Saturday, November 29, 2014

VIG and SDY Beat 2014 Dividend Machines but not 2013 Dividend Machines

Live by the dividend; die by the dividend.   While the 2014 Dividend Machine Portfolio delivers more income for income investors, the recent slide of oil prices took a toll on energy stocks Chevron, symbol CVX, and Conoco Phillips,symbol COP.    See the comparisons in the table below of year to date performance of two low cost ETF's that concentrate on dividends; VIG and SDY.

I personally would not sell.   If you have cash to invest, you might consider adding to CVX and/or COP.    COP  has a PE of only 9.   Both have healthy dividend yields.  CVX's dividend yield 3.72% with a five year dividend growth rate of 11.47% .  COP's dividend yield is 4.12% with a 5 year dividend growth rate of 9.2%.    Both have good balance sheets.   Chevron's D/E ratio is .13 according to MSN Money and COP's is .35.

You see the biggest question is will these dividends continue and will their annual increases continue.  If the past five years is any indicator of future performance, CVX and COP are bargains.

Using Dividend Machine criteria to pick stocks for the income producing portion of your portfolio is still a good strategy.   This is demonstrated by looking at the 2013 Dividend Machine Portfolio.  Stocks have been on a tear lately and it is not surprising that buying in 2013 provides more gain than buying in 2014.   Take a look at the 2013 Dividend Machine portfolio comparison with VIG and SDY in 2013.

Read more »

COP low PE high yield

ConocoPhillips: The Risks And Opportunities $COP
Read more »

Monday, November 24, 2014

Covered Calls Expired; sell more for more income

Calls expired this weekend and three stocks that I have profiled quite often in this blog were not taken away.   You know that about 75% of calls expire without the stock being taken away.   This is a gift for income investors.

Three stocks deserve another look; they are Intel symbol, INTC; Microsoft symbol MSFT; and Gaslog symbol GLOG.  

These three stocks and their covered calls are excellent examples of how to work this game.  Keep selling calls higher and higher.   I will use today's intra day price for the cost basis but if you bought, as I have, as lower prices your return is even better than displayed in the tables below.

INTC - November $37 call expired

MSFT - November $49 call expired

GLOG - November $22.50 expired

Good Income Investing.   TheMoneyMadam
Read more »

Saturday, November 22, 2014

INTC news

They downgrade but we buy for income.  MM.

CLSA downgrades Intel post-investor day; bulls upbeat about servers $INTC

Read more »

Thursday, November 20, 2014

INTC resumes dividend raise.

Intel rallies after upping dividend, setting 2015 guidance $INTC
Read more »

Wednesday, November 19, 2014

WPZ hopeful

Industry-Leading Growth For Williams Partners LP $WPZ, $ACMP
Read more »

INTC Dividend increase potential

Intel: A Dividend Hike May Occur In 2016 $INTC

Sure would be nice as many of us are long INTC.  MM

Read more »

Wednesday, November 12, 2014

Income Investor Conundrum WPZ Williams Partners

Williams Partners, symbol WPZ, is one of the few Master Limited Partnerships that I included in any of my model Dividend Machine Portfolios.   In April of 2011, WPZ qualified as a Dividend Machine.

As far as income goes, WPZ has done pretty well.  Four years ago our income was $2.81 per share per year.  Now we get $3.714 per share per year a nice increase.

But, Williams Partners has been troubled.   Their dividend has increased but their stock price has not and that is because their earnings have not grown.

Growth at the cost of Income

Access Midstream Partners, symbol ACMP is going to merge with Williams Partners.  For each share of WPZ you own you will receive .8 shares of ACMP.   It is anticipated that the dividend will decrease but growth will increase which eventually will lead to a resumption of dividend growth.

Seeking Alpha published a very well researched article on this ownership change.   It should help you decide how to handle your position in WPZ.

ACMP, like WPZ, has demonstrated excellent dividend growth over the four years they have paid dividends.   Their D/E ratio is less than WPZ’s. 

An Income Investors Conundrum

Picking Dividend Machines is an excellent way to secure dividend income that increases.   Often times this type of strategy is considered boring and one that does not need attention.   WPZ is a good example of a Dividend Machine that needs attention.

The ownership change of WPZ will result in a reduction of our income and that is serious business to retired income investors.   Even with the cut, the new shares may yield more than you can get from another, similarly safe investment.   I say safe because while WPZ has had it troubles, you have not lost money if you bought it in 2011 at around $51.88.  Today it trades at $51.18.  Debt to Equity ratios are quite reasonable and pipelines are needed.

Covered calls might be able to make up the difference in the dividend cut but those will materialize only when others think this change is valuable.

I am going to hold for a while.   Stay tuned!.

Read more »