Thursday, October 16, 2014

IS THIS A MARKET CORRECTION?

With the dismal performance of the stock market of late, some might be wondering if we're facing a market correction or could it just be a bad month, since October has historically been a poor month for stocks?  I'm not quite ready to call it a full blown correction, although I wouldn't be surprised if it was.  I've thought the market was overpriced for some time now.  So what's a person to do?  It's been almost painful watching stock price gains from the past year or so evaporate.  

I don't know what anyone else is doing and I don't pretend to have all the answers to the world's economic woes.  However, I'm a firm believer that anytime you're in the building phase of your investment portfolio, a significant drop in stock prices presents a marvelous buying opportunity.  So I'm planning on adding to my positions as much as possible while stock prices are down.  Not only will I be better positioned to gain from a recovery, but I'll also be buying in at lower prices and higher dividend yields, increasing my overall monthly earnings at a much faster rate than I would have been able to otherwise.

To be honest, I'm pretty excited.  If you want to make money in stocks, you buy low and sell high, which almost no one ever does.  Instead they tend to jump ship when the going gets tough and avoid the market all together until recovery is well under way.  Then they buy back in at higher than necessary prices and repeat the process all over.  Since I invest for dividends and income and have been through a lot of market ups and downs, I don't sell when the market falls.  I may go on hold, simply reinvesting dividends or if the drop is significant, I go bargain shopping for stocks.  

Tuesday, October 7, 2014

THE UPSIDE OF DECLINING STOCK PRICES

Like anyone else, I'm always pleased to see the value of my portfolio go up with share price increases.  However, I'm also mindful of the benefits to dividend investors during declining markets.  As a rule, dividend stocks drop less in declining markets, since investors are less likely to sell shares that they'll be collecting monthly or quarterly cash payments from.  So dividend investors benefit from price stability.

The big benefit to dividend investors like myself, who reinvest dividends to build their positions and increase cash flow is the increase in yields when stock prices drop.  As long as dividend payouts remain the same, when prices drop the dividend yield increases.  If you're reinvesting dividends, the new shares purchased with your dividends are paying out higher yields than shares you would have purchased at the higher prices.  If you have several months of declining stock prices, the average yield on your overall portfolio can increase dramatically.  Not only that, but your dividends are purchasing more shares at the lower prices than you would have gotten if prices remained high, increasing payments even more, since you own more shares.  

This really only applies to people like me who are working on increasing their portfolio holdings.  If you're at the stage where you are collecting dividends to pay your bills, it doesn't help to have the value of your portfolio drop.  Realizing this, I've come up with a plan to address this problem when I reach that stage.  I've decided when I'm ready to collect the cash dividends to live on, I'll collect only 75% of the actual cash each month and continue to reinvest 25% of all dividends collected.  So I'll continue to benefit from situations like declining markets and increasing investments each month will help address the problem of inflation when I retire.  Maybe not a perfect plan, but I think it will work out well for me.

Friday, October 3, 2014

UNIVERSAL INSURANCE COMPLETES $10 MILLION SHARE REPURCHASE PROGRAM

Toward the end of September, Universal Insurance Holdings, Inc. (UVE) announced completion of their $10 million share repurchase program.  The company noted that the timely completion of it's share buyback program underscores its confident outlook, solid financial position and commitment to effectively deploying capital when it sees clear value.  The Board and management team will continue to look for ways to enhance shareholder value, both through strategic growth initiatives and capital returns to shareholders.

As a long time investor in UVE in both my IRA and taxable investment accounts, the yield on my holdings are much higher than the current 3.08% since I bought in at a much lower price.  The actual dividend yield on my original investment is closer to 8%.  I currently reinvest all dividends in additional shares and the share buyback is just another good reason for me to keep this company in my long term portfolio of investments.  My original investment is up 148.44%, not a stock I want to get rid of anytime soon.

Wednesday, October 1, 2014

FESTIVAL OF DIVIDENDS FOR THE FIRST DAY OF OCTOBER!

The month of October is off to a fantastic start with 7 dividend payments on the first day of October.  It's like collecting 7 paychecks at once!  Of course I reinvested these payments to buy even larger future paychecks by purchasing more shares.  

Got more good news in the mail.  Apparently I'd miscalculated one of my medical bills and I'd actually paid it off with the last payment.  They returned my check for my most recent payment with a letter saying my balance was paid in full.  So this bill is paid off 4 months earlier than I'd expected!  I'm pretty happy about that.  

Looks like most of my payments are on the first this month, with 6 more dividends to collect for the remainder of the month.  However, the 6 remaining payments are the biggest dollar wise, with the three largest dividends at the end of the month.  When I start collecting the cash payments to actually live on, this should work out good for budgeting, because I'll get month to pay all the first of the month bills, collect some during the middle of the month and another big payment at the end of the month.  That's the way it works out with my current portfolio.  Don't plan on making any changes anytime soon, other than to add wish list stocks as soon as I can afford it.  The cash machine is working, so if it ain't broke, don't fix it.

Tuesday, September 30, 2014

EGAS DIVIDENDS STARTING IN OCTOBER!

Completed my purchase of a stake in EGAS with the proceeds from the sale of POT.  Just finished checking the dividend history and it looks like I'll collect the first dividend payment from EGAS around the end of October.  This will bring my total dividend paydays to 168 per year!  If you add the 24 paydays from work, that brings my total paydays per year to 192, or a payday every 1.9 days.  Now it's a simple matter of increasing the amount of pay on dividend paydays.  I may not have much control over pay increases from work, but I have quite a bit of control over dividend paydays.  They increase themselves every month through reinvested dividends, I just need to work on maximizing the amounts by making sure I'm holding quality dividend stocks.  

My big focus next year will be on improving the quality of holdings in my portfolio.  I'll be looking to add all the wish list stocks mentioned in an earlier post, with long histories of increasing dividends.  These will all be long term holdings.  I'll also continue reinvesting dividends to increase my stake in current holdings, boosting income every single month of the year! 

Friday, September 26, 2014

SOLD POT TO BUY GAS

No I'm not getting in to the business of selling marijuana, I sold my stake in Potash (ticker symbol POT) to buy a stake in EGAS.  Not only did I eliminate tax payments to Canada, I boosted dividend income by 2% per month.  I like the current yield on EGAS stock and I think there's plenty of room for the share price to grow.  

The purchase of EGAS also boosts the number of dividend payments per year from 160 to 168, since EGAS pays monthly compared to Potash's quarterly dividend.  Reinvested dividends will boost monthly dividends at a more rapid rate since money will compound monthly instead of quarterly.  

I'm still considering replacing some of the bond funds with dividend stocks, perhaps some of my wish list stocks, but that would reduce the number of annual dividend payments since the wish list stocks pay quarterly compared to monthly.  So that idea is on hold for right now and I'll continue with my previous plan of taking bond fund dividends in cash to purchase stakes in the wish list stocks.

While I'm looking forward to the big 3 end of the month dividends next week, dividend income for the last month of the 3rd quarter will be down compared to March and June of this year as a result of the stocks I sold in July.  Since that small setback, monthly income has been rising steadily, so I'm excited about boosting it even more with the purchase of EGAS.

MONTHLY DIVIDEND STOCK: GAS NATURAL, INC. (EGAS:NYSE)

All of the monthly dividend payers I currently hold in my portfolio are bond or stock funds.  I did some research into stocks paying monthly dividends, ruling out energy trusts, REIT's and investment trusts which I prefer to avoid.  I came up with one promising candidate.

Gas Natural, Inc.  (EGAS:NYSE)  EGAS  currently pays a 5 cent per share monthly dividend for an annual yield of 4.64% on the recent price per share of $11.82.  They have a P/E of 20.0 and their payout ratio is 58%.  The company's 2013 earnings of 71 cents per share easily covered the dividends.  

EGAS distributes and sell natural gas to residential, commercial and industrial customers in Montana, Wyoming, Ohio, Pennsylvania, Maine and North Carolina.  They have majority ownership interest in many natural gas producing wells and gas gathering assets.  They also own gas pipelines in Montana and Wyoming.  

While growth in share price and earnings over the past few years might not seem so attractive when compared to overall growth of the S&P 500, EGAS has held up better during past market downturns providing some protection in case of such an eventuality.  All things considered, EGAS could be a good addition to my long term holdings, providing 12 additional dividend payments per year.  Of course since I'm limiting my current portfolio to 20 stocks, I'm considering replacing one of my bond funds with EGAS.