F3Q09 Earnings Call

July 29, 2009 9:00 am ET

We are increasingly asked about low risk individual stocks that may be suitable for an equity income allocation within a portfolio. This is a general response to that question.

Before offering a prospect list in which you might find attractive ideas, we want to make it clear that diversification of sectors and individual securities is important; and that individual stocks involve more work to create and maintain in a portfolio than holding funds. Generally, individual stock portfolios have higher risk due to concentration among a limited number of issues. That higher risk could enable out-performance, but could also result lower performance than a diversified fund or index.

If you want to try the stock trading technique called 'Buying Dividends,' which is the technique of buying stocks before the ex dividend date and selling the stock shortly after the ex date at about the same price, yet still being entitled to the dividend, there are many stocks to choose from. This technique generally works only in bull markets.

When you buy dividends, there are many stocks in many different sectors to choose from. In order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another few weeks.

It’s 10 degrees where we are today, and it’s been cold here for a long. We’re hoping each day for more sun and warmth. Similarly, it’s been very cold for a long time in the stock markets. We are also hoping each day for stocks to move out of the deep freeze.

By no means are we stock bulls yet, but there are some other things moving. Clearly Treasuries have blossomed and gone by. Investment grade corporate bonds and municipals bonds have recovered nicely from the Q4 lows. Gold is strong. The Yen is very strong, and the Dollar is doing pretty well. Below investment grade corporate bonds and preferred stocks show some signs of life, but with high risk abounding.

F1Q09 (Qtr End 12/31/08) Earnings Call Transcript

Investors occasionally use a stock trading technique called 'Buying Dividends,' which is the technique of buying stocks before the ex dividend date and selling the stock shortly after the ex date at about the same price, yet still being entitled to the dividend. This technique generally works only in bull markets.

If you are interested in buying dividends, there are many stocks in many different industries to choose from. In order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another few weeks.

In a utopian world, the perfect dividend stock would be one that is both high-yield and provide a high dividend growth rate. Its share price would appreciate ratable with its increasing dividend. All of this would be driven by increasing earnings and cash flow.

I haven't found the perfect dividend stock yet. However, here are several stocks that recently raised their raised their cash dividends:

F4Q08 Earnings Call

November 13, 2008 2:00 pm ET

Q3 2008 Earnings Call Transcript

July 30, 2008 2:00 pm ET

F2Q08 Earnings Call

April 30, 2008 2:00 pm ET

F1Q08 (Qtr End 12/31/07) Earnings Call

February 6, 2008 2:00 pm ET

According to the Department of Energy's Energy Information Administration's release on January 8, "natural gas spot price averaged $7.17 per thousand cubic feet (mcf) in 2007, and is expected to average $7.78 per mcf in 2008, and $7.92 per mcf in 2009." Maybe it's time to take a closer look at natural gas, and propane utility stocks.

Amerigas Partners (APU) is a Pennsylvania-based retail propane distributor. The stock has a forward P/E of 14.29, a PEG of 3.78, and a yield of 6.8%.

New Jersey Resources Corporations (NJR)

F4Q07 Earnings Call

To begin this topic, let’s see what dividend is. According to Investopedia, dividend is

Distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (i.e. dividends per share or DPS). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.

Yields are based on the annual dividend payments divided by the price per share. The following are listed in order of highest yield first. The second one on this list, Laclede Group (LG) is one of the oldest publicly traded companies, founded in 1857. In addition, it is one of the original twelve stocks in the Dow Jones Industrial Average.

Data in table version -- click on a ticker for opinion and analysis of the company: