I have a new investment for the Model Portfolio to share...
The investing side of an insurance company is where they make their money. Thats how Warren Buffett really fueled the growth of Berkshire Hathaway, they own Geico. That might bring up the question, why would I want to invest in a company that invests in other companies? Wouldn't it be better if I just bought the investments directly? The answer is that I don't have access to a lot of things. Insurers like AFL can pick up private investments and private bonds not available on the open market. They will also have teams of researchers to find good investments. I think thats a fair deal. I give them money and they give me a 3% yield that they increase by 20% a year. Now they won't be able to keep pace of that growth but heck I'll take a 10% raise to my income.
In the first image look at the total return over the past 10 years vs the S&P500. 10.1% vs 3.8%. I have to laugh every time I hear someone tries to tell me that dividend paying companies cannot give big returns because they aren't innovative. Their reasoning being that companies pay dividends when they are out of ideas for products.
Another key take away is the upside potential. The black line is the actual share price. The orange line is the earnings based fair value of the company. AFL's business has grown in huge leaps and bounds and the market is not paying attention.
While dividend stocks can outpace growth stock in the capital gains category they can also beat bonds at the income game. As shown in the second image, over 10 years the actual amount received from dividends will double. Treasuries in comparison are flat and we end up getting paid over twice total amount that bonds pay.
Images from Fastgraphs.com
Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.
The investing side of an insurance company is where they make their money. Thats how Warren Buffett really fueled the growth of Berkshire Hathaway, they own Geico. That might bring up the question, why would I want to invest in a company that invests in other companies? Wouldn't it be better if I just bought the investments directly? The answer is that I don't have access to a lot of things. Insurers like AFL can pick up private investments and private bonds not available on the open market. They will also have teams of researchers to find good investments. I think thats a fair deal. I give them money and they give me a 3% yield that they increase by 20% a year. Now they won't be able to keep pace of that growth but heck I'll take a 10% raise to my income.
In the first image look at the total return over the past 10 years vs the S&P500. 10.1% vs 3.8%. I have to laugh every time I hear someone tries to tell me that dividend paying companies cannot give big returns because they aren't innovative. Their reasoning being that companies pay dividends when they are out of ideas for products.
Another key take away is the upside potential. The black line is the actual share price. The orange line is the earnings based fair value of the company. AFL's business has grown in huge leaps and bounds and the market is not paying attention.
While dividend stocks can outpace growth stock in the capital gains category they can also beat bonds at the income game. As shown in the second image, over 10 years the actual amount received from dividends will double. Treasuries in comparison are flat and we end up getting paid over twice total amount that bonds pay.
Images from Fastgraphs.com
Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
I have been tracking AFL for 3 months now and there is a high probability that this will be added in to my dividend reinvestment portfolio, and will be included in my monthly post.
ReplyDeleteI believe this company is truly undervalued, and a good deal. Its funny when you look at the article http://www.dailypolitical.com/finance/stock-market/ubs-ag-cuts-aflac-eps-estimates-afl.htm
and see the "analyst" price targets are all over the place. Bottom line is the company yields over 3% in dividends and is a dividend champion!
Another great update. Keep em comin!
ReplyDeleteThat dividend growth does sound attractive. Another one to consider with similar dividend growth is JNJ. It's around 3.5% yield and 14% growth. It even held up well during the 08-09 crash.
JNJ is a great company. Even with all their product recalls and difficulties in the consumer division... their other ones do nicely. They just reported earnings yesterday and I need to get to them still.
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