, most studies of portfolio durability show that one should not spend more than 4% of their portfolio value each year. If you have a dividend portfolio valued at $1 million dollars, which generates $40,000/year in dividend income, and whose dividend growth closely matches the inflation rate, you are ok as long as you don’t spend more than 40,000/year. If you spend more than that, you could end up eating your principal.

Thus, even if you found the highest dividend stock, you should not be spending more than 4% of the starting value of your portfolio each year, adjusted for inflation. If you owned a 10% yielder on a $1 million portfolio, and you spend all your dividend income, you would be in trouble when one of two things happen:

1) The company cuts dividends
2) The company fails to increase dividends to compensate for the eroding value of inflation

I do have several ideas on stocks with sustainable dividends that could also afford to grow them over time.

Realty Income Corporation (O) engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company has increased dividends for 15 consecutive years. Check my analysis of this REIT.

Kinder Morgan Energy Partners, L.P. (KMP) owns and manages energy transportation and storage assets in North America. This dividend achiever has rewarded unitholders with regular distribution increases for 13 years in a row. Check my analysis of this MLP.

Consolidated Edison, Inc., (ED) through its subsidiaries, provides electric, gas, and steam utility services in the United States. This Dividend Aristocrat has raised dividends for 35 years in a row. Check my analysis of Con Ed.

Altria Group, Inc., (MO) through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in the United States. Philip Morris International Inc (PM) on the other hand manufactures and sells cigarettes and other tobacco products in markets outside of the United States of America. Before spinning off Kraft (KFT) and Philip Morris International (PM), Altria had an uninterrupted streak of 41 consecutive annual dividend increases. The spun out companies are also likely to return increasing amounts of profits back to shareholders in the form of share buybacks and dividend increases. I like both MO and PM for global exposure to tobacco. Check my analysis of both stocks.

BP p.l.c. (BP) provides fuel for transportation, energy for heat and light, retail services, and petrochemicals products. This international dividend achiever has rewarded shareholders with dividend raises for 16 consecutive years. Check my analysis of BP.

In order to increase portfolio longevity, I would also consider at least a 25% allocation to fixed income, which would provide some buffer during bear markets and deflationary environments. In addition to that, having an allocation to lower yielding stocks with higher dividend growth characteristics could also provide a buffer for dividend increases if you are lucky enough to spend more time in retirement. After all, the world's oldest person on record was Jeanne Calment of France (1875–1997), who died at age 122 years. For a person retiring at the age of 60 or 70, this could mean planning for a 50 to 60 year retirement. Your goal should always be for your money to outlive you, no matter what.

Disclosure: Long PM, MO, ED, KMP, O, BP

Comments

[Avooch:]

Nice Article.

A sleeper dividend stock is CSX - should generate 8% CAGR

analysis

gudovac1941.blogspot.c...

Oct 21 11:42 AM

[Uncle Pie:]

When selecting dividend stocks for a long retirement, ask yourself, in what currency would I like to receive my retirement income? All the central banks are debasing their currencies at various rates, but none is being debased faster today than the US dollar. Wouldn't it be prudent to own securities which pay dividends in currencies other than the US dollar?
A few suggestions: Canadian telephone BCE pays 6% in Canadian $; Crescent Point Energy, oil producer, pays 7.3% in Canadian $, Glaxo SmithKline,GSK, British pharmaceutical, pays 5% in British pounds; Power Financial POFNF, Canadian financial conglomerate, pays 4.75% in Canadian $, Pembina Pipeline, PMBIF, transports oil in western Canada, pays 10% in Canadian $,
RioCan REIT, RIOCF, Canada's largest owner of shopping centers, pays 7.5% in Canadian $, Swisscom, SCMWY the Swiss telephone company, pays 7% in Swiss francs, Telefonica, TEF, Spanish telco with operations in Latin America, pays 6% in Euros, Total, TOT, large integrated oil co. based in France, pays 5% in Euros, Vermilion Energy Trust, VETMF, produces oil & gas in Europe, pays 7.5% in Canadian $. The writer owns shares in all of the above.

Oct 21 12:56 PM

[tripleblack:]

Solid article. Thanks to the author. Like Uncle Pie, I have also invested some of my money in the Candian trusts paying out nice dividends and shares in Canadian dollars. In the one recent case where I had one of these cease dividends for a while (PDS), I still held the stock for months afterward because it just kept going up in value.

Canada's dividend paying sector has been a solid investment for me over the past year.

Oct 21 01:10 PM

[Timmothy Posey:]

I disagree with the author here. Although the picks are 'sound' in nature by historical fundamental analysis for dividend investors, there are some real risk involved here. These stocks do not have guaranteed dividends and any unfavorable economic event to any one of the stocks listed in the article would cause severe portfolio dislocation. I think it would be prudent to look into an ETF that has most of these stocks listed (along with several others) to help diversify away risk. One such example would be PFM, a collection of 282 stocks with strong dividends. This currently yields about 2.25%; which is about on average.

If you are also looking at dividend, I would go higher up in the capital structure and take a look at PGF or PGX, an ETF of preferred shares, where the current yield is about 8% a year in steady dividends (mostly made of financial companies). Although preferred shares do not typically increase dividend amounts, they are mostly guaranteed and cumulative in nature if they have to be suspended.

Lastly, HYG is a popular ETF of high-yield corporate bonds that yields nearly 10% a year. Corporate bonds have guaranteed requirements on payment of interest (dividends for the ETF holder) along with return of principal.

Oct 21 02:10 PM

[Old Rick:]

On your KMP recommendation, note that Kinder has another issue (KMR) that pays dividends as quasi-stock splits thus avoiding the potential tax consequences of an LP and making it suitable for a tax favored account. The other advantage is that KMR trades at a slight discount to KMP while the dividend is essentially equal.

Oct 21 03:31 PM

[Low Sweat I...:]

It’s true that some investors might be more comfortable holding ETFs, and there is quick diversification in them, but any dividends are theoretically at risk.

PFM’s YTD dividend payments, for example, are 30% lower than for the same period in 2008, and double-digits lower than the comparable period in 2007.

A better choice for those who prefer ETFs might be Vanguard’s VIG. It has about the same yield as PFM but with better performance in price appreciation as well as fewer portfolio dividend blow-ups. VIG’s dividends are running about 4% lower YTD vs. 2008, but higher than for 2007.

VIG selects holdings in the broad PFM universe by running balance-sheet and profitability screens to find Dividend Achievers with good financial health and seemingly good prospects. Its expense ratio is about half PFM’s.

I definitely agree that preferred and corporate bond ETFs can be very good vehicles; those asset classes can be tricky for building a diversified portfolio of individual holdings.

On Oct 21 02:10 PM Timmothy Posey wrote:

> I disagree with the author here. Although the picks are 'sound'
> in nature by historical fundamental analysis for dividend investors,
> there are some real risk involved here. These stocks do not have
> guaranteed dividends and any unfavorable economic event to any one
> of the stocks listed in the article would cause severe portfolio
> dislocation. I think it would be prudent to look into an ETF that
> has most of these stocks listed (along with several others) to help
> diversify away risk. One such example would be PFM, a collection
> of 282 stocks with strong dividends. This currently yields about
> 2.25%; which is about on average.
>
> If you are also looking at dividend, I would go higher up in the
> capital structure and take a look at PGF or PGX, an ETF of preferred
> shares, where the current yield is about 8% a year in steady dividends
> (mostly made of financial companies). Although preferred shares
> do not typically increase dividend amounts, they are mostly guaranteed
> and cumulative in nature if they have to be suspended.
>
> Lastly, HYG is a popular ETF of high-yield corporate bonds that yields
> nearly 10% a year. Corporate bonds have guaranteed requirements
> on payment of interest (dividends for the ETF holder) along with
> return of principal.

Oct 21 04:12 PM

[dogwilli:]

If you are a novice dividend investor, check out Joe Eqcome articles about CEF's and skip stocks.

"Most novice dividend investors typically are under the impression that successful dividend investing entails finding and purchasing the highest yielding stocks."

Oct 21 07:51 PM

[MJJP:]

I checked some of your suggestions and Yahoo shows no data on dividends being disbursed on many of those mentioned and also they are in the PK category.


On Oct 21 12:56 PM Uncle Pie wrote:

> When selecting dividend stocks for a long retirement, ask yourself,
> in what currency would I like to receive my retirement income? All
> the central banks are debasing their currencies at various rates,
> but none is being debased faster today than the US dollar. Wouldn't
> it be prudent to own securities which pay dividends in currencies
> other than the US dollar?
> A few suggestions: Canadian telephone BCE pays 6% in Canadian $;
> Crescent Point Energy, oil producer, pays 7.3% in Canadian $, Glaxo
> SmithKline,GSK, British pharmaceutical, pays 5% in British pounds;
> Power Financial POFNF, Canadian financial conglomerate, pays 4.75%
> in Canadian $, Pembina Pipeline, PMBIF, transports oil in western
> Canada, pays 10% in Canadian $,
> RioCan REIT, RIOCF, Canada's largest owner of shopping centers, pays
> 7.5% in Canadian $, Swisscom, SCMWY the Swiss telephone company,
> pays 7% in Swiss francs, Telefonica, TEF, Spanish telco with operations
> in Latin America, pays 6% in Euros, Total, TOT, large integrated
> oil co. based in France, pays 5% in Euros, Vermilion Energy Trust,
> VETMF, produces oil & gas in Europe, pays 7.5% in Canadian $.
> The writer owns shares in all of the above.

Oct 21 08:37 PM

[mbkelly75:]

I use Bond ETFs (LQD and HYG) but prefer to pick individual dividend stocks. Nice article with some good comments. I was a long-term holder of MO and after KFT and PM split off - I kept PM and sold KFT. I also have Canadian Stocks and the Loonie has done quite well against the $. Some good ideas here for more thought. Thank you for your work on this.

Oct 21 08:52 PM

[contango:]

...this is an illusion if you are a US resident.... when you want to pay your bills with these wonderful foreign currency dividends what currency will you be converting back to??

On Oct 21 12:56 PM Uncle Pie wrote:

> When selecting dividend stocks for a long retirement, ask yourself,
> in what currency would I like to receive my retirement income? All
> the central banks are debasing their currencies at various rates,
> but none is being debased faster today than the US dollar. Wouldn't
> it be prudent to own securities which pay dividends in currencies
> other than the US dollar?
> A few suggestions: Canadian telephone BCE pays 6% in Canadian $;
> Crescent Point Energy, oil producer, pays 7.3% in Canadian $, Glaxo
> SmithKline,GSK, British pharmaceutical, pays 5% in British pounds;
> Power Financial POFNF, Canadian financial conglomerate, pays 4.75%
> in Canadian $, Pembina Pipeline, PMBIF, transports oil in western
> Canada, pays 10% in Canadian $,
> RioCan REIT, RIOCF, Canada's largest owner of shopping centers, pays
> 7.5% in Canadian $, Swisscom, SCMWY the Swiss telephone company,
> pays 7% in Swiss francs, Telefonica, TEF, Spanish telco with operations
> in Latin America, pays 6% in Euros, Total, TOT, large integrated
> oil co. based in France, pays 5% in Euros, Vermilion Energy Trust,
> VETMF, produces oil & gas in Europe, pays 7.5% in Canadian $.
> The writer owns shares in all of the above.

Oct 21 10:37 PM

[bobbybutte:]

As aperson who has achieved financial independence SOLELY from being a buy and hold dividend investor and who is featured in the November issue of newsmax I have to make a few points

There is no diversification against foolishness with using mutual funds or ETFS

Pick stocks like you do a spouse or friends

Stick with afew that you know real well and become an expert in them

Our society like it or not rewards someone who has a specific skill and plies it

The jack of all trades master of none is not prefeered in investing.peace

Oct 22 06:41 AM

[Urbane Gori...:]

Yahoo Finance is notorious for not posting dividend info. Click on their interactive 1 year chart though and choose 'events' and 'dividends' from the drop down list. You have to hover over the 'D' on the chart.

For example, AOD (Alpine Dividend ETF) registers as paying no dividend on the summary page, yet shows a 12 cents per share monthly on the chart.


On Oct 21 08:37 PM MJJP wrote:

> I checked some of your suggestions and Yahoo shows no data on dividends
> being disbursed on many of those mentioned and also they are in the
> PK category.

Oct 22 08:16 AM

[auto44:]

Canadian oil trusts and reits are going to loose their trust status and be converted to corporations that pay income taxes and will probaly be forced to lower their dividends substantially I think in
2011. This will unfortunately require some rethinking. Your idea of investing in companies that pay in other currencies has merit,but I would stickk to countries who are natrual resource based. What I call the BACs Brazil Canada and Australia. On Oct 21 12:56 PM Uncle Pie wrote:

> When selecting dividend stocks for a long retirement, ask yourself,
> in what currency would I like to receive my retirement income? All
> the central banks are debasing their currencies at various rates,
> but none is being debased faster today than the US dollar. Wouldn't
> it be prudent to own securities which pay dividends in currencies
> other than the US dollar?
> A few suggestions: Canadian telephone BCE pays 6% in Canadian $;
> Crescent Point Energy, oil producer, pays 7.3% in Canadian $, Glaxo
> SmithKline,GSK, British pharmaceutical, pays 5% in British pounds;
> Power Financial POFNF, Canadian financial conglomerate, pays 4.75%
> in Canadian $, Pembina Pipeline, PMBIF, transports oil in western
> Canada, pays 10% in Canadian $,
> RioCan REIT, RIOCF, Canada's largest owner of shopping centers, pays
> 7.5% in Canadian $, Swisscom, SCMWY the Swiss telephone company,
> pays 7% in Swiss francs, Telefonica, TEF, Spanish telco with operations
> in Latin America, pays 6% in Euros, Total, TOT, large integrated
> oil co. based in France, pays 5% in Euros, Vermilion Energy Trust,
> VETMF, produces oil & gas in Europe, pays 7.5% in Canadian $.
> The writer owns shares in all of the above.

Oct 22 08:59 AM

[auto44:]

It's not an illusion, I belive you are misinformed about curriency transactions and the effecs on the bottom lines of companies who sell in other nations and domestic companies.


On Oct 21 10:37 PM contango wrote:

> ...this is an illusion if you are a US resident.... when you want
> to pay your bills with these wonderful foreign currency dividends
> what currency will you be converting back to??
>
> On Oct 21 12:56 PM Uncle Pie wrote:

Oct 22 09:06 AM

[David Van K...:]

I have the same doubts about what currency dividends are paid in. I own foreign companies among my dividend stocks, and when the stocks pay dividends in their native currency, the dividends are immediately credited to my brokerage account in $US at the current exchange rate. Any benefit or detriment of stronger or weaker dollar takes place then. I'm not aware of being able to hold the dividend in its native currency, and then a year later having it be worth more because the dollar has since declined.

Oct 22 10:03 AM

[birder:]

Although I do agree with the comment that an EFT does hold a large selection of stocks thus mitigating specific risk, I have to comment that EFTs also are not so well healed as many might think. The comment was made that PFM holds 282 companies. Yes, but they do not hold them in equal proportions. Their largest holding is GE at 4.7% of assets. I will not comment on whether or not GE is a good company to hold, but I would not wish to hold it. Ten companies account for about 44% of their assets. The top 25 account for 67% of their holdings. The bottom 100 holdings account for less than 2% of their assets. This is not particularly my idea of having a sound dividend investment strategy. If I am going to hold 44% of my assets in 10 companies, I would rather be the one choosing those 10 companies rather than some computer somewhere based on some screw ball algorithm dreamed up by some screw ball on Wall Street.

Oct 22 10:15 AM

[Dollar Pimp:]

As the dollar declines, your dividend becomes worth more and more over time. Yes, the dividend is converted at the time of distribution, but a .50 per share dividend now will become a 1.00 later if the buck loses half its value. Also, the dollar denominated stock price will appreciate faster. If you believe in a lower US dollar, foreign dividend payers are a no brainer.


On Oct 22 10:03 AM David Van Knapp wrote:

> I have the same doubts about what currency dividends are paid in.
> I own foreign companies among my dividend stocks, and when the stocks
> pay dividends in their native currency, the dividends are immediately
> credited to my brokerage account in $US at the current exchange rate.
> Any benefit or detriment of stronger or weaker dollar takes place
> then. I'm not aware of being able to hold the dividend in its native
> currency, and then a year later having it be worth more because the
> dollar has since declined.

Oct 22 10:56 AM

[David Van K...:]

In my experience, if you are carrying out a focused dividend strategy, picking your own stocks is superior to ETFs and funds. The reason is that the ETFs and funds usually own a few stocks whose dividends, while substantial, are at risk. Most of the funds got caught holding the many banks and financial companies that slashed their dividends in 2008-09 as their business models crumbled, or they were forced to slash dividends as a result of having taken bailout money.

For the focused dividend investor, most of those dividend cuts were foreseeable--hell, GE announced theirs months in advance. I wrote an article on BAC in October 2008 (seekingalpha.com/artic... ) detailing the problems facing the company and its dividend. The ETFs and funds, meanwhile, continued to hold those companies. That's why Low Sweat's research shows dividend distributions from ETFs dropped so much.

It's commonly thought that ETFs and funds decrease stock-specific risk. I guess that's often true. But in the case of dividend investing, ETFs and funds increase "asleep at the switch" risk. How else can you explain a dividend-growth ETF still holding GE? I'd rather do my own research, determine as best I can which stocks have the most reliably increasing dividends, and invest accordingly. I must say that GE's press release that it was going to cut its dividend 6 months before they did it was not hard to spot.

Oct 22 11:38 AM

[User 24620:]

Although the high yield Canadian royalty, energy and income trusts must begin paying corporate taxes in 2011, many are already converting to corporations and still paying high dividends, because of various accumulated write-offs on exploration expenses, etc. Many of these are infrastructure and utility trusts, very low risk assets.

Oct 22 11:39 AM

[Trevose_Lion:]

On some stocks, CEFs, and/or ETFs the Summary page will not show a dividend rate, but the Historical Prices page will show dividend payouts. AOD is a perfect example.


On Oct 21 08:37 PM MJJP wrote:

> I checked some of your suggestions and Yahoo shows no data on dividends
> being disbursed on many of those mentioned and also they are in the
> PK category.

Oct 22 12:45 PM

[searcher:]

I'd guess that there are very many in need of income who have the bulk of their assets in tax favored accounts. This is a 'second' to the earlier recommendation of KMR in the 'MLP' arena. You might check out Enbridge Energy (EEQ), as well. Another alternative, a CEF, is AMJ. It tracks the Alerian MLP Index equivalent to 10% of the index. AMJ shares allow an investor to participate in industry growth and share in the related investment income. It has the added advantage of being a corporation paying dividends, thus tax hassle associated with distributions is avoided.

Oct 22 01:09 PM

[Uncle Pie:]

Yahoo is not a very good source of information on non-US securities. For Canadian issues, the website of the Toronto Stock Exchange can give you exact information (in Canadian $, of course). For European shares which trade in ADRs here, check out adr.com. Also, check out the websites of the individual companies. Not only do they have presentations for prospective investors, they will also have historical dividend information and tax information.


On Oct 21 08:37 PM MJJP wrote:

> I checked some of your suggestions and Yahoo shows no data on dividends
> being disbursed on many of those mentioned and also they are in the
> PK category.

Oct 22 06:16 PM

[Uncle Pie:]

If you are a US resident, as I am, and you purchase dividend paying securities of companies domiciled in other countries, the dividends they declare are declared in the local currency. Then when the dividends are credited to your account at your US brokerage firm, they are automatically exchanged into US dollars at the prevailing rate. If the US dollar continues to drop vs. the Euro, the Swiss franc, the Canadian $, the Australian $, etc., the amount of dollars you get for each dividend will increase commensurately, even though the company's dividend rate in its local currency has not changed. Take a look at The Economist magazine...in each issue they have a table at the back showing the performance of various stock markets around the world, denominated in local currency and then in US dollars. The performance of foreign marts is multiplied significantly for US investors by the decline of the US $.


On Oct 21 10:37 PM contango wrote:

> ...this is an illusion if you are a US resident.... when you want
> to pay your bills with these wonderful foreign currency dividends
> what currency will you be converting back to??
>
> On Oct 21 12:56 PM Uncle Pie wrote:

Oct 22 06:22 PM

[Uncle Pie:]

You are correct that Canadian income trusts are required to convert to tax paying corporations in 2011 and some will be required to reduce their distributions to shareholders commensurately. However, not all income trusts are created equal. Crescent Point has already converted and did not change its distribution. Riocan is not affected by the legislation because it is a REIT. Vermilion is not expected to be much affected because almost all of its oil production is located outside of Canada. Pembina's management states in their annual report that they expect to be able to maintain their distribution after conversion. So the Canadian income trusts I included in my posting are the ones that are expected to be minimally affected, or unaffected, by the change in the law. Of course there are no guarantees. All this info. can be found if you check the companies' websites.


On Oct 22 08:59 AM auto44 wrote:

> Canadian oil trusts and reits are going to loose their trust status
> and be converted to corporations that pay income taxes and will probaly
> be forced to lower their dividends substantially I think in
> 2011. This will unfortunately require some rethinking. Your idea
> of investing in companies that pay in other currencies has merit,but
> I would stickk to countries who are natrual resource based. What
> I call the BACs Brazil Canada and Australia.
> On Oct 21 12:56 PM Uncle Pie wrote:

Oct 22 06:27 PM

[Joe Snow:]

Unless you have an account denominated in a foreign currency, your account will still be credited in dollars AND you'll have foreign withholding to deal with which really complicates your tax return and reduces the payout on your investments. I just received a sizable dividend from one of my Taiwanese stocks and was credited in dollars and the dividend was subject to Taiwan tax withholding. I was holding it in an IRA so I can't claim a deduction against the foreign tax paid but if it was held in a taxable account I would be able to. Certain foreign stocks, like Canadian energy trusts, can also complicate your tax returns because in some instances you will still be required to pay taxes on distributions even if held in a tax free or tax deferred retirement account.


On Oct 21 12:56 PM Uncle Pie wrote:

> When selecting dividend stocks for a long retirement, ask yourself,
> in what currency would I like to receive my retirement income? All
> the central banks are debasing their currencies at various rates,
> but none is being debased faster today than the US dollar. Wouldn't
> it be prudent to own securities which pay dividends in currencies
> other than the US dollar?
> A few suggestions: Canadian telephone BCE pays 6% in Canadian $;
> Crescent Point Energy, oil producer, pays 7.3% in Canadian $, Glaxo
> SmithKline,GSK, British pharmaceutical, pays 5% in British pounds;
> Power Financial POFNF, Canadian financial conglomerate, pays 4.75%
> in Canadian $, Pembina Pipeline, PMBIF, transports oil in western
> Canada, pays 10% in Canadian $,
> RioCan REIT, RIOCF, Canada's largest owner of shopping centers, pays
> 7.5% in Canadian $, Swisscom, SCMWY the Swiss telephone company,
> pays 7% in Swiss francs, Telefonica, TEF, Spanish telco with operations
> in Latin America, pays 6% in Euros, Total, TOT, large integrated
> oil co. based in France, pays 5% in Euros, Vermilion Energy Trust,
> VETMF, produces oil & gas in Europe, pays 7.5% in Canadian $.
> The writer owns shares in all of the above.

Oct 22 11:34 PM

[ebworthen:]

Good luck if you think your investments, dividends, and any capital gains aren't going to be taxed to death by retroactive legislation to pay for the bailouts and government largesse.

Time to go underground and vote with your money before it is too late.

Oct 23 12:50 AM

[realold:]

Thanks for the great research ideas.


On Oct 21 12:56 PM Uncle Pie wrote:

> When selecting dividend stocks for a long retirement, ask yourself,
> in what currency would I like to receive my retirement income? All
> the central banks are debasing their currencies at various rates,
> but none is being debased faster today than the US dollar. Wouldn't
> it be prudent to own securities which pay dividends in currencies
> other than the US dollar?
> A few suggestions: Canadian telephone BCE pays 6% in Canadian $;
> Crescent Point Energy, oil producer, pays 7.3% in Canadian $, Glaxo
> SmithKline,GSK, British pharmaceutical, pays 5% in British pounds;
> Power Financial POFNF, Canadian financial conglomerate, pays 4.75%
> in Canadian $, Pembina Pipeline, PMBIF, transports oil in western
> Canada, pays 10% in Canadian $,
> RioCan REIT, RIOCF, Canada's largest owner of shopping centers, pays
> 7.5% in Canadian $, Swisscom, SCMWY the Swiss telephone company,
> pays 7% in Swiss francs, Telefonica, TEF, Spanish telco with operations
> in Latin America, pays 6% in Euros, Total, TOT, large integrated
> oil co. based in France, pays 5% in Euros, Vermilion Energy Trust,
> VETMF, produces oil & gas in Europe, pays 7.5% in Canadian $.
> The writer owns shares in all of the above.

Oct 23 01:08 AM

[realold:]

What does that mean?


On Oct 23 12:50 AM ebworthen wrote:

> Good luck if you think your investments, dividends, and any capital
> gains aren't going to be taxed to death by retroactive legislation
> to pay for the bailouts and government largesse.
>
> Time to go underground and vote with your money before it is too
> late.

Oct 23 01:12 AM

[Nettligent:]

Cigarette taxes in US will be up up and up very soon.

Oct 23 05:10 AM

[prairiedog555:]

Take a look at some of the Wisdom tree funds. They are all dividend based. I have a couple like DOO, pays 12.57%.
Although some have low volume, so watch that.

Oct 23 06:30 AM

[bobbybutte:]

@ points one Yahoo is inaccurate says Altria's payout ratio is over 100% NOT true

Im a great student of jeremy siegel and reinvested dividends but Siegel's dividend ETFS have lagged my newsletters investments by a LOT

Investing is 50% art and 50% science . Those of us who make aliving SOLELY from allocating capital KNOW that peace

Oct 23 09:08 AM

[Uncle Pie:]

Canada and many other countries, the UK excepted, have charge non residents a 15% withholding tax on dividends. The total of such withholdings will be reported on your broker's annual 1099 form. You can file tax form 1116 with your return and claim a tax CREDIT for the entire amount of the foreign withholdings. Note that a CREDIT reduces your US tax liability dollar for dollar, so it is much better than a DEDUCTION which merely reduces your total income against which your tax bill is calculated. Form 1116 is not an easy form to figure out, so unless you are very adept with IRS gibberish (I am not) use a paid tax preparer or a program like Turbo tax Premier. I use the latter and have had no problems. Recently I've noticed that the 15% withholding tax is waived for dividends paid by Canadian corporations held in a US IRA account. I don't know the details about this rule change, but it's very welcome. I've not had any other difficulties with getting the bulk of my retirement income from non-US securities. The main effect is that my investment income in dollars has risen about 20% this year since the US dollar has declined by about that much.


On Oct 22 11:34 PM Joe Snow wrote:

> Unless you have an account denominated in a foreign currency, your
> account will still be credited in dollars AND you'll have foreign
> withholding to deal with which really complicates your tax return
> and reduces the payout on your investments. I just received a sizable
> dividend from one of my Taiwanese stocks and was credited in dollars
> and the dividend was subject to Taiwan tax withholding. I was holding
> it in an IRA so I can't claim a deduction against the foreign tax
> paid but if it was held in a taxable account I would be able to.
> Certain foreign stocks, like Canadian energy trusts, can also complicate
> your tax returns because in some instances you will still be required
> to pay taxes on distributions even if held in a tax free or tax deferred
> retirement account.

Oct 23 10:17 AM

[ebworthen:]

It means to put your money into hard assets: physical gold, land, pay down debt, and get your money out of the casino markets that will be raided by your government.

Did you know that our Congress has passed legislation to dictate where your retirement is invested? If you have a 401K or 401A they, along with your employer, can force your money out of safer investments and into equities if they so choose to do so.

The only money left is the "money on the sidelines" and the government can increase capital gains, move your retirement into equities if they fall to bolster them, and limit your ability to withdraw your funds and increase taxes on them. In short, it isn't your money anymore.

If you add on top of this the deficit spending to socialize private losses the evidence is already there that they have and will pursue the theft of your current and future savings and income.

FDR confiscated privately held gold. Our current political class has rescinded bond and shareholder rights in the takeovers of GM, WaMu, etc., etc. They have nationalized financial institutions and automakers, devalued the dollar, maintained 0.025% rates and given banks trillions to perform M&A's, buy stocks, and give them the appearance of solvency. The FED has been spending future generations earnings (taxes) to buy treasuries and fund home purchases with 3% down. Hello housing bubble II. Look at today's data; One-third of sales were foreclosures, 45% were first time home buyers putting 3% down via FHA or Fannie/Freddie of sales primarily at or under the median price.

Money in an IRA or retirment fund is essentially held hostage, and in the future could be taxed at .50 cents on the dollar if they choose to do so. A devalued dollar and inflation or hyper-inflation will further erode any value of the money that is being held hostage.

You would be better off buying gold and property that has physical value and can't be stolen, unless of course they extend the KELO Supreme Court decision which essentially decided that your property can be confiscated and sold to increase tax revenues.


On Oct 23 01:12 AM realold wrote:

> What does that mean?

Oct 23 11:45 AM

[Crocodilian:]

what Kinder Morgan pays out are not _dividends_ they are distributions. That's not just a semantic difference, it reflects a different legal structure (MLP) and a different tax treatment (its a pass through entity).

I hold KMP, but you can't analyze their payouts as "dividends" -- they're not.

Oct 23 03:43 PM

[Chancer:]

I also like KMR for a taxable account. The distributions buy more shares every quarter without more cash investment. Your cost (tax basis) also declines with the additional shares. You do not pay any (capital gains) taxes until you sell


On Oct 21 03:31 PM Old Rick wrote:

> On your KMP recommendation, note that Kinder has another issue (seekingalpha.com/symbo...)
> that pays dividends as quasi-stock splits thus avoiding the potential
> tax consequences of an LP and making it suitable for a tax favored
> account. The other advantage is that KMR trades at a slight discount
> to KMP while the dividend is essentially equal.

Oct 23 08:31 PM

[Chancer:]

I also like KMR for a taxable account. The distributions buy more shares every quarter without more cash investment. Your cost (tax basis) also declines with the additional shares. You do not pay any (capital gains) taxes until you sell


On Oct 21 03:31 PM Old Rick wrote:

> On your KMP recommendation, note that Kinder has another issue (seekingalpha.com/symbo...)
> that pays dividends as quasi-stock splits thus avoiding the potential
> tax consequences of an LP and making it suitable for a tax favored
> account. The other advantage is that KMR trades at a slight discount
> to KMP while the dividend is essentially equal.

Oct 23 08:31 PM

[Chancer:]

I also like KMR for a taxable account. The distributions buy more shares every quarter without more cash investment. Your cost (tax basis) also declines with the additional shares. You do not pay any (capital gains) taxes until you sell


On Oct 21 03:31 PM Old Rick wrote:

> On your KMP recommendation, note that Kinder has another issue (seekingalpha.com/symbo...)
> that pays dividends as quasi-stock splits thus avoiding the potential
> tax consequences of an LP and making it suitable for a tax favored
> account. The other advantage is that KMR trades at a slight discount
> to KMP while the dividend is essentially equal.

Oct 23 08:31 PM

[Mehul:]

I am quite comfortable with ETFs and now want to know which are the high yielding shares. The author here shared rock solid advices. Many thanks to you.

- Mehul

Oct 23 08:51 PM

[Low Sweat I...:]

I also thought the author of this article presented a good, diversified list of dividend stocks with above-average yields.

As far as high-yield ETFs go, most are not nearly as high-yield as they used to be due to dividend cuts. I researched SDY and DVY, two of the most popular high-yielders with diversified U.S. holdings, for an article I wrote. They yield about 4%. As mentioned above, lower-yielding VIG outperformed them.

Also, FDL is another diversified ETF with about a 4% yield. I’m not as familiar with international ETFs, though there may be some good choices there. And of course sector specific choices like REITs might have some good yields if you want to take that route.

I’m also finding that it’s getting tougher to get up-to-date yield and complete dividend trend info on ETFs.

One way that seems accurate and complete, but a little clunky to use, is the Vanguard “historical dividend tool.” Punch in a quote, click the tool link, punch in the quote again, and voila. You can try it at the link below, which should start on the SDY quote page.

personal.vanguard.com/...

On Oct 23 08:51 PM Mehul wrote:

> I am quite comfortable with ETFs and now want to know which are the
> high yielding shares. The author here shared rock solid advices.
> Many thanks to you.
>
> - Mehul

Oct 24 02:49 PM

[GrantQ:]

"... I'm not aware of being able to hold the dividend in its native currency, ..."

Talk to your broker & have them open balances in other currencies. They are the ones who are converting your dividends.

Oct 24 04:37 PM

[Joe Shareho...:]

No SSL?

Oct 24 04:58 PM

[Artful inve...:]

Why is no one mentioning Verizon orATT? Each pays over 6% dividend and has earnings to cover.


On Oct 21 11:42 AM Avooch wrote:

> Nice Article.
>
> A sleeper dividend stock is CSX - should generate 8% CAGR
>
> analysis
>
> gudovac1941.blogspot.c...

Oct 26 08:58 PM

[Shane E. Dr...:]

I like Altria has one of your income plays. I would even like writing calls at these price levels at the money or a strike out of the money.


On Oct 21 11:42 AM Avooch wrote:

> Nice Article.
>
> A sleeper dividend stock is CSX - should generate 8% CAGR
>
> analysis
>
> gudovac1941.blogspot.c...

Nov 11 09:09 PM