Wednesday, July 13, 2011

Dividend machines increase income for ordinary investors.

How often have you read a story describing how much money a mutual fund makes only to find your actual experience with that fund is not exactly as good as reported?  The subject of this post is not about mutual funds but about measuring income.

Every serious income investor has to know how much money you will deposit into your checking account from your investments.

When you own individual shares in a company, shares that pay you income, your income is never in question.  You do not need to receive a twelve-page report to figure out your income. You receive per share what the company pays per share.

My strategy, as you know, uses companies that I call dividend machines.  These companies pay at least a three percent dividend yield when I profile them; and they must meet the following additional criteria:

          Earnings must exceed dividend pay out 
             Debt to equity ratio must be 1.0 or less or within the industry average 
            Dividend must have increased every year for at least five years.

Theoretically, each dividend machine I have profiled so far should increase the dividend within a year.  I started this blog in November 2010 and five of the first six companies have increased the dividend.  Here they are:

1.      Microchip Technologies, symbol MCHPSee Original Post on Nov. 14, 2010 increased June, 2011
2.       Johnson & Johnson, symbol JNJ: See Original Post on Nov. 21, 2010 increased June, 2011
3.      Genuine Auto Parts, symbol GPC: See Original Post on Nov. 28, 2010 increased April, 2011
4.      Sysco Corp., symbol SYY: See Original Post on Dec. 13, 2011 *increased January, 2011
5.      Abbott Labs., symbol ABT: See Original Post on Dec. 20, 2011 increased May, 2011
6.      RPM Incorporated, symbol RPM: See Original Post on Dec. 27, 2010 latest increase July, 2010

The purpose of this post is to encourage you to know how much income you receive from your income investments and to make sure those investments yield you more and more income every year.  You cannot afford to think that in 10 years you can live off the same income you have today.  You will have to reduce expenses or increase income.  With solid dividend machines, much of that work is automatic.

Very Truly Yours,
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