Showing posts with label The Money Madam. Show all posts
Showing posts with label The Money Madam. Show all posts

Friday, December 13, 2013

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 20th 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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Sunday, December 1, 2013

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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Wednesday, November 20, 2013

Small Cap Dividends for Income



Income investors look at many factors as they build their portfolios.  I encourage a disciplined, systematic approach.    As you know I use four criteria to screen for stocks to buy for income. 


Periodically, I evaluate my results and today’s post evaluates a microcap stock that I profiled in 2011 as a dividend machine.


Does Market Capitalization Matter?


This questions comes up all the time.   You will find expert investors who encourage small capitalization stocks at various times.   They will tell you these stocks do better than the big boys.   


What is a small cap stock?  What is a microcap stock?    Investopedia defines small cap. stocks as those with a market capitalization of between $300 million and $2 billion. Microcap stocks are less than $300 million.   By the way, to determine a stocks’ capitalization multiply the number of outstanding shares by the share price. 


Perils & Advantages of Microcap Stocks:


The factors that affect small companies include the fact that they tend to be thinly traded; they do not get attention from big Wall Street Investors; their revenues and sales may be linked to very few customers.    


These factors suggest that if you really need to sell a company that is thinly traded you may not get the price you need.    Because big investors like mutual funds have limits on how much an individual stock they are allowed to own, you do not get the advantage of the price increases related to mutual fund activity.   The loss of just one customer can ruin a small company.



However, history shows that smaller cap companies have better growth rates year over year:  Ibbotson reports small caps increase by 12% versus 10% for the big boys.  Moreover, these companies can operate under the radar and you can get a disconnect between stock price and company fundamentals providing an investment opportunity.



Microcap stocks tend to be associated with the phrase “penny stocks.”   Traded on the Bulletin Board or Pink Sheets, these stocks are usually stocks for trading.  I do not buy these stocks.  The only small or microcap stocks I buy are those that provide income.


The stock I am going to write about today is a microcap that has excellent fundamentals and an excellent history.


Espey Manufacturing & Electronics (ESP)


This company is a dividend machine.   It has been in business since 1928.  They are an original equipment manufacturer of very precise components for military and severe environmental applications. The market capitalization is a mere $77 million. 


ESP dividend machine fundamentals


The table at left presents ESP’s dividend fundamentals including their earnings per share, dividend, yield, number of years of dividend increases and debt to equity ratio.


ESP’s stock price history is interesting.   If you go back to before the financial crisis of 2009, ESP traded around $18.   The price suffered during the crises and retreated to $13.31 in March of 2009.   



 Since then, the stock price has clawed its way back to more than double to close at $33.08 on November 19, 2013.  When I profiled this stock in 2011 the price was $26.00 per share.


ESP Dividend History


The reason I have invested in ESP and included ESP in the 2011 dividend machine portfolio, is the dividend.   This company lives to pay its investors.   Every year since 2008 the company pays a quarter dividend that is increased annually and pays a special extra dividend.


2013 is no exception.   ESP just declared another $1.00 special dividend to be paid on Dec. 19, 2013 to owners of record on Dec. 12, 2013.


Conclusion:


This is a well managed company.  ESP has a proven history.  It is financially solid and has delivered excellent price increases.    Although it is a microcap stock, you should consider it for the income producing portion of your investment portfolio.


The Money Madam


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