Dividend Growth Investor

These 47 S&P 500 Dividend Aristocrats Are Good Investment Opportunities

THofler,

Most Aristocrats would generate very good inflation adjusted streams of dividend income. For example some investors who purchased JNJ, PG, MCD, MO 15-20 years ago are now generating double digit yields on cost. MLPs are great for now, but what happens if the US government decides to abolish the MLP structure ( just like the canadian government decided to abolish the income tax structure iby 2011)? chances are yields on MLPs would drop..

In addition to that, when interest rates start increasing,MLPs might be affected negatively in the process.


On Jul 15 11:40 PM THofler wrote:

> I happily own 4 of the above, as well as a few Master Limited Partnerships.
> The more I learn about the MLPs the more I wonder why I should own
> anything else? They are tax advantaged & pay high distribution
> yields. Check out the info at the web site below, especially the
> presentations and publications page,
>
> naptp.org
>
> Why own the aristocrats? For diversification, of course, since MLPs
> are entirely in the energy space.
>
> I also like most any foreign high dividend stock with a good future.
> Since the dollar has recovered some of its value in the FX markets
> in recent months, now is a good time to move some of one's portfolio
> out of the dollar and into these foreign stocks ahead of the next
> dollar decline. I like the Euro integrated oils (BP, E, TOT) and
> recently picked up some of the Brazilian utility CPFL Energia (seekingalpha.com/symbo...).

These 47 S&P 500 Dividend Aristocrats Are Good Investment Opportunities

Avy,

There are several companies on your " list", which have cut dividends in 2009 several months ago.Ganett (GCI) and Legg Mason (LM) are such examples.

Rohm and Haas(ROH) which is also on your list, has been bought out by Dow Chemical several months ago as well.

Check these articles below for an up-to date list of the dividend aristocrats to avoid in 2009:

www.dividendgrowthinve...

www.dividendgrowthinve...

Best Regards,

Dividend Growth Investor

S&P Dividend Aristocrats Getting Through the Credit Crisis

Actually your article is a little out-dates as JNJ has already raised dividends for 2009. In addition to that there have been about 20 increases in the Dividend Aristocrats index in 2009 versus 7 cuts.

I did enjoy the article however. Always pays to know as much as possible about the Dividend Aristocrats!

Dividend Stocks to Avoid

Historically dividend cutters have underperformed the stock market and dividend grower and initiators have outperformed the stock market on average. As a dividend growth investor I buy stocks that keep growing their dividends and sell stocks that cut or eliminate their dividends. Why would I keep on hoping that GE would someday increase its dividends and waste my money at a company that doesn't deliver rising income for me when I could allocate my money at a company that delivers results?

When GE starts delivering positive dividend growth I would once again consider initiating a position in the stock. The company might be a great buy at current levels, but your guess about future stock performance is as good as mine... I do hope sincerely however that you make money on your investments however.

Best Regards,

Dividend Growth Investor


On Apr 21 10:58 AM sthpawil wrote:

> I consider buying GE back when it was below $7 an incredibly smart
> move on my part. In a few years when the dividend returns to its
> normal level, the ROI will be huge since my cost basis is so low.
> Between that and my capital gains, I don't see how anyone with an
> ounce of common sense can make the argument that one should avoid
> these stocks. Articles like this are very short sited and proof that
> so called "experts" are people too and they make mistakes just like
> the rest of us.

The 'Sell After Dividend Cut/Freeze' Rule, With Exceptions

D4L,

Actually a dividend freeze might not be a bad thing. You shouldn’t really adjust your portfolio strategy based to follow the past market action too closely.
In the past stocks like WYE or K have frozen their dividends, but then resumed their payments. Furthermore what happens if a company freezes its quarterly dividends, and 5 quarters later it increases the dividends again? On an annual basis your dividend income from the stock could still be increasing.
Try researching dividend freezers over the past decade or two and only then determine if you should sell after a dividend freeze or not.

Best Regards,

Dividend Growth Investor

Should You Follow Warren Buffett’s Latest Moves?

Jason,

Most of JNJ and PG's products are things people use on a daily basis. Even a great depression shouldn't hit these companies too hard.

City Desk,

Buffett took a 3 billion francs in convertible preferred shares in Swiss Re that pay an annual interest rate of 12% and will be convertible into common stock after three years at a price of 25 francs a share, subject to anti-dilution adjustments.
If the entire investment of 3 billion francs were converted into shares, Buffett could end up holding more than a fifth of Swiss Re


On Feb 19 04:11 PM Jason C. Rines wrote:

> Just a guess as to WB's thinking on J&J and Proctor and Gamble.
> These companies are mixed Consumer Healthcare products and have greater
> exposure to consumers pulling spending back then say, a straight
> Pharmaceutical company selling essential Rx treatments. The writing
> is on the wall, we are in depression.

Should You Follow Warren Buffett’s Latest Moves?

Saltaway,

Actually the opposite is true - investors who mimicked Buffett's portfolio would have outperformed the markets over the past 30 years:

papers.ssrn.com/sol3/p...


On Feb 19 08:31 AM SALTAWAY wrote:

> I would point out that the average investor that follows and mimics
> Buffet's picks has not done well over the last 20 years or so. Because
> of the time lag between his moves and public knowledge, you are doomed
> to underperform him. I agree with Michael above. I wouldnt copy him,
> I would let him run my money by buying brk.a or brk.b

Should You Follow Warren Buffett’s Latest Moves?

Hedged in,

Another reason could be that he needs to raise as much cash as possible, in order to participate in other preferred stock or fixed income deals, where he could earn a 10%-15% annual dividend yield, with very favorable terms for his company. Ordinary investors do not however have the purchasing power to participate in such favorable deals at this time.


On Feb 19 06:53 AM Hedged In wrote:

> This is good attempt to rationalize Warren Buffett's moves -- thank
> you.
>
> But look again at this:
> "One reason why he might be selling solid dividend stocks such as
> Johnson & Johnson and Procter and Gamble could be that they haven’t
> fallen as much as the broader market, which makes them ideal for
> Buffett to deploy the funds in other beaten down sectors."
>
> If Buffett sees greater value in other sectors, then shouldn't other
> investors too?

Should You Follow Warren Buffett’s Latest Moves?

Michael,

Of course you could always buy BRKa/b and not need to do any research. Of course i enjoy trying to decipher what made Buffett decide to rebalance his portfolio.

Furthermore i see a major risk in BRKa/b that Buffett's investment objectives might not be the same as yours. Also in Buffett "retires" from BRKa you will be left with stock in the company, but the Buffett premium will soon evaporate and the stock will fall.. The end result is that you would have learned a valuable lesson - always do your own homework,


On Feb 19 06:01 AM Michael Zhuang wrote:

> Why make things more complicated than necessary? Why not just buy
> BRK.A or BRK.B?

Dividend Stocks: The Good, The Bad and the Ugly

Great Article as usual. PFE is also becoming a part of the ugly.

When to Sell Dividend Stocks

Chris,

1) I focus most of my attention on the Dividend Aristocrats, achievers and champions. I wouldn't say they are more risky than other stocks. I don't chase yield, I am mostly following a balanced yield/dividend growth approach. If the whole stock market falls by 40% in 2009 I would probably lose money as well however. I would never purchase a stock that hasn't had at least an uninterrupted ten years of consecutive dividend increases, although i am mostly interested in stocks that have raised payments for over 25 yrs. Thus i wouldn't have bought GM.

2) I do own GE stock, but after they announced a dividend freeze I am not buying more stock there and buying other stocks with the dividends in receive. I wouldn't buy GS because it doesn't fit my entry criteria.

3) When I posted a bearish article on BAC on seeking alpha in july saying that I don't think dividend is well covered, someone told me how foolish I was to be waiting for the payout ratio to decrease so that the div is well covered. They told me that I would be a buyer when BAC is back over 40. I don't really mind paying a higher price for a stock that could show some resilience in revenues/growth and dividends over time. I don't like cyclical stocks. I do realize that my strategy leads to a higher exposure to consumer names however.

4) Not all companies cut their dividends in this tough environment. In fact most of the dividend aristocrats in 2008 either increased or maintained their payments in 2008. I am looking for rising dividend income. If a company has a strong business model which has enabled it to increase dividends for more than 10 or 25 consecutive years, then chances are it will keep raising them. I do try to be diversified accross sectors and dollar cost average however.

5) Lehman was buying millions in stock in 2008 at an avg price of $40. The price was pretty low. I would much rather have the company send ME the cash than the company deciding it wants to do it for me ( buy back stock). I do like moderation however- XOM does both stock buybacks and dividend increases. Actually most companies "conserving cash" now are the ones which are too leveraged and without cutting their dividends they know they will go belly up. The dividend payment is not their main issue - it is reckless management that used a lot of leverage in order to get big quick and get a larger bonus.


On Jan 06 02:03 PM Chris B wrote:

> 1) What will you buy after you sell? Riskier companies? Companies
> that have not yet announced dividend cuts, but soon will? Companies
> that are financing their dividends with interest-bearing debt (like
> GM did for years)? Companies that will be bankrupt in 6 months because
> they are spending their last cash on dividends to the benefit of
> insiders? Companies that are mostly interested in pumping up their
> own stock price in the short term? Yield chasing could be dangerous
> at a time like this. More responsible companies cut their dividends
> in severe recessions.
>
> 2) Are you giving your money to GE or GS so they can pay Warren Buffet
> 10% of it and give you back what is left? If a company you own has
> a choice of borrowing $100M at 8-10% interest to pay a dividend or
> cutting the dividend, which option would deliver more value to your
> company? Can you earn 8-10% on your dividend with absolute certainty?
> Again, GM paid a decade of dividends out of ever-mounting debt. Despite
> those dividends, shareholders never did get their investment back
> and never will.
>
> 3) Do you have a flip side to this strategy of buying companies you
> suspect will soon raise their dividend? If not, you'll always be
> buying and selling after the announcements, resulting in losses of
> value. Companies won't restore their dividends until the recession
> is well over. By then you'll be paying double the price for many
> of them.
>
> 4) How can you be sure that the post-dividend-cut underperformance
> of these companies was caused by the dividend cut and not by... I
> don't know... the recession perhaps? Massive reductions in earnings?
> Assets gone sour? Risk of bankruptcy? Which is the cause and which
> is the effect?
>
> 5) What if the company altered its strategy and is using capital
> for share buy-backs instead of dividends? This would be a smart move
> right now, with so many solid companies out there priced with single-digit
> PE's and below book value. Would you sell low when the company is
> buying out its other owners at 5 year lows? The same argument could
> be made for companies that are using their capital to buy underpriced
> business assets such as ships, oil leases, real estate, transport
> contracts, and competitors instead of sending out a dividend just
> to pump up their stock price.
>

When to Sell Dividend Stocks

The problem with a dividend cut is that the current yield looks exceptionally good, but it is the yield on cost that is cut. For BAC if you bought it at 50 your yield on cost dropped from just over 5% to 2.5%. Once a company cut its dividend once, what stops it from cutting again? Some stocks like KEY or Citi cut their payment twice. Others completely eliminated it. The investors who held the stock after the cut were HOPING that the worst is over. In investing, the worst thing you could do is to hope - you have to decide your pain point and sell and have a clear mind.

As for BAC or Citi, i would much rather sell ( I never owned any) after a dividend cut and end up with something left, instead of hoping it will go up someday or that I should invest in something that should be generating a 10% current dividend yield just to maintain my dividend income.

Now if BAC and Citi were to resume increasing their dividends and I believed that there is a strong fundamental ability in their business models to support such a move, I would gladly buy back as soon as the stocks are not too expensive. If the dividend increases could be supported from the business, then I should be ok in the long run.

I don't consider selling when there is a doubt that a dividend will be cut, because I doubt that anyone can predict what will happen with above average certainty.

The Dogs of the Dow Can Keep You Out of the Doghouse

Didn't Dogs of the Dow significantly underperform major indexes by 20% in 2008?

The only period for which Dogs of the Dow made any more money than a simple buy and hold index funds strategy, was when the DOD strategy was being backtested.

My Take on Year End Investing

The funds definitely make it easy for you during tax time, as they report it in a 1099, as opposed to K1.

My Take on Year End Investing

If you are looking to purchase an MLP fund, check out TYY or TYG.
Another thing to check is the annual management fee that will come out of your pocket every year..