Look at these model portfolios and tell me what you think.  

I think they reveal that you can pick stocks using a strict formula or you can invest in a quality ETF and get close to the same results.

But what it really tells me is that you should start as soon as you can.

Consistent investing over time; persistence, duration,  these are the qualities of a well developed income investment portfolio.

Notice that none of these portfolios include reinvesting dividends, or investing the cash created from buy outs or additional income created from covered calls.   

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AstraZeneca (AZN) Risk to Sell

In 2013 I profiled AstraZeneca (AZN) as a Dividend Machine.   At that time the cost basis was about $54.  My personal basis is about $46.    Today, Pfizer (PFE) is making a bid to buy AZN and the results is AZN is up over $10.

AZN is no longer a Dividend Machine because of falling revenues that have caused EPS (earnings per share) to fall below their dividend payout.  All of you know that EPS must exceed dividends for a stock to be considered a Dividend Machine.  

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Dividends & Income - Chevron CVX 20th Dividend Machine for 2013

I am not sure if this will be the last Dividend Machine I profile for the 2013 portfolio but it a stock I profile with great confidence.  This will by the 20^th Dividend Machine profiled in 2013.

Chevron is the best of breed in the energy space and my reasons for saying so include their safety as measured by the balance sheet.   As you know I use D/E (debt to equity) equity to screen for safety.    Even more compelling is that the yield, currently above three percent, keeps up with the prices increases.

Chevron is diversified.  It owns and operates businesses in every segment of the industry and qualifies as a good global diversification for your portfolio as it does business all over the globe.

Chevron’s Dividend Machine Fundamentals:

Today, Chevron, symbol CVX is trading around $120.50; slightly off the 52 week high of $127.83 and well above the 52 week low of $105.75.     Chevron earns a mighty $12.22 per share and pays out $4.00 per share per year for a yield of 3.31%.   They have increased the dividend annually for over a decade.  Although this is huge company, they carry a very low D/E ratio of .1277.

See the table below for a snap shot of CVX’s Dividend Machine fundamentals.

 

Consider CVX for the income producing portion of your investment portfolio.

The Money Madam

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Small Cap Dividends and Income - Auburn National Bancorp AUBN

This post discusses how Auburn National Bancorp, symbol AUBN, qualifies as a Dividend Machine and has two features that make me want to add it to the income producing portion of my portfolio.

AUBN meets all four Dividend Machine criteria.   This is a small Alabama bank that has been in business since 1990.  AUBN’s dividend history is solid.   If you own AUBN by 12/10/2013 you will receive a quarterly dividend of $.21 on 12/26/2013.   Ten years ago your December quarterly dividend was $.12.  The dividend increase works out to 7.5% per year.    This is good for a small bank that continued to pay you during the financial crises of 2008/2009.   A snapshot of AUBN’s Dividend Machine bona fides is presented in the table below. 

Can you better the Dividend Machine strategy?

Your strategy is dividends and income.  You know you need to beat the 10 year treasury income.  You know your income needs to increase every year.  You want a low risk stock but you are experienced enough to know that even when a major disruption in stock prices occurs, many companies will continue to pay you and even increase your income during these troubled times.   You are disciplined and will stick with your picks. 

Just look at the 2011 Dividend Machine Portfolio and you will find that at least during that year, you could use only four criteria to pick a darn good portfolio of dividend stocks.  The question is, could you do better than the Dividend Machines?

Today I am profiling AUBN and I have two reasons above and beyond the Dividend Machine criteria that make me like this stock.   One is my view of the interest rate curve and the other is the outperformance of small cap stocks.

Interest Rate Curve benefits banks:

Banks lend out the money you deposit.   When they can lend the money at a greater rate than they pay you for holding your money safely, the banks make money.   Today, even small banks, like AUBN, engage in financial transactions that are broader than just making money on your deposits but the effect of rising interest rates on a bank’s ability to make money benefits the bank’s owners.   Interest rates are on the rise.   Nothing alarming yet in terms of inflation, but they are on the rise and that should benefit a banking stock like AUBN.

Small cap Stocks do better:

In a recent post I used another Dividend Machine stock, ESP, to illustrate the positive history of small cap stocks.  AUBN is another example of how well a small cap stock can benefit the income investor’s portfolio.  Vanguard Investments published this report which shows small caps do well.  AUBN’s capitalization is $90 million. 

Consider Auburn National Bancorp for the income producing portion of your portfolio.  AUBN qualified as a Dividend Machine in 2012 and it shows up again today as a stock that meets all four Dividend Machine criteria plus it can take advantage of the interest rate curve and the advantage of being a small cap stock.

The Money Madam

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