Thursday, December 30, 2010

Almost a dividend machine

Not all stocks that pay greater than a 3% dividend yield qualify to be a dividend machine.

I would love to own Clorox symbol CLX. It earns $4.67 per share and pays you $2.70 per share. Moreover, the dividend has increased 2.7% every year. So what is the rub? The debt to equity ratio is the rub. Clorox has too much debt. Money Central marks their D/E ratio at 10.5. Let us keep an eye on CLX for the future but for now we just cannot include it in our dividend machine list.

Royal Bank of Canada Montreal is another stock I would love to include as a dividend machine. Royal Bank of Canada Montreal symbol RY pays a 3.84% dividend yield. RY has increased the dividend most years but not in the last couple of years. I may buy it anyway as it meets the other key criteria (makes money, pays me some of what they make but not too much and has a decent D/E ratio) but it is not a dividend machine unless it increases the dividend every year.

Keep looking for dividend machine #7 which I will reveal on Monday 1/3/2011

Have a happy New Year,

I am looking forward to the market returning to normal with decent volume and reasonable trades once the big money gets back from the snowstorm and the holidays.

Happy, healthy and prosperous New Year to all.