The S&P500 is up nearly 20% YTD, after factoring in dividends. Looking at my portfolio, I noticed that Philip Morris (PM) was a few days ago flat for the year, not including dividends. After adding to my position at the end of last year, the question is, did I make a bad choice here? I could have simply invested in the index fund. There are also countless other stocks out there that are up 30%, 40% or more. This is what happens when the market does well, many stocks go up a lot more than the average.
Why I was a younger investor, I was enticed by the hot internet stocks of the day. Who needs a 6% dividend when my stocks just went up 10% today? Although I was great at math, I didn’t understand the math involved to actually getting great consistent returns out of owning stocks. Of course, it’s more than just math, you need to understand stocks and how to determine which ones to buy. Stocks do go up 10% in a day, even today. But if you own stocks or trade them, you need to keep tabs of what your progress is overtime. Short term changes don’t typically lead to long term returns.
It’s a hard lesson to learn, but you are better off tracking earnings and dividend yields instead of stock prices. I’ve gotten to the point in some of my investments that all I need is the dividend to tell me what the state of the business is and whether it’s a good time to buy.
Lorillard announced recently that they are doubling their stock buyback program from $500M to $1B. This aggressive program will take out about 6% of the outstanding shares just this year, assuming the stock price stays near to where it is now. The question is, are buybacks good for companies and shareholders or are they simply financial engineering that hides true company performance? Like anything else, it depends on what your viewpoint is, what you want out of your investment and what kind of company is doing the buyback.
I would make the case that buybacks are a great strategy for increasing shareholder wealth for a company like Lorillard, though it isn’t necessarily the right strategy for many companies.
I’ve previously written that I rent. I live in a small town with public transit, restaurants and services just a few blocks away. If I were to buy, I would want to get the same lifestyle.
When I wrote that article, mortgage rates were about 4.5%. I remember about 10 years ago I was looking to buy a home and at the time a 7% interest rate was available (and that was a good rate). With rates now around 3.5% and home prices down from previous higher prices from 5 years ago, does it make sense to give this another look?
I won’t waste your time: yes, you can absolutely crush renting now by buying instead. Read on for the numbers and reasoning.
I was in the barber shop getting my hair cut when Domenic (my barber) mentioned that he was glad he kept a multi-family home that he bought about 40 years ago. Over time he moved as his needs changed (larger family) or when he made a final move that was close to his newly opened barber shop. Except for that property, he would sell his previous residence at the same time he moved to the new one.
This particular property was different since he was already earning money by renting the other unit. He figured that the property wouldn’t be a drain on his finances because he could also rent his side such that all the expenses would be more than covered.
Fast forward 40 years and this property is his ace for a comfortable retirement. What if he didn’t keep it and sold it instead? He might of simply bought a more expensive house along the way. He would have lost this asset that over time continued to earn more and more money and increased in value as well.