Friday, September 30, 2016

SEPTEMBER DIVIDENDS UP 130% COMPARED TO 2015!

The last of September's dividend payments came in today and I'm happy to report, income for September 2016 is up over 130% compared to September 2015!  While part of this increase can be attributed to rising dividends, the majority is from reinvested dividends and additional cash investments.  Still, it's a pretty astonishing increase in cash flow.

For the month of October, I'll see new dividends kicking in from CRF, EAD and CHI, so it promises to be another great month.  I expect to see a similar, if not even larger, increase in year over year monthly cash flow for October.  At this point, I'm really getting excited about December.  December has the most dividend payments of any month of the year and includes special dividends, so it should be a great month for income.

Yesterday's 200 point drop in the DOW just served to confirm my decision to withhold reinvesting dividends for the time being.  The problems with Deutche Bank in Germany, uncertainty over the Federal Reserve rate increase, OPEC agreeing to limit oil production and the election are all bound to affect markets one way or another.  I'm thinking it's going to be a downward spiral for a while.  So I'll keep parking cash on the sidelines and hold out for better prices on stocks.  

Tuesday, September 27, 2016

THREE REASONS TO STOP REINVESTING DIVIDENDS NOW

I have stopped reinvesting dividends on all individual stocks, stock funds and bond funds for the time being, for three very good reasons.  For one, we are nearing the November elections and a new president will take over at the first of the year.  Regardless of who wins the election, historically we will be faced with at least a two year period of a sagging stock market.  Reason number two, the Federal Reserve seems intent on raising interest rates which will adversely affect bond funds and rate sensitive stocks, at least for the short term.  The third reason has to do with the aging bull market.  Stocks are historically overpriced right now and some sort of correction is due any time.  So reinvesting dividends at today's stock prices seem contraindicated to me.

My plan is to collect the cash dividends until I see how everything plays out after the first of 2017.  Should we see a correction in the market, I'll have a cash reserve built up to take advantage of lower priced stocks.  Should the Feds raise interest rates, shares of the bond funds I hold will drop in price, also allowing for me to purchase more shares at a better price.  If none of these things should happen, then I'm left with a chunk of cash I can put to work however I see fit.  I'll still be building monthly cash flow through additional cash purchases between now and the first of the year.      

THERE IS NOTHING WRONG WITH TAKING SOME CASH OFF THE TABLE

When I was younger, my brothers and I used to meet for dinner at our mother's house on Friday nights.  We'd have a great home cooked meal and a nice visit and afterwards we'd have our Friday night poker game.  We never played for big money, it was more about visiting and having a good time.  But every time we played, if I won a hand, I would take half of the winnings and put it in my pocket and continue playing with the rest of the money.  When the money on the table ran out, I'd drop out of the game.  Taking money off the play table ensured that I never had a poker night that was a total loss.

It's the same when it comes to investing.  There is never anything wrong with taking some of your cash off the table.  In my case, I don't sell any stock, I just divert dividend payments to cash.  Of course I keep the cash in an FDIC insured interest bearing account, so it continues to work and earn more money, but it's no longer subject to the gyrations of a sometimes volatile stock market.  I don't do this because I need the money, I leave the cash in my investment account.  However, when the stock market is dropping, having a sizable chunk of cash in your account is a great stabilizer.  And when things start to look up again, you can always put that cash to good use buying in while stock prices are still low.

HAPPINESS IS, ANOTHER PAYDAY!

O.K., I know money can't buy you happiness and just getting paid won't magically transform your life, but I've noticed that most of the people I work with are in a much better mood on payday.  So, with that being the case, imagine getting paid every day.  It won't make you totally happy but it will go a long way toward improving your mood and making happiness a lot easier to come by.  Any time I start feeling a little down about the struggles of life in general, it helps tremendously to remember that I'm now getting paid 339 times per year (including stock dividends, paychecks from work and interest payments).  All I have to do is figure out how to get paid the other 26 days and I'll be getting paid every single day!

I've really already figured out that I only need to buy shares of 2 monthly paying dividend stocks and one dividend stock that pays quarterly and I'll get paid 367 times per year.  While that, in itself, improves a persons disposition, what's even more exciting is it just keeps getting easier and easier.  Money attracts money and success breeds success.  It's the whole snowball effect taking hold, with monthly cash flow increasing month after month and no end in sight!  It took a lot of hard work and perseverance to get where I'm at today and I still have a long way to go, but it makes the whole process much easier and makes my life much happier just knowing that tomorrow is payday.

Wednesday, September 21, 2016

WELLS FARGO CASE HIGHLIGHTS THE NEED FOR SERIOUS OVERHAUL OF EXECUTIVE COMPENSATION

As a shareholder of Wells Fargo, I've been following the news about allegations of fraud committed by some of their executives to boost their compensation.  While I'm a firm believer in performance based pay packages, if it's found that fraud is committed as an effort to boost compensation, then I believe every effort should be made to retrieve the money paid to the individuals involved.  In the most recent article I read, the CEO of Wells Fargo was talking about possible "claw back" actions being invoked by the board of directors, but it didn't say they were actually going through with it.  In my opinion, failure to do so shows an egregious lack of responsibility on the part of the board of directors and should result in a call for their replacement.  The board of directors are supposed to represent the best interests of the company and it's shareholders (i.e. owners of the company, which I think they tend to forget).  If they fail to do so, then they need to be fired!

As far as I'm concerned, this whole situation brings up the need for a close look by all shareholders of every U.S. corporation at executive pay packages.  One of the people involved in the fraudulent practices at Wells Fargo is reportedly walking away with over $124 million in compensation.  The real question shareholders should be asking at this point is, why was this woman getting paid so much in the first place.  Here again, it goes back to the board of directors who repeatedly approve these outrageous pay packages.  Yes, I believe that good people should be paid well for their work, but come on!  What did this woman possibly do that would merit such high pay.  Apparently nothing, as it turns out.

So really, what it all boils down to is, we as shareholders (owners) of the companies doing business in the U.S. need to start demanding better representation of our interests from the board of directors.  If they fail to look out for our interests then they need to be replaced with people who will.  I'm not picking on Wells Fargo in particular and I do intend to hold on to my shares.  I'm sure these practices go on at other banks and they just haven't been caught yet.  I'm also equally sure that executives are way over compensated at most major corporations.  It's time shareholders put a stop to it.  

Friday, September 16, 2016

BUILDING MIDDLE OF MONTH INCOME

A big part of my investment plan, for the remainder of this year and for 2017, is to bolster middle of the month income.  Currently my portfolio churns out 291 dividend payments per year, with the majority of cash coming in at the beginning and end of each month.  This week's purchase of CHI gives me 4 monthly dividends on the 15th of each month with some quarterly dividends paying on the 15th throughout the year.  So it's a simple matter to boost mid month cash flow by purchasing additional shares of CHI, MAIN, JMP and IGD.  I also plan to buy more shares of CSX which pays quarterly on the 15th.  While it really doesn't matter when I get paid, I just like the idea of a nice stream of cash coming in all month long.

That being said, I have no intention of ignoring the rest of the month.  The purchase of CRF stock for my Roth account this week will significantly boost end of the month income.  I also plan on purchasing shares of CLM  for the Roth account, another end of month paying stock.  Both of these funds have an extremely high dividend yield, so they're great for collecting cash payments, but I won't reinvest the dividends.  I believe you should not reinvest dividends in any fund who's payouts include a large portion of "return of capital."  However, funds like UTG who's dividend is a payout from earnings, it's perfectly O.K. to reinvest the dividends.

Completed three of the thirteen stock purchases from my list for 2017.  I'm getting a little ahead of the game, but I can always add to the list or buy additional shares in current holdings.  One stock I'm very interested in is Prudential Financial (PRU).  They have a low price to earnings and a decent history of increasing dividends since 2002.  They're a bit pricey, at a little over $79, compared to stocks I usually buy, but I think they're worth it.  Then too, they're not a holding of any of the funds I currently own, so there would be no overlap in investment.  I'm not terribly concerned about investment overlap, since individual stocks can outperform funds who hold shares of their stock.  However, it's nice to have some stocks that are not widely held.  

Tuesday, September 13, 2016

MY REVISED STRATEGY FOR DEALING WITH A MARKET CORRECTION

I mentioned in a recent post that I already had a strategy in place to deal with a stock market correction, since I've been thinking some type of correction was imminent.  

My old strategy was to stop purchasing any shares until the market leveled off, then purchase as many shares as I could while it was down and on the way up.  I never sold shares unless they stopped paying dividends, not even in the crash of 2008.  I also continued to reinvest all dividends on the way down and on the way up.  This worked out well for me before, even in 2008.  As the market recovered, I ended up with more money in my investment portfolio than I'd ever had before.

However, this time around I decided to play things a little differently.  I'll still hold all current shares, but I will be looking for new stocks to buy and purchasing additional shares of current holdings even as the market drops.  To help offset the loss in value of investments, I have stopped reinvesting all dividends and will collect all payments in FDIC insured interest bearing accounts until price per share of my current holdings drop below my average price per share.  As soon as the share price is below the average price I paid per share, I'll start reinvesting the dividends to add more shares and reduce my average prices.  I figure as long as the price is lower than the original price I paid for the stock, I'll be lowering my cost per share by reinvesting the dividends on the way down and on the way back up.  I've already initiated this plan, in view of last Friday's big drop in the stock market and the further slide yesterday and today.  I'll let you know how it works out.

Some good news to report.  Since the money I transferred from my taxable account to my Roth IRA wasn't available to invest until today, I picked up shares of CRF, TROW and CHI at much lower prices than I expected, so the dividend yield and increase to monthly cash flow are much better than I expected.  Then too, the stocks I sold in my taxable account to fund this purchase have since dropped dramatically, so just by chance, the timing was in my favor.  If the trades are settled by the 15th, I should see dividend income from these purchases by the end of this month.