Dividend Days

Now, as always, I’m just gonna go ahead and say that I’m not advising anyone to buy anything (I also don’t currently own any Berkshire stock), but I like to keep an eye out on stocks that have been needlessly beaten down in recent weeks/months, and Berkshire fits the bill.

A recent article at Yahoo Finance claims that its possible that Buffett has lost his touch and that Berkshire could be going downhill further than the 30% that it’s already been knocked around, and they do have some valid points. After all, no matter who Warren picks to be his successor, there are going to be plenty of long time investors ready to hit the bail out button once he retires for good.

But consider the long term prospects for the company. Every time the stock has been knocked down like it has bounced back and then some. How long do you think Buffett has been grooming his successor? Quite awhile, and the firm itself has been a a juggernaut. Even the loss of the main man himself may not stop the long term success of the company.

Just some food for thought.

I can’t help but get tired of the seemingly insane amount of leverage that people, business, and our government utilizes. Even seemingly reputable agencies like the FDIC may actually have to borrow from the treasury to keep their butts covered as an increasing number of banks are in danger of failing thanks to (you guessed it) too much of their money being tied up in the sub prime and other mortgage securities.

I also read on to find out that if I want to be a millionaire, I better start borrowing, too. I bet I’ll need to borrow to pay for that $300,000 golf club membership, too. According to the article you’re not “rich” unless you have $24 million in assets or more. How rich are we talking here, and relative to who? How many Americans will ever even come close to that kind of scratch? Forget Americans, actually, how many humans on the planet will ever even reach $1 million in assets? Not many, is the answer.

Forget what the financial press tells you when it comes to what you’ll need. The only person who knows how much you need to live on is you. Creating recurring income streams as well as investment income may require the help of a professional if you don’t want to put the time in to do research and development of your financial plan, but I have news for you, most people don’t need $24 million to feel like they are truly rich.

As you probably know from reading my blog, I’m a huge fan of dividends and recurring income. I like to think of myself as an out of the box kinda guy. I managed to pull in a few grand once by camping in second life with a number of zombie machines for a few months with an investment total of $150 for a few computers that were just powerful enough to run the game 24/7. It took me about an hour a week to keep the “grid” going, and it netted me $100 a week for about 6 months. That opportunity has long since passed, but the idea of thinking outside the box to pull in passive income remains with me.

I recently came across an article over at CNN talking about Wind Power. Let’s ignore for a moment the guy who’s unhappy about the sight and sound of the turbines, and take away one very important phrase from the piece:

Yancey and some of his brothers begged Ed Yancey to leave the family land untouched. But the elder Yancey pointed to the money — a minimum of $6,600 a year for every turbine. This is your legacy, he told them.

Wow, $6,600 annually per turbine? That’s some serious spending power, and a minimum at that, every year. Dividend investing and creating recurring income is all about the creation of a legacy. You want that income to come in no matter if you decide to keep working or travel the world. Just something to keep in mind.

I take a unique approach when it comes to my career. Most people tend to focus on one job or job-type, throw themselves at it, and lock themselves into that path for the next 20-30 years, climbing the income and career ladder as time passes. Instead I take a different approach…

• Diversify: I believe in the power of diversification well beyond investing terms. Think of it this way: If you lost your job tomorrow, how could you support yourself? Would you immediately have to find a new job? Do you have reserves to run off of until that happens? Are you accustomed to a certain lifestyle that requires a relatively high amount of income? Instead of just doing one job, I have several. I write for a number of online publications, some blogs and a column here and there. I’ve also created a site portfolio, covering a variety of niches from cars to diseases, providing valuable information to users while also proving steady advertising income each month. On top of that I have my dividend portfolio to tap into (just the dividends!) in times when I need additional income. Finally I’ll soon (hopefully) be working as an assistant Financial Planner part time. If one of my jobs fell through, I could still support myself. Build yourself a financial moat.
• Be Creative: When I left the comfort of my full time 9-5 job in financial services, a lot of people to go seek out another full time (hopefully better paying) job. I’ve gotten a lot of skepticism that my approach may not work, but how are we to know until you try? Don’t be afraid to try new things, and remember the worst case scenario is that you fail and you can return to the comfort of a regular job. If you don’t believe me, check out Kirsty’s site, Nerdy Nomad, or Almost Fearless. They’ve veered well off the traditional path, but they’ve found happiness (and enough money to keep themselves afloat) along the way. Thinking outside the box has allowed me to design my lifestyle the way I want it to be: portable, fulfilling, and fun!
• Be Patient: One of the biggest mistakes many people run into when going out on their own or looking into new sources of income is that if it doesn’t make money RIGHT NOW then its time to close shop. One of my other blogs took months of content, link building, etc. before it even hit break-even to cover the hosting costs. After pushing on through the dry spell its now one of my more profitable ventures. Know when to accept defeat, but also understand that it takes time to develop reliable sources of income.

Within the next few weeks keep an eye out for some actual dividend analysis! If you have any suggestions for a particular stock, drop me a line and I’ll see what I can do.

With the market being dragged down into bear market territory, just about everyone in equities is feeling the sting. Some of my financial stocks have sunk to all new lows, driving their dividend yields through the roof (of course the stability of said dividend is a very valid concern, prompting breakthroughs below the typical yield cushion).

Listed below are some stocks I believe are worth looking at.

• Pepsi (PEP): Poor pepsi, along with most other beverage makers, have been knocked down quite a bit in the past few months. PEP’s business is still strong, however, and I believe they’ve been unfairly knocked around. You can survey the damage here.
• Southern Copper Corp (PCU): The past 3 months have seen a significant drop in PCU shares, but I think demand for copper is still going strong.  PCU has been on my watch list for sometime, and with an almost 7% yield, I may be picking up some shares in the near future.
• Apollo Investments (AINV): One of my riskier holdings (As a matter of disclosure I do own AINV), Apollo has been knocked well off from $20 a share and continues to be in freefall. I think its oversold, and the dividend yield, if sustainable, is starting to get lucratively high.

As always its important to keep in mind these are not recommendations. per se, but could be used as a basis for potential investments. Be sure to do your own due diligence.

Happy hunting.

I’ve been working to reallocate my income portfolio (a taxable brokerage account separate from retirement savings, which I use to build up a long term income source) to 50% US and 50% international. While I’m fairly comfortable with analyzing and choosing stocks here in the US, I prefer to take a broader approach when it comes investments globally. With this in mind I’ve been looking around to see what ETFs are available for a dividend-focused investor like myself.

One such ETF that I came across is DEM, or Wisdomtree’s Emerging Markets High-Yielding Equity Fund. This fund picks out stocks international holdings that have a high yield as per the description below:

“The WisdomTree Emerging Markets High-Yielding Equity Index is a fundamentally weighted index that measures the performance of the highest dividend yielding stocks selected from the WisdomTree Emerging Markets Dividend Index. At the index measurement date, companies within the WisdomTree Emerging Markets Dividend Index are ranked by dividend yield. Securities ranking in the highest 30% by dividend yield are selected for inclusion. Companies are weighted in the Index based on annual cash dividends paid.”

The fund currently yields 6.13%, which is quite high and well over my 4% threshold. Top countries include some nations I’ve been looking into of late like Brazil and yes, even a touch of China. Considering the slow down in the US economy which could or could not be more pronounced in the coming years coupled with the inevitable rise of other nations with developing middle classes and a lust for status and wealth (Again..China.) a hefty amount of international exposure makes sense.

In terms of sectors I’m happy to see that it’s not top-heavy with financials like many of their dividend counterparts. Here’s the top 10:

Its always fun to turn on CNBC and find out what all the hated sectors. “Stay away from X, talking head says, due to Y and Z factors” is an all too common statement. Some analysts will be bearish, some bullish, and of course Mr. Market will have his say as well. With the recent sub-prime mess and an uncertain outlook on how bad things will get, financial stocks have gotten crushed.

Some businesses have already been shaken out. Bear Stearns bit the big one, and got swallowed up by JP Morgan. If a financial institution that survived the great depression became so hopelessly laden with debt that it had to stage an emergency firesale to keep from going under, is anyone save? Maybe.

For me I’m looking to banks and trying to decipher which of them will make the cut. Those that remain will have the advantage of reduced competition, but will see a lot of pain in the short term. If you believe in the long term success of a financial firm and you’re willing to take some pain in the interim, you have a number of value picks with hefty dividend payments at your disposal.

For me, Bank of America is where I’ll be going. I think BAC has been crushed and written off a good amount of bad debt, but I think they will survive and, eventually, thrive. Currently trading at about $30 a share and at almost a 9% dividend yield, its obvious that investors don’t think their dividend is sustainable. In recent history, the Bank hasn’t shown a knack for slicing dividends, but these are unusual times. I’m going to pull the trigger on BAC, tuck it away, and wait for things to clear up. It’s risky, and I’m willing to admit that. They may have to cut their dividend, further driving down share prices, or the acquisition of Countrywide may not go as well as expected. However this is a long term play, and short term concerns like this are not in the cards. I may re-evaluate at a future date, but we’ll see how this plays out.

For me, creating alternate income is a means to an end. I research dividend-paying stocks and invest as a means to create yet another additional source of income. This allows me the luxury of creating wealth with residual payments regardless if I happen work that day or not. Whether through investing or other means, this is the real crux of alternate income, generating money in such a way that you don’t have to work as hard as you do now, giving you the time freedom you desire to pursue your life’s interest.

In my continuing quest to find sources of said income, my brother and I decided to start up a small venture into online marketing. We wanted to target very small keywords with little competition that get a consistent number of searches on a daily basis (minimum of about 100 searches per day). Rather than creating a spam site with nothing but advertising links and crap that provides no value to anyone and is unlikely to generate revenue organically, we take a different approach. We’ll research a subject, consolidate information from various sources, and build a site out with that content.

With some luck, people will link to the site, and since there isn’t too much competition in that area, our search engine rankings will climb over the next few weeks. We’ve hit the top 5 in most of our sites so far for their targeted key phrase, and the rest still hit the top 10-20. We’ve started to get the process down to a more automated science in terms of gathering information, writing in a reader-friendly consolidated format, and uploading it to a small but pleasant to the eyes site.

So you want to start your own niche site do you? Well not to worry, here’s a short breakdown of how we go about it:

1. Brainstorm: We really only like to create sites that we have an interest in. It gets very boring doing factfinding and research into something you don’t care about. Passion and interest are what drives us to create good content, so that we provide something of value to our visitors whilst making some money on the side as well. Write down some topics, ideas, subject matter, and then go from there.
2. What’s it Worth?: Once we have an idea we like, we check out the value of a particular key phrase, find out whether the domain name is available, and get a rough estimate for number of searches and how much the niche is worth click wise. We like to stick to free tools for this, so check out wordtracker’s free keyword tool if you’re curious. Don’t take it is gospel, but it’s a place to start. Once we’re happy with the profit potential it’s time to start the building process.
3. Fact Finding and Site Construction: We create a unique look for each of our sites in terms of logo and color, but much of the site’s structure remains intact. Once the logo and site design is whipped up, it’s on to content generation. We’ll gather information from official sites, create FAQs, gnab specifications if necessary, then we put it all into the site design and put the site live.
4. Promotion: Once the site’s up and ready to go, we’ll submit a sitemap to Google, use the sites that already have a decent rank to link over to the new site, ensuring that it will be indexed and ranked more quickly. We’ll also comment in popular blogs on the topic, and build up links through other means like wikipedia (Under external links, though we’ve had mixed success, some people are crazy about deleting links in the links section, so don’t spam! If it gets removed oh well, if it stays it’s a great source of traffic).
5. Hope for Paydirt: The site’s up, our promotion is done, nothing to do now but watch the money to roll in…if it does in fact roll in.

It’s not a perfect system, but it has served us well so far. On average we’ve launched 1-2 sites each month, and we’re currently bringing in $4-$8.00 per day in adsense earnings. Not exactly jaw dropping, but I don’t need a homerun right away, singles will suit me just fine, as we’re building on our current income one block at a time.

It’s interesting looking back and realize I only really began investing about a year and a half ago. I made some pretty boneheaded moves at the time, of course, but eventually came into my own and really found a method to investing that suited my style. Since then I’ve been slowly building up my dividend income, despite my commitment to paying off debts first (I hate debt, always have and always will!) and my need to save for other things like retirement and a house, my brokerage account has continued to grow in small amounts.

With this in mind I thought it would be a fun exercise to take a look at my statement and breakdown the dividends and see how I did for 2007. I hardly expect it to be groundbreaking, but we all have to start somewhere, right? Here we go:

• Conoco Phillips: $8.26
• Apollo Investments: $28.62
• Unilever: $6.08
• Brokerage Money Market: $3.24

I’ve been slowly and methodically adding in new money and positions, so I think 2008 will be a bit more active and profitable. Regardless it makes for a good start. I purposely left out interest from other accounts like Prosper, which warrants a post of it’s own, or income from emergency savings and other money market accounts, as they are more for capital preservation purposes.

Happy Holiday Everyone! I’m back from Memorial Day and I’m getting back into the swing of things so we’ll keep things brief, but here’s some things of interest for you.

Ben Stein, one of the many (questionable?) writers over at Yahoo Finance, had an interesting article today on the value of dividend-paying instruments.

I’ll be reviewing the Ultimate Dividend Investor’s Playbook soon, I really like it thus far.

Living Off Dividends continues the rent vs. own debate. This is always a hot-button issue for personal finance bloggers. Where’s your line in the sand?

Enjoy!