Monday, April 29, 2013

2013 Dividend Machine BCE - Canada's largest Communications Company



In 2013 I changed my dividend machine strategy.    I still use the same four criteria to screen for these stocks that I used in 2011 and 2012.   The difference is that in 2011 I picked one stock every week with no regard for anything other than the four criteria.   I did not try to diversify, I did not try to buy on dips, I did not select a stock that was trendy.     In 2012, I used that same technique, but I picked 48 stocks over the year instead of one per week.  My approach in 2013 has changed.

2013 Dividend Machine Strategy change:

You can see both income portfolios (see pages on 2011 DIVIDEND MACHINES and 2012 DIVIDEND MACHINES) and see that the technique created two successful portfolios.    The portfolios are diversified, their income is nearly four percent and growing and they each have capital gains.    In 2013, I am simply picking stocks as I find a stock that meets all four criteria and that I think is a good fit based on either industry or price for me instead of picking based on a schedule.

When I find a stock that I want to add to my holdings, I profile it in my 2013 DIVIDEND MACHINE list.  We will see over time if this more personal technique, which I think is more similar to how most investors buy stocks, beats the scheduled technique.

With that in mind, the next 2013 Dividend Machine is profiled below:

DIVIDEND MACHINE
4/26/2013
BCE Telecom
BCE
Price when profiled
$46.13
Last 4 Qtrs Earnings
$3.45
Last 4 Qtrs Dividends
$2.33
Current Qtr Dividend
$0.568
Annualized Div Yield
4.921%
No. Years Div Increase
        since 2006
Debt/Equity ratio
1.15%
BCE Company, symbol BCE 2013 Dividend Machine:

BCE Company is Canada’s largest communications company.   I like to own several companies in one arena.   I already own AT&T, it is an income investor’s dream, but with the stock price at or near highs and the challenges it faces, I have a stop on it.    I own two China telecoms and Vodafone so adding BCE is a good fit.



BCE Dividend Machine Fundamentals:

I remain committed to stocks that meet all four of my dividend machine criteria and BCE fills the bill.     Based on the closing price on 4/29/2013 of $46.20 the annualized dividend is $2.33 for a yield of 4.92%.    Earnings far exceed the dividend; their last four quarter earnings were $3.45.   Debt to equity ratio (D/E) is within industry standards at 1.15.  The table on the right clearly illustrates why BCE will be in my portfolio soon.


Income investors, if you want income to retire, consider BCE for your portfolio.



TheMoneyMadam



Wednesday, April 24, 2013

Gold Should retirees have gold in their portoflios?



I have often said that gold has no place in an income investor’s portfolio.   In my own investing career the price of gold has gyrated incredibly.   It is odd, however for gold to be highly valued when the stock market is near a high and so are bond prices.



James Grant publishes Grant’s Interest Rate Observer (his website link.)  He tells us that as long as money is being printed by governments, gold will be a good bet.    I really respect Grant and read all his stuff, but I still say owning the metal is not for income investors.    I have two ways to deal with this conundrum:    Jewelry and Miners.  Neither of the stocks profiled below qualifies as a dividend machine yet they both have income investment potential.  



Jewelry:

The problem with jewelry on your body is that you can rarely sell it for the price you paid.    It can be bartered or pawned but it will not create income.     However, you could invest in a jeweler.   In the past I wrote about investing in Tiffany, symbol TIF.    TIF pays a dividend and often times covered call income can boost your income to an acceptable level.     Let us look at today’s action.



CALL OPTION
TIF

Aug-13
Strike Price
$77.50
Cost Basis
$71.81
Call Premium
$1.80
Dividend
$0.32


Assigned Gain
$7.49
Call Yield
2.32%
Gain Yield
9.66%
Total Gain Yield
10.08%

TIF closing price $71.81
Last four quarters EPS $3.25
Current Dividend $1.28
Current Yield 1.78%
Dividend steadily increased since 2003
D/E ratio .37




I have played this angle in the past and it worked out well.   You can review the post here.






Miners:

Another investment to consider are the companies that mine gold.    Newmont Mining, symbol NEM is a company worth considering.   Let’s look at today’s action in NEM.




CALL OPTION
NEM

Jul-13
Strike Price
$34.00
Cost Basis
$32.43
Call Premium
$1.35
Dividend
$0.00


Assigned Gain
$2.92
Call Yield
3.97%
Gain Yield
8.59%
Total Gain Yield
8.59%
NEM closing price $32.43
Last four quarters EPS $3.63
Last four quarters Dividend $1.70 
Current Yield 5.09%
Dividend Increases:   Held steady from 2004 through 2010 with increases since then.
D/E Ratio:  .46











My Take:


I currently own NEM and will add to my position as the price is weak.   I do not own TIF as this time.

Consider these stocks for the income producing portion of your investment portfolio.



TheMoneyMadam



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