Nitro, what is your opinion for DRIP's (dividend reinvestment)? The dividend money can go to buy more stock, but I have no broker to pay. I can buy from the company their stock. Some DRIP's I can put all dividends to buy more stock, or part cash of the dividends to buy more stock, then take the cash of the balance. What do you think?
I want to tell you I am not saying DRIP's for the whole portfolio, ok? For maybe 20% of the portfolio money.
Compounding. "If a seasoned investor met a beginning investor on an elevator and tried to offer a quick summary of the past 100 years worth of American stock market investing, the short explanation might sound a little something like this: "The American stock market has returned about 10% annually over the past century. Inflation ran about 3% per year over that time frame, giving long-term investors an average increase in purchasing power of about 7% annually. The price of admission for this 7% increase in yearly purchasing power is that investors have to weather unpredictable changes in the net worth of their investments, which often fluctuate by 20%, 30%, or even 40% per year." We can toggle with the numbers a little bit -- maybe assume that inflation will run at 4% over the next twenty years and assume that the increases in purchasing power will be a little bit less than 7% annually going forward -- but the general narrative loosely holds. This is not earth-shattering news: the cost of admission for pursuing 10% nominal returns is that you have to stomach 20-50% declines in your net worth along the way. To take a quick look at the price wreckage that occurs over the course of an investing lifetime, take a glimpse of the worst annual returns for the Dow Jones Index over the past century: Yikes. An investor with a million dollar portfolio at the start of 1931 had less than $500,000 by the end of that year. More recently, an investor with a million dollar portfolio in 2008 saw his net worth fall to the $700,000 mark in 2008. Eck, somebody pass the Tums. I don't know about you, but I want to be compensated for having to put up with my net worth falling twenty, thirty, or forty percent. A non-dividend stock grants you no reward for the journey travelled. Let's say you bought Berkshire Hathaway (BRK.B) at $85 in 2010 and sell it for $120 in 2015, pocketing a 41% gain. But along the way, you had to witness the shares fall to $65 in September 2011. But because Berkshire does not pay a dividend, there is absolutely no 'thank you gift' that signals that you persevered through a time when your Berkshire net worth lost about a quarter of its value. When I look at that Dow Jones chart above that chronicles the bad years of 20-30% losses, I think to myself, "Well, what kind of investor do I want to be when that time comes?" And I'm once again reminded why dividends appeal to me. When you own an excellent company like Coke (KO) or Colgate-Palmolive (CL) during a 25% price decline, you receive cash payments that are reinvested at a 25% price decline. Over the past year, Walgreen (WAG) has traded between $30 per share and $45 per share. Let's say that an investor owns 1000 shares of the firm, and plans on reinvesting the dividends. At a current rate of $0.225 per share, that is a quarterly payout of $225. If Walgreen was still trading at $45 per share, the investor would receive 5 new shares of Walgreen which will now pay out $0.225 quarterly (earning dividends on dividends). But if Walgreen is still trading near $30 when the June 12th dividend payout comes, that $225 will now buy 7.5 shares which will pay out $0.225 quarterly (these dividends on dividends create an extra $1.68 of immediate income instead of $1.12). Let's fast-forward to 2016 and the shares of Walgreen are trading at $60 per share. Instead of having 5 shares worth $300, you now have 7.5 shares worth $450. You have an extra $150 thanks to the depressed price you were able to reinvest at during one particular quarter-this is your cash memento for putting up with these temporary declines in your net worth. DRIP investors who dollar cost average into a stock generally understand this point quite well. If you're investing $100 per month into Conoco Phillips (COP), you probably want to get the most bang for your buck and have each dollar invested buy as many future profits as possible. If Conoco trades around $60 per month for an extended period of time, you read monthly statements noting the additional 1.67 shares added to your balance, which pays out $4.40 in annual dividends. But if Conoco falls to $50 per share, you start adding 2.00 shares to your balance each month, which pays out $5.28 in annual dividends. When you look back later on five years worth of DRIP investing, you're likely going to have the most appreciation for the months when you bought the most shares, representing a higher amount of dividends and claims on a company's retained earnings. Of course, the moment when you buy the most shares is when the company is selling at the lowest price. The dividends that we receive during times of market declines turn out to be quite nice consolation prices for putting up with this turbulence. But in many cases, it's a consolation prize that is most appreciated in hindsight. An investor owning 1000 shares of Chevron (CVX) in 2008 saw his wealth cut in half as the stock fell from $105 to $55 per share. He might have been miserable seeing his $105,000 investment turn into $55,000. But Chevron paid out a $0.65 quarterly dividend in 2008. Reinvested at $55 per share, that $650 payout bought almost 12 new shares of Chevron stock. At the time, this might have been small consolation to the Chevron investor. But now that Chevron is trading at $97 per share, those 12 new shares have turned into $1,160 worth of value. Since steep market declines are an inevitable occurrence on the journey of long-term investing, we should make the best of the depressed price levels by owning dividend-paying firms that pay us quarterly cash so that we may sow the seeds to reap a great harvest later. Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours." http://seekingalpha.com/article/641821-dividend-stocks-give-rewards-for-putting-up-with-this
I think that anything that blindly follows some rule without adapting to the conditions of the market is likely to be suboptimal. That said, as I have said elsewhere on ET or maybe even on this thread, I can't tell you how many people I know that took a long term view on WAG, and were able to use the money gained from the dividend from the stock to put their kids through college and to get the down payment on their house :eek:
Yes. So not to follow blindly, but if the dollar cost averaging help to keep the price per share low over the time, that will help, true? And if the company stop the dividend, then sell. I am not sure but for some DRIP's to sell the stock I have to sell back to the company, and not on the market. Ok, I really like your thread nitro! And you!
http://www.insidermonkey.com/blog/5-dividend-stocks-reaching-52-week-highs-15668/ 5 Dividend Stocks Reaching 52-Week Highs By Serkan Unal Published: July 31, 2012 at 9:07 am China Mobile Ltd. (NYSE:CHL) is the largest wireless operator in China with a total market capitalization of $232 billion. The company has 683 million subscribers, six times more than Verizon Wireless. In fact, just last month, the Chinese mobile telephony operator increased its subscriber count by 5.6 million. The company has shown consistent growth in its revenues, high gross margins, and solid EPS growth. It has almost no debt and boasts a free cash flow yield of 15.3%. This yield is high despite the companyâs stock running up to a new 52-week high of $57.82 a share. The stock is 16% higher than a year ago. The telecom giant pays a dividend yield of 3.5% on a payout ratio of 42%. The companyâs peers China Telecom Corp. Ltd (CHA) and China Unicom (CHU) pay yields of 1.9% and 0.9%, respectively. Billionaires Cliff Asness and Israel Englander hold major stakes in the company. Wal-Mart Stores Inc. (NYSE:WMT) is a $252 billion U.S. retail giant with international operations. The stock has been on a tear since mid May. The company represented an attractive value play and investors snapped up shares in a flight to quality and safety as bond yields plummeted to record lows and global economies weakened. The stock has risen nearly 41.4% over the past year to a new 52-week high of $74.80 a share. On a forward P/E basis, the stock is still trading below the overall market, the broadline retailers industry, and the companyâs long-term metrics. The retailer is expected to see EPS growth averaging about 9% per year for the next five years, close to the EPS growth realized over the past five years. The stock is a dividend aristocrat that has raised its payout every year since starting to pay a dividend in 1974. It pays a dividend yield of 2.1% on a payout ratio of 34%. Its competitors Costco Wholesale Corporation (NASDAQ:COST) and Target Corp. (NYSE:TGT) pay yields of 1.1% and 2.3%, respectively. Legendary investor Warren Buffett had nearly $3 billion invested in the company in the first quarter of 2012. Northrop Grumman Corporation (NYSE:NOC) is a $16 billion company that provides products, services, and solutions in the aerospace, electronics, and information systems industries. It is one of the key U.S. defense contractors. Even though the company posted lower revenues and earnings in the previous quarter on a year-over-year basis, it still beat analyst expectations for both top and bottom lines. It also raised guidance for the year citing âa robust level of new business capture and the increase in total backlog.â The planned defense budget cuts and those slated for next year under the process of sequestration would certainly hurt the companyâs sales, earnings, and cash flow. However, the defense contractorâs management is confident that the areas in which the company has a lead, such as unmanned systems, cybersecurity, intelligence, and logistics, would continue to be U.S. governmentâs priorities in the coming years. The companyâs shares have increased 8.7% over the past year, and they are currently hovering around the new 52-week high of $66.04 per share. On a forward P/E basis, the stock is priced below the defense industry and the overall market. The company pays an attractive dividend yield of 3.3% on a low payout ratio of 28%. Its main rivals The Boeing Company (NYSE:BA), General Dynamics Corp. (GD), and Lockheed Martin Corporation (LMT) pay yields of 2.3%, 3.2%, and 4.4%, respectively. Among fund managers, the stock is popular with Cliff Asness, Ken Griffin, and David Dreman. PG&E Corporation (NYSECG) is a multi-utility company serving some 5.2 million electricity customers and 4.3 million natural gas customers in the United States. The utility boasts an attractive dividend yield of 3.9% and has a payout ratio of 84%. Its peers Edison International (EIX) and Sempra Energy (SRE) yield 2.8% and 3.4%, respectively. The stock has risen to a new 52-week high of $46.26 a share. It is up almost 11.3% over the past 12 months. The stock is attractive for income investors, given that electric and multi-utilities offer comparably higher yields that U.S. Treasuries and most dividend stocks. The stock of PG&E Corporation is trading on a forward P/E below that of its industry and its own historical averages. Its price-to-sales and price-to-cash flow ratios are below industry averages. Moreover, the stock has a very low beta of 0.3, which may have benefited the inflows into the stock during the currently volatile markets. Fund managers Phill Gross at Adage Capital Management and billionaire D. E. Shaw are fans of the stock (see D. E. Shawâs top picks). Exxon Mobil Corporation (NYSE:XOM) is a $409 billion integrated oil and natural gas giant and the largest U.S. energy company. The companyâs stock has found a new momentum that has taken it to a 52-week high of $87.95 a share. The stock is up 9.6% over the past year. Exxon Mobil missed analyst estimates in the second quarter as the companyâs oil and natural gas output declined along with energy prices. The economic slowdown in Europe and Asia also contributed to slower sales. Notwithstanding the economic slowdown, the company expects the energy demand to rise in the future. Analysts also see higher EPS growth in the coming years, forecasting growth to average 7.8% per year for the next five years. Still, UBS analysts downgraded the stock recently based on deteriorated ârelative valuation, disappointing production trends, and (lower) earnings quality.â The stock is priced more than its industry on average, but it still looks attractive as a dividend growth pay. Exxon Mobil has raised dividends for 29 consecutive years. It looks poised for additional dividend hikes in the future, following a 21% boost this year. The stock currently yields 2.6% on a low payout ratio of 28%. Its peers ConocoPhillips (NYSE:COP) and Chevron Corporation (NYSE:CVX) pay higher yields of 4.8% and 3.3%, respectively. Billionaire Ken Fisher and fund manager Phill Gross each hold more than half a billion dollars invested in the stock.
Hmm? Part 1 "It doesn¡¯t make much difference if you¡¯re receiving a 2% dividend when the underlying capital asset loses half it¡¯s value in 3 months ¨C which is exactly what happened to many perfectly legitimate dividend/growth stocks in late 2008. If my thesis linked at the beginning of this article is correct, I expect such events will be more frequent for the next 20 or so years as a result of shifting demographics in the US. So let¡¯s assume for a second I¡¯m right. If investment is a bad idea in general for the next 20 years, what should a family do with spare money? One option is to simply place it in a pile in the living room, or do the financial equivalent and put it in a checking or savings account. None of those are particularly attractive, however. Even the highest yield online savings accounts yield about 1% below inflation ¨C rather that generating additional income, you¡¯re just subjecting yourself to a slow bleed. Let me suggest an alternative. What I need to achieve my goal, and what I hope interests some readers of this blog, is an ¡°investment replacement¡± speculation method. Something that works as much as possible like an investment, and yields good income, but which is not fundamentally tied to economics or demographics or the performance of any given firm." Part 5. Method ¡öBuild a watch list starting with the dividend championstocks ¡öEliminate all stocks with dividends greater than earnings or projected earnings ¡öEliminate all stocks with market caps less than $1B or known to have very thin markets ¡öEliminate all stocks that exhibit strong trending behavior ¡öEliminate all stocks with a beta less than 0.6 (this gives us the most boring ones, plus has some portfolio allocation advantages) ¡öRe-build the watch list each year. ¡öThe watch list for 2012: ABT, BMS, CLX, GPC, JNJ, NWN, PEP, PNY, PG, SYY, WGL ¡öWait for one of these stocks to move more than 2 standard deviations from the 20-bar mean on weekly bars. Then wait for it to move slightly towards the mean. Then enter a beta-neutral spread betting the stock will return to the mean value. ¡öExit this spread when the stock returns to the mean value. http://www.offroadfinance.com/2012/05/30/a-speculative-alternative-to-investing-part-1-goals/
After soaring 50 fold in just over a decade with no dividend, Apple stock is now significantly lower than the price where it announced its dividend. What do you say to that? Also, what about the performance of Berkshire Hathaway, which does not pay a dividend?