American Capital Strategies, one of the high-yield companies in the Dividend Superstars portfolio, announced their third-quarter earnings today. A few of the company's investments lost value because of the unfolding subprime mess, but by and large, things looked very good.
More importantly, ACAS announced that it would boost the quarterly dividend payment 14% in the fourth quarter. At a new annual indicated rate of $4 a share, that puts the stock's yield north of 9% again. Very nice, dude.
On top of that, the company all but promised even bigger dividends next year because of a policy change. Now that's what I like to hear!
Wednesday, October 31, 2007
Monday, October 22, 2007
Yield on Cost
I'm simply amazed at the number of people who just don't understand the concept of yield on cost. Whenever I point them to a dividend-paying stock, they look back at me and say something like, "Dude, it only has a 4% yield ... I can get that from a money market account."
Well, yeah, you can. But that money market ain't gonna be increasing its payments very much. Meanwhile, there are plenty of stocks that raise their dividends every single freakin' year!
In other words, if you come back a few years later, your cost basis hasn't changed, but your annual dividend is likely to be a lot higher. A simple division problem later, and you'll realize that you're now getting something like 15% a year on that original investment.
Can your money market do that? Didn't think so!
Well, yeah, you can. But that money market ain't gonna be increasing its payments very much. Meanwhile, there are plenty of stocks that raise their dividends every single freakin' year!
In other words, if you come back a few years later, your cost basis hasn't changed, but your annual dividend is likely to be a lot higher. A simple division problem later, and you'll realize that you're now getting something like 15% a year on that original investment.
Can your money market do that? Didn't think so!
Monday, October 15, 2007
Citi's results are ...
It would just be too easy to make a ryhme there, wouldn't it? But I digress ... we continue to see the ramifications of the subprime mess and credit crunch in the financial sector.
Case in point: Citigroup's third-quarter profits dropped 57%.
We'll be getting more earnings from J.P. Morgan Chase, and Bank of America this week, too.
The question now is whether the financials are a buy for long-term income investors. After all, Citi is yielding about 4.5% from the $2.12 annual dividend.
As I wrote in a recent issue of Dividend Superstars, I think the answer is YES.
We may see more volatility in the short term, but the opportunity to pick up blue chip firms with yields approaching Treasury bond rates is too good to pass up.
I recommend separating the wheat from the chaff by looking for long histories of steadily increasing dividends, solid balance sheets, and diversified operations. We recently added Bank of America to the portfolio for just those reasons. I'll be curious to see what they report this week.
Case in point: Citigroup's third-quarter profits dropped 57%.
We'll be getting more earnings from J.P. Morgan Chase, and Bank of America this week, too.
The question now is whether the financials are a buy for long-term income investors. After all, Citi is yielding about 4.5% from the $2.12 annual dividend.
As I wrote in a recent issue of Dividend Superstars, I think the answer is YES.
We may see more volatility in the short term, but the opportunity to pick up blue chip firms with yields approaching Treasury bond rates is too good to pass up.
I recommend separating the wheat from the chaff by looking for long histories of steadily increasing dividends, solid balance sheets, and diversified operations. We recently added Bank of America to the portfolio for just those reasons. I'll be curious to see what they report this week.
Thursday, October 4, 2007
Yahoo Finance Conspiracy Theory
Like most of you, I visit Yahoo Finance and browse the headlines just about every day. But what I've been seeing recently is enough to make me start dreaming up conspiracy theories.
First, I see an article by Ben Stein called "Big Oil, Little Gratitude." It's all about how we should thank the oil companies for risking life and limb to getting us cheap fuel ... how their profit margins are so low ... how their product is the very lifeblood of our modern society.
Next, I see Jeremy Siegel's article entitled "Don't Blame the Central Banks, Thank Them." As you'd guess, it's a ringing endorsement for the puppet masters of money.
And then there's Charles Wheelan's sensitive article "Maternity 'Leave' Doesn't Mean Forever." A short synopsis: Women who take maternity leave and don't come back are in the wrong.
Let me get this straight: We should thank big oil for its random acts of kindness? We should mindlessly applaud Bernanke's decision to bail out Wall Street while risking the eternal fires of inflation? And we should chastise any person who uses an established benefit before deciding to quit?
The only thing I can agree with is that oil companies are extremely attractive investments, especially if you like dividends. But that still doesn't mean I get a warm and fuzzy feeling when I fill up my car.
First, I see an article by Ben Stein called "Big Oil, Little Gratitude." It's all about how we should thank the oil companies for risking life and limb to getting us cheap fuel ... how their profit margins are so low ... how their product is the very lifeblood of our modern society.
Next, I see Jeremy Siegel's article entitled "Don't Blame the Central Banks, Thank Them." As you'd guess, it's a ringing endorsement for the puppet masters of money.
And then there's Charles Wheelan's sensitive article "Maternity 'Leave' Doesn't Mean Forever." A short synopsis: Women who take maternity leave and don't come back are in the wrong.
Let me get this straight: We should thank big oil for its random acts of kindness? We should mindlessly applaud Bernanke's decision to bail out Wall Street while risking the eternal fires of inflation? And we should chastise any person who uses an established benefit before deciding to quit?
Talk about a coordinated attack to keep the little sheep in line!
The only thing I can agree with is that oil companies are extremely attractive investments, especially if you like dividends. But that still doesn't mean I get a warm and fuzzy feeling when I fill up my car.
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