Dividend Stocks ( General Discussions )

[winston]

The Ultimate Way to Protect Your Money from Wall Street Scams
By Dr. David Eifrig

"Dividends don't lie."

It's one of my favorite Wall Street sayings. Accountants can mess with a company's books in all kinds of ways, but they can't fake a cash payment. And if a company can pay a dividend, it's almost always making money.

In the past 20 years, we've seen Merrill Lynch's Henry Blodgett touting stocks he privately dismissed as crap (actually, his term was worse)… Bernie Madoff mailing phony account statements to hoodwink clients out of $18 billion… Corrupt lenders building a multibillion-dollar firm based on worthless "liar" loans… And that's just a sample. There's nothing new about accounting fraud.

The irony is, protecting yourself from these convoluted shell games is simple… Demand a cash dividend from your investments. It's hard to pay shareholders year after year if you're cooking the books.

A dividend is money a company pays its shareholders. Every quarter, the company counts its earnings and pays out some portion to its owners (the shareholders). Essentially, it's your cut of the profits.

Focusing on dividend-paying stocks is one of the great secrets to building wealth. And fortunately, the market is giving us a rare chance to load up on some of the world's greatest dividend payers at good prices.

Most investors dismiss dividends. In fact, some alleged professional stock-pickers refuse to even consider companies that pay a dividend. After all, they argue, the company should be plowing all the money back into the growing business. If the company reinvests the cash in itself, the company can grow even bigger, right? Wrong.

Here's what investors who only focus on capital gains are missing: Nearly half of your total long-term returns from investing in stocks come from dividends.

Sure, you want the company to use some of its earnings to grow, but you also want to get your money back along the way. In fact, among the most important rules to investing (along with asset allocation and position sizing) is defining your exit strategy – how will you get your money back?

When you invest in a small startup, you're happy to let your money grow as the business grows. But what happens when the growth slows? Do you sell the stock?

Not if it's still a good business. You don't want to lose out on reaping the success of the business as it evolves into a larger, steadier company.

Dividends are a simple way to pay back owners who've invested in the business. By keeping some of the money and paying the rest to shareholders, dividend-paying companies can continue their growth while rewarding shareholders at the same time.

Right now, I love those rewards. We have a rare moment in modern history when the yield on dividend-paying stocks matches the yield on 10-year U.S. Treasury notes. We haven't seen this setup in more than 35 years.

As investors reach for income and safety, they've bid down the yield for 10-year Treasurys to historic lows – now 2.95%. I understand the rush to safety. But giving $1,000 to the government to get $30 a year for 10 years is a poor choice, especially when there's no upside.

If you want to wait to earn $300 over 10 years, so be it. But you can do better by looking at other securities paying at least that same 3% yield… investments where you can get all the capital gain potential of a stock and a growing income stream.

For example, three months ago, I recommended pharmaceutical company Eli Lilly (LLY) to readers of my Retirement Millionaire advisory. We locked in a 5.6% annual payout. Lilly's paid a dividend for 125 consecutive years and increased it 42 years in a row. It's almost impossible to have a business better managed than that.

When companies like LLY establish a decades-long history of paying out money to shareholders, it reflects their commitment to managing the value of the business through down times and up times.

The No. 1 fear of retirees is that inflation will erode the value of their money. If you're on a fixed income like Social Security, it's imperative to own securities that will keep up with future prices and pass some of that growth back to investors. Dividend growers are your best answer here. And as I mentioned, they have a built-in safety mechanism…

In the past 30 years, I've seen Wall Street lie and cheat… from Blodgett to Madoff. The simplest, most effective way to fight back is to demand a dividend. Companies that pay dividends are sending you real money – and dividends don't lie.


Source: Daily Wealth

[kennynah]

It's one of my favorite Wall Street sayings. Accountants can mess with a company's books in all kinds of ways, but they can't fake a cash payment. And if a company can pay a dividend, it's almost always making money.

what sweeping statement this above is....

the rest of his writing does not interest me any further...

[winston]

by Chinaman » Thu Aug 19, 2010 3:15 pm

kennynah wrote:
MM : hahahaha....i know what you mean.... and sure hope those who play for dividends aren't just receiving $400 annually...but lose $4000 on price adverse movement...

bro k & MM , understandable both have same wave length...hmms me not in yr frequency zone.

I dun like reit nor trust stocks, kena burnt b4, BUT I also dun buy stocks without paying dividend, dat my investment style...no capital gain meanwhile collect some dividend also song leh...Yr money tank must have consistently regular income, i always say this (how u do it, dat the diff why some so rich n some forever poor.... it wise to learn from the rich.

[kennynah]

Bro C..pls don't misunderstand that I mean I scorn at dividends..who doesn't want to be paid dividends for any investments..it's like interest paid.
My primary objective of any investment venture is for the invested capital to grow, instead of focusing on the consolation prize of receiving dividends.

[Musicwhiz]

Bro C..pls don't misunderstand that I mean I scorn at dividends..who doesn't want to be paid dividends for any investments..it's like interest paid.
My primary objective of any investment venture is for the invested capital to grow, instead of focusing on the consolation prize of receiving dividends.

I go for a healthy mix of both!

[winston]

If it was only so easy ...


How to Make $75,000 a Year Doing Absolutely Nothing By Tom Dyson

"All I do is push a few buttons, and I earn $75,000 a year…"

Most entrepreneurs go into business seeking million-dollar fortunes. The entrepreneur I met last week, Bob, set up a business to generate $75,000 in income each year.

Bob's business doesn't employ any staff, make any fancy products, or operate any complex machinery. To open shop in the morning, Bob turns on the lights, sets the air conditioning, and presses the buttons. Then, he spends the rest of the day sitting at a desk, watching the stock market, surfing the Internet, and, of course, collecting money.

Bob lives in a town popular with young families. The schools are great. The community is safe. Parents have only one problem. It's extremely hot in the summer and cold in the winter, and the kids had nowhere indoors to run around.

Bob noticed this gap in the market. So he leased an abandoned car dealership, outfitted the building with rubber floors and walls, and filled it with inflatable slides, bouncy castles, and arcade games. He charges $5 an hour for little kids and $10 for big kids. He sells snacks and receives royalties from the arcade-game suppliers.

Bob is the only game in town, so he always has customers. It's a simple business with almost no operational risk. He has no staff. He has no major assets. And most importantly, he has no growth potential. Instead of wasting money on ambitious growth ideas – a mistake many inexperienced entrepreneurs make – he sits back and captures a steady cash income.

While the children run and jump for two hours, the parents sip coffee in the air conditioning. Bob keeps one eye on his customers and one eye on his laptop. He makes $75,000 a year before tax, from an investment of less than $200,000.

"Congratulations," I told Bob. "You've built an impressive passive income stream."

You can earn a large passive income, too… just like Bob. The investments you need are all available in the stock market. All you have to do is buy these passive income stocks, sit back, and collect the cash flow…

So how do you identify the best passive income stocks?

First, you should only buy companies with simple business models…

Simplicity is important because it's easy to identify the risks in a simple business. All businesses carry risk. If you can identify them, you can make a more accurate assessment of a company's value.

Would you rather make a bid on a vast corporation with myriad operations and opaque accounting – say, Citigroup – or a pipeline stock? I always give more value to dividends from simple businesses than dividends from complicated businesses.

Second, look for businesses that don't aspire to grow…

This sounds odd at first. Most investors love growth. You're taught growth leads to profits. But look at Bob's business. He has no intention of growing. He's happy cranking out profits while he surfs the Internet. Or think of a hydroelectric dam or a toll road. These types of businesses make excellent income investments.

Expansion is a distraction… and often a big waste of money. Businesses that can't expand have the most focused management teams and pay the safest dividends. You want a company that pumps cash into its dividend, not its capital-expense budget.

Third, pick businesses that enjoy wide moats and significant barriers to competition. Moats used to protect castles from invaders. In business, moats protect dividends. A physical monopoly is the most obvious moat, but moats come in many different guises, like brand names, a niche market, or an expert management team.

Finally, aim to buy stocks that pay little taxes, so they have more money to pay us. REITs and MLPs are the most obvious, but many other companies qualify. Infrastructure companies, for example, often have large tax losses on their balance sheets that they can use to shield future profits.

At current prices, I don't see many opportunities for safe passive income in the traditional high-yield markets. Pipeline stocks are usually one of my favorite passive income stocks. But right now, they're too popular with investors and you won't get a satisfactory entry price. The same goes for REITs, bond funds, and other popular high-yield investments.

Instead, my favorite passive income stocks right now are stocks that meet the requirements above, but instead of paying big dividends right now, they grow their dividends relentlessly, year after year. These stocks will end up generating much higher incomes over the long run than traditional high yield investments.


Source: Daily Wealth

[kennynah]

How to Make $75,000 a Year Doing Absolutely Nothing By Tom Dyson

"All I do is push a few buttons, and I earn $75,000 a year…"

i wont corrupt my mind with such articles.... reading it will do more harm to my trading than do any good....

[millionairemind]

A couple of things.

1. Small businesses like Bob's can go bankrupt VERY EASILY when a parent sue because his/her child is hurt during play time in your playground.

2. When it has such low barriers to entry, I am sure others will soon follow suit.

[winston]

We Were Dividends, Before Dividends Were Cool

When we buy a dividend stock, we hope to hold it forever. What makes a good dividend stock? Here are some of the things I look for:


Good Business Model

Sell things that people want or need, and do it in such a way that it is difficult or impossible for others to duplicate. There is a reason that pharmaceutical companies, such as Abbott Laboratories (ABT), are so profitable. With effective drugs under patent that sustain or enhance people’s life these companies have a deep moat.

Consumer goods companies like Procter & Gamble Co. (PG) and Kimberly-Clark Corporation (KMB) manufacture products such as soap, detergent and toilet paper that we just can’t do without. Sure, there may be generic substitutes, but over the years many of these products have endeared themselves to consumers who are willing to pay a few cents more for the name brand.


Strong Free Cash Flow

Dividends are paid with cash remaining after paying the operating expenses and replacement capital (free cash flow). If a company has trouble meeting these basic needs, then its dividend is perilously at risk. Companies with a low free cash flow payout (FCF) payout are well-positioned to sustain their dividend.


Acceptable Debt Level

Generating a strong free cash flow is not enough – cash has to be available to be paid as dividends. As a result of the economic downturn, many companies are feeling pressure to reduce debt to stay within their covenants and try to maintain their debt rating.

If a company’s excess cash is being used to service debt, there may not be any left over to increase dividends.


Good Balance between Dividend Yield and Growth

There is usually a reason why a stock’s yield is above average. Often it is the market’s way of saying it doesn’t believe the company can maintain the dividend. Most people understand this risk.

However, there is also risk to a stock that has a high dividend growth rate. To maintain a high dividend growth rate the company has to grow cash available for dividends at the same rate. This is often difficult to do.

For those of us that have invested in dividends for years (decades for some), we know dividend growth investing is not a passing fad to be “played” then move on the next hot investment strategy. Part of me will be glad when dividend investing falls out of favor and the masses moves on.


http://dividendsvalue.com/7526/we-were- ... were-cool/

[winston]

Why Dividend Investing Will Become The Investment Trend In 2011

As we all know; there are a lot of dividend investors in the market. Some like the thought of getting paid quarterly, others think it is the best growth model for an investment portfolio but all agree that dividend investing works.

And it sure does. But I am under the impression that this investment strategy will gain even more momentum in 2011.

http://www.thedividendguyblog.com/why-d ... d-in-2011/