Tuesday, August 28, 2012

Can I find a dividend machine in the financial sector?

AUBN was the first dividend machine I came across in my pursuit of a dividend machine pick for this week.   Since I believe in disciplined investing, I have to stick to my plan of finding forty-eight dividend machines in 2012 and for profiling the first one, I find that week.  I do not market time, I do not screen by sector and I do not use market capitalization.  I only use my four key dividend machine criteria to find a dividend machine.
Once I find the dividend machine, I work backwards to try to figure out how this company could meet these very strict criteria.  AUBN is an interesting study.

Remember when your parents deposited their paychecks in the local bank.  Remember when the bank would lend the money to local people who could pay back the loan?  My parents always said banks would lend you money if you did not need it.   They, the banks, were so stodgy that if a bank made the news, they were doing something wrong.   If you remember those days, then you are older than I think.

            According to Tuesday’s Wall Street Journal, private mortgage loans have increased significantly over last year.  Taxpayers do not guarantee a private mortgage.  Banks loan their deposits to people who are highly likely to pay. What a novel idea; a borrower is expected to pay back their mortgage without a safety net.  The scary idea is that a bank would actually lend your deposits to someone to buy a home without the safety net of the US Tax payer.  AUBN and other community banks are lending the old-fashioned way.

            Private mortgages allow a community bank to make a little money from lending at a rate higher than they pay their depositors.  These banks function as if Glass-Stegall (see post) was still in force.  This is why I liked the idea of including Auburn Bank as the dividend machine for this week, August 27, 2012.    

Auburn Bank is a tiny bank with assets of $766 million.  However, this Alabama community bank has been paying dividends since 1995 and has increased the dividend every year for 10 years.     If you own Auburn Bank (AUBN) by September 6, 2012, you will receive the quarterly dividend of $.2050.  

AUBN closed today at $22.99; the dividend yield is 3.566%.  Their D/E equity ratio is .67.   By every definition, AUBN is a dividend machine.  

Auburn Bank (AUBN)

Price when profiled
Last 4 Qtrs Earnings
Last 4 Qtrs Dividend
Current Dividend Yld
No. of Years increased
Debt/Equity ratio

Consider AUBN for the income producing portion of your investment portfolio.

Very Truly Yours,

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