Friday, September 30, 2011

Follow up on dividend machine Harleysville Group, symbol HGIC

          Dear income investors, you hit a home run with HGIC, Harleysville Group a small insurer that I profiled on May 30, 2011 see original post on HGIC.

Wednesday, September 28, 2011

Follow up on dividend machine Watsco, symbol WSO

Follow up on dividend machine Watsco, symbol WSO

                Income investors who want to invest when the market is down, which is the best time to add to your income investments, have to decide to dedicate their capital to a new holding or an existing holding.  In that vein, I would like you to look at Watsco, symbol WSO.  See original post on WSO.

Monday, September 26, 2011

Dividend Machine for September 26, 2011 Landauer, symbol LDR

Patient treating room for neutron radiation th...Image via Wikipedia

                When I started this simple income investing  project that includes  finding at least one company per week that qualifies as a dividend machine, my theory was that 52 companies are just about the right number of companies for a large portfolio.  Fewer companies are okay but you risk too much concentration in one company or industry.  More than 52 and you have trouble tracking them.  I know this much from my many years of investing my money and that of others, you need to diversify; never risk everything on one endeavor.  Equally, portfolios with 100 holdings usually underperform as far as income is concerned; and income in the sole purpose of this investing for income blog.

Thursday, September 22, 2011

Income investor strategy for today’s market

Income investor strategy for today’s market

          Like all of you, the market action, the fed action, the U.N action, the European action all lead to making me sickly especially when I look at the value of my portfolio.  Today is painful but we have to view it as an opportunity.  If you keep your lists up to date, you can scan through your holdings and look at opportunities to add to your positions or to write calls against positions.

Monday, September 19, 2011

DIVIDEND MACHINE September 19, 2011 TRASH - RSG or WM

Trash Recycling with Disposal ContainersImage by via Flickr
                My search for a dividend machine for this week was very interesting.    Several companies came so close to meeting our four hurdles (1) makes money (2) pays at least a 3% dividend with a payout that is less than their earnings (3) has increased the dividend every year for at least 5 years and (4) has a low debt to equity ratio.  I am still waiting for Verizon to be my pick but it is just not quite ready as they pay down debt and work on creating ever-increasing income…after all, ever-increasing income is a precursor to ever-increasing dividends.

                I am going with trash this week.  RSG, Republic Services peaked my interest with earnings of $1.26 and a dividend of $.88.  At the close on Friday September 16, 2011, of $28.85, the yield is just barely above 3 percent.  Analysis of RSG lead me to review Waste Management symbol WM.

              Waste Management, symbol WM, earns a solid $1.98 per share and pays out $1.36 in dividends.  At Friday’s closing price of $32.01, WM sports a dividend yield of 4.25 percent, which exceeds Republic’s dividend yield by over 1.25 percent.   When looking at dividend growth Republic is the winner, but WM has also increased the dividend every year and has provided a few extra payouts.   In 2006, RSG paid $.107 per share per quarter and will pay $.20 per share this quarter.  In 2006, WM paid $.22 per share per quarter and will pay $.34 per share per quarter.   

                Since both RSG WM meets three of our four criterion, the final measure is debt to equity ratio.  WM has a D/E ratio of 1.44 and RSG has a D/E of .95.  

               The choice is yours.  WM pays out more today than RSG but RSG is more fiscally solid than WM.  RSG pays out less but has increased the payout at a faster rate than WM.   It is nice to have two choices this week.

Very Truly Yours,
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Monday, September 12, 2011

ITW Dividend Machine with Call Option Income

          Earlier today I profiled ITW as a dividend machine.  I want to share with you another income opportunity on ITW and that is to sell calls against ITW.  Here are the facts:  you can buy ITW today at about $41.25, you will receive a dividend of $.36 on October 12, 2011; you can sell a December $45 call against your holdings and you immediately receive a call premium of about $1.75.

DIVIDEND MACHINE for September 12, 2011 ITW Illinois Tool Works

NEW YORK - JULY 30:  A financial professional ...Image by Getty Images via @daylife

            Income investors must take advantage of poor markets; these are opportunities to search for deals.  ITW, Illinois Tool Works has been a company I have wanted to own.  My reasons for not buying ITW already are many, including already owning a bunch of industrial companies, and the dividend yield was a touch too weak for me in the past.

            Times have changed for me and perhaps for you too.  Earlier this year when the markets were up, I wrote calls on the industrials and the call  buyers took my stock.   I always make at least 10% on the gain from a call being taken, so I was happy to lose them.  Now I am a little short on industrials.  Since over time, industrials have provided nice dividend income that goes up during bad times and they share extra profit with us during boom times we always want to have a healthy allocation of industrials.  With the recent market swoon, I finally find an opportunity to add ITW to my income portfolio.

            ITW’s dividend fundamentals are solid.  Earnings are $3.85 per share per year, dividends were just increased again as they have been for at least five years.  ITW’s annual dividend is now $1.44 per share per year.  If you own ITW by September 30, 2011, you will receive the recently enhanced quarterly dividend of $.36 per share on October 12, 2011.  The dividend yield is 3.39% based on the closing price of $42.51 on Friday, September 9, 2011.  

            ITW has been in business for around one hundred years and is composed of 840 small businesses.  They have a very solid balance sheet as measured by D/E ratio, which is .39.

            If you have money to invest and want to buy a diversified industrial with a dividend yield that is well above what you can get from a corporate bond and with a dividend yield that has increased every year for at least five years, ITW is for you … and me!

Very Truly Yours,
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Monday, September 5, 2011

Portland General Electric - Dividend Machine for Sept 5, 2011

Rosskopf (Freiburg), Windräder vom AussichtsturmImage via Wikipedia          Our dividend machine for September 5, 2011 is Portland General Electric, symbol POR.  This electric and alternative energy company was a subsidiary of Enron.

After POR became independent, it has consistently increased its earnings.  POR paid its first dividend of $.225 in March of 2006.  If you own it before September 26, 2011, you will receive a quarterly dividend of $.265 on October 17, 2011. Few investments have increased their payout recently.

POR meets our very stringent criteria for a dividend machine.  POR earns $2.19 per share per year, pays our $1.06 per share per year, which, at Friday's closing price of $23.45, is a dividend yield of 4.52 percent.  POR's debt to equity ratio is 1.09, within industry average.

The above paragraph depicts the nature of simple income investing.  Bonds are still too expensive and this blog does not cover real estate investing, therefore your investment choices tend toward investing (not trading) equities.  During times of market uncertainty, a safe investment is one where the company makes more that it pays you and it pays you more and more every year.

Consider POR, Portland General Electric for the income-producing portion of your portfolio.

Very Truly Yours,

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Friday, September 2, 2011

Adding to MOLX & LMT

Image representing Lockheed Martin as depicted...Image via CrunchBase          A quick review of my list of dividend machines revealed two buys in this down market.  Readers of this blog know that the sole purpose of income investing is to generate income.  We know stock prices will move up and down.

          LMT and MOLX are two companies whose stock price is down at least 10 percent from the date each was profiled as a dividend machine.   I like to add to positions when I can get it on sale.  Each of these companies still meet my criteria as a dividend machine.

          Today you could buy LMT at about $71.20 and write a December $77.50 call for $1.80.  LMT's quarterly dividend is $.75.  Writing this call, also known as selling a call, creates income greater than two dividend payments.  Furthermore if the buyer of my call takes LMT at $77.50 we book a capital gain of 11.37 percent.  My kind of trade.

          MOLX is trading today at about $20.30.  You can write a November $22.50 call for $.75.  Again this meets our criteria.  The call premium is almost equal to a whole year of dividends which are $.80.  Moreover, if MOLX is bought by our call buyer, we book a 14.53 percent gain.

          You have to have ice in your veins to do this kind of investing.  The income is worth it for me.  You will have to determine if this strategy works for you.

Very Truly Yours,

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