STOCKS, DIVIDENDS AND COUPON SAVINGS

It was a slow week for dividends, only collected one payment for the week from Great Plains Energy (GXP).  While it was only one dividend payment, it was a decent one, since GXP is one of my long term holdings and I own a good number of shares.  Stocks trended lower this week from their recent highs, but I look at it as a good thing, especially since I've got a purchase order in for next week.  I'm hoping the prices stay down a little longer until my order goes through.  Market timing is not a part of my long term investment plan, but if I can buy on the dips, it couldn't hurt.

Had a great week of savings on groceries.  I'm working on improving my extreme couponing and it's really been paying off.  Through coupon match ups with store sales, I was able to save 54% on my trip to Gerbes this week, which included three 2-liter Diet Pepsis for free!  Matching coupons with store sales at Schnucks I saved over 67% on my purchases.  On this trip I got two packages of Barilla pasta entirely free and paid only 17 cents each for Nissin Big Cup soups!  I also got Minute Rice, which normally sells for $2.38 a box, for just 79 cents each!  Since I like rice, and Minute Rice is my favorite, I stocked up on those.  I'll pick up some good deals on personal care items tomorrow at Walgreens and use their register rewards to purchase my favorite Stouffers entrees which they have on sale in this Sunday's ad.  I think what I like most about coupons is, they allow me to do the majority of my shopping outside the big box retailers.      

BIN LADEN STOCK MARKET BOUNCE?

Osama Bin Laden is dead and oil has dropped by $2 a barrel on hopes that his death will lead to a more stable oil supply.  They're also talking about a possible "Bin Laden Bounce" in the stock market this week.  It would be nice to see.  Wouldn't it be the height of irony though, for a man who sought to destroy the U.S. economy through terrorism and terrorist threats.  For his death to actually boost the stock market and lower oil prices in the U.S., even if only temporarily, I'd imagine it would have him spinning in his grave.

DIVIDEND INCREASE OR STOCK REPURCHASE PROGRAMS?

Corporations have traditionally sought to return value to investors either through increased dividend payouts or through stock repurchase programs.  A dividend increase obviously meets the stated purpose of "returning value to investors" since the investor receives an increased cash payout.  However, as a long time investor, I have to say I've never really seen any noticeable benefit from stock repurchase programs.

Yeah, I know that a repurchase program reduces the number of outstanding shares, making the remaining shares (at least in theory) more valuable, since profits are split over a smaller number of shares.  This supposedly returns value to shareholders, who should then see an increase in the dollar value of their holdings.  I've never actually noticed any difference (increase in value) when I've had investments in companies who vote to repurchase shares.  In fact, recent research shows that repurchase programs tend to be a wash, since many corporate executives also vote to issue shares as part of executive compensation programs.  Turns out that the majority of shares being repurchased, and supposedly retired, are in reality being re-issued in the form of executive compensation. (Almost sounds like something someone should be going to prison for?)  Which also means that most shareholders would see absolutely zero benefit from a share repurchase program.

This being the case, I say "Show Me The Money!"  I'm making it a policy as a shareholder to vote my shares against ALL stock repurchase programs.  I'd rather invest my dollars with companies who have a history of increasing dividends.  You just can't beat cash in hand. 

For those who would argue the tax advantages of growth stocks, I say hogwash!  Didn't the "Great Recession" teach you anything?  How foolish did all the "growth" investors feel when 10 years of "growth" disappeared from their stock accounts practically overnight.  No thank you!  I'll stick with dividend investing.

DON'T COUNT ON OBAMA'S 50 BILLION DOLLAR INFRASTRUCTURE SPENDING TO CREATE JOBS

I've said it before and I'll say it again, there will be no meaningful recovery of the economy without new jobs.  But I wouldn't count on Obama's plan to create new jobs by spending 50 billion dollars on infrastructure.   Creating infrastructure jobs will not directly impact the areas of unemployment among the poorly skilled workers,  those hardest hit by high unemployment.  When current and newly employed skilled workers spend their earnings there may be some residual job creation, but in my opinion it's highly unlikely to have any significant impact on unemployment overall. 

When the State of Missouri received federal funding for road improvements in the last round of stimulus spending, the only thing I saw locally was some street resurfacing and a lot of new roundabouts that were not really needed.  Did it create more jobs locally?  Not that I'm aware of.  It appears that all the work was done by persons already employed by city street and state highway departments.  So I guess it did keep those people working and good for them.  But there was no significant increase in employment and I'm sure it will play out much the same on the national level.

So how will this affect the stock market?  We might see some temporary gains because of additional funds being pumped in to the economy, but it's unlikely to last.  Big infrastructure firms and their shareholders are likely to benefit most of all.  We're also likely to see a severe market correction, as taxpayers who are spooked by runaway government spending and the ever increasing threat of massive new tax increases, tighten down even more on discretionary spending. 

If they want to create jobs, why not invest the 50 billion in partnerships with business owners who have proven track records of starting and building businesses and creating new jobs?  It shouldn't be that difficult to identify 50,000 U.S. businessmen with successful track records, loan each of them $1,000,000 to start new businesses on the condition that they hire at least 20 employees.  This would instantly create a million new jobs.  The business man would benefit as the owner of a new business, the government would benefit by having a chance to reclaim the money loaned out from successful business ventures.  While they may lose some from businesses that fail, it's better than infrastructure spending where there is no repayment at all.  Taxpayers would benefit by having jobs and residual jobs created by increased spending from a million newly employed.  Oh and don't forget, the 50 billion dollar spending package on infrastructure was just the amount proposed to get the program started,  so even more taxpayer dollars would be spent on future projects. 

However, with the type of government and business partnerships I'm proposing, if the first 50 billion in partnerships was successful, then the loan repayments could go toward creating new partnerships between government and business leaders, whereby even more jobs could be created, without additional costs to taxpayers.  Of course it will probably never happen, but wouldn't it make more sense?  As for those who would argue the dire need for infrastructure spending, I couldn't agree with you more.  We definitely need infrastructure spending, but the money for infrastructure could and should come from increased tax revenues due to job creation, not the other way around. 

A NEW CAR OR A NEW FUTURE?

My car has been paid off for a little over 2 years now. It's still in pretty good shape, even though I bought it used (2 yrs old at time of purchase). But I've been thinking a lot lately about buying a newer model. I wanted to wait until I could pay cash or work out a great deal with a trade in and large down payment, so I could pay off the remaining balance in 3 years with small payments. Then I started to think a little more about the return on investment here.

We all know that cars are not really investments. You pay a large price, you pay even more if it's financed and the value steadily drops the longer you own the vehicle. Not to mention all the money you put out along the way for maintenance and repairs. All that aside, let's pretend for just a moment that you consider your car an investment of sorts. Say you were to buy a nice used car for $12,000 for 60 months, with payments of $200 per month. At the end of the 5 years we'll generously assume that you're able to sell the car for $4,000. Instead of spending the money, or using it to pay on a newer model, you decide to pay yourself equal monthly payments for the next 5 years (60 months) from the $4,000. You would be able to draw roughly $66.66 per month for 60 months ending with a $0 balance. O.K., that doesn't sound too bad. But let's consider another scenario. Instead of buying a nice used car, you decide to make do with the vehicle you have and invest $200 per month in dividend paying stocks. At the end of 60 months instead of having a $4,000 car to sell, you have accumulated roughly $12,000 worth of dividend paying stocks. From personal experience I'd say you could expect to draw $75 per month for the next 5 years in dividend payments, at which time you still own your $12,000 investment portfolio, instead of being back to $0. But it doesn't end there, because as long as you continue to hold your stock, you continue to draw dividends of $75 or more per month.

I realize the preceding scenarios do not take into account everything you would want to consider in making an informed decision. However, the basic lesson holds true: It's always better to buy things that put money in your pocket than something that takes money out of your pocket. So the real choice you'd be making here was whether to buy a new car or purchase a new future for yourself by investing in something that pays you back and keeps on paying.

STOCKS END 7 DAY SLIDE

U.S. markets ended their seven day slide with the Dow gaining 57 points. Investors seem to be trying to make up for some steep losses by searching for value plays after the 4th of July holiday weekend. I picked more shares of General Mills (GIS) and am looking to add to some of my other positions, if the prices are right.

Had a great holiday weekend! Got to watch a couple of World Cup games. Was happy to see Uruguay win in sudden death over Ghana. Uruguay's goal keeper did a great job! Also saw the match between Germany and Argentina. I have to admit that I've never seen the German team play until now and I was expecting Argentina to win. What a shock, when Germany mopped the floor with them!!! It was an exciting match and I can't wait to see more from Germany!

PFIZER AND PEPSI ARE OUT, LINN IS IN!

I recently reviewed the terms of the merger between PBG and Pepsi Co and decided instead, to take advantage of recent price increases to sell my position in Pepsi Bottling. I also decided to sell my stake in Pfizer due to lackluster performance and poor dividend returns. The proceeds from the sale of these two stocks will be reinvested in Linn Energy LLC (LINE: NASDAQ).

Linn Energy carries a dividend payout of $2.52 which works out to over a 9.5% yield on their recent share price of $26.03. Linn Energy, LLC. is an independent oil and gas company focused on the development and acquisition of long life properties which complement its asset profile in producing basins within the United States. The company's properties are currently located in the Mid-Continent and California. The company seeks to be the operator of its properties so that it could develop drilling programs and optimization projects that not only replace production, but add value through reserve and production growth and future operational synergies. The development program is focused on lower risk, repeatable drilling opportunities to maintain and/or grow cash flow. The oil and gas industry is highly competitive. The company encounters strong competition from other independent operators and master limited partnerships in acquiring properties, contracting for drilling and other related services and securing trained personnel.

Adding Linn Energy to my investment portfolio should work well with my goal for 2010 of increasing dividend income. With the recent increase in demand for oil and gasoline along with rising prices, I think Linn will do well for the foreseeable future.

The Week Ahead in Stocks

The stock market ended up for the week, after a better-than-expected jobs report fueled hopes of an economic recovery and provided solid footing for the recent market run-up.

The Labor Department said U.S. employers cut 247,000 non-farm jobs in July, far less than the 320,000 expected and the smallest decline in a year, suggesting the recession was abating. Also, the July unemployment rate eased to 9.4 percent in the prior month, the first time the rate has fallen since April 2008.

Treasurys came under selling pressure, driving yields higher, and the dollar finished the week firmer. In the week ahead, investor focus will be on the Treasury market and dollar as much as the Fed's 2 day meeting midweek and a heavy calendar of economic reports. Retail sales are released Thursday, and there are just a few major earnings reports, including Wal-Mart and several other chain stores.

Although there has been a lot of talk about all the money waiting on the sidelines, possibly coming in to stocks and driving the markets higher, I would expect some kind of pull back before that would happen. There is current speculation that the market could return to 12,000 but I wouldn't expect that to happen until sometime next year at the earliest.

For the coming week, I'll be buying shares of MLP, Markwest Energy Partners LP (MWE) for their 11%+ yield and adding to my stake in AT&T (T) in my IRA account.

Walmart vs Aflac

A friend of mine asked me to call his mother yesterday to help her decide whether she should sell her shares of Walmart (WMT) stock and buy more shares of Aflac (AFL) or sell shares in Lowes (LOW). Wal Mart has held up well for the first half of the year, with people turning to discount stores for shopping during the downturn in the economy. Aflac went through some tough times earlier in the year but is recovering quite nicely, and I expect that to continue through the second half of the year. Given that they are roughly 27% below their 52 week high, and Wal Mart is only a little over 14% below their 52 week high, I think Aflac has a lot more room for possible price recovery. I also think it's likely that Wal Mart could see another weak holiday season, in which case I would expect some price declines.

As for Lowes, with housing showing some signs of recovery and people who are off work doing improvement projects to their homes, I think they have room for growth as well. I personally sold all my Wal Mart stock a few years back. Even though I think holding their shares is not really a bad thing, I just don't expect to see it moving much anytime soon. I think there are a lot better places to invest your money right now.

On an unrelated subject, I was glad to see Pepsico up their offer to buy out Pepsi Bottling. I've been a long time shareholder of Pepsi Bottling and will see a decent profit from the buyout. I like the fact that shareholders have the option of all cash or all stock as long as Pepsico pays half cash and half stock total. Personally I would rather have a cash and stock combination as I think Pepsico will do well in the coming years.

Dividend Stock Investing Is Far From Dead

Dividend stock investing has been an attractive investment strategy for several reasons. They provide you with a real return immediately, in the form of dividend payouts as opposed to growth stocks, which only provide profits when you sell. Increasing dividend payouts, offer the shareholder a hedge against inflation not provided by non dividend paying stocks. Shareholders are able to choose what to do with dividend cash, paying bills, adding to cash savings, reinvesting in stock or whatever strikes their fancy. Now that so many weak dividend paying companies have either cut or eliminated their payouts entirely, it might seem as though dividend investing is no longer a viable strategy. On the contrary, getting rid of the weaker dividend payers has made the stronger companies even more apparent, making it easier to build a solid dividend portfolio. In fact, with stock prices well off last year's highs, dreadfully low interest rates, dividend yields higher than they've been in years, now is an excellent time to load up on the best dividend stocks.

Some things to keep in mind when searching for dividend stocks:

Look for stocks with above-average dividend yields (currently 2.25%). I personally shoot for around 6 to 8% yields, higher risk yes, but potentially much higher returns. You will also want to make sure the company generates enough free cash flow to maintain and possibly increase its dividend, otherwise it's doubtful they will continue payouts. While it's no guarantee of future returns, it's also beneficial to look for companies with a long history of increasing its payouts in proportion to earnings growth. If the company is growing earnings it should be rewarding shareholders with increases in dividend payments. In order to accomplish all of the above, you would definitely want any prospective investment to have a solid balance sheet. If they are carrying too much debt and are unable to repay creditors, they will not be able to pay you.

So even though we've seen drastic cuts in payouts, from some dividend stocks and others who have eliminated their dividends entirely, now is really a good time to be a dividend stock investor. Far from being a dead investment strategy, it may prove to be one of the best strategies going forward.

Legally Invest on Inside Information

Almost every book I've ever read about investing advises you to invest in what you know. I've found this to be some of the best advice when deciding where to put your money. In all of our lives we are surrounded by terrific sources of inside information. In my case, I used to work for a major restaurant chain. Every day I worked, I saw what went on there. I saw the products that sold the best and the ones that didn't sell well. I had access to the packaging the products were delivered in, so I was able to determine which companies the best selling products originated from. With that information, I was able to look up each company, determine their profitability and decide on the ones I thought would make the best investments. Since our restaurant was part of a national chain, I knew that all the other restaurants were ordering the exact same products. From this type of inside information, which is perfectly legal, I've been able to make some terrific investments in 4 great companies and have my eye on 2 more that I'm waiting to purchase stakes in, as soon as the price is right.

Another example of a type of inside information that is available to everyone would be the people you do business with personally. Who do you write checks to every month? Are they a publicly traded company? I've found it a lot easier to part with my money, when paying the phone bill or the electric bill, when I know that every quarter they are going to pay some of my money back in the form of dividend payments. A couple more things to think about, where do you shop? Where do you go out to eat? Have you looked in to the stocks of the companies you frequent the most. Chances are very good that you're not the only one going to these places over and over again. Take the time to look up their stocks. You'd be surprised how many of these companies may be way more profitable than you might think. Maybe they're not the ones you hear about in the news all the time, but then again, by the time they're in the news, they're usually over priced and ready to drop. Best to find these gems before they hit the news.

I really love the idea that when I leave a job, even if they have no retirement program, I'll be making money off them for years to come, through the stock dividends I receive from the companies they do business with. So instead of trying to keep up with the latest investing trends or to try and figure out how the latest tech companies are going to make money, invest in the companies who make the products and deliver the services that you use on a regular basis. You already know how they make their money.

No One Has All The Answers

I recently read a post on another investment blog which I thought was very insightful and informative. Following the post was a comment from one of the readers criticizing the suggestions as too simplistic and suggesting that they would not work. First of all, the article was only meant to be taken as a guideline, or starting point. There were a lot of practical suggestions for setting criteria when choosing stocks for investments. The critic said it made them angry when people say that if you follow their suggestions, you will be a successful investor. I read the post and I saw no such claim, so I'm not sure what they are harping about.

The bottom line is, no one has the perfect system for investing. If they did, I doubt they'd share it so freely. The reason that I write about investing is to share my ideas, not to suggest that everyone else follow what I'm doing. Hopefully the reader will find their own path to success at building wealth and if anything I suggest helps them, great! Any time I read anything about investing, I try to apply the material to my situation. Many times I find something useful, sometimes not. What I have found is that the more you know, the easier it is to adjust your investments to help reach your goals. So I keep reading, applying things I learn and sharing some of the more successful approaches with others. Feel free to follow my advice or ignore it all together.

Little Changes Can Make a BIG Difference!

I know a lot of people who say they just can't save or set aside any money to invest. Their budgets are just too tight, there is nothing they can cut back on to start an investment program. What they often overlook, however, are the small changes they can make in their lifestyles that lead to big differences in their future well being.

You've probably heard of the "Latte factor", where you give up the cup of latte a day and put that money into savings. This is a one very good example of a small change that can really add up to a big difference in the amount you save. When I first started saving for my investment program, one of the small changes I made was, literally, small change. By that I mean, I stopped spending my change. Any time I paid cash for purchases the change went in to my pocket and as soon as I got home, I put the change in a jar. It's such a small amount, you don't really miss it from your spending money, but it does add up. On average, I save $250 every 3 months this way. That adds up to $1,000 per year. If you started this habit at age 20 and put the money in a non-interest bearing account, you would still end up with $45,000 by age 65. Not a lot, true, but if you invested that amount in a dividend paying stock or even a money market account, you would have several thousand more by age 65. All from saving spare change!

Once you make one small change and stick with it, you'll find yourself looking for more ways to save and build your investments. You might shop for insurance on your car and find out you can save $200 or $300 per year or more, or you might decide to eat out less, or take your lunch to work. Whatever the case may be, by just saving small amounts, just making small changes, it can make a really BIG difference in your savings and investments.

Interesting Post On the Commodities Rally

If you're interested in commodities and the current rally in oil and gas prices, you might like to check out this post:

http://briskycapital.blogspot.com/2009/06/commodity-rallyis-it-for-real.html

I recently made some quick cash trading in my shares of British Petroleum. I had intended to hold it long term, but the price skyrocketed soon after I bought in and I decided to take the profit. May buy back in if prices decline latter this summer.

Lackluster Friday, But Not a Bad Week

Not much news as far as the stock market goes today. None that really caught my interest anyway. The new jobless claims were lower than expected, but I'd really like to see overall unemployment numbers improving. Would like to see the economy improving to the point that employers were hiring again. Overall though, it hasn't been a bad week for me as far as my investments go. I made some trades that were quite profitable (the last half of my UVE stock I'm selling with a 101% gain) and I've identified some shares I'm buying in to that I believe will do well. See: http://thebluecollarinvestor.blogspot.com/2009/06/trading-for-some-quick-cash.html So it really hasn't been a bad week for me.

Last spring I did an experiment in trading equities. Although I prefer long term investment, along the lines of Warren Buffet's long term, I did quite well with trading small cap stocks. As an investor, the more you learn, the more you earn. I feel comfortable with my knowledge of the stock market and my stock picks at this point and feel that I'm ready to make short term trades for quick cash. I am limiting the amount I allocate for short term trading and will report on how it goes in future posts. I think the market is in for a rough ride throughout the rest of this year, but I believe there are always opportunities to make money. You just have to look for them.