The Dividend Dude's Finance Shack

Sorry for the haphazard updates on this blog!

2009-08-18T06:38:00.000-07:00

Sorry, everyone. It's been hard to keep up with this blog given all my other dividend dude duties.

For example, I just started Twittering ... you can get my updates here.

And you already know about my weekly articles over at Money & Markets.

But I promise to pay a little more attention to this outlet going forward ...

Markets look shaky; Dividends in decline ...

2009-07-07T11:01:00.001-07:00

As I wrote in today's Money & Markets column, I strongly suggest more aggressive investors take some profits in their speculative positions that have run up strongly.

Reason: We are at critical technical levels on the major indexes AND I see no major fundamental reasons for the market to go higher in the short-term.

Meanwhile, dividends are getting harder to find. According to Standard & Poor's, the second quarter of 2009 was the worst for dividends in nearly 50 years.

That doesn't mean there aren't still solid income stocks out there, of course. My Dividend Superstars subscribers have seen a number of increases despite the meltdown. However, you need to be much more selective than you were a few years ago.

Mortagage applications post big drop ...

2009-07-01T06:42:00.000-07:00

Newsflash: People don't want to borrow money when rates surge!

Seriously, dude.

According the Mortgage Bankers Association, mortgage applications for the week ended June 26 dropped 18.9% ... the lowest reading since November 2008.

Interesting, isn't it? Right back to some of our darkest credit hours.

In my opinion, this is very bad news for the housing recovery. And it's one more reason for people to start begging Washington to manipluate rates yet again. The magic number -- according to all our favorite real estate cheerleaders -- is a 30-year fixed that begins with a "4."

No, not 40% ... that will probably come later once everyone realizes just how much money we've created out of thin air. =^)

Meanwhile, all indicators are pointing to worse-than-expected job losses when the official number is released this Thursday.

So I ask you, dear reader, how exactly is housing supposed to be bottoming right now? How are all those $400K and $500K houses going to move off the market?

The FICO article I mentioned a couple days ago ...

2009-06-30T06:05:00.000-07:00

Just wanted to give you a link to the FICO article I mentioned in the story below. This just went up on Money & Markets this morning, and I think it's worth reading. Of course, I'm biased. =^)

Click here for the story!

Credit Card Companies Slashing Available Credit

2009-06-25T08:12:00.000-07:00

This story from BusinessWeek (via Yahoo! Finance) shows just how unfair consumers are getting treated nowadays.

Basically, card companies are slashing people's limits, often without good reason. And because of the way FICO scores are calculated, the end result can be a lowered score through no fault of your own.

It's ridiculous ... in fact, the entire system is ridiculous. It simply proves just how far the pendulum swings from one side to the other.

I'm planning on writing extensively on this topic for my next Money & Markets column so stay tuned!

Foreigners Want Less U.S. Bonds ...

2009-06-17T08:45:00.000-07:00

More news in the "why Treasury yields will rise" department. According to Washington, net purchases of stocks, notes and bonds purchased by foreigners dropped to $11.2 billion in April from $55.4 billion in March.

Dude, that's an 80% drop!

Do you think foreigners might be worried about the dollar ... the pathetic interest rates they're receiving ... and a host of other systemic problems we have?

I sure do ...

Today's Money & Markets column ...

2009-06-16T09:11:00.000-07:00

I decided to take that little nugget I posted below and expand on it quite considerably for my newest column in Money & Markets.

And the activity over on my Money & Markets blog has been absolutely tremendous. I encourage you to stop over there and read the column/share your thoughts. The insights and feedback have been tremendously valuable, and I'm having a load of fun responding to everyone ...

Nilus

Why Housing Has Much More Downside

2009-06-10T08:11:00.000-07:00

I don't care what your local realtor might have to say ... real estate remains largely overpriced just about anywhere I look -- whether it's South Florida, California, or more "stable" areas like Pennsylvania, Delaware and New York.

Look, the basic numbers just don't make sense ...

According to a 2005 Census economic survey:

Only 5% of individuals had six figure incomes and the top 10% got paid more than $75,000.

On a household level, the top 5% (75% had two earners) had incomes of $166,200 or more .

The top 1.5% of households raked in more than $250,000.

Meanwhile, nearly everywhere I look any house that a middle-class person would consider buying (meaning reasonably attractive, in a decent school district, in good condition, etc.) is easily pushing $400,000 or $500,000.

How does that add up? If the fifth percentile household makes about $160,000 that means a $400,000 house is marginally "affordable" in my book. Unlike most people, I'm factoring in taxes, insurance, car payments (two BMWs, I'm sure), and all the other everyday necessities that an affluent household simply must have. And I'm -- gasp! -- actually assuming that they might want to save some money for retirement and their kids' college funds.

So call me crazy, but I simply do not see how -- given falling prices, recently rising rates, and ultratight credit conditions -- that housing at the higher end has any chance in hell of rebounding or even stabilizing anytime soon!

Full disclosure: I have been renting throughout the madness ... in Manhattan, then South Florida, and now in the Brandywine Valley of DE/PA.

Why I Said Sell Southern Copper, Texas Instruments, and More ...

2009-06-09T07:52:00.000-07:00

As I look at my trading screens today, I see that a couple of recent Dividend Superstars recommendations are rising yet again -- including Texas Instruments (TXN) and Southern Copper (PCU).

Now, my subscribers should already be out of those positions with very nice gains. And while I hate to see any money left on the table, in this market I still think selling into strength makes sense on some of the higher-beta stocks and industries.

For all the reasons why, see my latest story over at Money & Markets.

A Follow-Up on the Treasury Bond Post ...

2009-06-05T10:41:00.000-07:00

I also wanted to note that Professor Jeremy Siegel (who I tend to agree with quite often) very clearly spelled out the situation regarding Treasuries in this Yahoo Finance column.

Personally, I feel much better about TIPS, despite the supposed long-shot default risk. Again, that's because I believe inflation is both baked into our current system and especially because of our country's current fiscal policies.

It is also interesting to note the idea of a government defaulting on its debt held by foreigners while honoring obligations to its citizens. I don't believe the U.S. would pursue such a self-destructive strategy, but in many ways we are already pursuing a similar -- albeit less overt -- form of this by continuing to flood the market with bonds that must be begrudgingly bought by countries such as China who already hold massive amounts of our debt in their reserves.

It's certainly an uncomfortable Catch-22 ... and how it will play out remains to be seen.

Treasury Bonds Are Still a Bad Bet ...

2009-06-05T08:14:00.000-07:00

Before I go any further, I want to clarify something ... when I say Treasury bonds, I'm talking about longer-term notes and bonds not the shorter-term notes and bills.

Okay, with that out of the way, I have been fairly vocal about the risk associated with longer-dated Treasuries. And despite a respectable sell-off, I continue to believe that it does not make sense to buy massive amounts of these investments for your income portfolio right now.

No, I am not worried about the U.S. government losing its AAA rating (though that is a small possibility at some point in the future). Instead, I simply believe that the Fed will end up behind the curve regarding inflation and will ultimately have to jack up rates significantly.

When will it happen? Who knows. But if you think long-term yields aren't going to ever get back to 6% and ultimately to 10% or higher, I think you're failing to understand just how much money is being pumped into our economy right now ... and just how "Fed up" foreign investors are becoming with the massive amounts of debt our government is issuing.

If you want to hold "safe" government-backed bonds, I strongly urge you to consider Treaasury Inflation-Protected Securities (TIPS) or I-bonds instead of plain vanilla Treasuries right now ...

Why Are Investors Cheering So Loudly?

2009-06-05T08:00:00.000-07:00

It's interesting to watch the market's rally continue throughout some absolutely horrible news items. Just in the last few days ...

General Motors, one of our nation's most storied companies, filed for bankruptcy. (Hot on the heels of Chrysler, another major U.S. industrial concern).

We learned that our nation's jobless rate hit 9.4% in May, the highest level in more than 25 frickin' years!

The SEC is charging yet another finance figure (Anthony Mozilla from Countrywide) with fraud.

Oil prices hit $70 a barrel, implying that despite deflationary forces at work, consumers are still going to get absolutely creamed at gas pumps.

And May retail sales fell 4.8%, more than economists expected.

Sure, stocks must climb a wall of worry ...

Yes, there are some "green shoots" out there ...

And I absolutely continue to advocate buying and holding quality dividend-paying stocks ...

But I fail to see why investors are SO upbeat right now, and I think 1,000 on the S&P 500 is going to present major psychological resistance throughout the summer.

As such, you should expect the volatility to continue from here on out. And that's why I think both income-producing assets and other more advanced strategies (such as covered call writing) are the bets ways to play this market.

Reviving this blog!

2009-06-05T07:23:00.000-07:00

Hey, everyone. I decided to bring this blog back from the dead just as a way to communicate with all the dividend-hungry, yield-seeking investors who may not be visiting my other blog on Money & Markets.

If there's one gift I was born with, it's the ability to talk a lot! (Just ask my wife).

So I plan on posting tons of dividend news here in copious amounts going forward. It should be fun for all of us!

Nilus

Here in Thailand ...

2008-09-10T05:17:00.000-07:00

I'm typing this at about 7:30 PM local time. It's dark here in Bangkok, but it sure ain't quiet. Outside the window of my recently-constructed luxury apartment is a hub of construction activity. Adjacent to this building, there's a large hole in the ground with a whole slew of workers sawing, pounding nails, and shouting.

Farther off in the distance, I see more of the same. Construction cranes ... flickering solder irons, and foundations yet to be laid. All around are plenty of buildings that were just finished. I'm told were built upon skeletons abandoned during the Asian financial crisis.

It's remarkably similar to what I saw in Costa Rica, only on a much grander scale. And it certainly supports the idea that Asia continues to steam ahead. Pictures to come shortly ...

More on Latin America Dividends ...

2008-08-28T08:35:00.000-07:00

My latest column for Money & Markets has a lot more about my thoughts on Latin America's growth, especially as it relates to dividend-paying companies. If you haven't already read it, check it out now!

Lots of Development in Latin America

2008-08-25T11:37:00.000-07:00

Well, I wasn't surprised to see that Costa Rica, and Tamarindo in particular, continues to develop at a rapid rate. More paved roads ... expensive condos ... well-stocked supermarkets ... it's all there for the influx of U.S. and European retirees.

Is is sustainable? I don't know. I do think Latin America is witnessing real gains in domestic consumption. More on that in the near future.

But as I noted on my other blog, it's hard to comprehend $800K condos in a third-world jungle. I'd rather buy a little bungelow in a beautiful, subprime-battered California town like Laguna Beach and take little jaunts down to Nicaragua during the flat spells. But to each his own, dude ...

New High-Yield Recommendations; Lots of Traveling!

2008-08-14T07:43:00.000-07:00

I've been absolutely slammed with work lately. In fact, I recently released three new special reports on my favorite high-yielding stocks.

If you're interested in getting them, check out this page for all the details.

I've also been doing a lot of interviews lately. For example, I just sung the praises of dividends to CBS MarketWatch a couple days ago.

Now, I'm busily preparing for a bunch of trips to find both waves and great, new investment opportunities.

Tomorrow I'll head off to Latin America for nine days. Then a quick business trip to NC. THEN ... I'll be immediately off to Thailand with a brief stop in Switzerland.

Yowza.

Oh, and did I mention that I'll be bringing along my wife and 15-month-old daughter? Yeah, it will be a real trip, dude!

Look for more updates from the road!

Dude, Where Are My Dividends? Right Here ...

2008-07-30T19:18:00.000-07:00

According to Standard & Poor's, the second quarter saw the greatest number of dividend cuts in 18 years.

The firm also reduced its expected 2008 dividend payment on the S&P 500 index from $30.80 to $28.85. Last year, the number was $27.73. So while it's still forward motion, it's the lowest increase since 2002.

While that's grim news, as I've been pointing out here, not all firms are cutting ... in fact, some are RAISING their payments.

Heck, seven stocks in the Dividend Superstars portfolio made payments in July. And not one holding has reduced its dividend. So there are plenty of places to find solid, reliable yields ... you just have to do a little legwork.

Cummins Dividend Comes Up ...

2008-07-14T10:53:00.000-07:00

Over on my other blog located here, I recently mentioned that CVS upped its dividend. Well, it wasn't the only company to do so last week. Industrial concern Cummins Inc. (NYSE: CMI) also boosted its payment to shareholders.

The maker of engines hiked its quarterly dividend 40%. Nice! What's more, that's the third hike in two years.

While the broad indexes continue to wallow, stocks like Cummins are proof that investors can get paid more and more by just waiting patiently.

"Social Insecurity"

2008-06-05T11:45:00.000-07:00

I'm about to do my fourth radio interview of the day. And every one of them has been about this story I did over at Money and Markets.

While the subject matter is anything but lighthearted, I'm glad to get the chance to talk about this topic on the public airwaves.

After all, it's about time people wake up to the fact that Washington has its own reasons for playing with numbers. I mean, Social Security recipients are sleeping in parking lots out in Santa Barbara! Maybe we should start calling it "social insecurity," dude!

I encourage you to learn all you can about the real inflation situation in this country right now. And I definitely suggest taking steps to protect yourself from politicians' misguided policies.

Fannie Mae to Cut Dividend

2008-05-06T05:47:00.000-07:00

Another one bites the dust. Fannie Mae just posted a massive first-quarter loss ($2.2 BILLION) and says it will have to chop its quarterly payment to try and get its finances in order.

It really stinks to see another major financial firm making an announcement like this. But at least I can cling to the fact that none of the companies in the Dividend Superstars portfolio have reduced their payments yet. In fact, most continue to pay and even increase their distributions.

By the way, you can probably tell that I'm not posting here all that much. That's because I've got another blog over here at the Money and Markets website. I encourage you to check it out now.

Huaneng Power Surges Today

2008-04-23T07:11:00.000-07:00

Huaneng Power, which is one of my favorite foreign dividend-paying stocks, is up big today (about 14% as I write this). Overall, the shares are still trying to find a bottom, but given the company's stronghold on Chinese power generation and its generous dividend payments, now is a great time to take a look at this company!

ANOTHER Hike from American Capital Strategies (ACAS)?

2008-02-14T07:10:00.000-08:00

Geez, if it weren't Valentine's Day, I'd think it was Groundhog Day ... ACAS announced yet another dividend hike yesterday. Talk about a sweetheart deal for shareholders!

The company now expects to pay out $4.19 in dividends for '08. That puts the stock's indicated yield around 12% right now. Am I glad this stock is in the high-yield portfolio in Dividend Superstars? You bet!

Why Dividend Stocks Are a No-Brainer

2008-02-07T14:05:00.000-08:00

Given that so many people need income right now, I just wanted to post a little excerpt from my recent Money & Markets column. I think it sums up just why dividend stocks are the absolute best choice for income investors right now ...

"Just in the last two weeks, Ben Bernanke has slashed rates by a full 125 basis points. And he's not done cutting.

"That may be welcome news for some house flippers with adjustable-rate mortgages and credit card borrowers with outrageous balances (provided those rates also come down) ... but it's horrible for anyone with the foresight and discipline to save and invest!

"Take a look at what the latest round of rate cuts have done to the major income investment categories:

"Ten-year U.S. Treasury bonds were recently yielding 3.6%, near their lowest level EVER!

"Meanwhile, the Wall Street Journal reported that the average seven-day money market account was yielding just 3.4% vs. 4.7% last September.

"And according to Bankrate.com, the national average for a one-year CD was 2.75%, while a five-year CD was yielding just 3.09%.

"You know it's a very sorry state of affairs when income investors are actually wishing they could still get 4% a year!"

Meanwhile, conservative stocks like Pfizer, Altria, and Consolidated Edison ARE yielding 4% - 6%.

I think the choice is obvious.

Market Tanking! My thoughts ...

2008-01-22T07:00:00.000-08:00

I hate to sound like a bobble-head Wall Street dude, but I'm just not too worried about this market drop. In fact, I think dividend investors, particularly those of you participating in DRIPs and other dollar-cost averaging strategies should feel just fine.

Consider this study that I originally did for my book, The Standard and Poor's Guide for the New Investor ...

Assume for a moment that it was possible to buy an index fund of the Dow back in the 1930s. And pretend that you began investing $100 into that index fund every month, starting on October 31, 1929. You continue this strategy for the next decade.

Well, at the end of 10 years, the Dow is DOWN 46%. That's one of the worst periods for stocks you can possibly imagine. However, over the same time, your overall investment is actually UP 5%!

How can that be? Because you were buying equal dollar amounts throughout the turmoil. And that means you were getting more of the index when it was low, and less when it was high. You were making friends with the volatility!

So, sit back and relax. Keep saving and investing. Plow your dividends back into more shares. And come back and check in with me ten years from now, dude.

Citigroup Cuts Dividend!

2008-01-15T05:46:00.000-08:00

Well, we knew it could happen ... and probably would. But Citigroup finally announced that it's reducing the annual shareholder payment by 40.7% to $0.32 quarterly from $0.54.

Interestingly, the stock is STILL sporting a yield of 4.4%, which is pretty darn good by most standards.

It's also worth noting that Citigroup was the third largest payer in the S&P 500 (now #6), and this cut will reduce the index's yield from by three basis points.

Bummer!

A Happy New Year for Dividend Investors?

2008-01-02T08:39:00.000-08:00

Man, it's been a long time since I posted! But I'm back from a long vacation up north and ready to get cracking in 2008. With that, I thought I'd give you a quick update on the dividend outlook for the coming year.

Standard & Poor's is expecting a 9.3% gain in the actual cash dividends paid by companies in the "500" vs. what was shelled out in 2007. That amounts to $30.30 for the index.

The big wildcard in that forecast is the financials, of course. If they manage to dig deep and hike dividends despite their deteriorating fundamentals, we're good to go. If not, well, it might not be such a great year for increasing payouts.

I would like to note that more than 60% of S&P 500 constituents increased their dividends in 2007, and 11 companies STARTED paying a dividend. So we do have something to celebrate as we ring in the New Year!

Fed Rate Cuts Positive for Dividend Stocks

2007-12-13T06:24:00.000-08:00

Clearly, the market was disappointed with Bernanke's quarter-point cut on Tuesday. But I've got to believe that Gentle Ben isn't done cutting yet ... not when so many economic indicators look as bad as they do.

In fact, I think we're going to get a few more cuts in the first half of 2008. Bad news for savers; good news for dividend investors. Why? Because lower interest rates make traditional income investments like CDs and money markets far less attractive.

Conversely, dividend stocks -- many of which are offering large yields because of market weakness -- look better and better!

Plus, certain dividend-centric sectors, such as utilities, rely heavily on borrowing to fund their businesses. In other words, lower interest rates benefit these stocks both fundamentally and in terms of investor perception.

Talk about a win-win!

Some dividend tidbits for you ...

2007-11-28T10:25:00.000-08:00

With the financial stocks in turmoil, I thought it would be good to point out just how important the sector is to the broad market (and dividend investors).

The following data is from Howard Silverblatt, an old co-worker at Standard & Poor's:

-- The Financials account for the largest share of dividend payments to the S&P 500 (30.41%), and have the highest tendency to pay and increase.

-- Year-to-date, there have been 60 dividend increases in the Financial sector (93 issues), one decrease (MGT in October from $1.00 to $0.10 - note they still pay) and 1 suspension (MI, that increased in January and is now splitting into two concerns).

-- The yield on the Financials has increased from 2.39% at year end to 3.22% (3.19% if FRE decreases its payment by half).

Is it time to buy some of these beaten-down behemoths? While there could be more pain before this is all over, I do think some of the strongest names are looking attractive.

Intel Ups Dividend

2007-11-15T07:37:00.001-08:00

The semiconductors are getting hit on concerns about slowing consumer spending and less demand for electronic gadgets.

However, I think long-term investors can find plenty of nice dividend-paying tech stocks amid this cyclical weakness in the semis.

Just look at what happened today -- Intel (INTC) announced a 13% hike in its dividend. And plenty of other firms from Microchip (MCHP) to Linear Technology (LLTC) are rewarding shareholders with nice payouts.

So take a look at some four-letter ticker symbols for dividends, dude. You might be surprised by what you find!

iStar Financial (SFI) boosts dividend ...

2007-11-07T07:06:00.000-08:00

Another Dividend Superstar, iStar Financial, reported earnings yesterday. The market was obviously pleased, sending the shares up almost 10%.

What made me happiest was the fact that iStar bumped up its dividend another 5%. I mean, heck, the shares are already yielding more than 12 darn percent!

Is the company a speculative play? Absolutely, especially given the ongoing credit crunch and the moribund mortgage market. However, this latest earnings call made the gamble a little less risky, in my opinion. Reason: Money is still flowing into the company, and those generous dividends are not only secure but growing.

Great ACAS Dividend News

2007-10-31T13:29:00.000-07:00

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!

Yield on Cost

2007-10-22T12:53:00.001-07:00

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!

Citi's results are ...

2007-10-15T07:59:00.000-07:00

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.

Yahoo Finance Conspiracy Theory

2007-10-04T10:44:00.001-07:00

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?

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.