Sunday, June 9, 2013

DIVIDENDS that increase every year

Fight Inflation.  Buy a stock that increases your income every year.   Meredith Publishing, symbol MDP is a good example. 

Meredith Publishing
Price when profiled
Last 4 Qtrs Earnings
Last 4 Qtrs Dividends
Current Qtr Dividend
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No. Years Div Increase
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The effect Inflation has on your retirement is the subject of this post.   

An inflation fallacy measured by the experts needs to be examined.    

Then I want to convince you that your investments have to create ever increasing income because of the effect of inflation on your lifestyle.

I like the stock Meredith Publishing, symbol MDP.  MDP has increased investor income every year for twenty years;  Retirees and for those saving for retirement should consider MDP for the income portion of their portfolio; MDP's dividend machine fundamentals are presented below.

The no inflation fallacy:

Experts in the government and on TV continue to try to convince us that “there is no inflation.”  They use  complicated formulas.  Social Security payments go up based on inflation and since the formulas measure no inflation, social security increases have not been reliable because "there is no inflation."


My personal experience does not support their analytical results.  I have lived long enough to know how much more it costs me to maintain my lifestyle now as compared with say ten years ago.  


For investors who are saving for retirement, do not fall into the trap of thinking you will spend less in retirement than during your working years.   You will spend differently, but nearly all of my clients spent at least as much during their golden years as they did during their working years.  

Inflation is complicated and we can forgive the experts, but you cannot forgive yourself if you fail to take into account the effect inflation will have on your lifestyle during retirement.

In terms we ordinary investors can understand, inflation is an increase in the cost of things that you buy; and/or a decrease in the buying power of the dollars you use to buy things.

We have both; increases in the cost of things we buy; just look at the cost of milk, meat, gas, and now even rent and housing prices.   Plus, we have a reduction in how much our dollars will buy due to dollar devaluation.

Try the "calcxml"  website (see link below) that provides an easy way to determine what your actual cash flow needs will be based on how old you are now; when you expect to retire and how long you think you could live is worth your time.  Check it out :    

Dividend Machine Meredith Publishing, symbol MDP

Ten stocks were on my short list as I tried to find an investment that provides income increases; income increases that can keep up with inflation.  

I am going to invest in Meredith Publishing, symbol MDP.  This is a publishing company and you might initially think I am crazy to consider a company in such an old industry.   

Think again.   MDP has been in business since 1902, and it has kept up with current events.  They operate in two major market segments:  national and local: and they know how to function in both arenas. 

MDP closed at $41.09 on Friday, June 7, 2013;  MDP pays an annualized dividend of $1.63 per share which is a yield of 3.97%.   MDP has paid dividends for 66 years and has increased the payout every year for twenty straight years.    We plan for three percent inflation and MDP's dividend growth beats that by 1%.   MDP's average annual dividend increase is about four percent.

Meredith, MDP, earns much more than it pays out (E = $2.66 D = $1.63) and their D/E ratio is only .43.  MDP hit a high of $45.00 earlier this year and has retreated about ten percent.  I like a ten percent sale.   However, it is volatile and could have price fluctuations.  I personally do not care as much about price fluctuations as I do about the dividend history.   

Yet, price fluctuations suggest to me that I could make additional income selling a call.  I found one covered call on MDP.  The call is a September 2013 call; strike price of $45.00 that would pay a premium of $.70 per share premium.  The call volume is low so do not invest in MDP for call income.

Invest in MDP for future dividend increases that will help your retirement portfolio meet the inevitable inflation pressures every retiree faces.