The Div Guy

Where Best to Compare ETFs

2012-01-24T05:00:00.005-06:00

Two Websites ace the data you need to compare exchange-traded funds: XTF and ETFdb have the sharpest tools in the drawer—including illustrated tools that let you search by geographic reach. Barron's by Mike Hogan

As easy as they are to trade, and as cheap as they are to own, it's often hard to see an exchange-traded fund for its metrics.

Think about how hard it is to penetrate any single security's forest of data, times 25 to 700 fund holdings. Then multiple that by three or more funds that qualify as comparable investments.

Whenever I have to build an ETF short list, the two sites I invariably turn to are XTF (www.xtf.com) and ETF Database, or ETFdb (http://etfdb.com).

They slice and dice the 1,400-ETF universe in numerous different ways—but, between them, I can always find the right tool for the job. And both are revamping their fund sifters right now.

XTF has just finished revamping its ETF Comparison and ETF Explorer tools.

The first helps subscribers assemble up to six similar funds to compare by a keyword, security's name or a fund's ticker symbol, while the second lets the user whittle down funds by investment objective. The popularity of these two most-often-used tools has led XTF to integrate some of their features into other parts of the site as well, reports president and CEO Mel Herman.

A search on any ETF ticker also fetches links to up to six similar funds. Clicking on the new Compare ETFs button atop the fund-profile pages instantly launches a spreadsheet-like display of all metrics for those funds. The user can easily add or remove funds to the list.

For example, a search on the very popular iShares MSCI Emerging Markets Index (ticker: EEM) brings up five like tickers. But some, such as the Rydex MSCI Emerging Markets Equal Weight ETF (EWEM), garner a low overall investibility score—based on XTF'S many-factored ranking algorithm—compared to XTF's 8.3 rating for EEM, on a scale of 10.

Both XTF and ETFdb have tools that let the user quickly find ETFs by exposure to a particular security. Both have exhaustive Boolean screeners, but they're executed differently. ETFdb's is subtractive, narrowing down the 1,400-strong ETF universe as the user clicks parameters for the 17 most common fund descriptors.

The data are organized under several topic-appropriate tabs; again, ETF data being so voluminous no single page can hold it all.

Like XTF, ETFdb also breaks down major fund characteristics graphically for quicker comprehension; and, later this month, it will start assigning A-to-F letter grades. Users will be able to see how a fund stacks up against its peers in fund expenses, performance, liquidity, volatility, dividends and concentration risk.

The power of XTF and ETFdb ultimately depends on their laborious updates of vast pools of information. Just as important are the clever ways both Websites let you grab onto just the piece of the ETF universe you want—and save yourself from drowning in a sea of incoherent data.

10 Cheap Stocks

2012-01-23T05:00:00.011-06:00

10 Cheap Stocks With Dependable Earnings. Bargain hunters should focus on companies that can deliver on forecasts. The evidence favors these names. SmartMoney by Jack Hough

So here are two ways to tell which firms are reliable. The first is to look for a recent dividend increase. That puts more cash in shareholder pockets, but just as important, it signals that managers are confident about future results. After all, no company wants to raise its dividend only to find the new payments unaffordable in the coming year.

The second is another statistical clue: a tight clustering of the earnings estimates issued by different analysts. Three decades of research, including recent studies by Anna Scherbina, now at U. C. Davis, show two important things about estimate dispersion. First, tightly grouped estimates are more likely than scattered ones to precede an upside earnings surprise. Second, stocks with clustered earnings estimates tend to outperform those without.

One theory on why this is so has to do with the earnings guidance that companies provide to analysts. Firms with good news to report tend to be more forthcoming with details than firms that are struggling, the thinking goes.

The 10 stocks below have modest P-E ratios and healthy dividend yields. They've also raised payments over the past year and have earnings estimates that show relatively close agreement among analysts.

COMPANY TICKER
ABBOTT ABT

ALTRIA
GROUP MO

ANALOG
DEVICES ADI

CAMPBELL

SOUP CPB

DARDEN

RESTAURANTS DRI

GENERAL

DYNAMICS GD

JOHNSON &

JOHNSON JNJ

MATTEL MAT

MICROSOFT MSFT

RAYTHEON RTN

2012 Dividend Income Goal

2012-01-09T05:00:00.007-06:00

2012 Dividend Income Goal
We finished the year with $6,341 in dividend income versus our 2011 year end goal of $6,700. We sold some dividend stocks in 2011 to help purchase a vacation rental condominium. We plan on growing the yearly dividend income for 2012 to $6,700 by the end of the year from our end of year 2011 balance of $6,341. In 2011, we continued to see many dividend increases as we did in 2010.

I plan to be a little more conservative with my stock purchases for 2012. I will focus on increasing stock purchases into our large blue chips stocks that will represent long term value. I will look to reduce some of my bank holding throughout 2012 as well.

Our long term goal is to have $30,000 in yearly dividend by retirement in 2024. Keep in mind, I don't consider this dividend stock portfolio diversified. I have most of our retirement assets in a diversified mutual fund portfolio with Vanguard.

Review of 2011 and New 2012 Financial Plan

2012-01-06T05:00:00.009-06:00

The financial markets of 2011 reached their peak in April and turned down over the summer but ended the year nearly flat. The S&P 500 had a total return (including dividends) of 2.11% for the year. Many dividend stocks increased their dividend payments in 2011 as they did in 2010.

A few years ago I started tracking our yearly progress towards reaching our retirement goals of having $2 million in retirement assets as well as reaching $30,000 in dividend stock income. I originally wanted to complete both these goals by the time I am 60 which is 13 years from now. But with the market decline in 2008, we will have to add a couple of years to our goal and our new plan is to retire at age 62 which is in 15 years. I have been using Bloomberg's Retirement Planner on their personal finance calculators site to come up with what we will need at retirement.

2011 Retirement Goal
$615,699 2010 year end retirement asset balance
$52,334 8.5% investment return
$9,500 2010 contributions to our retirement accounts
$677,533 2011 year end goal

Retirement Assets
In order to reach our retirement goal, we will need an average investment return of 8.5% along with a 10% contribution to our retirement plans for the next 15 years. I have used $95,000 for our annual household income that we will need in retirement. I am using 3% for inflation, 2% for expected salary increases and 8% return on investment during retirement.

We finished 2011 with retirement assets of $624,115 versus our end of year goal of $677,533. So we were $53,418792 under goal for the end of 2011.

To calculate the amount needed for the end of 2012, I start with our 2011 year end retirement balance of $624,115 which is the balance of our retirement accounts as well as our taxable stock accounts. We then add the 8.5% investment return which is $53,049 for a total of $677,164. Next I add our retirement contributions of $9,500 which is a 10% contribution for a grand total of $686,664 in retirement assets needed at the end of 2011.

2012 Retirement Goal
$624,115 2011 year end retirement asset balance
$53,049 8.5% investment return
$9,500 2010 contributions to our retirement accounts
$686,664 2012 year end retirement goal

As part of our retirement contributions, we will make contributions to our Roth IRA's as well make 6% contributions to our 401(k) and 403(b) plan.

2011 Net Worth Goal
$677,533 2011 year end retirement goal
$205,000 House
$30,000 Cash
$6,000 Cars
$3,000 Personal Property
$38,000 529 Accounts
$959,533 Total

Net Worth
We finished 2011 with an actual net worth of $938,892 versus our 2011 Net Worth goal of $959,533 which is $20,641 under the 2011 goal.

2012 Net Worth Goal

Assets
$686,664 2012 year end retirement goal
$205,000 House

$140,000 Condo
$30,000 Cash
$16,700 Cars
$3,000 Personal Property
$45,000 529 Accounts

Debt

$5,811 Car Loan

$107,942 Condo Mortgage

$1,012,611 Total

Let's hope the 2012 plan goes better than in 2011. I will go over my 2012 Dividend Income Goal on Monday.

Top 20 Stock Holdings

2012-01-05T05:00:00.005-06:00

Here are the top 20 stocks in my Dividend Portfolio as of 12/31/11 ranked by size of holdings.

1. Kinder Morgan Energy (KMP) USA
2. DCP Midstream Partners (DPM) USA
3. ONEOK, Inc. (OKE) USA
4. Abbott Labs (ABT) USA
5. Johnson & Johnson (JNJ) USA
6. Procter & Gamble (PG) USA
7. PepsiCo (PEP) USA
8. General Electric Company (GE) USA
9. Exxon Mobil (XOM) USA
10. GlaxoSmithKline (GSK) UK
11. Unilever NV (UN) Netherlands
12. Aircastle Limited (AYR) USA
13. Becton, Dickinson and Co (BDX) USA
14. Barclays PLC (BCS) UK
15. Pfizer (PFE) USA
16. Intel (INTC) USA
17. Newell Rubbermaid (NWL) USA
18. CommonWealth REIT (CWH) USA
19. Duke Energy (DUK) USA
20. Novartis (NVS) Switerland

Here are the top 10 holdings of the Vanguard High Dividend Yield ETF (VYM) as of 11/ 30/11. The Fund consists of stocks that are characterized by higher-than-average dividend yields, and is based on the U.S. component of the FTSE Global Equity Index Series (GEIS). Real estate investment trusts (REITs), whose income generally do not qualify for favorable tax treatment as qualified dividend income (QDI) are removed, as are stocks that have not paid a dividend during the previous 12 months.

1. Exxon Mobil Corporation (XOM) USA
2. Microsoft (MSFT) USA
3. Chevron (CVX) USA
4. Johnson & Johnson (JNJ) USA
5. Procter & Gamble (PG) USA
6. AT&T (T) USA
7. General Electric Company (GE) USA
8. Pfizer (PFE) USA
9. Coca-Cola (KO) USA
10. Walmart (WMT) USA

December Dividend Income Update

2012-01-04T05:00:00.004-06:00

I have been building a stock portfolio of dividend stocks outside of my retirement accounts that I will use to help produce income in retirement. This portfolio was valued at $143,152 as of the end of December.

My Annualized Dividend Income as of the end of December increased to $6,341 from $6,317 over the past month. This means my dividend stocks will pay $6,341 in dividends over the next 12 months. This portfolio of stocks has a current yield of 4.42%.

All my dividend distributions from the month went toward paying down debt. The stock market was up for the month and we continue to see companies increasing their dividends this year.

Most of my stocks are held in my Vanguard Brokerage account and the rest are DRIPs. I am keeping track of the amount of income I could receive once I retire or choose to receive the dividends in cash.

I will post my Top 20 Stock Holdings on Thursday.

December Net Worth

2012-01-03T05:00:00.001-06:00

As of the end of December our Net Worth increased to $938,892 from $928,483 for the month which is a 1.12% increase. The increase in net worth is tied to the increase for the stock market in December. The S&P 500 was up 1.02% for the month of December.

The breakout is as follows:
ASSETS
Retirement Accounts $480,963
Taxable Accounts $143,152
Cash $28,114
Home $205,000
Other Real Estate $140,000
Cars $18,700
Personal Property $3,000
Kids 529 Accounts $42,116

DEBT

Other Mortgage $110,942

Car Loan $10,811

Credit Card $400

NET WORTH

$938,892

Here is the summary for this month:

The stock market was up for the month of December. The S&P 500 was up 1.02% for the month and that accounted for most of our increase in value.

We now have $400 in credit card debt that is interest free for 12 months. The money was used to furnish our new investment condo. We will continue to use our other credit cards for rewards but pay off the balances each month. All dividends received this month went toward paying down debt.

We also have a car loan for $10,811 since we purchased a new car in October.

We will be paying down debt and trying to building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. We continue to fund our Roth IRA's each month.

I will post my Dividend Income Update on Wednesday.

Top 20 Stock Holdings

2011-12-07T05:00:00.001-06:00

Here are the top 20 stocks in my Dividend Portfolio as of 11/30/11 ranked by size of holdings.

1. Kinder Morgan Energy (KMP) USA
2. DCP Midstream Partners (DPM) USA
3. ONEOK, Inc. (OKE) USA
4. Abbott Labs (ABT) USA
5. Johnson & Johnson (JNJ) USA
6. Procter & Gamble (PG) USA
7. PepsiCo (PEP) USA
8. General Electric Company (GE) USA
9. Exxon Mobil (XOM) USA
10. Unilever NV (UN) Netherlands
11. GlaxoSmithKline (GSK) UK
12. Becton, Dickinson and Co (BDX) USA
13. Barclays PLC (BCS) UK
14. Aircastle Limited (AYR) USA
15. Intel (INTC) USA
16. Pfizer (PFE) USA
17. Newell Rubbermaid (NWL) USA
18. CommonWealth REIT (CWH) USA
19. Banco Santander (STD) Spain
20. Duke Energy (DUK) USA

Here are the top 20 holdings of the Vanguard High Dividend Yield ETF (VYM) as of 9/ 30/11. The Fund consists of stocks that are characterized by higher-than-average dividend yields, and is based on the U.S. component of the FTSE Global Equity Index Series (GEIS). Real estate investment trusts (REITs), whose income generally do not qualify for favorable tax treatment as qualified dividend income (QDI) are removed, as are stocks that have not paid a dividend during the previous 12 months.

1. Exxon Mobil Corporation (XOM) USA
2. Microsoft (MSFT) USA
3. Chevron (CVX) USA
4. Johnson & Johnson (JNJ) USA
5. Procter & Gamble (PG) USA
6. AT&T (T) USA
7. General Electric Company (GE) USA
8. Coca-Cola (KO) USA
9. Pfizer (PFE) USA
10. Walmart (WMT) USA
11. Intel (INTC) USA
12. Philip Morris International (PM) USA
13. Verizon (VZ) USA
14. Merck (MRK) USA
15. Pepsico (PEP) USA
16. McDonald's (MCD) USA
17. ConocoPhillips (COP) USA
18. Abbott Labs (ABT) USA
19. United Technologies (UTX) USA
20. Kraft (KFT) USA

November Dividend Income Update

2011-12-06T05:00:00.004-06:00

I have been building a stock portfolio of dividend stocks outside of my retirement accounts that I will use to help produce income in retirement. This portfolio was valued at $135,803 as of the end of November.

My Annualized Dividend Income as of the end of November increased to $6,317 from $6,279 over the past month. This means my dividend stocks will pay $6,317 in dividends over the next 12 months. This portfolio of stocks has a current yield of 4.65%.

All my dividend distributions from the month went toward paying down debt. The stock market was up for the month and we continue to see companies increasing their dividends this year.

Most of my stocks are held in my new Vanguard Brokerage account and the rest are DRIPs. I am keeping track of the amount of income I could receive once I retire or choose to receive the dividends in cash.

I will post my Top 20 Stock Holdings on Wednesday.

November Net Worth

2011-12-05T05:00:00.005-06:00

As of the end of November our Net Worth decreased to $928,483 from $934,004 for the month which is a 0.52% decrease. The decrease in net worth is tied to the decrease in the stock market for the month. The S&P 500 was down 0.22% for the month of November.

The breakout is as follows:
ASSETS
Retirement Accounts $479,878
Taxable Accounts $135,803
Cash $30,276
Home $205,000

Other Real Estate $137,500
Cars $18,900
Personal Property $3,000
Kids 529 Accounts $41,591

DEBT

Other Mortgage $110,942

Car Loan $11,123

Credit Card $1,400

NET WORTH

$928,483

Here is the summary for this month:

The stock market was down for the month of November. The S&P 500 was down 0.22% for the month and that accounted for most of our decrease in value.

We now have $1,400 in credit card debt that is interest free for 12 months. The money was used to furnish our new investment condo. We will continue to use our other credit cards for rewards but payoff the balances each month. All dividends received this month went toward paying down debt.

We also have a car loan for $11,123 since we purchased a new car.

We will be paying down debt and trying to building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. We continue to fund our Roth IRA's each month.

I will post my Dividend Income Update on Tuesday.

October Dividend Income Update

2011-11-02T05:00:00.004-05:00

I have been building a stock portfolio of dividend stocks outside of my retirement accounts that I will use to help produce income in retirement. This portfolio was valued at $134,877 as of the end of October.

My Annualized Dividend Income as of the end of October increased to $6,279 from $6,249 over the past month. This means my dividend stocks will pay $6,279 in dividends over the next 12 months. This portfolio of stocks has a current yield of 4.65%.

All my dividend distributions from the month went toward paying down debt. The stock market was up quite a bit for the month and we continue to see companies increasing their dividends this year.

I will post my Top 20 Stock Holdings on Wednesday.

October Net Worth

2011-11-01T05:00:00.004-05:00

As of the end of October our Net Worth increased to $934,004 from $868,690 for the month which is a 7.52% increase. The increase in net worth is tied to the increase in the stock market for the month. The S&P 500 was up 10.93% for the month of October.

The breakout is as follows:
ASSETS
Retirement Accounts $484,450
Taxable Accounts $134,877
Cash $33,000
Home $205,000

Other Real Estate $137,500
Cars $19,000
Personal Property $3,000
Kids 529 Accounts $41,622

DEBT

Other Mortgage $111,274

Car Loan $11,436

Credit Card $1,900

NET WORTH

$934,004

Here is the summary for this month:

The stock market was up for the month of October. The S&P 500 was up 10.93% for the month and that accounted for most of our increase in value.

We also have a car loan for $11,436 since we purchased a new car.

We will be paying down debt and trying to building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. We continue to fund our Roth IRA's each month.

I will post my Dividend Income Update on Wednesday.

September Dividend Income Update

2011-10-11T05:00:00.001-05:00

I have been building a stock portfolio of dividend stocks outside of my retirement accounts that I will use to help produce income in retirement. This portfolio was valued at $122,656 as of the end of September.

My Annualized Dividend Income as of the end of September increased to $6,249 from $6,224 over the past month. This means my dividend stocks will pay $6,249 in dividends over the next 12 months. This portfolio of stocks has a current yield of 5.09%.

All my dividend distributions from the month went toward paying down debt. The stock market was down for the month but we continue to see companies increasing their dividends this year.

I will post my Top 20 Stock Holdings on Tuesday.

September Net Worth

2011-10-07T05:00:00.002-05:00

As of the end of September our Net Worth decreased to $868,690 from $894,761 for the month which is a 2.91% decrease. The decrease in net worth is tied to the decrease in the stock market for the month. The S&P 500 was down 7.03% for the month of September.

The breakout is as follows:
ASSETS
Retirement Accounts $440,524
Taxable Accounts $122,656
Cash $28,524
Home $205,000

Other Real Estate $137,500
Cars $6,300
Personal Property $3,000
Kids 529 Accounts $38,860

DEBT

Other Mortgage $111,274

Credit Card $2,400

NET WORTH

$868,690

Here is the summary for this month:

The stock market was down for the month of September. The S&P 500 was down 7.03% for the month and that accounted for most of our decrease in value.

We now have $2,400 in credit card debt that is interest free for 12 months. The money was used to furnish our new investment condo. We will continue to use our other credit cards for rewards but payoff the balances each month. All dividends received this month went toward paying down debt.

We will be paying down debt and trying to building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. We continue to fund our Roth IRA's each month.

I will post my Dividend Income Update on Monday.

Dividends: It's Payback Time!

2011-09-09T05:00:00.006-05:00

SmartMoney by Ben Levisohn

Slow economic growth. Whipsawing volatility. In an environment like this, it is little wonder investors are piling into stocks with steady dividend payments.

Mutual funds specializing in dividend stocks have seen inflows of $12.6 billion so far this year, four times as much as in all of 2010 -- even as stock funds as a whole have posted outflows of nearly $25 billion, according to fund tracker Lipper.

The key to dividend investing, say strategists, is to be selective. That means avoiding the juiciest dividends and concentrating instead on companies that are boosting their payouts -- and have the growth potential to keep those payments coming.

"You should never be taking shortcuts," says Ben Inker, director of asset allocation at money manager GMO LLC in Boston. "Just because a stock pays a dividend doesn't mean you don't have to worry about the rest of the company."

At the same time, a low yield might not be a problem if the company seems poised to raise its payment. Take UnitedHealth Group (UNH: 45.73, -1.29, -2.74%) Inc., a favorite of Richard Helm, manager of the Cohen & Steers Dividend Value Fund. It has a yield of just 1.2%, but it raised its dividend payment from three cents per share to 50 cents in 2010, and then raised it again in May 2011 to 65 cents.

"We favor those that have lower payout ratios, but higher rates of dividend growth," says Mr. Helm, whose fund is down 6.7% so far this year, better than the S&P 500's 7.8% decline through Thursday.

Of course, a fat yield does no good if a company can't make its payments in the future. How do you tell if a dividend may be unsustainable? First, look at a company's payout ratio -- the dividend payment per share divided by earnings per share. A common rule of thumb: If the number is more than 50%, the dividend may be too high, especially for companies where earnings fluctuate with the economy.

In stable sectors, such as utilities and telecommunication companies, higher payout ratios might not be a sign of trouble because companies' income fluctuates less.

Financial planner Emily Sanders, chief investment officer of Sanders Financial Management in Norcross, GA passed on buying Frontier Communications recently, choosing Verizon, PepsiCo (PEP: 63.30, -0.85, -1.33%) Inc. and Abbott Laboratories (ABT: 51.04, -0.90, -1.73%) instead.

"We decided that the stability of the dividend wasn't ensured enough to buy the stock," Ms. Sanders says.

A high-yield, low-beta strategy would steer you toward consumer staples like General Mills (GIS: 37.41, -0.30, -0.80%) Inc., which pays a dividend yield of 3.3% and has a three-year beta of just 0.2. Utility PG&E (PCG: 41.34, -0.75, -1.78%) Corp. yields 4.4% and carries a beta of 0.2; and health-care company Abbott Laboratories yields 3.8% and has a beta of 0.3.

Several mutual funds and exchange-traded funds generated fatter yields than the S&P 500 and provided more safety. The SPDR S&P Dividend (SDY: 50.19, -1.10, -2.14%) ETF, which tracks the S&P High Yield Dividend Aristocrats index of S&P 500 companies that have raised dividends every year for 25 consecutive years, has dropped 8.6% in August, compared with a 13.1% fall for the S&P. It yields 3.3% and has a beta of 0.88.

Other investors might prefer more upside potential alongside a fat yield. One strategy: build a portfolio that pays a high dividend but tracks the S&P 500. By leaning toward stocks with above-average yields, but higher betas, investors can match the S&P's price gains while beating it on a yield basis.

Joe Wolfe, director of quantitative research at Northern Trust (NTRS: 36.53, -1.49, -3.92%) Corp., recommends higher-beta dividend payers like Microsoft (MSFT: 25.80, -0.41, -1.56%) Corp., which has a dividend yield of 2.6% and a beta of 0.98, and Intel (INTC: 19.64, -0.35, -1.75%) Corp., which has a dividend yield of 4.3% and a beta of 1.1.

Among the higher-beta dividend payers that Jeff Layman, chief Investment Officer at BKD Wealth Advisors LLC in St. Louis, has been accumulating for his clients are ConocoPhillips (COP: 66.44, -1.53, -2.25%), which yields 4% and has a beta of 1.2, and Aflac (AFL: 34.99, -1.70, -4.63%) Inc., which yields 3.4% and has a beta of 2.0.

High-beta income ETFs include First Trust Morningstar Dividend Leaders (FDL: 16.06, -0.27, -1.65%), which yields 3.7% and has a beta of 0.9, WisdomTree Equity Income (DHS: 39.23, -0.73, -1.83%), which yields 3.6% and has a beta of 1.1, and the Vanguard High Dividend Yield (VYM: 41.36, -0.85, -2.01%), which yields 2.82% and has a beta of 1.

"In the future, dividends will be a stronger portion of returns," Mr. Wolfe says. "But we want market exposure too."

Top 20 Stock Holdings

2011-09-08T05:00:00.009-05:00

Here are the top 20 stocks in my Dividend Portfolio as of 8/31/11 ranked by size of holdings.

1. Kinder Morgan Energy (KMP) USA
2. DCP Midstream Partners (DPM) USA
3. Johnson & Johnson (JNJ) USA
4. Abbott Labs (ABT) USA
5. ONEOK, Inc. (OKE) USA
6. Procter & Gamble (PG) USA
7. PepsiCo (PEP) USA
8. General Electric Company (GE) USA
9. Becton, Dickinson and Co (BDX) USA
10. Unilever NV (UN) Netherlands
11. Exxon Mobil (XOM) USA
12. GlaxoSmithKline (GSK) UK
13. CommonWealth REIT (CWH) USA
14. Aircastle Limited (AYR) USA
15. Barclays PLC (BCS) UK
16. Novartis (NVS) Switzerland
17. Pfizer (PFE) USA
18. Intel (INTC) USA
19. Newell Rubbermaid (NWL) USA
20. Banco Santander (STD) Spain

Here are the top 20 holdings of the Vanguard High Dividend Yield ETF (VYM) as of June 30, 2011. The Fund consists of stocks that are characterized by higher-than-average dividend yields, and is based on the U.S. component of the FTSE Global Equity Index Series (GEIS). Real estate investment trusts (REITs), whose income generally do not qualify for favorable tax treatment as qualified dividend income (QDI) are removed, as are stocks that have not paid a dividend during the previous 12 months.

1. Exxon Mobil Corporation (XOM) USA
2. Microsoft (MSFT) USA
3. Chevron (CVX) USA
4. General Electric Company (GE) USA
5. AT&T (T) USA
6. Johnson & Johnson (JNJ) USA
7. Procter & Gamble (PG) USA
8. Pfizer (PFE) USA
9. Coca-Cola (KO) USA
10. Walmart (WMT) USA
11. Philip Morris International (PM) USA
12. Intel (INTC) USA
13. Pepsico (PEP) USA
14. Merck (MRK) USA
15. ConocoPhillips (COP) USA
16. Verizon (VZ) USA
17. McDonald's (MCD) USA
18. United Technologies (UTX) USA
19. Abbott Labs (ABT) USA
20. Caterpillar (CAT) USA

August Dividend Income Update

2011-09-07T05:00:00.004-05:00

I have been building a stock portfolio of dividend stocks outside of my retirement accounts that I will use to help produce income in retirement. This portfolio was valued at $125,382 as of the end of August.

My Annualized Dividend Income as of the end of August decreased to $6,224 from $6,511 over the past couple of months. I sold off a couple of stocks to pay for some extra costs the past couple of months. This means my dividend stocks will pay $6,224 in dividends over the next 12 months. This portfolio of stocks has a current yield of 4.96%.

All my dividend distributions from the month went toward paying down debt. The stock market was down for the month but we continue to see companies increasing their dividends this year.

I will post my Top 20 Stock Holdings on Thursday.

August Net Worth

2011-09-06T05:00:00.004-05:00

As of the end of August our Net Worth decreased to $894,761 from $965,562 which I last calculated in May.. The decrease in net worth is tied to the decrease in the stock market for the past few months.

The breakout is as follows:
ASSETS
Retirement Accounts $465,928
Taxable Accounts $125,382
Cash $26,286
Home $205,000

Other Real Estate $137,500
Cars $6,300
Personal Property $3,000
Kids 529 Accounts $39,804

DEBT

Other Mortgage $111,439

Credit Card $3,000

NET WORTH

$894,761

Here is the summary for this month:

The stock market was down for the past few months which accounted for most of the decline in our net worth.

We have $3,000 in credit card debt that is interest free for 12 months. The money was used to furnish our new investment condo. We will continue to use our other credit cards for rewards but payoff the balances each month. All dividends received this month went toward paying down debt.

We will be paying down debt and trying to building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. We continue to fund our Roth IRA's each month.

I will post my Dividend Income Update on Wednesday.

3 Stocks for Beating Inflation

2011-07-19T05:00:00.003-05:00

3 Stocks for Beating Inflation
These stocks offer handsome yields and protection against rising prices.
By Jack Hough

Treasury inflation-protected securities offer meager interest: 0.9% on 10-year issues, versus 3.2% on standard bonds of the same duration. The tradeoff, of course, is that the principal is adjusted for the rate of inflation, keeping investors current with the cost of living, right?

Maybe not. The inflation measure underpinning TIPS has shown a 3.2% price increase over the past year. That's the biggest increase since October 2008, and it's higher than the 2.4% average for rolling 12-month periods since 2000. But gasoline now costs U.S. drivers 38% more than a year ago, according to the Department of Energy. Employer health care costs are poised to rise 8.5% next year, according to a recent report by PricewaterhouseCoopers. Butter--humble butter--is up 23% in a year. Who's to tell a long-distance-driving, health-plan-sponsoring, butter-loving business owner that his costs have climbed only 3.2% in a year?

Cynics have long argued that government inflation statistics are rigged to understate cost increases. I find little evidence for that claim. But no inflation measure can track the cost of living for everyone using the same basket of goods and services. A family putting two kids through public college, the cost of which has increased at more than three times the rate of inflation over the past decade, probably won't care that bananas have gotten cheaper over the past three years. A childless vegan might.

Here's an alternative for investors seeking inflation protection: shares of companies whose goods and services we spend plenty on. Soaring prescription costs will be a little easier to swallow is shares of your drug maker are rising, too. Pumping gas might feel like less of a loss if your oil driller's stock is pumping out quarterly payments. Below are three candidates with dividend yields over 3%, or more than triple the yield on those 10-year TIPS. And whereas TIPS coupons are locked in for the life of the bonds, dividends for these companies have grown in recent years.

ConocoPhillips
Dividend yield: 3.7%
ConocoPhillips (COP) shares have climbed 58% in two years, besting shares of rivals like Exxon Mobil (MOB) and those of large U.S. companies in general. Oil's price increase explains only part of the company's recent prosperity. Management is about halfway through a restructuring program that involves selling low-margin refining capacity, reducing debt, returning cash to shareholders and increasing returns. Last year the company spent more on share repurchases than on dividends, meaning the stock's 3.7% dividend yield was really a 7%-plus net payout yield. This year analysts expect ConocoPhillips to spend nearly $11 billion on share repurchases, versus about $3.6 billion on dividends.

Johnson & Johnson
Dividend Yield: 3.4%
Shares of Johnson & Johnson (JNJ) have been battered by manufacturing problems leading to recalls for a long list of products, including Tylenol, Benadryl and Rolaids. European austerity measures have also cut into the company's drug and medical device businesses. Overall sales have declined over the past two years. This year, however, sales are expected to rebound 6% as replacements for recalled products make their way to stores. Once-pricey J&J shares now sell for 13 times earnings, a discount of 15% or so to the broad market.

Public Storage
Dividend yield: 3.2%
Public Storage (PSA) is a real estate investment trust, which means it passes the bulk of income from its holdings, self-service storage facilities, to investors as dividends. Real estate and rents are subject to inflation, which means Public Storage should be able to keep up with rising consumer prices. Historically, it has far surpassed them. Over the past two decades, shareholders have received gradually rising dividends to accompany a 25-fold increase in their stock value. The company's fastest growth days are likely behind it, but current trends bode well. Occupancy rates and average rents have risen of late, and management recently boosted the dividend payment by nearly one-fifth.

Disclosure: The Div Guy owns shares of JNJ at the time of this post.

Want Returns and Safety? Buy Dogs (Value Stocks)

2011-07-18T05:00:00.007-05:00

Most unloved companies won't stay that way for long, a new study concludes. By Jack Hough for SmartMoney

Shares of the largest two-dozen American firms sell for 20% less than those of other companies based on forecast earnings. Giants are priced like dogs, in other words. History says buy them; the stocks investors like least ("value" stocks) tend to outperform the ones they like most ("glamour" stocks) over long time periods. But little about these companies suggests a turnaround is afoot.

It might not matter. New research suggests value stocks outperform, not necessarily because the companies they're attached to improve, but because investors judge them too harshly to begin with, and later soften their criticism. That means today's investors can seek refuge in discounted companies with plump dividends, strong cash flow, global sales exposure and stable profits, and likely secure bigger price gains than they would chasing after market darlings. Some picks in a moment.

Some academics cling tightly to the belief that risk and returns are inseparable--that the only way to secure higher returns is to invest less safely. In seeking to explain the outperformance of value stocks, then, people in this camp say that modest valuations must be a sign of risk. Why else would companies trade cheaply, if not for their added likelihood of failure? There are problems with this view, however. For example, cheap companies don't show other signs associated with riskiness, like volatile share prices.

Nick Magnuson, an analyst at The Brandes Institute, an investment research group, offers a different explanation in the latest edition of Journal of Behavioral Finance. Investors, rather than companies, account for the value premium. Magnuson looked at performance data for the largest half of rich-country companies between 1990 and 2009. In an average year, the most expensive decile of stocks by forward price-to-earnings ratios went on to lose nearly 1% in value over the following year. The cheapest decile gained nearly 12%. That is, value outperformed glamour by a whopping 13 percentage points a year.

When Magnuson looked at earnings surprises, the results were, well, surprising. Glamour stocks gained after beating Wall Street's earnings forecasts but got clobbered after missing them. Value stocks rose even more than glamour stocks following beats -- and even rose following misses. Other performance measures like margins and sales growth showed similar trends. Value stocks did great when margins were expanding and good even when they were deteriorating, whereas glamour stocks did just OK and lousy, respectively, under the same circumstances. Value stocks shined whether sales were rising or falling, and glamour stocks, in neither case.

Magnuson reckons this means that the average value stock is merely in the first part of an investor cycle--overreaction to setbacks. Later parts of the cycle include a gradual shift in sentiment and expansion of price-to-earnings ratios.

Below are listed six giant companies that sell for a song based on earnings and that offer meaty dividend yields. All of them look properly unattractive. Exxon Mobil (XOM: 83.00) will collapse with the price of oil, of course, and Microsoft (MSFT: 26.78) won't figure out how to sell software in the age of cloud computing. General Electric (GE: 18.41) and Wal-Mart (WMT: 53.63) are too big to grow, Johnson & Johnson (JNJ: 67.45) will never correct its recent manufacturing missteps and AT&T (T: 30.31) will lose more from the death of landlines than it gains from wireless.

Unless, that is, investor fears are overblown. If that's the case, holders of these stocks will collect an average yield of 3.3%, and enjoy handsome gains once the public decides these companies aren't such dogs after all.

Company Dividend Yield
Exxon Mobil (XOM) 2.3%
Microsoft (MSFT) 2.4%
General Electric (GE) 3.3%
Wal-Mart Stores (WMT) 2.7%
Johnson & Johnson (JNJ) 3.4%
AT&T (T) 5.6%

Disclosure: The Div Guy owns shares of XOM, GE and JNJ at the time of this post.

Top 20 Stock Holdings

2011-06-03T05:00:00.006-05:00

Here are the top 20 stocks in my Dividend Portfolio as of 5/31/11 ranked by size of holdings.

1. Kinder Morgan Energy (KMP) USA
2. DCP Midstream Partners (DPM) USA
3. Johnson & Johnson (JNJ) USA
4. ONEOK, Inc. (OKE) USA
5. Procter & Gamble (PG) USA
6. Barclays PLC (BCS) UK
7. Abbott Labs (ABT) USA
8. General Electric Company (GE) USA
9. CommonWealth REIT (CWH) USA
10. Becton, Dickinson and Co (BDX) USA
11. PepsiCo (PEP) USA
12. Exxon Mobil (XOM) USA
13. GlaxoSmithKline (GSK) UK
14. Unilever NV (UN) Netherlands
15. Aircastle Limited (AYR) USA
16. Banco Santander (STD) Spain
17. AT&T (T) USA
18. Pfizer (PFE) USA
19. Novartis (NVS) Switzerland
20. Verizon Communications (VZ) USA

Here are the top 20 holdings of the Vanguard Value ETF (VTV) as of March 31, 2011. The Fund seeks to track the performance of the MSCI® US Prime Market Value Index, which measures the investment return of large-capitalization value stocks.

1. Exxon Mobil Corporation (XOM) USA
2. Chevron (CVX) USA
3. General Electric Company (GE) USA
4. AT&T (T) USA
5. JPMorgan Chase (JPM) USA
6. Procter & Gamble (PG) USA
7. Johnson & Johnson (JNJ) USA
8. Pfizer (PFE) USA
9. Wells Fargo (WFC) USA
10. Bank of America (BAC) USA
11. Intel (INTC) USA
12. ConocoPhillips (COP) USA
13. Verizon (VZ) USA
14. Merck (MRK) USA
15. Occidental Petroleum (OXY) USA
16. Goldman Sachs Group(GS) USA
17. United Technologies (UTX) USA
18. Citigroup (CP) USA
19. 3M (MMM) USA
20. Home Depot (HD) USA

May Dividend Income Update

2011-06-02T05:00:00.006-05:00

I have been building a stock portfolio of dividend stocks outside of my retirement accounts that I will use to help produce income in retirement. This portfolio was valued at $146,553 as of the end of May.

My Annualized Dividend Income as of the end of May increased to $6,511 from $6,506 over the past month. This means my dividend stocks will pay $6,511 in dividends over the next 12 months. This portfolio of stocks has a current yield of 4.44%.

All my dividend distributions from the month went toward paying down debt. The stock market was down for the month but we continue to see companies increasing their dividends this year.

May Net Worth

2011-06-01T05:00:00.006-05:00

As of the end of May our Net Worth decreased to $965,562 from $982,002 for the month which is a 1.67% decrease. The decrease in net worth is tied to the decrease in the stock market for the month.

The breakout is as follows:
ASSETS
Retirement Accounts $516,140
Taxable Accounts $146,553
Cash $26,912
Home $205,000

Other Real Estate $137,500
Cars $6,400
Personal Property $3,000
Kids 529 Accounts $41,636

DEBT

Other Mortgage $111,939

Credit Card $5,640

NET WORTH

$965,652

Here is the summary for this month:

The stock market was down for the month of May. The S&P 500 was down around 2% for the month and that accounted for most of our decrease in value.

We now have $5,640 in credit card debt that is interest free for 12 months. The money was used to furnish our new investment condo. We will continue to use our other credit cards for rewards but payoff the balances each month. All dividends received this month went toward paying down debt.

We will be paying down debt and trying to building up our cash over the next few months to increase our cash reserves. You can click on my Net Worth graph on the right to see the changes in each category from the previous month. We continue to fund our Roth IRA's each month.

I will post my Dividend Income Update on Thursday.

12 Stocks to Get Dividends Every Month

2011-05-31T05:00:00.006-05:00

Kiplinger - 12 Stocks to Get Dividends Every Month By Jeffrey R. Kosnett

We found a dozen great stocks with a payment schedule that will line your pockets with cash all year.

January
General Electric (symbol GE) price: $21, yield 2.6%
The diversified giant known as "Eclectic" has been reinventing itself since Thomas Edison's time. Now, GE is remaking itself as the developing world's go-to source for engines and turbines while remaining a global leader in high-end medical devices and energy-related capital equipment. The Fairfield, Conn., firm is shifting away from media and financial services. GE sold control of NBC Universal to Comcast, and its finance arm, which nearly sank the whole ship, is recovering but produces only one-sixth of the company's profits.

In any case, diversified manufacturers are generally more consistent sources of dividends than television networks and financial engineers, so you can be confident that GE's pledge to rebuild its dividend, which it slashed by two-thirds in 2009, is genuine. A boost in 2010 and another this year have brought the annual rate back to 56 cents, up from 40 cents per share annually. More raises are likely this year and beyond.
Also pays in: April, July and October

(Dividend-paying stocks can help your portfolio through volatile markets. Watch our video for more tips on Navigating Volatility in Your Portfolio.)

February
Aqua America (WTR) $23, 2.6%
February is a short month, so we'll cheat and make Aqua America, which pays on March 1, an honorary February dividend payer. Providing water is an essential service, and it's a business that earns a guaranteed profit margin. Water service is also a monopoly, or close to it -- even water purists who drink and cook with bottled H2O are likely to twist the tap for bathing.

Aqua America, which serves about one million customers in 14 states, is the largest of the nation's dozen or so investor-owned water utilities. The Bryn Mawr, Pa., company's market capitalization of $3.2 billion exceeds the value of all other publicly traded water companies combined. Because of its girth, Aqua America can raise capital cheaply and use it to buy other water systems, usually from local governments that can't afford to maintain their systems. That enables Aqua America to raise dividends consistently, usually by about 4 cents per year.
Also pays in: June (first day), September and December

March
McDonald's (MCD) $76, 3.2%
The fast-food giant is a Dog of the Dow, one of the ten highest-yielding stocks in the Dow Jones industrial average. That's enough to get some love from dividend hounds. But unlike the other Dogs, McDonald's barks to celebrate its tail-wagging dividend increases. Over the past five years, the Oak Brook, Ill., company has raised dividends at an annualized rate of 30%, to a current $2.44 per share yearly.

McDonald's is a prodigious generator of cash. While other chains struggle to stay in business, McDonald's invents one hit product after another -- think breakfast servings of oatmeal and McCafe coffee drinks. More than half of sales and profits come from outside the U.S., so an investment in McDonald's shares effectively gives you exposure to all sorts of foreign currencies and lets you ride the rising spending power of hundreds of millions of consumers in fast-growing emerging markets.
Also pays in: June, September and December

April
Automatic Data Processing (ADP) $50, 2.9 %
Payroll processing may be a boring business, but few firms, whether they pay dividends or not, are as consistent as Automatic Data Processing. The company, one of a handful in the U.S. with a triple-A credit rating, processes payrolls, manages employee and business records, and runs IT departments under contract. The payroll business depends on the overall health of the economy in general and job growth in particular. Because the economy is expanding and the employment picture appears to be improving, this is a good time to invite ADP to send you a check every three months.

ADP's yield won't knock your socks off, but its dividends are ironclad -- the company holds $1.4 billion in cash and owes minimal debt. The low yield is also palatable because ADP boosts its dividends like clockwork -- 36 years in a row, to be precise. A modest rise in short-term interest rates will benefit ADP, which invests the payroll money it holds before transferring it to its clients' workers.
Also pays in: January, July and October

May
Verizon (VZ) $36, 5.4%
Before the Internet, the iPhone and Skype, Ma Bell was the phone company. Ma Bell, formally American Telephone & Telegraph, was tightly regulated and paid high dividends. The government broke up Ma Bell in 1984, accelerating a revolution in telecommunications that continues to this day. But when it comes to high dividends, it's back to the good old days, with two of Ma's offspring, Verizon and a new iteration of AT&T, each yielding better than 5%.

It's okay to buy both, but we prefer New York City-based Verizon. Verizon Wireless's deal to sell the iPhone is a game-changer, breaking AT&T's four-year stranglehold on the Apple bestseller. Analysts estimate that Verizon Wireless, 55% of which is owned by Verizon Communications, sold 500,000 iPhones on the first day its model went on sale. Verizon Wireless is spending heavily to promote the iPhone launch, and the result should be an expansion of its market-share lead in the U.S.
Also pays in: February, August and November

June
M&T Bank (MTB) $90, 3.1%
This Buffalo, N.Y., institution, organized in 1856, is the largest U.S. bank to have remained reasonably healthy during the 2008-09 financial crisis. The best evidence: M&T did not cut its dividend, which has stayed at an annual rate of $2.80 per share since the middle of 2007. Bank officials give two reasons for M&T's steadfastness.

First, M&T has a number of large shareholders (including Warren Buffett's Berkshire Hathaway) that have made it clear that they expect regular cash payments. The other is that because M&T remained profitable during the calamity, regulators had no need to press M&T to hack its dividend. M&T presciently bought a scandal-ridden Baltimore bank on the cheap in 2003 and used it to invade the booming Washington, D.C., region. The company hopes its pending buyout of Delaware's Wilmington Trust will further boost profits.
Also pays in: March, September and December

July
Kimberly-Clark (KMB) $66, 4.3%
The maker of Kleenex, Huggies and Scott paper products steers a steady financial course. The Dallas-based company maintains consistently high profit margins, carries a moderate amount of debt and tends to pay about half of its profits to shareholders.

Kimberly-Clark has lifted its payout 39 straight years, including an increase of 10% in 2010 and 6% so far this year. But while executives at some regular dividend boosters care more about the streak than their stock's yield, Kimberly's CEO, Tom Falk, has said that "our above-average dividend yield is important to us and distinguishes us among our peers." The stock's yield is higher than that of all consumer companies in the S&P 500. The outlook for 2011 is a tad iffier than usual because of soaring costs for the raw materials that Kimberly uses to make its products. So the company is mounting a preemptive cost-cutting plan that includes selling pulp mills and ceasing the manufacture of products for private labels.
Also pays in: January, April and October

August
Colgate-Palmolive (CL) $79, 2.7%
Colgate-Palmolive owns some of the world's best-known consumer brands -- among them, Colgate toothpaste and toothbrushes and Palmolive, Fab and Ajax cleaning products. And Colgate is a major player around the globe: The New York City-based company generates about 75% of its sales and earnings outside the U.S.; more than half of revenues and profits come from fast-growing emerging markets. It has 50% of the market in "oral care" (mostly toothpaste) in India and an even greater share in Brazil.

Colgate should be able to protect its profit margins by boosting prices enough this year to offset higher costs for raw materials. That, in turn, will allow it to hike its dividend for a 48th consecutive year (Colgate hasn't omitted a dividend since 1895). Colgate's yield isn't extraordinarily high, but the company has boosted its payout at an annualized rate of 13% over the past five years. Look for increases of that magnitude to continue for some time.
Also pays in: February, May and November

September
American Electric Power (AEP) $36, 5.1%
Electric utilities are practically synonymous with dividends, and every income investor should own at least one. Our pick is American Electric Power, a Columbus, Ohio, company that serves 5.2 million customers in 11 states in the Midwest and South. AEP also owns one of the world's biggest power-transmission networks, which collects tolls from wholesalers and other utilities that move electricity long distances.

AEP has everything you want in a top-notch power company. Its return on equity (a measure of profitability) is more than 10%, and the company generates power from a broad mix of fuel sources, including nuclear energy. Its stock boasts an above-average yield, and the payout ratio -- dividends as a percentage of earnings -- is a reasonable 60%, giving the company some flexibility to keep up the payments even if earnings fall a bit. After keeping the dividend rate in place for two years, AEP raised the payout twice in 2010, first by 2.4% and then by 9.5%.
Also pays in: March, June and December

October
Sysco (SYY) $28, 3.7%
From an investment perspective, the nation's leading distributor of food and related supplies to restaurants, schools, hospitals and other institutions behaves more like a utility because it generates steadily rising profits and dividends. Sysco holds an outsize 18% share of a $200 billion market in the U.S. and Canada, and it expects to expand that share by a half-percentage point annually for some time to come.

Earnings have been sluggish lately because the restaurant trade, which accounts for nearly 60% of sales, has been struggling and because costs are surging. But the Houston company runs a tight ship. As it buys smaller competitors and folds their accounts into its system, the increased efficiencies offset any shocks to the bottom line from such things as higher prices for sugar and diesel fuel. Sysco has boosted its dividend 41 straight years. It did so even in 2009, as a long string of consecutive years with earnings gains ended during the recession.
Also pays in: January, April and July

November
Realty Income (O) $35, 5.0%
With this high yielder, you don't have to wait three months between checks -- the Escondido, Cal., real estate investment trust pays out monthly. In fact, Realty Income has paid cash dividends for 487 straight months, and it usually raises the disbursement three or four times a year. Granted, the boosts are usually on the order of hundredths of cents per share, but they solidify Realty Income's reputation among REIT fans as the stock-market equivalent of an ATM. Realty Income's formula is simple: It leases properties long term, with rent escalators, to fast-food franchises, cinemas, auto-repair shops and other mundane businesses. The tenants pay the property taxes and upkeep.

Occasionally, Realty Income does the unexpected. Late in 2010, it bought a Napa Valley winery, which now accounts for a fat 8% of the trust's assets, and agreed to lease it to spirits giant Diageo for 20 years at a rent that gives Realty Income an initial yield on its investment of about 8%.
Also pays in: all other months

December
ConocoPhillips (COP) $72, 3.7%
You can find all sorts of ways to collect cash from energy enterprises (see 3 Higher-Risk, Higher-Reward Ways to Earn Dividends). But the most popular way is still to buy shares of a large, integrated oil company. Our favorite is ConocoPhillips.

Not surprisingly, the energy giants make more money when oil prices are high and less money when oil prices fall. But that doesn't mean their fortunes -- and yours -- are tied to the whims of energy traders. Conoco is selling the last of its once-20% stake in Lukoil, a Russian oil company, and is using the proceeds to drill vigorously in shale fields in the U.S. in search of both natural gas and "liquids," which means oil, as well as propane and other gas that can be liquefied. Conoco, based in Houston, has raised its payout ten straight years, and over the past five its dividend has grown at an annualized rate of 13%. If shale pays off, shareholders will continue to see fat increases in coming years.
Also pays in: March, June and September

The Div Guy owns shares of GE and VZ at the time of this post.

The dividend investor - Bob Shearer

2011-05-10T05:00:00.001-05:00

The dividend investor By DAVID K. RANDALL

It’s a great time to be buying stocks that pay dividends. Nearly a quarter of the companies in the S&P 500 have announced that they’ll raise their dividends this year. That puts investors in an enviable position – they have to sort through a lot of big-paying companies and decide which ones to buy.

Bob Shearer, who manages the $13.3 billion Blackrock Equity Dividend Fund, talked with The Associated Press about his strategy and expectations for dividends. During the 10 years he has run the fund, he has beaten the S&P 500 by an average of 3.7 percentage points a year. Its top holdings include Chevron, ExxonMobil and General Electric.

Which industries have the most appealing dividends?

Shearer says that multinational companies that do business in emerging markets are in the best position to raise dividends. “So we prefer companies in the mining and industrial sectors,” he says. Companies like Caterpillar and Deere have booming businesses in China, Brazil and other countries that are growing, he says.

When will dividends return to their pre-2008 levels?

“We have looked at the dividend cuts during the financial crisis and found that for the most part, they were limited to just a few sectors – primarily the consumer discretionary sector and obviously financials,” Shearer says. “So, for many sectors like energy, materials and industrials, we are seeing some dividends even hitting new highs.”

Your portfolio is relatively light on financial companies. Why?

Shearer is concerned about new regulations that limit banks’ revenue from overdraft charges, late payment penalties and other fees. Without those money makers, “the ultimate earnings power of some of these companies is somewhat unclear,” he says. But he does like some financial companies. JPMorgan Chase is one of his fund’s top holdings because the company is well managed. His fund also owns Wells Fargo, which Shearer thinks will make more money as it completes the conversion of former Wachovia branches into Wells Fargo branches.

Was there anything surprising about the dividend increases this quarter?

“I think one surprise that we are seeing are technology companies initiating dividends for the first time, as Cisco announced last year,” Shearer says. “Technology companies typically like to reinvest back into their business for growth. However as these companies mature, they can now think about returning some cash to shareholders in the form of dividends.”