Tag Archives: dividends

Dividend Stocks, Free Lunch Experiment #8

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Dividend Stocks, Lunch Experiment Update:

Dividend Experiment

Dividend Experiment Update

This month, long with the Stock market overall (the DOW is above 12,000 again… hooray), I gained in both EVEP and CIM!  The stock ANH didn’t move staying the same price.  If I could, I would like to get rid of ANH and buy something more conservative. 

So far, I’ve been impressed with the performance of my experiment portfolio, I gained another 2% from last month.  I’ve heavily invested in REITs, and I need to switch into another type of dividend stocks some day.  Most likely, I will try to dump ANH…  soon! 

Background:

The Free Lunch Experiment, which invests in dividend stocks so that I can use the yield to pay for my work day lunches, is my first true experiment here at MoneyReasons.com and was started with the article called: “Paying An Adult Allowance, A Lunch Experiment”.  As explained in the post link above, the money used in this experiment is sort of like free money because it would have been spent on eating lunches out at work anyway.  This means that if I were to lose the money in this experiment tomorrow, it wouldn’t bother me because it really didn’t cost me anything to fund.  Of course the probability of losing all my money in the stocks in the experiment is very slim. 

Having practically free money in this experiment, I’m able to take higher risks that I normal would consider. 

Now on to this month’s results!

           
  Stock Name Anworth EV Energy Chimera  
  Stock Ticket ANH EVEP CIM  
  # of Shares 260 45 600  
  Orig. Price $7.84 $23.25 $4.01  
  Curr. Price $6.95 $42.98 $4.26  
  Orig Cost $2,038.14 $1,046.25 $2,404.80  
  Curr Value $1,807.00 $1,934.10 $2,556.00  
  Annual Yield 13.24% 7.05% 16.90%  
  Actual Dividend $59.80 $34.07 $108.00  
      Total Dividends $807.48  
      52 weeks 52  
      Dividend / week $15.53  
           
      Total Gain in    
      Stock Apprec. $807.91  
           
      % Change 14.72%  
           
           
      Amt Loaned to myself: $1,726  
      Amt paid back to date: $1,459  
      Amt Still Owned: $267  
           

  

Priming the Pump:

As I stated in my previous posts, the money involved in this experiment is technically free money, to expedite the stock purchases I’ve borrowed money from myself a few times just to speed up the investing process, this action is called “priming the pump “.  Of course I’m paying myself back.  Currently, I still owe myself $267. 

Modifications to the Experiment

I decided to wait to make changed to the experiment, I’m still rolling around ideas in my head, who knows… maybe I’ll end up putting the money in some dividend yielding mutual funds instead and just leave it g0!  I wonder if I make enough in dividends if I’ll have to pay an estimated quarterly tax payment 2011?

-MR

Hidden Value In Owning Dividend Paying Stocks

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With non-dividend yielding stocks, you have to sole depend on capital appreciation of the stock price to get ahead.  Admittedly, you could latch onto a great stock and ride it up to the moon, but more than likely, this will not be the case.

So today, I’m going to talk about the advantages of stocks that do yield a dividend.  Perhaps a good example would be McDonalds (MCD), it has a decent yield (3.3%) and a chance for stock price appreciation to boot.

In Volatile Markets

When there is scandal or a major concern in the country (or world), stock prices get pummeled.  This can create stress and even temporarily depress investors.  Currently, there is instability in Egypt that has caused the stock market to decline by 166 points this past Friday.  While I’m very concerned about this, having dividend yielding stock takes some of the edge off of the stress about the stock market.

Why, you might ask?

Because for the most part, dividends that stocks pay out aren’t determined by current events.  Temporary drops in the stock market do not affect the dividend payout by the companies that elect to pay a dividend.  Mainly profits and executive decisions are what determine what the company will pay out as a dividend (at least at the better companies).  Some companies (like REITs) are required to pay out around 90% of their profits for the year to be classified as a REIT (Real Estate Investment Trusts).

Since most dividends are paid out quarterly, current news is immaterial and may have resolved by the time that the dividend payout amount is determined.

Another positive value is that fact that the dividend payouts reduce the downward action of the dividend yielding, stocks price.  People are less apt to give up the juicy dividend, so the decline of the price of the stock moves slowly.  The reason for the slow downward movement of the stock price is because if there is a drop in the stock price, the dividend yield become more appealing because the payout percentage will be higher.  This naturally motivates people to jump in and grab hold of that great percentage yield before the stock price starts to go up again!

Caveat!

Just because a stock pays a dividend, doesn’t mean that they are still viable!  Do the proper research to make sure that the dividend paying stock is a solid investment (don’t by any typewriter stocks!).

As an alternative to purchasing individual dividend paying stocks, Nicole at “Grumpy Rumblings of the Untenured” suggests and go out and buy a mutual fund that is oriented towards paying out a dividend or actually only purchases dividend paying stocks (watch out for high fees though).  This way you reap the rewards while a professional manages your dividend portfolio.

-MR

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Disclosure, I do own a very small position in McDonalds stock.

Dividend Stocks, Free Lunch Experiment #7

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Dividend Stocks, Lunch Experiment Update:

Dividend Experiment

Dividend Experiment Update #7

This month, capital appreciation in the value of the stocks in the experiment has overall risen because of EV Energy (EVEP).  Ironically, EVEP is also the stock that I bought the least amount of.  Surprisingly, the market value of EV Energy has just surpassed the market value of ANH.  This is surprising because ANH cost me double the amount as EVEP did.  In fact, the share price of EVEP is starting to worry me a bit; it’s starting to look frothy so I’ll probably review the financial stats to make sure it’s still solid and not overbought.

The other two stocks in the experiment have remained close to the market values that they were last month.

Background:

The Free Lunch Experiment, which invests in dividend stocks so that I can use the yield to pay for my weekly lunches, is my first true experiment here at MoneyReasons.com and was started with the article called: “Paying An Adult Allowance, A Lunch Experiment”.  As explained in the article link in the preceding sentence, the money used in this experiment is free money because I would have spent it on eating lunch out with friends at work anyway (and yes my friends still go out everyday).  This means that if I were to lose all the money in this experiment tomorrow (very unlikely), I would really be out nothing!

By having free money fund this experiment, I’m able to take additional risks that I normal wouldn’t consider.

In some perverse way, one could consider the experiment money a form of emergency money, but I prefer not to make that claim…

Stock Name Anworth EV Energy Chimera
Stock Ticket ANH EVEP CIM
# of Shares 260 45 600
Orig. Price $7.84 $23.25 $4.01
Curr. Price $6.95 $42.33 $4.07
Orig Cost $2,038.14 $1,046.25 $2,404.80
Curr Value $1,807.00 $1,904.85 $2,442.00
Annual Yield 13.24% 7.15% 17.69%
Actual Dividend $59.80 $34.07 $108.00
Total Dividends $807.48
52 weeks 52
Dividend / week $15.53
Total Gain in
Stock Apprec. $664.66
% Change 12.11%
Amt Loaned to myself: $1,726
Amt paid back to date: $1,299
Amt Still Owned: $427

Priming the Pump:

While the money involved in this experiment is technically free money, to expedite the stock purchase funding I’ve borrowed money from my checking account a few times just to speed up the process (thus priming the pump so to speak).  Of course I paid myself back too though.  Currently, I still owe myself $427.

Evolution of the Experiment:

Now that the experiment is established and generating a decent dividend stream, after I pay off my loan to myself in mid-March 2011, I may cut back on the amount that I borrow from my checking account or not borrow any more from myself at all.  This would mean that I would just save the money by not eating out first, then purchase additional stock after I save up enough to make a decent buy.  I many use some of my dividend money to help purchase future shares too.

Hopefully, by the next monthly update I’ll be able to provide more details about the specific of the future changes to this experiment.

-MR

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Getting Wealthy By Swimming to Shore

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Getting Wealthy By Swimming to Shore.

Yesterday’s post: Defend Your Financial Fortress Against Spending Temptations!, prompted Sandy from First Gen American to ask the following question:  “I’m interested which budget categories you beefed up since your mortgage got paid”?  So in this post, I attempt to explain my position and answer Sandy’s question!

Originally, I wrote: Stop Drowning in Debt, Start Swimming To Shore.  In that post, I compared being deep in debt to being underwater trying to breathe.

When you are underwater, you only focus on one thing, and that is to get our head above water so you can breathe again!  In the financial world, you try to get out of debt so that is your goal and what you primarily focus on!

When you are deep underwater, it’s a battle to get to the surface to breathe air!  When you are in massive debt, your primary goal is to claw yourself back to the financial free air.

I broke the surface of the water, but instead of getting wealthy by swimming to shore, I’ve been treading water, trying to catch my breath, and then determine which direct to swim.

 

Getting Wealthy

Now that I’ve caught my breath, I’m going to start to swim towards the financially independence island/goal by going after the expenses that are like debt!

So I decided to start swimming by buying stocks with dividends, so someday the dividends could cover my Real Estate taxes and homeowner’s insurance payments.  I think the key is to start swimming and stop just treading water!

I’m going to start to research which stock(s) to purchase, and then in a later post, I’ll identify which one(s) I have chosen.

 

The Decision

While I haven’t saved a lot of money since paying off my house, I still have a few thousand to play with, and that enough to start to swim towards shore. 

So to answer Sandy’s question above, I’ve been putting the extra money from the payment from my former mortgage into cash, fixing things and a mild lifestyle inflation spending.   I’ll probably purchase the investments partially through a Roth IRA and partially through my regular online brokerage account.

Other than retirement, what ways are you planning on using to getting wealthier?

-MR