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.

                Watsco, symbol WSO was dividend machine number 7 when I profiled it on January 3, 2011.  At that time, WSO trading at $63.08 per share.  Today WSO is trading at $55.41 per share.  WSO is the worst performing dividend machine based on stock price of the 45 dividend machines I have profiled so far. The loss of principal is a touch scary for me as it should be for you if you bought at around that price.   It is scary because not only do we want income, we would like to preserve our principal as well.  But Watsco is one of the best performing dividend machines because it has increased the quarterly dividend by $.05.  The January dividend was $.52 and the April dividend was $.57. 

                These are times when a long-term view is critical to income investing success.  If you bought WSO in 2009 at $33.00, you would have bought a company with a 5.45 percent dividend yield.   That suggests that WSO could go down further in the suction of a bad economy.  However, your income would have increased in 2010 and again in 2011.   In fact, WSO has had 10 years of dividend increases.

 When I profiled WSO, the yield was 3.3% and today I added to my position and my new investment yields 4.19%.  If I reinvest my dividend of $2.28 per share and the share price stays the same, I will need a mere 40 months to recoup the loss on my original buy.  If WSO continues to increase the dividend as it has in the past, my wait will be short.   But I do not think that way.  I am looking for a company that will pay me an ever-increasing income and WSO should do that.

                Look, WSO is on sale and it is an excellent example of a stock that you might consider accumulating at various price points.

Very Truly Yours,