Tuesday, May 28, 2013

DIVIDENDS for retirement May 28.2013



Dividend Income is still part of a retiree’s model portfolio and this will be true for a while.  Once inflation rears its head, we may have some bond choices but right now we are stuck with dividends.     One of the problems with a dividend strategy is these stocks are going up in price which places more risk on a dividend portfolio.   Moreover, when stock prices climb, dividend yield on the best of the stocks declines.    Let’s look at how 2013 is shaping up.



Dividend stock prices on the increase:



In 2011, the available pool of dividend stocks yielding above three percent was pretty vast.  If you look at the list of stocks I picked in 2011 (see 2011 dividend machine page) you will notice significant price increases since then.   That portfolio of stocks is up over thirty percent since 2011.   Not every stock is up but most are. 



In 2012, the available pool of dividend stocks was somewhat less due to stock price increases that eliminated some stocks because they no longer yielded greater than three percent.   Yet that portfolio too is up nearly twenty percent since 2012.



In 2013, stock prices have been very strong especially among those stocks that provide dividend income.   This makes it harder to find stocks that will preserve your capital as well as provide income.  The eleven stocks in the 2013 portfolio are up a little over four percent.   




Dividend yields on the decrease:



The 2011 dividend stocks I picked cost about $207,000 and are now worth about $276,000.  That portfolio delivers about $8,875 per year of income.   The yield on the invested capital is 4.28% but on the current portfolio value, the yield is 3.21%.    As prices increase the dividend yield decreases.   Most of these companies that increased their dividend, which is one of the fundamentals we income investors require, yet the dividend increases are less than the stock price increases.   I am not complaining, I am simply pointing out how 2012 was more of a challenge than 2011.



In 2012, the dividend stocks also cost about $208,000 and are now worth about $248,000.  That portfolio delivers about $8,110 per year of income.   The yield on the invested capital is about 3.88% with the yield on the current portfolio value at 3.26%.     You can clearly see that picking good stocks for yield hungry investors was harder than in 2011.



2013 has proved to be a challenge; however, I changed my technique just a little.   Instead of randomly selecting dividend stocks (all of which still have to meet my four dividend machine criteria), I have selected stocks that I like for some reason.   I also strive to get closer to 4% income.



So far in 2013, I invested $45,910.  The portfolio value as of midday today 5/28/2013 is $49,128 which is a gain of 7%.   Dividend income from this group of stocks is $2,034 which is a yield of 4.43% on the basis and 4.14% on the current value.



Dividend Stocks are still good for retirees:



My take on this analysis, is to continue to use discipline, including my four dividend machine criteria to pick stocks.   While stock prices are high and your risk of capital preservation is higher, as long as the alternatives are few, this is a good strategy.



See the table below for in-depth analysis of the 2013 dividend machine portfolio.  For more information on the 2011 and 2012 dividend stock picks, please see the pages at the top of this blog.




2013 DIVIDEND MACHINES Bought 100 Shares




Basis

 $  45,910

Current Dividend Income
 $    2,034



Value

 $  49,128

Yield on Basis
4.43%



$ Gain

 $    3,218

Yield on Current Value
4.14%



% Gain

7.01%















Stock Prices Updated Intraday 5/28/2013
Stock Quotes Provided by MSN Money


  

Basis
Symbol
Post Link
Div

Last
52 Wk High
52 Wk Low
EPS
 $   46.13
BCE
 $ 226
46.42
48.06
39.12
3.11
 $   45.36
DRI
 $ 200
52.83
57.93
44.11
3.27
 $   33.27
SYY
 $ 112
34.82
35.62
27.46
1.73
 $   31.21
MGRC
 $   96
32.54
33.64
22.93
1.75
 $   57.50
RTN
 $ 220
66.73
67.44
49.03
5.82
 $   59.84
COP
 $ 264
62.53
64.77
50.62
6.15
 $   33.02
VVC
 $ 142
35.07
37.57
27.46
1.92
 $   44.84
CINF
 $ 163
47.93
50.6
34.82
2.98
 $   33.94
MCHP
 $ 141
36.32
37.97
28.92
0.62
 $   21.35
INTC
 $   90
23.92
27.75
19.23
2
 $   52.64
AZN
 $ 380
52.17
53.45
52.91
4.51












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