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Get Started Dividend Investing…Today!

February 25th, 2012 10 comments

I started investing in dividend stocks in 2006. That’s only six years ago. I could tell you a story about my mothers astronomical gains she got investing in ExxonMobil over 30 years. But, that’s old news, right? Does dividend investing still work?

Let’s look at my results so far for just one position.

I bought Altria (MO) at the end of 2005. At the time, Jim Cramer said that Altria was going to 100 because they were going to break up the company to “unlock” the value of their Philip Morris International stake (Altria was trading at 70 at the time). This argument sounded good to me. So I bought 200 shares.

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Tired Of Low Interest Rates? Here’s An Alternative!

February 21st, 2012 4 comments

We live in a low interest rate environment. The U.S. Federal Reserve which has power on setting short term (as well as specific methods to influence long term rates) has made it clear that rates are going to stay low for at least 2 years, perhaps more when you consider that any increases will happen gradually.

This is unfortunate for a few reasons. The most obvious is that low short term rates don’t offer any rate of return. In fact you can make a case that the returns are negative. For example, the 10 year U.S. Treasury bond is yielding about 2% – which after a reasonable assumption of >2% inflation going forward leaves you with a negative real rate of return. How’s that for policy?

A far more damaging aspect of this policy is that it has distorted the relationship between stocks and bonds as a means of valuing the return and risk of investments. Are stocks really cheap now? Well, you can make the case that they are because the 10 year is at 2.0% – but, what would a real market bond rate be right now? Certainly higher than this rate. If it were at a higher rate this would make stocks less attractive.

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5 Ways to Increase Your Investment Income

February 16th, 2012 2 comments

When I started investing for income, my primary goal was to find good companies to invest in. An investment that pays you income is easier to value and much more likely to be an investment that is shareholder friendly. Also, a track record of paying dividends implies that the company manages its finances well.

After investing for a period of time, I have realized that your investment income can be a very powerful tool to increase your spending or supercharge your reinvestment into other companies that are attractively valued. By continuously putting money to work in the market can enable you to get outsized returns by taking advantage of opportunities that develop. Or, you can also just spend the money without selling any shares!

The more investment income you create, the better off your portfolio will be. Here are some tips to increase your investment income.

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The First Billion Dollar Lottery Prize Is Coming

February 13th, 2012 2 comments

The age old measure of wealth is millionaire. But this will soon be eclipsed by a new class of wealthy, billionaire. And I don’t just mean the Mark Zuckerberg’s of the world who are billionaires through entrepreneurship. But, the longest shot of getting wealthy, the lottery.

The largest lottery prize to date was a Powerball ticket from a few years ago that had a prize of $360 million. There have been multiple 300 million dollar prizes, but this is a recent occurrence as prizes typically never reached that level. The Powerball game has changed over the years including adding additional states as well as increasing the odds of winning by adding balls and other adjustments. These adjustments have caused prize levels to increase.

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Investor Repression At Work: My Preferred Stock Was Called!

February 8th, 2012 4 comments

The Fed is bent on forcing investors out of cash and Treasuries. I don’t know if it’s working or not. Stocks are up this year so far, but trading volume is very low. It’s about 30% below average on the NYSE!

The hunt for yield by  investors is enabling companies to get better financing. This effect has caused one of my preferred stocks to get called. Preferred stocks are hybrids between stocks and bonds. They can be traded like stocks but have pricing and coupons similar to bonds.

Realty Income Corp (Public, NYSE:O-D) has been called effective on March 1st. This preferred paid out monthly dividends at a yield of 7 3/8% at par of 25.

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