Dividend Stocks

Hello Everyone,

Today I’m going to cover dividend paying companies.  Over the past few months the stock market has been extremely volatile.  It has been a very frustrating time period for many investors.  Wouldn’t you like to ease your frustration?   Of course you would!  That is why during times of uncertainty dividend stocks tend to not move in such an erratic manor. 

I mentioned dividends in one of my posts last year, but it’s always good to revisit great investment strategies. First many may ask, what is a dividend?
A dividend is a portion of the earnings a company generates to give back to the shareholders of the stock.  A large portion of companies pay out a dividend on a quarterly basis to their shareholders, meaning every 3 months.

There are many advantages for investing in dividend paying companies

1.      Dividends serve as a source of income at retirement

2.      They can be reinvested to buy more shares of stock

3.      They add value to companies that have slowed in growth

4.      They are taxable at 15%, which is much lower than ordinary income

5.      Companies can raise the dividend payout as earnings increase

6.      Dividend paying stocks have a higher yield than a savings account

7.      Potential for stock to appreciate in value, while paying a dividend

I’m sure I can think of a few more, but you get the idea.  The one thing I like to point out to everyone is during stock market uncertainty the amount of the dividend payout doesn’t change.  Unless of course the company is in financial trouble.  That’s why many institutions and fund managers pour money into dividend paying companies. Dividends allow for stability and income.  This is also how many investors make their millions. 

Take for example Warren Buffet’s company Berkshire Hathaway. Berkshire has an 8.71% stake in Coca Cola (KO) owning 200,000,000 shares.  I always use this example when I speak about dividends since Warren Buffett is by far the greatest investor during my lifetime.  Currently Coca Cola pays a 2.70% yield. That is equal to $1.88 a share a year or $0.47 a quarter.  That means Buffett’s company gets paid $94,000,000 a quarter ($376,000,000 a year) to own Coca Cola stock.  That right there is the secret to amassing wealth. Dividends!  On top of that the dividends can be reinvested to buy more stock.  In Buffett’s case Berkshire Hathaway could potentially reinvest all of its dividends.  If the stock price stayed stagnant at today’s closing price of $69.38 all year an additional 5,419,429 shares could be bought. And with the power of compounding the additional shares reinvested over time would continually increase in size.  It’s essentially an ATM machine!

That said each and every person has an opportunity to take advantage of companies that pay a dividend.  This allows investors to share in the company’s profits.  It drives me crazy when people talk bad about Wall Street and how they never do anything good for people.  I say dividends!!! Ding! Ding! Ding!

Using a company’s money to reinvest in that company to build wealth overtime is a no brainer.  Quit wasting time and go buy yourself some dividend paying companies!  Here are a few stocks along with their current yields.  This should help you get your research rolling!


AT&T (T) 6.20%

Verizon Communications (VZ) 5.70%

Merck (MRK) 4.80%

Pfizer (PFE) 4.40%

Intel (INTC) 4.30%

General Electric (GE) 4.00%

Johnson & Johnson (JNJ) 3.60%

JP Morgan Chase (JPM) 3.10%

DuPont (DD) 3.60%

Travelers (TRV) 3.40%

Proctor & Gamble (PG) 3.40%

Chevron (CVX) 3.30%

Home Depot (HD) 3.10%

McDonalds (MCD) 2.90%

Wal-Mart (WMT) 2.80%

Clay-

“When in doubt buy more!”

Current Holdings:
Apple (AAPL)
Cosi Inc. (COSI)
Weatherford International (WFT)

The Power Of Dividend Reinvestment. Harness The Power!

First I would like to say Wow! What a great day for the stock market! I have been looking for a positive day like this for weeks. The Dow up 273.28 to close up 2.76% to 10,172.53 I also enjoyed the nice action in WFT-Weatherford International. Finally the market has given this stock a little respect up 6.81% on the day. We still have a long push upward with this company.

Today I’m going to talk about the power of dividend reinvestment. You may say what is a dividend?

A Dividend is a portion of the earnings a company generates to give back to the shareholders of the stock. A large portion of companies pay out a dividend on a quarterly basis to their shareholders, meaning every 3 months.

For example Coca Cola Company ticker symbol (KO)

Pays out a $1.76 a year in dividends and at the current price of $52.45 that would yield a return of roughly 3.4% a year. That means every 3 months you would receive .44 cents for every share that you owned. Not to bad! That is definitely better than what you receive for the money you have parked in your savings account.

Now that we know the definition of a dividend I want to really explain the true power of reinvesting the dividend. Reinvesting the dividend is essentially buying more stock with the dividends you would receive on a quarterly basis. Well continue to use Coca Cola Company (KO) as an example.

Ex: Let’s say you bought 1,000 shares of KO.  Every 3 months you would receive .44 cents a share.

.44 x 1,000=$440 or $1,760 a year.

Say you reinvested those dividends for 30 years and never touched the stock and the price of the stock didn’t appreciate and stayed the same your initial investment of 1,000 shares would turn into 2,636.91 shares and you didn’t do a darn thing. That means:

1,000 shares at 52.45 would be $52,450

After 30 years your initial investment of $52,450 would have grown to a whopping $143,008.44 that’s a 172% return on your money. That was all created by reinvesting and compounding the dividend. You may say okay that’s a lot of money but I’m not really impressed. Check this scenario:

Same investment of 1,000 shares of KO at $52.45 and you reinvest your dividends, but now you also take advantage of the actual stock appreciating in value. Let’s say KO stock grows at an 8.5% rate of return annually. Your initial investment of $52,450 would have grown after 30 years to an amazing total of 1,529,847.31. That’s roughly 2,816% return on your money. You would have made $1,477,397.31 over 30 years. 1.4 million dollars!!!!

Don’t believe it! Check out this link and plug in the numbers

http://www.hughchou.org/calc/drip.php (this is where I pulled all my numbers and I give full credit to this site for a great product)

So in the end dividend reinvestment is the way to go! Harness the power of compound interest and in the long term you will see great results. Some great examples of dividend stocks you may want to check out are the following- (KO)-Coca Cola Company, (PEP)-Pepsico, ( JNJ)-Johnson and Johnson, (KMP)-Kinder Morgan Energy Partners, (MO)-Altria, (XOM)-Exxon Mobil, and (CAT)-Caterpillar to name a few.

If you invested correctly you could have a portfolio that consists of dividend paying stocks. Once in retirement you can pull a portion (a %) of the dividends to use as income to live on and let the rest of the dividends grow by reinvesting to continue to grow your nest egg. Make your money work for you! You have worked hard for your money and now its time to repay yourself!

I would also like to share a great website. I came across this site and have read a few of the articles and the information is very beneficial to all that would like to learn more about dividend stocks to grow their portfolio. This person has great insight!

http://www.dividendgrowthinvestor.com

Thank You,

Clay-

Have a Question? Send Questions to wheatleycsmk@gmail.com

New Content every Thursday and Sunday.
Occasional Stock Market Commentary during the week.
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Stock Market Worries? What Goes Up Must Come Down!

To all my followers it seems that the passed couple of days have been rough for anyone that owns stocks.  I'm here to tell you that everything will be just fine!  The U.S. Stock Market has been on a run since March of 2009 and frankly as the saying goes WHAT GOES UP MUST COME DOWN!  Markets move up and down and there will be corrections along the way.  I'd rather see the stock market pull back gradually than what we experienced in 2008. 

Europe is playing a major role in dragging the U.S. Equity market down.  Please don't be discouraged because the best time to buy is when you feel awful about the stock market.  Invest in companies that have good fundamentals.  What I mean by that is companies that have good earnings, little debt, possibly a dividend, great management, and a optimistic outlook on future business. 

Many companies have been sold off way to far and warrant higher stock prices.  Stay optimistic and in the end you will be the one living comfortably in retirement!

Come visit tomorrow as I will have new material on what to look for when choosing a Mutual Fund for your 401K or other Retirement Fund.

Thank You,

Clay-

Have a Question? Send Questions to wheatleycsmk@gmail.com
New Content every Thursday and Sunday.
Occasional Stock Market Commentary during the week.
Feedback Welcome!
Interested? Please become a follower