Dividend Days

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!

A lot of bloggers that write about dividends often mention real estate as a way to bring in yet another source of alternate income. If you’re good enough, you can go out, buy an investment property, and make some money on the side after maintenance expenses, taxes, and the mortgage. There’s something about Real Estate that has made me very iffy about getting into it however. I can’t seem to get over this hurdle, because it goes against the fiber of how I live and what I believe in. Sounds like a serious issue? It really shouldn’t be, but it is..and that’s debt.

Ever since I graduated from college with a just-large-enough-to-be-annoying student loan, I’ve had an extreme distaste for leverage and credit. I don’t pay interest, I receive it. It pains me to think of whatever fatcat is calculating the monthly interest on the money I borrowed, and I cringe when I make my payment on my loan each month. It’s much akin to dumping the money into a black hole. I’m appreciative of the fact that it got me an education that I’ve utilized for a great job, but that doesn’t make the sting any less when I see “X amount of your payment went to interest.” Additionally, the instrument in which debtors are forced to be governed by, the credit score, is a rather inaccurate, somewhat broken system that dictates to lenders what favorable or unfavorable terms they’ll offer to you. Seeing people bound by this arbitrary number so completely that there are tons of books, articles, and blog posts about improving your credit score immediately throws up red flags for me.

Buying stocks on margin is considered risky business because you are investing money you don’t have. I take real estate in the same stride. I don’t want a mortgage, I just want the house. If that means I have to live in an apartment for several years whilst I save up, then so be it. If I want to create additional streams of income, I’ll utilize the funds I have at my disposal.

Which brings me to my final point. I’m perfectly fine with investing in real estate and I understand it’s potential, but if I wanted to go that route, I’d much prefer REITs (Real Estate Investment Trusts) as my vehicle of choice. In this way I can add additional diversity to my portfolio, take advantage of hefty yields often sported by these instruments, and forgo the dealing with tenants, paying for maintenance, and worrying who I’m going to get to pay the mortgage in times of vacancy.

Your mileage may vary.

It almost seems counterintuitive, but it’s true. If you’re a dividend investor you should focus an awful lot of your investment analysis on growth, though not in the context you’re thinking of. I’m not speaking to the growth of the firm itself, but rather the rate in which a firm increases it’s dividend payment.

This is particularly important for a variety of reasons. Firstly as you may know, dividend payers are often large companies that don’t have a whole lot of room to expand their operations. As such much of your return will be driven by the growth of the dividend payout itself. Here’s a great example from a recent article at the Motley Fool:

“Remember, my purchase price was roughly $43 per share. If you take the current annual dividend amount of $1.66 (paid out in quarterly installments, like most dividends) and divide it by my purchase price, you get a dividend yield of 3.9%. (Divide it by the current price and you get 2.6%.)

My yield is bigger because I bought the stock for less. The dividend is growing, too. When I bought back in 2002, the annual dividend was just $0.82.”

That’s in reference to Johnson and Johnson, but there are other great opportunities like this out there as well. Below are some examples (also from the article).

I’m always on the lookout for firms that consistently raise dividends or spotting trends of increasing dividends. With that in mind, let’s take a look at some companies that raised their dividend payouts in recent weeks!

• FactSet Research Systems (FDS) raised it’s quarterly dividend by 50% to 18 cents per share.
• Barrick Gold (ABX) raised it’s dividend semi-annual dividend by 33% to 20 cents per share.
• PepsiCo (PEP) [Note: I'm a fan of this one] raised its annual dividend by 13% to $1.70 per share.

I’ll be trying to keep track each week of notable firms that are out there raising dividends. As per the usual these aren’t recommendations, but I hope to mark them as candidates for further research. I’ve been interested in Pepsi for some time, but have yet to pull the trigger.