Monday, May 31, 2010


Recently I decided to look into investing in preferred stocks, as a means of boosting dividend cash flow. I currently hold around 30 different stocks in my regular investment portfolio, so I'm not really interested in adding a lot of new stocks to keep track of. So instead of researching individual stocks, I decided to simplify the move by purchasing shares of an ETF that invests in preferred stocks.

The one I've chosen to add to my portfolio is ISHARES S&P U.S. PFD STOCK (PFF :NASDAQ). Their current dividend of $2.92 works out to a 7.98% yield on their recent stock price of $36.62. Since their top ten holdings are all financials, I won't be concentrating a great deal of my investment capital in this fund, but I don't think it out of line to invest around 5% of my cash in the fund. At their current yield, I could have all my money back, from dividends alone, in less than 9 years and anything after that would be icing on the cake. I could also benefit from any further recovery in the financial sector, while reducing risk by spreading my investment over a wide range of financials held by the fund. This will be a long term addition to my portfolio.

Normally I strongly advocate investing in individual stocks over funds. In a case like this however, where I don't want to expend a lot of time and energy researching individual investments, I've opted for an ETF to broaden my investments and take advantage of the preferred stock issues.

Tuesday, May 25, 2010


During the formative years of my early childhood, we lived in a small farming community in southeast Missouri called Acorn Ridge. It was not really a town, more of a collection of houses along the highway, with a church and a small country store. Still, until we moved away the year I turned 12, it was pretty much the world to me. I can't say I have a lot of fond memories of the place, given that we were one of the poorest families to live there, yet there were good times along with the bad.

What I remember of Acorn Ridge was mostly neat little houses with well kept yards. Inhabited by mostly decent, hard working families with a no nonsense attitude towards life. Everyone knew everyone else, most of the residents attended one of the two local churches and life went on pretty much as you'd expect in any small town of the day.

So this weekend I was driving a friend of mine to Cape Girardeau on some business and decided I'd give the little town a visit. Not especially anyone I wanted to see there, after nearly 40 years, but just curious about how the town had turned out after all this time. I don't really know what I expected to see, but I sure wasn't prepared for what was there. Most of the neat little houses I remember were gone, or so overgrown and deteriorated as to be almost unrecognizable. The country store and one of the churches were gone, no sign really that they ever existed. Our old house was gone, a mobile home now sits on the lot where it used to stand.

What shocked me the most I suppose was the family home of one of the wealthiest and most prominent members of the community during the time we lived there. It had always been well kept, modest but nice house, several outbuildings, including a detached garage, expensive late model car and truck and top of the line farming equipment. It was a picture perfect farming operation built up by a very hard working, business savvy farm family. I had pictured it to be much the same as I remembered, with newer vehicles, maybe a nicer house, thinking that family members would have continued to build on what their parents had worked so hard for. I had to drive past the place twice before I was sure it was the same place. The house and garage are still there, although run down and tired looking. Gone are the outbuildings and farm machinery, the well kept yard and basically any hint of prosperity whatsoever. Perhaps they sold out after the parents died, or perhaps they were not as adept at the business of agriculture as their parents were. I think what I found so disturbing is that after 40 years, almost no evidence exists of this families one time prominence and prosperity.

While I'm glad I took the time to visit, I found the whole thing a bit disturbing. Got me to thinking a little more about what kind of legacy I'd like to leave behind and how I want to be remembered.

Thursday, May 20, 2010


Contrary to what we saw last year, it looks as though most investors are following the old adage, "In May, go away." With market experts predicting a 15% to 20% correction, many are fleeing stocks in favor of cash. While I'm not selling and have no plans to sell anything anytime soon, I am letting my cash from dividends build up in my money market accounts. It does seem to help you keep your nerves to have some cash on hand when the market goes into free fall.

This is one of those times I like to be in the position to buy. When the market finishes its' tumble and begins to level off, I like to jump in and pick up shares of companies that I believe are normally out of my price range, but would otherwise love to own. You don't have to pick the exact bottom to make money, you just come in as near the bottom as possible. This puts you in a great position for capital gains as the market begins to recover. As a bonus, if you're a dividend investor, you get to earn cash while you wait for stock prices to go back up. This time around, I'll be looking to up my stakes in Johnson & Johnson, Clorox and Campbell's Soup Co.. I may come up with some additional stocks that I'd like to get in on, but for now I'll be concentrating on these three.

Since starting my new job, I've managed to cut my expenses to the bone and am finding it easy to set aside extra money for cash savings as well as continued investments in my regular stock portfolio and my IRA. It strikes me as really odd that I make so much less than I used to, but I'm saving as much or more. I guess when you finally get the hang of managing your cash flow, it's almost irrelevant how much you make. You always manage to pay yourself first and keep right on building wealth. It's taken me a lot of years to get to this point. Sure wish our school systems had provided financial education when I was growing up. Could have saved me a lot of time and a great deal of money.

Friday, May 14, 2010


As much as I hate to see the balances in my investment accounts drop when stock prices decline, I always try to keep in mind that yields on dividend paying stocks go up as their prices fall. Some say this is only a temporary slow down and the market will take off again soon, while others are predicting another 50% drop in stocks. Either way, it could present level headed dividend investors with great opportunities to pick up bargain priced shares and increase their overall dividend yields.

Say for example you have a $20 stock paying a dividend of $1 per year, that works out to a 5% return on your investment. Not bad really, but if that stock drops in price by 50%, or to $10 per share and still maintains the same $1 dividend, then the dividend yield jumps to 10%! This actually happened to one of my stocks during the last downturn and I was quick to take advantage of the lower stock price to double the number of shares I owned. The greatest thing about that is, now that the share price has returned to near it's former high, I'm still earning a 10% return on the shares I purchased at the lower price, not to mention a sizable unrealized capital gain.

This time around I'm in a lot better position to take advantage of another downturn than I was in 2007 and 2008. While my income is lower, I do have a job with a steady income. My personal debt is nearly all paid off and I've managed to build up a cash surplus. So when opportunities present themselves, I'll be able to move quickly a pick up some terrific deals on solid dividend stocks for both my investment accounts.

For my most recent moves, I'm adding RAI to my regular stock account and JNJ to my IRA account. Reynolds American Inc (RAI) carries a dividend of $3.60 per share which represents a yield of 6.74% on their closing share price of $53.40. Johnson & Johnson (JNJ) currently pays a dividend of $2.16 per share, for a yield of 3.38%. Both companies have more than sufficient earnings to maintain their current dividend payouts and should make great additions to my investment accounts going forward. I'll definitely be looking to add additional shares of both stocks should their share prices drop with the rest of the stock market.

Sunday, May 9, 2010


We had a wild ride in the stock market last week, to say the least. While the U.S. government and others try to figure out exactly what caused the big plunge on Thursday, investors are left to wonder whether they should stick with stocks or sell, sell, sell. My personal investments ended the week down by 10%. While I don't like to see lower balances in my investment accounts, I do like to see lower stock prices on some of my favorite dividend stocks. So I'm looking for buying opportunities.

I've put in orders to buy more shares of AFLAC (AFL) and Astrazeneca (AZN) for my IRA account. Also put in an order to buy more shares of AZN for my regular investment account. I currently hold 27 different dividend paying stocks in my regular investment account and am looking to take that back up to 30. Haven't found any new stocks that I'm interested in yet, but when I do, I'll be sure to keep my readers informed.

Got a great dividend payout from CPL the Brazilian utility company! Will probably add to my stake in this great company. I've done very well with them since my initial investment. Also looking forward to the big payout this coming week from my holdings in energy limited partnerships. Haven't decided what to do with the money yet, so I'll leave it in my money market account for the time being.

Had dinner at my favorite Chinese restaurant the other night and my fortune cookie said, "You can look forward to many rich rewards in the coming year." I took it as a sign, I'm looking forward to a prosperous year ahead.

Monday, May 3, 2010


I've been keeping an eye on the news related to the oil spill in the Gulf of Mexico. After reading more in yesterday's paper, I decided it might be a good idea to sell my shares in BP and BPT. Although I'm not sure the trust would face any litigation related to the spill, I figure what's bad for British Petroleum would be bad for them as well.

At any rate, I've placed orders to sell all shares and am using the cash to purchase more shares of AZN, AT&T and UVE. So all the money I get back from my investment in British Petroleum will be re-deployed and put back to work so I shouldn't lose much dividend income.

Just hope the politics of this oil spill don't lead to such severe restrictions that consumers end up paying for the whole mess.

Sunday, May 2, 2010


The big scandal at Goldman Sachs put investors on edge this week, causing a minor drop in share prices across the board. While scandal in corporate America is never a good thing, it's especially troublesome in such a fragile economic recovery. I'm sure there will be a great deal of investors running for cover, pulling their money out of the market in anticipation of a much more severe drop in the market. I for one intend to stay fully invested and plan to be ready to take advantage of any major drop in share prices to add more shares to my investment portfolio.

Got my first dividend from Campbell's Soup this past week, was pretty happy about that. I'm currently holding shares of CPB in both my regular investment account and my IRA. I think they're a great long term holding. Their current dividend yield is only 3.07%, however with their great franchise product line and ample earnings per share I hope to see some increases in dividends in the years to come.

I will also be collecting dividends this month from all of my investments in energy limited partnerships. I didn't realize when I made my initial investments that they all paid in the same month and on the same day. While I like to have payments spread out more evenly, I can see where having a big lump sum payout every quarter could come in handy at times. I plan to hold this money in cash in my money market account until I find another good dividend stock so I can put it to work. In the mean time, I'll draw interest on the cash.

Haven't made a lot of big moves in either of my investment accounts lately. I did end dividend re investments in AEA, the cash advance company. I wasn't especially happy with some of the things I read in their annual report, so I don't intend to invest any additional funds with them. However, I will continue to hold shares I currently own and draw the dividends in cash. Otherwise I haven't made a lot many adjustments to my investment plan for this year. Happy to report everything is moving along quite well and I'm on target for reaching or exceeding my goals for the year.