Friday, November 5, 2010

Dividend Machines

I like to lump my dividend producing stocks into two categories. One category, my growth and income category, contains companies that meet all my criteria (1) makes money (2) pays a dividend (3) increases the dividend and (4) has a strong balance sheet. These companies have lower yields than the second category but higher growth rates. Hence I use this first category to create capital gains from price gains and/or writing covered calls. See previous blogs on learning about covered calls.

I call the second category of dividend producing stocks my dividend machines. These companies all pay at least 3% and I prefer 4%. Of course they make money as measured by earnings per share (EPS) and pay out less than they make. Moreover, each of these companies has increased their dividend every year for at least 5 years.

Now think back over the past 5 years and you know the stock price of these companies has been volatile just like all the markets. You must be very patient during these times of poor stock performance knowing that you buy a dividend machine to get ever increasing dividend payments. You have comfort in the fact that your companies are financially strong. Actually, some investors who pay a little more attention will turn on dividend reinvestment during times of poor stock price performance and buy additional shares low.

Periodically I provide a list of dividend machine stocks. I love cash flow. I love to see those payments show up in my checking account. You will love it too.

Even with the market surging this week, I have 5 stocks listed on this site that you should consider as dividend machines.

Very Truly Yours,


I will have more insights next week on income investing strategy lessons and ideas. For now, good luck to those who are betting on The Breeder's Cup. Our favorite female athlete is running Sat. Go Zenyatta!

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