Archive | Dividend Investing

RSS feed for this section

Versatile Dividend Stocks You Can Own No Matter Your Age

The following is an excerpt from 5 Versatile Dividend Stocks No Matter Your Age:

When you think of a “retirement” stock, certain things come to mind. Retirees need income, so their portfolios tend to be chock full of dividend stocks. They also tend to prefer stable, established companies over new and unproven up-and-comers. Growth is important, but safety and stability are more important. Leave the flashy growth stocks to the kids.

The outperformance of dividend stocks is not random. Paying a dividend forces company management to be more disciplined. Every dollar paid out to investors is a dollar that isn’t retained in house, so management is forced to prioritize and, ideally, eliminate value-destroying empire building via acquisitions.But while we tend to think of retiree stocks in this light, investors of all ages would be smart to take the same balanced approach. After all, value stocks have massively outperformed growth stocks over time, and dividend stocks outperform their non-dividend-paying peers … and with less volatility to boot.

Furthermore, in investing you win by not losing. By limiting your portfolio to dividend stocks, you immediately exclude younger and unproven companies — or those most likely to spectacularly blow up.

The safest dividend is the one that was just hiked. If management was confident enough to raise the dividend, it generally means that company is bringing in ample cash for future dividends. So, by further limiting your list of dividend stocks to those with a good recent history of raising the payout, you better increase your odds for outperformance.

So, today we’re going to take a look at five dividend stocks that would be every bit as appropriate for a young investor just starting to save as for a retiree living on the golf course.

I’ll start with Microsoft Corporation (MSFT). It wasn’t that long ago that Microsoft looked like a has-been on the slow road to irrelevance. The company missed the mobile revolution completely, leaving Apple and Alphabet to make it a two-horse race. PC sales — which ultimately drive Windows licenses — have been in decline for years. With more and more computing happening on mobile devices, Microsoft appeared to be doomed.

But then, along came Satya Nadella, who upon taking over as CEO in 2014, refocused Microsoft as a cloud services company that is now rivaled by only Amazon.com, Inc.’s (AMZN) AWS.

That’s the beauty of Microsoft. Its businesses were strong enough to survive more than a decade of unimaginative leadership under Steve Ballmer.

Nothing is permanent in technology, of course. But some trends last at least as long as the average retirement. For example, the “PC era” as we think of it lasted a good 20 years. The “mobile era” has been going on for over a decade now and shows no sign of slowing down. I have no reason to believe that Microsoft’s cloud business doesn’t have a long, profitable life in front of it.

And in the meantime, Microsoft will continue to be a dividend-paying machine. Over the past 10 years, Microsoft has grown its dividend at 15.7% annual clip. And any shares of Microsoft you might have bought a decade ago now trade at a yield on cost of nearly 7%. (Yield on cost is today’s dividend divided by your original purchase price.) That’s something that should be exciting for any investor, regardless of their stage of life.

To see the remainder of the list, go to 5 Versatile Dividend Stocks No Matter Your Age

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

Read full story · Comments { 0 }

Stocks That Could Double Their Dividends In 3 Years

The following is an excerpt from 7 Dividend Stocks Whose Payouts Could Double in 3 Years.

The legendary Wayne Gretzky famously said that “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”

Well, it’s not all that different with dividend stocks. If you’re looking for good long-term returns, you’ll buy a stock sporting an attractive dividend yield. But if you want great returns, you’ll look for stocks raising their dividends year after year.

Over a long time horizon, high-dividend-growth stocks are a lot more likely to keep pace with inflation. Plus, let’s face it — it’s nice getting a raise every year, and that’s exactly what dividend growth stocks do. With every passing year, the amount of cold, hard cash they put in your pocket increases.

But dividends also tell a far more important story. An exceptionally high dividend yield is often a sign of financial distress … and a sign that dividend cuts are a lot more likely than dividend hikes. But dividend growth is a sign of company health. Company boards of directors only vote to raise the payout if they believe a lot more cash will be coming in to replace it.

I don’t have a crystal ball, and I can’t say with 100% certainty which dividend stocks are going to grow their payout the fastest in the years ahead. But by looking at recent dividend growth history gives us a good starting point.

So, today we’re going to take a look at seven stocks that I expect to double their dividends over the next three years. None are what I consider monster dividend yielders today, but all pay a respectable current dividend that promises to get a lot bigger in the years to come.

You’re going to notice a lot of banks on this list, and there’s a good reason for that. After the 2008 meltdown, most banks had to slash or completely eliminate their dividends. And ever since, the Federal Reserve has kept them on a short leash, massively restricting their ability to pay or raise a dividend.

Well, that’s changing. After the most recent stress test by the Fed, most large banks were given the green light to boost their payouts … and they are doing so with gusto.

Take Citigroup Inc (C), for example. Citi just doubled its dividend last month and raised its stock buyback plan to boot.

But even after a monster dividend hike like that, Citi’s dividend payout ratio is an extremely modest 24%. Citi could double its dividend again tomorrow, with no change in earnings outlook, and not put itself at risk of financial distress. And that is exactly what I like to see.

Citi’s dividend growth will depend on its profitability over the next three years, which will in turn be affected by interest rates and by the overall health of the economy. Assuming that we avoid a major recession and that the Fed continues to gradually raise rates, the pieces are in place for very respectable profit growth. And given how low the payout ratio is at current levels, I’d be shocked if Citi didn’t double — or triple — its dividend over the next three years.

To read the rest of the article, please see  7 Dividend Stocks Whose Payouts Could Double in 3 Years.

Disclosures: Long C

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

Read full story · Comments { 0 }

Why Dividends Matter: Prospect Capital

For a very clear example of why dividends matter, consider the case of Prospect Capital (PSEC). I first purchased Prospect in late 2014, believing it to be cheap at the time and that the risk of a dividend cut was overstated.

Well, it turns out I was wrong about the dividend. Shortly after I bought it, Prospect slashed its dividend by 25%. Predictably, the price took a tumble, but I decided to give the position a little more time. The yield was high even after the cut, and the stock traded below book value.

I should have been more disciplined and sold the stock after the dividend cut, as it continued to drop for the next year. Even now, that initial position is down over 20% on a price basis. But when you adjust the price for dividends paid, you get a much different picture.


Adjusted for dividends paid, Prospect Capital is up about 15% from my original purchase price. That’s by no means a great return (the S&P 500 is up about 22% over the same period). And I haven’t taken into account tax effects. But it does make the power of dividends abundantly clear. After dividends paid, a disappointing loser becomes a respectable winner.

Disclosures: Long PSEC.

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

Read full story · Comments { 0 }

It’s About Time, Kinder Morgan!

Long-suffering Kinder Morgan (KMI) longs got some welcome news this week. After nearly two years of reduced payouts, Kinder Morgan will be aggressively hiking its dividend next year. Kinder will be bumping its annual payout from $0.50 to $0.80 next year, and plans to push it to $1.25 per share by 2020. That amouts to a 60% increase next year and 25% annual growth for the two following years.

KMI slashed its dividend in 2015.

And it doesn’t stop there. KMI is also undertaking a $2 billion share repurchase, which is equal to about 5% of the company’s market cap at current prices.

And perhaps most importantly, Kinder expects to do all of this — along with funding new growth projects — with current cash flows, without having to tap into the debt markets. From the press release:

“Importantly, these steps to return value to our shareholders will not come at the detriment of our balance sheet. In fact, we expect to continue to fund all growth capital through operating cash flows with no need for external funding for growth capital at KMI,” said Kinder. “As previously announced, we expect to end 2017 at a 5.2 times net debt-to-Adjusted EBITDA ratio, ahead of plan, and remain committed to a leverage target of approximately 5.0 times. We are extremely pleased with the company’s financial strength, and today’s announcement is confirmation of that strength.”

I’ve expected this for a while. Facing a hostile market and a prohibitively high cost of capital. Kinder opted to “self fund” its growth projects by slashing its dividend in late 2015. In the nearly two years that have passed, the company has added quality assets while also chipping away at its debt load.

Beyond 2020, KMI may never be the aggressive dividend-raising machine it was prior to its 2015 cut, but that’s ok. The newer, more conservative Kinder Morgan should still be a fantastic cash generator for yield-hungry investors.

Disclosures: Long KMI

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

Read full story · Comments { 0 }

The 7 Best Dividend Stocks to Buy for Q3 and Beyond

The following is an excerpt from The 7 Best Dividend Stocks to Buy for Q3 and Beyond

The theme for the first half of 2017 was something to the effect of “Buy Amazon.com (AMZN) and dump pretty much everything else.”

At least that’s what it seemed like. Recent pullback aside, 2017 has broadly been a great year for tech … but it has been a lousy year for “old economy” stocks like energy, retail and autos, and for dividend stocks in general.

But as they say, it ain’t over until the fat lady sings, and we still have another half of the year left to go. Today, we’re going to take a look at the best dividend stocks to buy for the third quarter and likely the rest of the year.

You’ll immediately notice that there are several names on the list that struggled in the first half of the year, and that’s by design. After a lengthy stretch of underperformance, I expect to see value stocks — and particularly dividend stocks — take leadership.

Last year, we saw a similar pattern. Energy stocks, REITs and dividend stocks in general started the year in the doghouse. But in the second half, they roared back to life.

I can’t promise the same will happen this year. But given some of the high dividend yields on offer, I’m comfortable showing a little patience here. We’re being paid handsomely in cold, hard cash to wait for the market to appreciate value.

So with no further ado, here are the seven best dividend stocks for the second half of 2017…

As I started this piece by saying, the dominant theme of 2017 has been the unstoppable rise of Amazon … and the equally unstoppable destruction of traditional brick-and-mortar retail.

Frankly, there is a lot of truth to this sentiment. Amazon really is upending shopping malls and big-box retailers. But there are plenty of areas of the retail economy that are healthy, and triple-net retail REIT VEREIT Inc (VER) has solid exposure to them.

VEREIT is one of the very cheapest REITS in the retail space. Part of this is due to the lingering stench of scandal following its predecessor company’s accounting restatement a few years ago. But investors who eschew VER because of the sins of its former management are really missing a good opportunity. VEREIT has a high-quality portfolio of restaurants, pharmacies, deep-discount stores and other tenants that tend to be Amazon-resistant.

VER also pays an attractive 6.7% yield that promises to rise in the years ahead as the company completes its planned divestitures and returns its focus to growth.

I consider VEREIT on of the few REITs that is priced to double your money in the next 2-3 years, so it belongs in any list of best dividend stocks for the second half of 2017.

To read the rest, see:  The 7 Best Dividend Stocks to Buy for Q3 and Beyond

Disclosures: Long VER

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

Read full story · Comments { 0 }