IT'S MUCH HARDER TO INVEST A LITTLE THAN A LOT

When deciding on a new stock investment, I find it more difficult to invest a small amount of money, than investing larger amounts.  Well duh, you might say, but what I really mean is, I spend a lot more time evaluating stocks before making a final investment choice, because I'm more aware of the need to get the most bang for the buck. 

For instance, my quarterly IRA investment is coming up in April and it was a tough choice deciding where to put my money to work.  I finally narrowed my choices down to two stocks:  Spectra Energy Corp (SE:NYSE) or Abbott Laboratories (ABT:NYSE).  While I believe both stocks are good sound investments, I could only choose one for the amount of money I have to invest in my IRA account.  Both have great financials and good business models and while Abbott is a pharmaceutical company, they are not facing any major near term patent expiration like many of their rivals.  Spectra is involved in natural gas distribution, but a great deal of their profit comes from their toll-bridge like storage and pipeline operations.  Both carry similar dividend payouts of around 4%.  So it was hard to choose one or the other.

Since I had to make a decision, I finally went with Abbott Labs due to their slightly higher yield and their lower price to earnings ratio.  I also liked the fact that they have a great deal of cash on hand and a payout ratio of 58% compared to SE's 62%, leaving them more room for future dividend increases.  I have put in the order to purchase ABT for my IRA, but decided to buy shares of SE for my regular taxable account.  I'll have to wait until I collect enough dividends to purchase the SE shares, but I think they'll be a great addition to my portfolio in the long run.

I sure miss the good old days, before the "Great Recession", when my problem was having more cash and not being able to find enough good investments. 

MY TOP TEN HOLDINGS!

My Top 10 Holdings For 2010:

1. CPFL Energia SA-ADR (CPL)--Brazilian Utility Company

2. Legacy Reserves LP (LGCY)--Energy Limited Partnership

3. AT&T (T)--Telecom

4. Universal Insurance Holdings (UVE)--Insurance

5. Encore Energy Partners (ENP)--Energy Limited Partnership

6. Merck & Co. Inc (MRK)--Pharmaceutical

7. EV Energy Partners (EVEP)--Energy Limited Partnership

8. Philip Morris Intl. Inc. (PM)--Tobacco

9. Calumet Specialty Products (CLMT)--Limited Partnership

10. AstraZeneca CA PLC (AZN)--Pharmaceutical


This is a list of my top 10 investments for 2010. I'm not trying to endorse these particular investments, I only list them for informational purposes.

ANOTHER GREAT STOCK FIND!

While reviewing AstraZeneca's stats, I also decided to take a look at Glaxo Smith Kline (GSK:NYSE). GSK pays a $2.29 annual dividend per share, which represents a yield of 6.00% on their recent share price of $38.26. Their price to earnings is 10.90 with earnings of $3.49 per share. They also have $3.65 per share in cash, so their dividend should be quite sustainable. Their ROE is 60.40% with a gross margin of 81.70% and a profit margin of 19.50%.

With my purchase of a stake in AstraZeneca, I found myself short on cash to buy a stake in GSK. So I decided to take profits I'd made on Merck to purchase a position in GSK. I think GSK's numbers are better right now and I am retaining the same dollar position I originally held in Merck shares, so it's kind of like playing with the house's money. But I think that I'll actually come out much better with my position in GSK than if I left the entire amount invested with Merck. I'll also be adding an additional source of dividend income.

Glaxo Smith Kline is facing criticism and possible litigation over diabetes drug Avandia, due to implication of increased heart attack risks for persons taking the drug. However, loss of sales of Avandia in the U.S. would cut 2010 and 2011 earnings estimates by less than 1%. While litigation still could have detrimental effects on earnings going forward, I think that overall the company will come out O.K.. It's not unlike a similar situation faced by Merck a few years back. The threat of litigation and the resulting depressed stock price, could spell opportunity for anyone wanting to invest in GSK for the long term.

ASTRAZENECA P L C MY LATEST STOCK PURCHASE

Yesterday was a good day for the market and a good day for shopping for a new addition to my investment portfolios. I've decided to add shares of drug maker AstraZeneca P L C (AZN:NYSE) to my regular investment portfolio and as a long term holding in my IRA account. AZN has earnings per share of $5.19 with a dividend payout of $3.42, which represents a 7.80% return on their recent share price of $43.94. Their ROE is 35.10% and they have $5.38 per share in cash. They have great profit margins and an acceptable level of debt. As a dividend investment, I'm thinking I will do quite well with AZN.

AstraZeneca PLC is focused on the discover, development, manufacturing and marketing of prescription pharmaceuticals and biological products for important areas of healthcare: Cardiovascular, Gastrointestinal, Infection, Neuroscience, Oncology, and Respiratory and Inflammation. Its primary products include Arimidex for hormonal breast cancer, Crestor that provides treatment for managing cholesterol levels, Nexium for acid-related diseases, Seroquel an atypical anti-psychotic therapy for treating schizophrenia and bipolar mania and Symbicort for the treatment of asthma patients. The company is active in over 100 countries with a growing presence in important emerging markets including China, corporate office in London, UK and major R&D sites in Sweden, the UK and the U.S.. The company owns and operates numerous R&D, production and marketing facilities worldwide. It has over 25 manufacturing sites in over 15 countries. It operates a small number of sites for the manufacture of active ingredients in the UK, Sweden and France, complemented byefficient use of outsourcing.

Changes To My Stock Investments

In the previous article, I mentioned I was selling my stake in Altria Group (MO) since I'm pretty much convinced they are in a declining business. I've decided to re-invest the money in three stocks:

Advance America Cash Advance (AEA)

I previously invested in Advance America for a quick trade profit and made over a 97% gain. I've come back for a second, longer term investment for the dividend.


Windstream Corp. (WIN)

A rural telecom with promising numbers and a great dividend payout.


Merck & Company Inc. (MRK)

I'm adding to my long term investment in Merck. I've made quite a bit of money trading their shares in the past. Now I'm holding on for some dividend cash.


By dividing the money up between the above stocks I should lower my risks and increase my dividend income per dollars invested.