Sunday, May 5, 2013

Thomson Reuters, TRI Buying income in a frothy market

Meeting with Thomson Reuters in London
Meeting with Thomson Reuters in London (Photo credit: Global X)
Does price matter?    Should you put new money into the market at this time?   These questions are being considered by every individual investor as well as every professional investor. Price does matter.   Yet, even in a market that I would call frothy, you can find investments to use for the income producing portion of your investment portfolio.

Stock prices do matter.

Stock price and dividend income are what determine your yield.   In my 2011 and 2012 dividend machine portfolios, I paid weight on overall stock prices.   However, individual stock prices determine if the money you are investing will yield at least three percent.    

In 2013, I am being pickier as I build the portfolio.  I am not picking the first stock I find that meets my four criteria as I did in 2011 and 2012.  I continue to comb through the available list of stocks until I find one that fits my portfolio.  Perhaps a better yield, increasing the yield quicker, or being a better fit for diversification as well as other factors.

Add money to a frothy market?

The stock market is a risky investment.    But, I believe, every investment is risky.   I can make an argument that keeping money in your own safe is risky.  Over the duration of this blog, stock prices have increased as earnings increased.    More recently, stock price increases exceeded earnings increases.  I will leave it to the economists to explain why; yet, I would label this market as frothy.

You cannot be a market timer trying to sell high and buy low.    However, you can be a disciplined income investor and still find good investments in a frothy market.

Dividend Machine Thomson Reuters, TRI:

I will bet that if you are considering stocks for income, you are thinking of stocks like Kimberly Clark or Chevron or maybe Apple.    KMB at $105.38 is very close to the 52 week high of $106.54.  KMB is a dividend machine by every measure.  The dividend increases have kept up with the stock price so the yield is just over three percent.    Similarly CVX at $123.50 is at its 52 week high.    Although CVX’s dividend has increased steadily, their dividend yield is less than three percent.  KMB has been as low as $77.80 in the past year; will it go there again?    CVX has been as low as $95.73 during the past year; will it go there again?   Apple’s dividend is not close to three percent and their dividend history is too new to place AAPL in the dividend machine category.

Technically, using my dividend machine criteria, you could buy KMB but it is expensive in spite of our rule that price only matters to determine the yield.   CVX and APPL do not meet our minimum income yield, therefore, they are not buys at this time.  

Thomson Reuters
Price when profiled
Last 4 Qtrs Earnings
Last 4 Qtrs Dividends
Current Qtr Dividend
Annualized Div Yield
No. Years Div Increase
since 2002
Debt/Equity ratio
I have another idea:  consider Thomson Reuters, symbol TRI.   TRI closed on Friday, May 3, 2013 at $34.04.   This is a 52 week high but the yield on the recently increased dividend is 3.82%.    I can live with the high stock price to get 3.82%.   The dividend has increased every year since 2002 and their D/E ratio is a very reasonable .45.     I like their industry; intelligent information for businesses and professionals.    I would be willing to bet that you do not have a company like this in your portfolio.

TRI was a dividend machine in 2012 and I will add to my position.  See a summary of TRI’s dividend machine fundamentals in the table at the right.

Consider TRI for the income producing portion of your retirement portfolio.


Enhanced by Zemanta