Wednesday, May 9, 2012

What is an opportunity?

When the market is down, investors tend to want to take action.  Committed income investors look for opportunities.

When the bond market tanks, and some day it will, bond investors will want to take action.  Committed income investors will be ready to buy.

The purpose of diversification is to spread risk among your investments.  Some days your bonds are up and some days your stocks are up etc.  You can also spread risk within bonds and stocks where on some days certain stocks go up and others down and certain bonds go up and others down.

Seasoned income investors have a history of what works for them.   As you know I advocate using dividend machines to create a lot of my income.  The list of companies that are dividend machines (dividend machine criteria are listed on the left) is limited.   Therefore, it seems to me that I can comb through my 2011 and 2012 (YTD) dividend machine list to determine if any opportunities exist.

WHAT IS AN OPPORTUNITY?

An opportunity to me is a company that qualified as a dividend machine when I bought and still qualifies as a dividend machine today but sells for at least 10% less than when I first bought it.    I found only one opportunity from the 2011 dividend list and that is New Jersey Resource, (NJR) a utility.

I looked to the YTD 2012 dividend machine list and found 2 opportunities; Microchip Technology (MCHP) and Nucor Corp (NUE.)

MCHP was $37 when I profiled it as a dividend machine in 2012 and today it is trading at about $32.50 which is a loss of just over 12%.  NUE was $41.20 when I profiled it and today it is $37.35 which is a loss of just under 9%.

Each of these companies continues to qualify as a dividend machine and these companies are good choices if you want add to your income portfolio.   MCHP pays just over a 4% yield and NUE pays a 3.9% yield. 

Nothing is guaranteed and the stock prices of these two companies could continue to decline.   However, each company raised the dividend during the very difficult times of 2008 and 2009. 

Every market has opportunities and seasoned investors can save time by combing through your current holdings to determine if you could add to what you have.

Very Truly Yours,

TheMoneyMadam