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
