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Retired VP from an Small Cap IT International Company. Investing in the stock market since my early 20's. Primarily an income investor on the long side with some covered call option plays. I follow the market daily.
  • Dividend Aristocrats - Not A Piece Of Cake!

    There are several problems with the Dividend Aristocrats.

    1. Low Yield not suitable for retirement income.
    2. Long timeframe for dividend growth.
    3. Principle requirement/dividend yield for retirement to high.

    An investment in the "Dividend Aristocrats" (DA) of $10,000 in each stock on the list would cost $540,000 and yield $12,861 (2.38%) in dividends a year. So clearly, all the hype of DA can't be about investing in this manner.

    Maybe one should buy them in their 20's and hold until 60 or 70. I haven't run the numbers but I suspect this plan wouldn't work out much better. Problem is the monthly or quarterly investment when you are young wouldn't contribute much to capital growth and the low yields wouldn't help much. Yes I agree over time the yield may get better but not fast enough. Growth would have to come from more dollars applied to investments. When I was young I just didn't have the dollars for investment. Besides, when I was young I took on risk for profit.

    Only 14 of the DA stocks pay 3% or above. If you limited your investments to the top 14 stocks a $540K investment would yield 3.62% or $19,572. Even if you go to the top 6 dividend payers 3.5% or better you get to 4.28% and $23,135. The top three stocks HCP, T and ED would be $27.090 and 5.02% yield. Based on best case here you would need about 2.6 million dollars to get to $130K yearly income. Nothing here is realistic for most Americans.

    The only DA stock I own is AT&T and have for a long time. When I bought T the yield was 6.28% and now it's 5.2% on market cost.

    Disclosure: The author is long T.

    Jun 01 12:59 AM | Link | Comment!
  • Anyone Can Beat This Market.

    I have been investing in stocks for at least 35 years. Thirty-five years cover a lot of good investments, bad investments, smart moves and really dumb moves. On July 7, 2003 I made a really brilliant move, well for me it was anyway. I deposited $1,000 in a low cost brokerage account. Over the next three years I continued to deposit money in the account. On July 17th of 2006 I had deposited at total of $103,060.90 into the account. I haven't made any withdrawals an today the account balance is $186,255.16.

    The good news, I didn't own any Enron, I did own 400 shares of BP the day the rig blew up in the gulf. The account was fully invested thru 2008 and 2009. And about 600 shares of some bank preferred shares were de-listed and became worthless; a small gift from Lehman Brothers.

    So what was so great about the move on July 7, 2003. I started buying stocks with a system or plan, a very simple plan with 5 rules.


    1. Only buy stocks of majors companies.

    2. Stocks must pay a decent dividend (3.5 to 7.5 percent).

    3. Stock should allow options.

    4. Buy in 100 to 400 share lots with a maximum of 400 shares per position.

    5. No bank common stocks, bank preferred are allowed.

    Most would call these "value stocks" as opposed to" growth" or "investment" stocks. I look at it a lot more simple than all of the jargon gurus. A stock is either a value stock or a speculative stock. Google is speculative; I have no clue when to buy it or sell it and there is no dividend. On the other hand ED, Consolidated Edison is a value stock, at $56.03 with a 4.3% dividend I know when to buy and sell the stock. I'll wait for a pull back, however I don't think you can go all that wrong at $56.03 and a $2.42 dividend unless they shut the lights off in New York city. To sum up on this point my last two purchases this month were NYSE at $23 with a 5% plus yield and CSX at $19.89 with a 2.82% yield. Ah, you say that doesn't fit my 3.5 to 7.5 percent rule and you are right. But how many railroads have they closed lately. With 65 different positions I discovered I didn't have anything in transportation. It was a small effort at being diversified.

    I considered calling in to Mad Money of the "Am I Diversified" segment but decided it would give Jim Kramer a heart attack. During the 2008 - 2009 melt down the portfolio incurred a paper loss of 57%; everything went down. I just keep buying stock and seemed to have weathered the storm. So much for diversification.

    I never really sell a stock except for an occasional preferred. That is, I don't issue a order to sell 100 shares of XYZ at market or limit price. I do however sell a covered call with a decent spread if a stock I have owned has gone up in value reducing the yield below 3% based on current market.

    The rule no common bank stocks rule however bank preferred are ok really doesn't make sense. When a bank fails both class of stocks are whipped out. But I buy preferred stocks of major banks from time to time when they are at a discount and just hold them until called.

    They say buy and hold is dead and maybe that is true. However, if you buy a decent stock with a good dividend and hold, it could overtime pay move in dividends than the cost of the original position. I'm approaching that with several of my positions.

    Disclosure: I am long CSX, NYX.

    Dec 10 12:49 AM | Link | Comment!
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