Dividends Paid

A Reminder Of Why You Stick With Dividend Stocks

2013-05-07T17:30:00.000-05:00

Sorry for the long delay since my last post. I've been very busy and I've had little time to dedicate to original posts of my own. I'm slowly working on analyzing additional banking stocks to consider for my dividend growth portfolio and hope to have that completed soon. In the meantime, here is a Seeking Alpha article from an author I've enjoyed reading.

One of the unfortunate side effects of buying an overvalued stock is that, almost by definition, there will be a period of time in which the total return rate that the investor enjoys will likely trail the growth rate of the firm (provided prices are rational and do not transition from "overvalued" to "more overvalued"). This fact can make it worthwhile to pose the following question: If I currently own a stock that is trading above a price that I would be willing to pay to purchase additional shares, what is the point of continuing to hold it? READ MORE

Disclosure: I have no position in the stocks mentioned in this article

TAGS: [CVX] [JNJ] [PG] [XOM]

Banking Stocks Continue to Improve

2013-04-12T17:00:00.000-05:00

Back in late 2011 I decided it was time to invest in banks again. The affects of the mortgage crisis had finally took a turn for the better and banks' financials were improving. TARP funds were being paid back, lending was opening back up, and most importantly dividend payments were increasing again. I wrote about four bank stocks with future dividend potential, and due to the research from that article I decided to take a chance on PNC Financial Services Group, Inc. (PNC).

Since then, PNC hasn't rewarded me much in price appreciation, but it has rewarded me in dividend increases. Last year PNC gave investors a 14% raise. This past week it increased its dividend payment again by 10%. The new payout gives PNC a yield around 2.7%.

This of course is another positive sign that PNC's financials are strong. Current government regulations prevent banks from raising their dividends unless they are able to pass certain stress tests that were designed to see how well a bank would survive if the economy went through another deep recession.

Within the banking industry I believe PNC is a strong dividend growth prospect and represents a good value at current prices. I'd like to diversify further within the industry and invest in another bank that is showing similar financial strength as PNC. I intend to do some screens in the near future and put together a more detailed analysis of other banking investment options we have. I believe the dividend increases will continue within the industry along with stock price appreciation. The financial sector will likely be the biggest benefactor if the economy continues to improve.

Disclosure: I am long PNC.

Related Articles:
http://seekingalpha.com/article/300872-4-bank-stocks-with-future-dividend-potential
http://www.dividendspaid.com/2012/04/ka-ching-pnc-just-gave-me-14-raise.html

Phillips 66 Upcoming MLP: How It Will Affect PSX

2013-04-03T17:00:00.000-05:00

Phillips 66 (PSX) has been on a tear since splitting from ConocoPhillips (COP) last year. Aside from its run-up in price, it has also raised its dividend for three straight quarters as well as announced plans to spin-off certain assets into a Master Limited Partnership (MLP).

All of this of course was great news, but I wanted to know about the details of the MLP spin-off. What assets were going to be included in the new company? Will existing shareholders receive shares of this new company, or will it benefit through holding stock in PSX? Well PSX recently shed some light on these questions.

My main concern was whether existing shareholders would receive shares of the MLP spin-off, Phillips 66 Partners LP (PSXP). I hold PSX in my Roth IRA which are not conducive for holding MLPs, so if I would receive shares of the new MLP I would likely have to sell it immediately. Luckily that is not the case.

Benefits
The parent company will retain the majority of shares in the newly formed PSXP. For us dividend growth investors that is good news and I believe will benefit us in several ways:

PSX will receive PSXP's distributions, which will be tax-advantaged due to its MLP structure, and will be able to pass a large percentage of those distributions on to existing shareholders. This should help PSX continue to increase its dividend.
Although existing PSX shareholders will benefit from these additional distributions, we get to avoid the tax headaches of owning a MLP.
PSX does not have to rely solely on itself to generate growth to fund dividend increases. Any growth achieved by PSXP should increase the distributions of the MLP which will directly affect PSX and its shareholders.

Assets
The assets that will fall under the Phillips 66 Partners entity include:

Clifton Ridge crude oil pipeline
Terminals and storage in Louisiana, Illinois, and Texas
Sweeny to Pasadena refined products pipeline
Hartford Connector refined products pipeline
3 NGL fractionators: 130,000 bpd capacity

The initial public offering is expected in the second half of this year and is estimated to raise $300 million. As demonstrated in the COP spin-off and subsequent dividend increases, PSX management has proven its ability to create additional shareholder value. I believe the PSXP spin-off will be another great move.

Disclosure: I am long COP and PSX.

TAGS: [COP] [PSX] [PSXP]

2 Big Dividends to Avoid (and 1 to Embrace)

2013-03-27T17:00:00.000-05:00

The following post comes from the Motley Fool. It serves as a nice reminder that bigger is not always better when looking at dividend yield.

With yields on ultra-safe debt stuck in the gutter, many investors are reaching for higher income through dividend-paying stocks. That's a fine strategy -- as long as you're comfortable with the extra risks involved.

To minimize those risks, you won't want to reach too high. Dividend yields that are more than about 4%, for example, are usually worth extra research. You'll also want to screen for dividends that are backed up by strong earnings and sales growth. Ideally, those dividends will have a good chance of rising -- or at least staying put. READ MORE

My Annual Roth IRA Rant

2013-03-13T17:00:00.000-05:00

It's tax time. Time for everyone to get a fresh reminder that Uncle Sam is a greedy old fart who takes away a lot of your money. Oh, and next year most of you will be paying even more. Are you ok with that? I should hope not, but don't fret there is a way to fight back. Invest your money in a Roth IRA.

Those of you who have followed me know I'm a huge proponent of Roth IRAs and dividend stocks. It gives me great pleasure to receive dividend payments in my Roth IRA account, reinvest those dividends to utilize the compounding affect, and not have to worry about paying a cent to the IRS.

If you are already taking advantage of a Roth IRA, nice job. Pat yourself on the back and drink a cold beer to celebrate sticking it to the "man". For those of you who are still on the fence or are dragging your feet, let's address why you're making a huge mistake.

Taxes are probably going to go up. Even if you think your tax rate will go down when you retire, it surely isn't going to zero. And that's what your rate will be for any money withdrawn from your Roth IRA.
Time = Money. Dividend growth investing is a way to "get rich slow". For those of you who have a hard time waiting, investing money into a Roth will force you to slow down since you cannot withdraw from it until your are 60. The younger you are, the more time you get to enjoy that compounding affect that will make you wealthier. But don't worry, if you absolutely need to withdraw money from your Roth you can...
You can withdraw your original investment amount without penalty if necessary. Let's say I've invested $10,000 in my Roth so far. It has grown to $15,000 but I have an emergency and need some cash quick. I can withdraw up to my original contribution ($10,000) from my Roth without a tax penalty.
Those poor souls who "make to much" to invest in a Roth. Don't worry, the backdoor is still open for 2013.
Roth IRAs have no required minimum distribution (RMD) during the owner’s lifetime. These are only required after the Roth IRA owner dies and only for non-spouse beneficiaries. You withdraw as much or little as you want.

Hopefully that is enough to convince you. If not, then allow me to brag a little as I have found that jealousy is a great motivator. I've been maxing out my Roth for several years now. The amount has grown to nearly $40,000. In 2012 I made about $1,500 in tax free dividend income. Because I reinvest my dividends and invest in companies that raise their dividend each year that amount is only going up. I have 25 years of dividend reinvesting and compounding until I retire. Assuming a very conservative annual dividend and stock growth rate of 6%, my Roth IRA will be worth around $418,000 and paying almost $14,000 in dividend income when I retire. A less conservative 8% rate of return will yield a portfolio worth around $680,000 and pay $22,000 in dividend income. A plausible 10% rate will make me a millionaire with $1,105,000 portfolio value and $35,600 in dividend income. All of which will be tax free.

So hopefully I got your attention. If this has convinced you, I recommend not wasting anymore time. Remember that you have until April 15 to contribute 2012 dollars. And there are income limits and contribution limits that you should be familiar with before contributing. These can be found here: http://www.irs.gov/publications/p590/ch02.html

For those of you just getting started in opening a Roth IRA account, I recommend Sharebuilder.com

In this world nothing can be said to be certain, except death and taxes. At least there is something you can do about that latter.

Related Posts:

Roth IRA + Dividend Stocks = Awesome!

MLPs and Retirement Accounts

My Favorite Thing About Dividend Stocks

2013-02-25T17:30:00.000-06:00

Other than the wonderful compounding affect that will make me a wealthier man when I retire, the thing I enjoy most about dividend stocks is that they allow me to be lazy. Granted I do put in a lot of time evaluating a stock before I invest, but once I buy a quality dividend growth company I can relax while that company's employees work hard to put more and more cash in my pocket.

I was on a nice, relaxing vacation last week. I checked in on the market a couple of times out of curiosity and even checked my work email once, but otherwise my mind was elsewhere. I didn't want to think about work and ruin a relaxing moment. I knew I didn't have to worry about my investments because my money was invested in companies who are working hard on my behalf. And wouldn't you know it, when I returned home I discovered that, KA-CHING!, I got two more fat raises.

Wal-Mart (WMT) increased its dividend by a whopping 17.5%. This is one of their largest increases in their impressive dividend history that dates back nearly 40 years. “We are pleased to increase Walmart’s dividend by $0.29 per share, one of the largest increases in our history,” said Mike Duke, Walmart president and chief executive officer. “Our global businesses consistently generate strong free cash flow, providing ample opportunities to fund growth across all our markets and to deliver strong returns to shareholders. In fact, during fiscal year 2013, we returned $13 billion to shareholders in the form of dividends and share repurchases."

WMT's quarterly payout increased from $0.40 to the new $0.47 giving an annual dividend of $1.88. WMT is currently yielding around 2.70%.

Kimberly-Clark (KMB) also provided a nice raise to its investors, increasing its dividend by 9.5%. This marks 41st consecutive year KMB has increased its dividend. "This dividend increase reflects not only the strength of our business but also our commitment to allocate capital in shareholder-friendly ways," said Thomas J. Falk, chairman and chief executive officer. "We continue to provide a top-tier dividend payout among our peer consumer packaged goods companies, and this remains an important component of our plan to deliver strong returns to shareholders."

KMB's quarterly payout increased from $0.74 to $0.81 giving an annual dividend of $3.24. KMB is currently yielding around 3.5%.

In the past month my portfolio has already had five dividend increases, ranging from 9.5% to 25% with an average of 16.4%. That's an impressive start to 2013 and hopefully a sign for my other holdings.

Although WMT and KMB are two core holdings in my portfolio, I don't view them as great buys at current valuations. For those looking for a solid buy, I still consider Intel (INTC) as one of the best values out there and it remains my largest holding. I am also looking to add to my position in Amgen (AMGN) based on my recent analysis.

Disclosure: I am long WMT, KMB, INTC and AMGN

Related Posts:
Ka-Ching! Hasbro just gave me an 11% raise
Ka-Ching! Phillips 66 just gave me (another) 25% raise
Ka-Ching! Realty Income just gave me a 19% raise

TAGS: [WMT] [KMB] [INTC] [AMGN]

Ka-Ching! Hasbro just gave me an 11% raise

2013-02-11T17:00:00.000-06:00

Yep, another one. Three straight weeks of double digit dividend increases. Getting tired of these? I know I'm not!

Hasbro (HAS) announced last week that it would be increasing its quarterly dividend by 11% from $.36 to $.40. The size of this increase is likely a surprise to many since the company reported a decrease in full-year revenue and earnings for 2012 vs 2011. Despite the drop management still had no problems with making such a large increase which I believe should be viewed as a positive for 2013 and beyond.

When I first analyzed Hasbro last June and decided to buy I was able to get in just before the stock price popped. Many investors would have been thrilled at the immediate price increase, but honestly I was hoping for the price to come back down so I could buy more on the cheap. My original buy price was under $33 which now gives me a yield on cost of almost 5.0% for my original investment. My only other purchases since then has been the automatic dividend reinvestments.

When I analyzed Hasbro I noted that there didn't need to be earnings growth to justify an increase in their dividend due to their free cash flow payout and debt to total capital numbers. The new fiscal year is an important one for Hasbro though as I believe they need to establish growth once again to justify another double digit dividend increase. Future increases will likely be more tied to the overall earnings growth. The company has implemented a cost-savings plan that will deliver "$100 million in annual savings by 2015” according to their CEO Brian Goldner. The success of this cost-savings plan will likely have a direct affect on the size of future dividend increases as well.

With the recent dividend increase Hasbro is again yielding 4% at current prices. Investors looking for income in that range should feel safe investing at current valuation. Dividend growth investors should feel comfortable getting in a current levels as well, but its likely that future increases will be more tied to earnings growth than increases in the payout ratio.

Disclosure: I am long HAS

Related Articles:

Ka-Ching! Realty Income just gave me a 19% raise
Ka-ching! Phillips 66 Just Gave Me a 25% Raise
Ka-ching! AFLAC Just Gave Me a 6% Raise
Ka-ching! Microsoft Just Gave Me a 25% Raise
Ka-Ching! Intel Just Gave Me A 7% Raise

TAGS: [HAS]

2013 Dividend Aristocrats

2013-02-06T17:00:00.000-06:00

The Dividend Aristocrats list is an excellent starting point for dividend growth investors to begin their research. In order to make this list a company needs to be in the S&P 500 (top 500 publicly listed companies by market capitalization) AND it needs to have increased its dividend payout for at least 25 consecutive years. You won't find the likes of Apple (AAPL), Google (GOOG), or General Electric (GE) on this list as they have yet to prove themselves worthy. Actually, GE was on the list until it had to cut its dividend in 2009.

These are the elite dividend payers, the cream of the crop. Investors who have been fortunate enough to hold these companies over the long-term are significantly wealthier and will likely be enjoying future dividend increases yet again this year.

There are three new inductees to this prestigious club in 2013 thanks to their 25th consecutive dividend increase.

Chevron (CVX ) - A global integrated oil company with interests in exploration, production, refining and marketing, and petrochemicals. Current yield: 3.1%

Cardinal Health (CAH)- A leading wholesale distributors of pharmaceuticals, medical/surgical supplies and related products to a broad range of health care customers. Current yield: 2.5%

Pentair (PNR) - A diversified industrial manufacturing company specializing in water and fluid controls. Current yield: 1.8%

Here is the entire list for 2013. I would encourage dividend growth investors, no matter how much or little experience you have, to use this list as a starting point for your research. These companies have already proven they are dedicated to rewarding their shareholders with an increasing dividend payout. Their dividend culture is established and something they are likely proud of, so it would take a significant economic event for them to change their ways. Just keep in mind that just because a company is listed here doesn't mean that its a good buy at current prices.

2013 Dividend Aristocrats
TICKER	COMPANY	SECTOR
ABBV	AbbVie Inc.	Health Care
ABT	Abbott Laboratories	Health Care
ADM	Archer-Daniels-Midland	Consumer Staples
ADP	Automatic Data Proc	Information Technology
AFL	AFLAC Inc	Financials
APD	Air Products & Chemicals	Materials
BCR	Bard (C.R.)	Health Care
BDX	Becton, Dickinson	Health Care
BEN	Franklin Resources	Financials
BF.B	Brown-Forman'B'	Consumer Staples
BMS	Bemis Co	Materials
CAH	Cardinal Health Inc	Health Care
CB	Chubb Corp	Financials
CINF	Cincinnati Financial	Financials
CL	Colgate-Palmolive	Consumer Staples
CLX	Clorox Co	Consumer Staples
CTAS	Cintas Corp	Industrials
CVX	Chevron Corp	Energy
DOV	Dover Corp	Industrials
ECL	Ecolab Inc	Materials
ED	Consolidated Edison	Utilities
EMR	Emerson Electric	Industrials
FDO	Family Dollar Stores	Consumer Discretionary
GPC	Genuine Parts	Consumer Discretionary
GWW	Grainger (W.W.)	Industrials
HCP	HCP Inc	Financials
HRL	Hormel Foods	Consumer Staples
ITW	Illinois Tool Works	Industrials
JNJ	Johnson & Johnson	Health Care
KMB	Kimberly-Clark	Consumer Staples
KO	Coca-Cola Co	Consumer Staples
LEG	Leggett & Platt	Consumer Discretionary
LOW	Lowe's Cos	Consumer Discretionary
MCD	McDonald's Corp	Consumer Discretionary
MDT	Medtronic, Inc	Health Care
MHP	McGraw-Hill Companies	Consumer Discretionary
MKC	McCormick & Co	Consumer Staples
MMM	3M Co	Industrials
NUE	Nucor Corp	Materials
PEP	PepsiCo Inc	Consumer Staples
PG	Procter & Gamble	Consumer Staples
PNR	Pentair Ltd.	Industrials
PPG	PPG Indus	Materials
SHW	Sherwin-Williams	Materials
SIAL	Sigma-Aldrich	Materials
SWK	Stanley Black & Decker	Consumer Discretionary
SYY	Sysco Corp	Consumer Staples
T	AT&T	Telecommunication Services
TGT	Target Corp	Consumer Discretionary
TROW	T.Rowe Price Group	Financials
VFC	VF Corp	Consumer Discretionary
WAG	Walgreen Co	Consumer Staples
WMT	Wal-Mart Stores	Consumer Staples
XOM	Exxon Mobil	Energy

Disclosure: I am long ABBV, ABT, AFL, KMB, MCD, and WMT

Ka-Ching! Phillips 66 just gave me (another) 25% raise

2013-01-31T17:00:00.000-06:00

Another week and another big raise, but this came from an unexpected stock, Phillips 66 (PSX). Why was it unexpected? Well because they already gave me a 25% raise three months ago!

PSX has been on an impressive run since it split away from its parent company ConocoPhillips (COP). Not only has it raised its dividend three straight quarters and over 50% since it began trading earlier this year, its stock price has also increased by more than 75%. Those would be impressive numbers for a stock over several years, let alone several months. So how has PSX managed to do this in such a short time?

PSX has three primary business segments.

Oil Refineries - PSX has processing plants where crude oil is processed and refined into more useful products such as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas.
Midstream - Gathering, transporting, and storing oil and natural gas. The company’s principal midstream asset is its 50% stake in DCP Midstream Partners LP (DPM).
Chemicals - Their chemical company, CPChem, is a producer of oleﬁns and polyoleﬁns, and a leading supplier of aromatics and styrenics (whatever those are). CPChem, is a 50-50 joint venture between Chevron (CVX) and Phillips 66

The majority of their business falls in the refinery section, and this is where they are making a lot of money. Refinery companies have typically in the past made a small percentage on the products they produce from the cost of the oil they bring in. In the current environment though, that percentage (profit margin) has increased. They are bringing in cheaper oil due to high domestic production growth, which is allowing them to make more on the refined products they sell. This is a very basic explanation, if you wish to learn more I suggest you research "brent crude vs wti".

With these big gains from their refinery business PSX's management has been able to comfortably increase its dividend and fund an additional $1 billion into its stock repurchase program. How long will the cost difference that benefits the refinery exist? Hard to say, but I don't think management would risk increasing the dividend if it could not be easily covered in the future under slimmer profit margins.

PSX has also announced that it will spin-off some of its midstream business into a MLP. CEO Greg Garland stated “We expect to use the master limited partnership as an efficient vehicle to fund growth investments in the transportation and midstream sectors. We believe the proposed MLP will enable us to enhance value for our shareholders and increase the transparency of our business.” Details are still scarce on this spin-off, in particular what assets will be included, but this could be another shrewd and profitable move by management.

PSX began trading last year at $34 paying a quarterly dividend of $.20 with an effective annual yield of 2.3%. After the back-to-back dividend raises ($.20 -> $.25 -> $.3125) my yield on cost has already increased to 3.7%. I certainly don't expect the pace and size of these increases to continue, and I imagine management will soon move to an annual dividend increase policy. But I'm not going to complain if they have a few more of these surprises up their sleeves.

Disclosure: I am long PSX and COP

Related Articles:

TAGS: [PSX] [COP] [CVX] [DPM]

Ka-Ching! Realty Income just gave me a 19% raise

2013-01-24T17:00:00.000-06:00

Realty Income Corp. (O) announced last week that it will be increasing its monthly dividend from $0.15175 per share to $0.1809167 (yeah, that's a lot of numbers beyond the decimal). This is a whopping increase of 19.2% and gives Realty an effective annual yield of 5%, up from 4.2%.

So how did a company with a 5 year average dividend growth rate of under 3% manage to make such a large increase? Realty's recent successful bid to acquire American Realty Capital Trust (ARCT) allowed them to make such a move. The buyout was announced this past summer, but shareholders of ARCT were not happy with the initial offer. It took some sweetening on Realty's end to get the job done, including a one-time cash payment of $0.35 / share to ARCT investors, but the overall deal looks like a good one for Realty shareholders.

Typically when one company buys out another it takes a little time for the benefit to be seen in the combined company's bottom line. This is not the case with Realty and ARCT. Since Realty and ARCT are REITs, we are not as concerned with the company's net income as we are with Funds From Operations (FFO). FFO is a REIT's version of cash flow and the ARCT deal immediately increases Realty's FFO which allows for the large increase in the dividend.

Another reason I like this deal is that it was funded with the issuance of Realty stock (other than the additional $0.35 cash payment) rather than debt. ARCT shareholders received 0.2874 shares of Realty Income stock for each share of ARCT common stock owned. So even though Realty increased the number of shares outstanding by 45.6 million shares, it was still able to increase its monthly dividend paid to each of those shares by 19.2%. That is an incredible deal for Realty and a no-brainer for management.

The additional FFO isn't the only thing that ARCT brings to Realty. ARCT owns 515 commercial properties which are net-leased primarily to investment-grade (financially sound) tenants. Some of ARCT's biggest tenants include FedEx (FDX), Walgreen (WAG), CVS (CVS), the Government Services Administration, Dollar General (DG), Express Scripts (ESRX) and PNC Bank (PNC).

Including these new properties, Realty Income will own a total of 3,528 properties leased to 202 tenants doing business in 48 industries. Approximately 34% of the anticipated lease revenue will be generated by investment grade rated tenants, vs 19% prior to the ARCT acquisition. These new tenants also increase the diversification of Realty's tenants among more companies and industries.

This past summer I had sold part of my position in Realty to initiate a position in Hasbro (HAS). The reason I had done this was because, at the time, Realty appeared to be overvalued and their dividend growth rate was violating my Rule #4. Needless to say the recent acquisition and dividend increase has reaffirmed by belief in Realty and I have no intention of selling any more of my position in the near future. The stock is still valued higher than most of its peers based on several metrics, but with deals like the ARCT buyout management has proven that it is a top-tier REIT and should be valued as such.

Disclosure: I am long O

Related Articles:
Sold Some O to buy HAS
Boring Terms: REIT

TAGS: [O] [ARCT] [FDX] [WAG] [CVS] [DG] [ESRX] [PNC] [HAS]

The Best Investment Advice You'll Never Take

2013-01-22T17:00:00.000-06:00

Some of you may have heard of or even subscribe to the daily emails from the folks at DailyWealth.com. Although some of their stuff can be a little too "doom and gloom" or politically focused for my taste, they do have some good insights into the market. They are also big proponents of dividend reinvestment and have written about it on many occasions. I found a recent article rather interesting, with the headline "The Best Investment Advice You'll Never Take". Well, hopefully you're not one of those.

I guarantee you won't take my advice...

Over the past two weeks, I've shown you how to use the single greatest investment secret ever discovered. I've shown you how to buy capital-efficient companies and compound your wealth at double-digit rates – safely – for decades.

I've described exactly how to measure capital efficiency (it's easy) and explained the pitfalls to avoid (even smart investors fall into these traps).

Using just the information contained in these two essays, a little bit of common sense, and a little bit of discipline, you can become a world-class investor using this strategy. And yet... very, very few people will pursue this approach. READ MORE

A Potential Dividend Growth Future Star

2013-01-09T17:00:00.000-06:00

As a dividend growth investor, one of the primary stats I look at when evaluating a stock is the number of annual dividend increases. The longer a stock has been increasing its dividend payment, the more that becomes part of the corporate identity. Typically, it takes a major event within the company (or industry) to prevent the board of directors from continuing to raise its dividend after a long history has been established. This adds a layer of safety that helps me sleep better at night. I am quite certain that Kimberly-Clark (KMB) - 38 years of increases, Wal-Mart (WMT) - 37 years of increases, and AFLAC (AFL) - 30 years of increases, will provide me with a raise once again this year. Companies like these should be at the core of any dividend growth portfolio. READ MORE

TAGS: [AMGN] [AFL] [INTC] [MSFT] [KMB] [WMT]

No New Taxes! ... For Most of Us

2013-01-03T17:00:00.000-06:00

If you haven't yet sifted through all the noise and political B.S. about the recently agreed upon "Fiscal Cliff" deal you may have missed some fantastic news for dividends. The taxes on dividends did not increase as much as expected, and for many of us not at all!

The new deal permanently sets the top tax rate for dividend (and capital gains) at 20% for couples earning more than $450,000 ($400,000 for single filers). For anyone earning below this, dividends and capital gains will continue to be taxed at the current rates. So many of us will continue to pay 15% on dividend income. This is way better than I had expected.

This means that dividend income will continue to be one of the lowest taxed sources of income. Investors who previously dumped dividend paying stocks before the end of the year will likely be jumping back in. This may cause a temporary bubble in the prices of some dividend stocks, but I fully expect the upcoming debt ceiling bickering to create another buying opportunity.

I couldn't be happier with this decision. Of course, this development still has no bearing on my Roth IRA. I continue to get paid tax free income in my Roth and reinvesting those tax free payments into more shares, creating the beautiful compounding affect that is going to allow me to retire in style. Tax season is coming up, so when you see that large sum of cash going to Uncle Sam remember that there is a way around it.

Speaking of my Roth, I just made a recent buy in my account. Its an early dividend payer that I feel could become a dividend growth star over time. I'm putting together an article on it now and plan to publish it early next week.

Related Articles: Roth IRA + Dividend Stocks = Awesome!

3 Unloved Dividend Stocks to Watch in 2013

2012-12-21T17:00:00.000-06:00

I'm in full holiday mode and have been lazy with the articles this month. I've got a few ideas in the works, but currently lack the motivation to complete anything. I've also been in a holding pattern with any purchases until this stupid "fiscal cliff" nonsense gets resolved. The one good thing that may come from this is that it could create some fantastic buying opportunities if there is panicked selling. If it does, I'll be waiting to pounce on some stock sales. Speaking of sales, here's an article from MarketWatch.com that outlines two of my favorite holdings and one potential future holding.

Three financially sound companies — but where’s the crowd?

McDonald’s Corp., Intel Corp and Microsoft Corp. (US:MSFT) offer a steady dividend and have the cash to increase shareholder payouts, but investors lately have given these blue-chip stocks the cold shoulder.

This year through Dec. 12, Intel (US:INTC) shares were down 15%, ranking it as the No. 2 percentage decliner on the Dow Jones Industrial Average (US:DJIA) . McDonald’s (US:MCD) had dropped 11%, making it the No. 3 Dow decliner. Only the stock of troubled Hewlett-Packard (US:HPQ) has fared worse. READ MORE

Disclosure: I am long INTC and MSFT

TAGS: [INTC] [MSFT] [MCD]

Searching For A Dividend Growth Utility Stock

2012-12-11T17:00:00.000-06:00

I have been a dividend growth investor for over eight years now. Over those years, I have slowly allocated a diverse portfolio that is spread out among the major sectors, except for one. I have yet to invest in any utility stocks. Now this may come as a shock to other dividend growth investors as utility stocks have been a cornerstone for many dividend portfolios.

Utility stocks have a long history of paying dividends to their shareholders. This is because what they provide (electricity, water, gas) are always in need, despite what the economy is doing. These stocks tend to have stable, predictable, and secure cash flows. And their stocks are typically less volatile vs. the overall market (low beta). READ MORE

TAGS: [D] [ED] [NEE] [PPL] [SO] [UNS] [XEL]

3 Reasons Not To Flee Dividend Stocks

2012-11-27T17:00:00.000-06:00

I have been asked by many people lately if I am worried about a sell-off in dividend stocks because of the impending Bush Tax Cut expiration. The potential dividend tax increase certainly sucks, but I'm not concerned about a selloff. In fact, if you look at previous years when Congress increased taxes on dividends, dividend paying companies typically outperformed the market as a whole. I had planned to write an article on this, but I came across one on SeekingAlplha that already explained it well.

The election night parties were barely over last week before investors started selling stocks. While renewed uncertainty over Europe did not help, the source of the volatility was closer to home: The fiscal cliff. Washington now has seven weeks to reach a compromise — a failure to do so will mean the largest fiscal drag in the post-World War II period and a possible recession.

Many investors are particularly worried that dividend stocks are vulnerable given the potential for a near tripling of the tax on dividends. READ MORE

Trading vs Investing

2012-11-13T17:00:00.000-06:00

I don't like Jim Cramer. I think he's a terrible person to listen to if your looking for financial advice. He's a great entertainer (which is why he has the job of hosting a television show) but he is not someone you should listen to if you're trying to build wealth. It's likely that the only person Jim Cramer will make wealthy is your stock broker because of all the buy and sell transactions he generates from his Mad Money show.

Of course, I'm not Jim Cramer's target demographic. He's not going to lose sleep at night if I'm not watching. And if you are a dividend growth investor, then he should not appeal to you either. The type of show like Mad Money will appeal to stock market traders. There are major differences between investors and traders.

Traders:
A trader is someone who buys a stock because they are speculating that it will go up. They are typically looking for a quick gain in the short-term. One of the problems, in my mind, with current Wall Street is that the market is driven more by Traders than Investors. It's easier to make a quick buck "trading", of course its much easier to lose money this way too. I equate Trading to gambling. Its exciting, you can turn a quick profit if you're lucky, but in the end the majority of people will lose money.

Investing:
Investors buy a stock for the long term. They're not that concerned with daily fluctuations of their stock as long as they believe in the company and its long term potential. Investors look for quality companies that are selling at a cheap price. Investing is boring and can take time to see the wealth that it can create. But investors will generally have much more success in the market over their lifetime than traders.

When I buy a stock, I intend on holding that stock forever. Of course there are situations that would make me sell. But as long as the company continues to pay and grow its dividend, I know the price of the stock will catch up. So when the price of a quality dividend growth stock goes down, I'm excited because I know I'm getting a deal for the long term.

Here are several stocks that I see as deals right now. You may not make a quick buck over the next few months in these, but you're likely to do well if you hold them for the long-term and reinvest your dividends along the way.

Stock	Yield	5 Yr Div Growth Rate	Current P/E vs Avg 5 Yr
Abbott Laboratories (ABT)	3.1%	10%	15.8 < 18.3
AFLAC Inc. (AFL)	2.8%	12%	8 < 14.5
ConocoPhillips (COP)	4.7%	10%	6.8 < 8.1
Intel Corporation (INTC)	4.3%	14%	9 < 17.1
McDonald's Corp. (MCD)	3.6%	35%	16 < 19.6

Disclosure: I am long ABT, AFL, COP, and INTC.

TAGS: [ABT] [AFL] [COP] [INTC] [MCD]

MLPs and Retirement Accounts

2012-11-01T17:00:00.000-05:00

If you're not familiar with Master Limited Partnerships (MLPs) I suggest reading my Boring Terms post for an overview. In that article I mentioned the pros and cons of MLPs and dividend investing. In short, MLPs are a great investment vehicle for generating dividend income, but because of their tax implications they aren't a great option for dividend reinvestment or retirement accounts. In fact, many brokers won't allow MLPs in retirement accounts. And that's a shame since the way MLPs are structured would make them a great choice for retirement accounts.

Well some of the larger MLP companies have figured out a way for us to invest in a MLP within a retirement account without the tax headaches. Kinder Morgan Energy Partners (KMP) and Enbridge Energy Partners (EEP) were the first two companies to solve this problem. They created "Companion Corporations" which are basically a corporation that owns stock of a MLP. KMP's companion corporation is Kinder Morgan Management (KMR) and EEP's is Enbridge Energy Management (EEQ).

So essentially KMR owns stock in KMP. That is their business, simply to own stock in KMP. Every time KMP pays a distribution (dividend), KMR receives that payment. Now, instead of KMR passing that dividend on to its shareholders, it instead gives its shareholders additional shares of its stock. So it pays its shareholders with more shares. The easiest way to think of this is that KMR automatically reinvests your dividend into more shares, just like we want. An added bonus is that receiving these shares is not seen as a taxable event. Where as with a regular dividend payment you still owe taxes, you are not taxed on these additional shares until you sell the shares (unless of course its a Roth IRA). EEQ operates the same way. So if you want to see what kind of yield you would be getting when investing in these companion companies you should look at the "parent", KMP or EEP.

I personally took advantage of KMR in my Roth IRA several years ago. Since my original investment, my share total has increased nearly 30% through additional stock I have received. And yes, KMP has been increasing its dividend each year which of course has translated into more shares paid out by KMR. So the compounding affect is working its magic.

Since investing in KMR, I've been on the lookout for another "companion corporation" to invest in. Since EEQ is in the same business as KMR (energy distribution via pipeline), I preferred to be only invested in one or the other. Well just recently another popular MLP, Linn Energy (LINE), finally created a third companion corporation, Linn Co (LNCO).

LINE is different from KMP and EEP as it is in the business of energy production, specifically oil and natural gas. And LNCO will be different from KMR and EEQ as it will actually pay a cash dividend that equals LINE's dividend (less corporate taxes LNCO has to pay so its dividend will be slightly less than LINE). This dividend will be considered a normal dividend in the IRS's eyes so LNCO can be added to retirement accounts without additional tax headaches and paperwork.

So for investors looking for MLP dividend income within your retirement account, you may want to consider LNCO. And for the younger investors who would like to benefit from the favorable dividend policies of MLPs to reinvest and grow in your retirement account, you may want to consider KMR, EEQ and LNCO. I have made a purchase of LNCO in my Roth IRA recently. I believe these companion corporations are fantastic way to take advantage of MLPs in a retirement account and look forward to watching my shares grow.

Disclosure: I am long KMR and LNCO

Related Posts:
Boring Terms - MLP

TAGS: [KMP] [KMR] [EEP] [EEQ] [LINE] [LNCO]

Ka-Ching! AFLAC just gave me a 6% raise

2012-10-29T17:00:00.000-05:00

Another week, another raise... a guy can really get used to this. AFLAC (AFL), the supplemental health and life insurance company, increased its quarterly dividend 6.1% to $0.35 per share. The dividend is payable on December 3, 2012, to shareholders of record at the close of business on November 14, 2012. The yield based on the new payout is 2.8%

Now I'm not one to look a gift horse in the mouth, but I have to admit I'm a little disappointed in the size of this increase. Based on the very low free cash flow payout ratio of 6% and latest quarter's debt to total capital of only 21%, AFL could have easily increased the dividend by double digit percentages.

The company did revise future earnings guidance downwards slightly, but it wasn't by much and their latest earnings was better than expected. In fact, the stock price is still sitting near a 52 week high, so that news wasn't a big deal in the shareholders minds. So why not a bigger increase? My best guess is that management has other intentions for the all that cash. Despite the stock price being near a 52 week high, it still appears severely undervalued so management may be planning a new stock buyback plan. Another possibility is that they are preparing for future acquisitions. Since a large amount of their revenue is generated in Japan, it would make sense for the company to expand its domestic business through acquisition of another company.

Of course, these are just guesses on my part. I'm sure management has a plan and it's in the best interest of the shareholders. It's hard for me to complain about a company that has more than doubled its dividend since 2006. I still think AFL is a great buy at current prices, and unless they give me a reason to sell they will be in my portfolio for a very long time.

Here is a list of other notable companies making their shareholders wealthier:

Company	Industry	Dividend Increase	New Yield
Six Flags Entertainment Corporation (SIX)	General Entertainment	50.0%	6.3%
Access National Corporation (ANCX)	Regional - Mid-Atlantic Banks	33.0%	2.5%
V.F. Corporation (VFC)	Textile - Apparel Clothing	21.0%	2.2%
Peoples Bancorp Inc. (PEBO)	Regional - Midwest Banks	20.0%	2.2%
National Penn Bancshares, Inc. (NPBC)	Regional - Northeast Banks	11.1%	4.7%
Aflac Incorporated (AFL)	Accident & Health Insurance	6.1%	2.8%
Tompkins Financial Corporation (TMP)	Regional - Northeast Banks	5.6%	3.7%
Simon Property Group, Inc. (SPG)	REIT - Retail	4.8%	2.9%
Paychex, Inc. (PAYX)	Staffing & Outsourcing Services	3.1%	4.0%
Met-Pro Corporation (MPR)	Diversified Machinery	2.1%	3.3%
Williams Partners L.P. (WPZ)	MLP - Specialty Chemicals	2.0%	6.0%
Bar Harbor Bankshares (BHB)	Regional - Northeast Banks	1.7%	3.4%
Middlesex Water Company (MSEX)	Water Utilities	1.3%	4.0%

Disclosure: I am long AFL

Another Technology Dividend Stalwart in the Making?

Ka-Ching! Intel Just Gave Me A 7% Raise

TAGS: [SIX] [PEBO] [SPG] [NPBC] [TMP] [AFL] [MSEX] [ANCX] [MPR] [BHB] [PAYX] [WPZ] [VFC]

Pay Yourself to Wealth

2012-10-24T17:00:00.000-05:00

It amazes me how many people think they "can't afford" to fund a stock portfolio. Even when I tell people I started with just $50 / month they act like that is too much. Of course these are the same people who don't think twice about spending that on dinner and drinks several times a month. Or they are the type who rush out to buy a newer car once they have their old one paid off.

I understand that it's fun to have new things. The excitement of owning something new is a powerful force and the American economy relies on it. But this force is also what holds a lot of people back from building wealth.

Over the years I've slowly increased my monthly investment contribution. When I would get a raise at work, I didn't think about what more I could afford. I thought about how much more I could invest. When I paid off my car, I continued to make the same car payments "to myself" into my brokerage account. I was already used to that money being spent each month so why not put it to work for me.

Of course I understand that I don't think like most people do. I'm the guy who still has a flip phone for crying out load (sidenote: my iPhone 5 will arrive mid-November). But these decisions have made a big change to my net worth over the years and, I have no doubt, will make me a wealthier person when I retire.

For those of you who would like to follow this strategy but feel you are in too much debt I'd like to recommend a site I've come across recently called ReadyForZero. This is a free service that helps consolidate your debt in one site. It then helps you set up a plan to get out of debt. It's a cool sight, and again, its free.

Well that's enough "preaching" for today. I promise to get back to talking stocks on my next post.

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Roth IRA + Dividend Stock = Awesome!
Roth IRA For Kids
Roth IRA Backdoor

Ka-Ching! Phillips 66 just gave me a 25% raise

2012-10-08T17:30:00.000-05:00

Phillips 66 (PSX) announced last week that it was increasing its quarterly dividend by 25% to $0.25 / share. My position in PSX came from the split of ConocoPhillips (COP) this past April. PSX now focuses on energy & chemical refining and transportation while COP focuses on the exploration side.

To be honest, I wasn't sure how I felt about PSX and considered selling it as its price increased 50% since May. This recent increase and statement by their CEO has made me a believer in PSX's dividend growth future.

“This 25 percent increase reinforces our objective to provide competitive and growing dividends,” Phillips 66 Chairman and CEO Greg Garland said in a company statement. “Allocating capital to dividends and repurchases while continuing to invest in the growth of our business is fundamental to our philosophy of delivering shareholder value.”

PSX has a low payout ratio and low debt to total capital since their split from COP. This means that the company will be able to grow its dividend in the future without needing much internal growth from its business. The CEO appears to be focused on rewarding the shareholders, and as long as they execute I will be one of those shareholders.

With the recent dividend increase, the yield has climbed to just above 2%. This may not be appealing to dividend income seekers, but younger investors looking for dividend growth may want to take a closer look. Since PSX has only been trading since April, I am unable to do a full analysis. Once they have reported a full Fiscal Year I will be able to break the numbers down more.

Disclosure: I am long PSX and COP

Related Posts:
Ka-ching! Microsoft Just Gave Me a 25% Raise

Another Technology Dividend Stalwart in the Making?

Ka-Ching! Intel Just Gave Me A 7% Raise

TAGS: [PSX][COP]

Payout Appreciation: Some Investors Pile Into Stocks Likely to Keep Raising Dividend

2012-10-01T17:00:00.000-05:00

Note: I'm going to be traveling the next couple of weeks so there likely won't be any original posts from me. I'll be reposting articles I find interesting and applicable during this time though. Below is an article from the Wall Street Journal that points out how money management firms are now focusing on companies that pay and grow their dividends each year. What an interesting concept!

Call them the new growth stocks. After rushing into dividend stocks of all stripes this year, some investors are homing in on a more select group: stocks of companies that are likely to keep raising their dividends at a fast clip.

It is all part of the chase for better returns on the heels of the Federal Reserve's announcement last week of another round of bond buying aimed to keep interest rates at rock-bottom levels until the economy improves. As yields on the 10-year Treasury wallow at near-record lows and "junk"-bond yields also are sinking, investors are seeking anything that offers some extra income. READ MORE

Disclosure: I am long VZ, HAS.

TAGS: [VZ][T][SRE][MO][HAS][GCI][CSCO][AEP]

Ka-Ching! Microsoft just gave me a 15% raise

2012-09-21T17:00:00.000-05:00

Joining its fellow IT sector leaders Intel (INTC) and Cisco (CSCO), Microsoft (MSFT) announced this week that it would reward its shareholders by increasing its annual dividend by 15%, from $0.20 per quarter to $0.23. Armed with almost $62 billion in cash while generating nearly $30 billion in cash flow, its nice to see Microsoft continue their annual double digit dividend increases.

Microsoft faces a big catalyst in the coming months with the release of Windows 8. This will also be the platform for their latest entry into the mobile market. Despite failing to make much headway thus far in mobile, Windows 8 Phones have had positive reviews. The main focus will be on their cash cow though, the PC. Recent softness in the PC market has scared some investors and analysts, but the new release of Windows 8 may be what that market needs. If successful, that growth will help continue to drive Microsoft's dividend higher in the coming years.

Below are some more companies, including McDonald's (MCD), that are sending more cash to their shareholders.

Company	Industry	Dividend Increase	New Yield
Fifth Third Bank (FITB)	Regional - Midwest Banks	25.0%	2.6%
Texas Instruments (TXN)	Semiconductor	24.0%	2.9%
IDACORP (IDA)	Electric Utility	15.2%	3.6%
Microsoft (MSFT)	Application Software	15.0%	3.0%
W. P. Carey & Co (WPC)	Real Estate Development	15.0%	5.3%
McDonalds (MCD)	Restaurants	10.0%	3.3%
Newcastle Investment (NCT)	REIT	10.0%	11.1%
Washigton Trust Bankcorp (WASH)	Regional - Northeast Banks	4.3%	3.7%
ConAgra Foods (CAG)	Processed & Packaged Goods	4.1%	3.6%

Disclosure: I am long MSFT, INTC, and MCD.

Ka-Ching! Intel Just Gave Me A 7% Raise

TAGS: [MSFT][INTC][CSCO][MCD][FITB][TXN][IDA][WPC][NCT][WASH][CAG]

Dividend Income Analysis: Leggett & Platt (LEG)

2012-09-18T17:00:00.000-05:00

I always enjoy coming across lesser-known companies who have stellar dividend track records. Although I had heard of Leggett & Platt (LEG) and briefly skimmed over the stock in the past, I did not appreciate its impressive dividend history until doing this analysis. A mid-cap ($3.5 billion) company that has been paying a dividend for 73 years and increasing that dividend for 40 years deserves more attention. Well LEG, you've caught my attention. READ MORE

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MCD Dividend Growth Analysis
HAS Dividend Income Analysis
LLY Dividend Income Analysis
UPS Dividend Growth Analysis

TAGS: [LEG]

Stock Sale: Intel (INTC)

2012-09-05T17:30:00.000-05:00

Those of you who have followed me know I'm a big fan of Intel (INTC). I've made it known on several occasions that it is my biggest dividend growth holding. I've been allocating Intel off and on since 2008 and was lucky enough to load up during the crash in March 2009. The main reason it's my biggest holding though is because, despite reporting solid earnings throughout the years and steadily increasing its dividend by double digits each year, the stock price continues to be cheap. I find it hard to pass up a good deal, and Intel has been a good deal for quite some time.

The stock had a nice run from the beginning of the year and into May touching a 52 week high of $29. Since then it has bounced around the $26 and $27 level. But the past couple weeks the stock has dropped to below $25 and has piqued my interest once again. So why did the stock drop nearly 5% in the past couple weeks?

The main reason for the drop is because of PC manufacturers HP (HPQ) and Dell (DELL) reporting poor PC sales in their recent quarters and forecasting slow growth. This led analysts to cut Intel's 2012 and 2013 sales estimates as they expect fewer chips to be sold. This may be the case, but long-term investors shouldn't be concerned with a slight revenue miss. In fact, Intel lowered its full year guidance in July, so its likely they foresaw the PC growth problem well before HP and Dell reported it.

Instead of focusing on a potential revenue miss, long-term investors should be excited about future catalysts that can provide earnings (and dividend) growth. Microsoft's (MSFT) release of Windows 8 this Fall will drive PC sales as customers upgrade to the latest and greatest. Growth in server sales has been offsetting the slow growth in PC sales and should continue to do so. And Intel's entrance into the smartphone / tablet business, although later than investors would prefer, could be the primary driver for future earnings and stock growth.

Intel currently has a P/E of 10 which is a significant discount to the average semiconductor P/E of 15. Add a better than industry average dividend yield of 3.6% and the fact that it is THE dominating company in its industry makes it hard to pass up this stock sale.

Disclosure: I am long INTC, MSFT

Tags: [INTC] [MSFT] [DELL] [HPQ]