Sunday, September 28, 2014

Are you really an income investor?

Would you be happy with this performance?  Invest $207,336 during 2011; hold it for 3 years and your value is up nearly 50% to $309,843.    Moreover, the money you invested creates nearly $10,000 per year and your income has increased nearly 19%.   See the table below.

Now, let's look at a more recent measure consisting of three investments:  (1) Dividend Machines, (2) VIG a dividend increase ETF, and (3) SDY a dividend yield ETF.  

Invest $63,490 dollars during 2014 in the Dividend Machines I write about and your money would be worth $64,698 for a gain of 1.9%.    Invest in VIG and your money would be worth $64,698 for a gain of 2.35%.  If you invested your money in SDY your investment would be worth $64,868 for a gain of 2.17%.   See the table below.

Gain, however, is only one measure of your portfolio.   In all cases you need to look at income and income growth. If you are a real income investor, the first thing you look at is which portfolio pays the most and which one has the best income dividend increase.  Notice that the portfolio of Dividend Machines is creating $2,436 per year.  VIG has a bigger gain but not a bigger income.  SDY's gain is not as good as VIG but better than Dividend Machines. SDY provides $1,518 per year just over half of Dividend Machines.    VIG provides only $1,369 per year.

Investment costs are important but almost insignificant in this case as the SDY and VIG charge almost nothing and your Dividend Machines have only one expense when you buy it.

IT reminds me of a conversation I had recently with a man who is so thrilled his 5 year investment in SDY is still at 20%.   What is the income buddy and what is the income gain.

Growth investors will look only at capital gain/loss but we income investors need cash flow.  At the end of 2014, this portfolio will be closed.   We will make no more buys or sells.   I will report on dividend increases throughout 2015 and beyond.   I will track all three SDY, VIG, and my 2014 Dividend Machine stocks.

Very Truly Yours,


Thursday, September 25, 2014

ARLP 5.6 percent yield and a call for more income

It is always funny that I jump on the computer during a down market to find income.   Alliance Resource Partners, symbol ARLP is one such opportunity.  

ARLP Slpit June 17, 2014 2 for 1.   Dividend fundamentals are:
$4.14 E $2.50 D 5.62% yield with a 5 year dividend growth rate of 13.36/yr. D/E .84.

Covered call today is worth a consideration.


Tuesday, September 23, 2014

Dividends & Income Sysco sybmol SYY update

English: A Navistar International truck operat...
English: A Navistar International truck operated by Sysco docked at Duke Hospital South in Durham, North Carolina. (Photo credit: Wikipedia)
Sysco symbol SYY wants to merge with United Foods.  WSJ has an article about it today.

Their combined company would own about 25% of the market for food distributors.  Of course the government worries about these types of mergers.

As an income investor I do not think SYY's merger will jeopardize the dividend but it may cause the stock price to be rocky.

SYY was a 2013 Dividend Machine  Today it does not quite qualify as the yield is only 3%.  But on every other level it is still a good income investment. 

As boring as a good distributor may be, SYY has a nice call today.    This November $40 call expires after the next dividend date so you would pocket both the call premium and the dividend.  See the table below for details.


Tuesday, September 16, 2014

Solid Dividend Machine, Southern Companies SO

I write about three strategies to create retirement income:  Dividend Machine stocks, Discount Bond interest, and Covered Calls on dividend stocks.   This post reviews Southern Companies as a solid, Dividend Machine. 


Screening Criteria

Stocks move in and out of the Dividend Machine universe all the time.  This year we expect more than 3.5% in yield and a 5 year history of dividend increases no less than 4%. Some really great stocks miss the cut on yield and yield increases.  Today we have a widows and orphans stock that is solid; it beats the 3.5% yield threshold, the dividend increase threshold and like all Dividend Machines, earnings are greater than the dividend and the debt to equity ratio D/E is within industry standards.

It is such a pleasure to profile this stock.   I have owned it so long that my cost basis is in single digits.    Yet I have not been so happy with it lately. 

Southern Companies as a 2012 Dividend Machine

SO was a Dividend Machine in 2012 at a cost basis of $47.31.  Folks that is an 8.35% loss.   But we always say that if we have to hold a dog because we need the income, then let’s hope for not only income but income increases.  SO does not get the award for biggest annual dividend increases but it meets our 2014 criteria of a 4% increase of income per year. 

SO yields 4.84% at the closing price of $43.37 on 9/15/2014.  The yield alone makes me a happy investor but I looked at the dividend increases again just to make sure my income will go up if the overall market tanks like it did in 2009.  Over the past 10 years, SO has delivered annual dividend increases of 4.685%.  

Southern Companies 2014 Dividend Machine Fundamentals

Seeking Alpha published an article recently explaining how Southern Companies has turned around their operation. .

I am going to add to my position.  I like the yield and the dividend increases and its solid nature. Consider SO for the income producing portion of your investment portfolio.