Wednesday, January 8, 2014

Dividends & Income 2014 Dividend Machine - First Stock Pick

Patience and discipline are required to successfully employ any discipline.  

Discipline is especially helpful in the arena of dividend and income investing.  Just look at the 2011 portfolio.   In 2011, each week I selected the first stock I found that met all four criteria for inclusion the portfolio. 

I tried to find one stock per week and sometimes it took a long time to find one.   Picking stocks with this technique worked out well as you can see by the chart below.   Yield on invested money is 4.45%; current yield is 3.11%.   The portfolio has gained 43.11% since inception or about 14 percent per year.


In 2014 I will employ the same discipline of looking for a Dividend Machine stock and reporting on it when I find it.  This week I think I have found a stock for serious consideration for inclusion in the 2014 portfolio.  

May I remind you of the 2014 criteria? 

EPS:   The company I buy must have created more earnings during the last four quarters than they pay out in dividends.   Not a lot to ask.

DIV:   A dividend yield of at least 3.5% is required because the U.S. 10 year treasury will be paying that sooner than you think and you want no less.

DIV INCREASE:  Inflation is upon us and you only have to look at your own personal 2013 income statement to figure out things cost more.  To be included in the 2014 Dividend Machine portfolio, a company will have to have averaged a four percent increase of the dividend for at least five years.   

D/E RATIO:  Companies that have low debt levels are less likely to not increase the dividend or, horrors, cut or eliminate the dividend.  To be a candidate for the 2014 Dividend Machine portfolio, a stock will have a D/E of 1 or less or less than the industry standard.


RGC Resources is the first stock I found this year that merits consideration as a 2014 Dividend Machine.     RGCO is the gas company for Virginia.  It is a utility.  Price is $19.32.   Growth has been significant; the company split the stock in 2011.    

Dividend Fundamentals:  

See the table below for the dividend fundamentals of RGCO; they include a yield of 3.79%, earnings of $.90 with a dividend of $.72 and a very solid D/E ratio of .5656.  

Dividend increases are the question.  Quarterly dividends have increased from $.32 to $.36 split adjusted.  In 2012, RGCO paid an extra special dividend of $1.00.   RGCO has paid special dividends in the past.   

I think RGCO is a good stock to consider for the income portion of your portfolio.

The Money Madam

Watch for discount bond and covered call opportunities!