Is Warren Buffett wrong about dividends?

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.

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.

The case against DRIPing your dividends

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.

With everything I talk about investing and trading wise I want to offer both sides. The more options, ideas, and strategies that you have for your own portfolio the better you will become as an investor.

The choice to DRIP or not to DRIP is a good decision to have. What to do with free money coming at you. Neither choice is a bad one that will ruin your account. Its more a question of which will provide more benefit then the other for you.


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.

Anti dividend debates

This happens for more often then it should....

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.

If dividends are so bad for investors and companies or do not mean anything then why do 402 of the 500 companies in the S&P500, reflecting the 500 biggest most successful companies in the U.S, pay a dividend? If you want to question my intelligence and investing experience by asking what makes me think I can do better then the CEO with corporation's money then you are also questioning 80.4% of the top CEOs in the U.S.


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.

What is Cost Basis for Investing?

Last week I was in an interesting discussion about cost basis for dividend investors. How does one calculate cost basis?  You might as well ask what the best ice cream flavor is as it comes down to personal preference.
Now to be clear before I continue... the IRS has a very specific way of calculating cost basis for tax purposes. The following is not about that as you have to follow their definition. This is purely about how do you want to think about your money. How do you define your success...

Quite a bit of theory and math coming up or jump to the bolded section for the short version...

First let's look at a purchase of stock and the total dollar amount generated without terms of cost basis and % returns.
1.0: Buy $10 stock that pays no dividend. Price rises to $20. Total amount: $20
2.0: Buy $10 stock that pays $1 dividend and keep it as cash. Price rises to $20. Total amount: $21
3.0: Buy $10 stock that pays $1 dividend and DRIP an extra 0.1 shares at the same price. 1.1 shares rise to $20 share price. Total amount: $22
Assuming the stock price moved as described then #3 seems to be the clear best choice as it generates the most money. How is it then measured as far as profit and % gain?

If you bought a $10 stock and then one day later you were paid a special $10 dividend the stock would essentially be free to you. You have all your money original money back. The share price could drop to $0 and you wouldn't have lost anything. From this point of view we would actually want to reduce our cost basis by the dividend paid out. Using the same examples as above...
1.1: $10 original purchase goes to $20: 100% return
2.1: $10 original purchase, $1 dividend drops your original at risk money to $9 then goes to $20 for $11 profit: 122% return
3.1: $10 original purchase, $1 dividend drops your original at risk money to $9, you DRIP 0.1 shares, your 1.1 shares rise to $20 for $22 total position and $13 profit: 144% return
This makes sense because that $1 dividend is in your pocket and independent of share price fluctuations so it could be taken out of the equation.

We can look at DRIP shares in another way. That they are a new purchase of stock. That you have the $1 dividend in your pocket and decide to make a new purchase placing more of your money at risk.
1.2: No change: 100% return
2.2: No change: 122% return
3.2: $10 original purchase, $1 dividend drops your original at risk money to $9, you DRIP 0.1 shares raising your at risk money back to $10, your 1.1 shares rise to $20 for $22 total position and $12 profit: 120% return.
From this are we to say that starting with $10 and ending with $21 is more profitable than starting with $10 and ending with $22 because that is what the % profit tells us.
If you feel dizzy or confused here don't worry because...

Stock brokers calculate profit and cost basis differently too
Sharebuilder calculates cost basis that a dividend does not reduce cost basis and DRIP shares increases it.
Fidelity calculates cost basis that a dividend reduces your cost basis and DRIP does not increase it.
I have active accounts with both and turn DRIP on and off at different times for different stock. Its amazing how much more profitable I feel with Fidelity.

% returns and measure of gains are nothing more then a "feel good stat" most often used to figure out who the better investor is between different strategies and different positions. There is utility with how you set your own cost basis and use it to measure yourself to yourself. Was investment choice A better then your investment choice B. I feel it is important to measure yourself to find areas to improve upon so we do need some sort of cost basis to % return metric.

For the Model Portfolio I am using my original purchase as the cost basis. How much of my original money out of my pocket am I risking.
Dividends taken as cash I will use to reduce my cost basis.  This money is out of the market and will not be impacted by share price changes. It is the same as if I never had that money in the market in the first place.
Dividend taken as DRIP I will reduce my cost basis as I took it in cash then put my money from my own pocket back into the market at risk to price fluctuations. Essentially make DRIP investments an even wash.


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.

First half 2012 investing account review

I often review the trading count but not as often check the investing account as a whole...

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.

So things are preceding well and we have two points of concern...
1: PSX uncertainty.
2: ERF's dividend growth


For PSX its a waiting game. They are a brand new company and we will need to see how they develop.
For ERF.. I have gone into extreme detail with them elsewhere but my reasons for buying and owning them have not changed. I'm not saying that my thesis of ERF long term is how it will turn out. But I have my thesis, have considered the alternatives, have my backup plans in case I am wrong. That is how we become profitable long term when the average investors fails and loses. We act opposite of the average investor which is to say that we consider the possibility of being wrong as much as being right.


One last thing in regards to ERF.... ERF is a prime example of what Benjamin Graham talks about in his book "The Intelligent Investor". You do NOT sell stock just because it has fallen. You do NOT sell stock because of being swept away in mass hysteria. My reason for buying them has not changed just because someone wants to sell their shares in the $12s.  It has taken me years of investing to be able to have that frame of mind after seeing a 50% drop. Investing is not unlike trading in this respect. It takes time and experience to build up that skill set.


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.

Dividend Investing 8 - DRIP

DRIP, aka dividend reinvestment plans, offer some options and decisions for the dividend investor...

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.

There are enough pros and cons for both DRIP and cash dividends that I do not think there is a right or wrong choice, its personal preference.

For the Model Portfolio, once there is $250 of cash made a month I will probably turn DRIP off and take my dividends in the form of cash. That is the current size of each of my stock orders. This way I can roll my dividends back into my portfolio monthly but take advantage of the weakest of them. At this point in time where I am getting $10 a month it would take 2 years before I reinvest the first dividend and that is too much compound interest that I am losing.

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.

What to do with a "bad" investment 2

I wanted to share a little bit more on portfolio management...

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.

Protection. Safety. Risk control. Notice everything in the video was all about "What can go wrong with this investment? How could I be wrong with my theory that HGT is a good investment?" I want to be in a win win scenario.

So why not put everything into ERF if its so great in the first place and get even better yield? Why bother with diversification? This goes back to why I have done so much research on HGT and ERF and everything I listed in the video.... what if I am wrong? 5 bad events happened leading up to this point (Natural gas price drop, oil price drop, 3 different lawsuits). What if I am wrong a 6th time? Sure the odds are low but this isnt a video game where I can reload my save game and start over. I cannot afford to be wrong and suffer large penalties.

One thing I did not talk about in the video that does need to be mentioned.  I owned HGT for 19 months. I got $1.89 from each $20 share. That certainly helps on recouping some of the loss and taking some of the sting out of the drop. I got 9.5% of my original money back before the share price drops. I didn't have to sell to get that.



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.

What to do with a "bad" investment

So its time to talk about Enerplus (ERF)

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.

As I mention in the video, its easy to sit back and say you will do something or that you won't care or be effected. There are plenty of books that we can read telling us to not give in to emotions.
Its an entirely different matter when you have money on the line.

So to answer the question.. what to do with a bad investment. Treat is as you did when you first entered it.
Why did you get into the position in the first place. Has that changed. Does selling now cause more harm then holding on.

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.

Stop with the 43% dividend tax

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.

So I am not quite sure how there can be complaints about the loopholes of the tax system and then at the same time talk about the theoretical maximum on a small population of the party reflects the nation as a whole.

Note that I am not taking a side in if it should or should not be raised. That's a personal political opinion. My only points in the video is that its not going to be the death of dividends.


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.

New investment: ConocoPhillips (COP)

The order has been filled for the next investment in the Investment Account...

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.

Let's take a look at the Fastgraphs for COP...

At first glance the current price vs the fair value of COP seems to be great with a wide margin compared to most other stock. However I think its more accurate to compare a stock to its own history. As seen above, COP hardly ever goes above its fair value. Therefore the average COP trading value has to be under fastgraph's valuation. I'm not going to work through a formula to figure out exactly what that average is. Looking at the chart I think its safe to say its a nice valuation compared to its earnings.

Charts provided by Fastgraphs.

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.

Weight and Diversification

With the holiday dinners, baking, and cookies done its time to talk about weight...

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.

Weight by income is something I not seen discussed before. Awareness of it could well be more important then weight by position size for a dividend investor wanting to live off of their income.

The Model Portfolio is still very young with only 5 positions. Do I balance out he weight right now? If I am to have 25 position in Phase 2 of the Investing Account then I have plenty of time because at that point ERF should only be a 4%-5% weight. It will still be a lot higher then WMT which would probably only have a 1.5% but the risk to me would be limited.

But could one fix this and get the weight by income balanced? To do that right now I would have to have about a $850 position in WMT.  Keeping everything else the same that would not only mean 6 more deposits going to WMT but that would push its weight by position over 30% and cause a new problem.

Apart from waiting and letting diversification lower the risk there is also dividend growth that will help. Over the years, WMTs 17% growth will catch up to ERF and the other high yield positions.

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.

Investing account update

Some important observations for the investing account I wanted to bring up in a text only blog entry. No video due to things about to get mathy...

Walmart WMT finally got its first dividend in the Model Portfolio. It seems like I purchased it a long time ago and it had 0 DRIP shares. So whats the big payoff? $1.58 a quarter. A bit anti climactic seeing as how ERF and JNK pay more then that each month. So why bother with Walmart with its 2.5% yield when I could be loading up on JNK at 7.5% and ERF at 9.7%?

It has to do with the other half of dividend investing. The growth part.  WMT has a 10 year average of raising their dividend by over 17%. Right now it pays $0.37 per quarter. Assuming it maintains its pattern each year that will get raised. $0.43, $0.50, $0.59, $0.69, $0.81
In 5 years it will have doubled what it pays now. Inflation can be rough but will gas be $6/gallon in 5 years? Will milk cost that much? I do not see prices doubling in that time. This means we will start coming out ahead.
In 15 years when I hope to quit each WMT share today will pay $3.89.
That means my original $250 investment of 4.3373 shares will be making $16.87 a quarter. $67.43 a year.
Thats nearly 27% yield on cost. Again that is without the compounding power of DRIP shares.

Wait a minute. If dividend growth stock increases like that for decades how come we don't have blue chip stocks paying that much now? To pay a $3.89/quarter at a 2.5% yield WMT stock will need to be $622 a share. That doesnt seem possible right? It is if we add in stock splits.  Give 4 stock splits of 2:1 each and we end up with a share price of $38 paying out $0.24 dividends.

For the record I do not expect WMT to continue growing at that pace for the next 15 years.
On the other hand WMT investors 15 years ago with their $12 share price and $0.025 dividend probably didn't expect the values of today.

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.

The first dividend growth stock of the portfolio is...

I ended up placing my order last night with Sharebuilder. It should be going through this morning...

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.

One thing I want to talk a bit more about is the % of time I spent talking about the fundamentals of the dividend vs the future plans of Walmart.  I see a lot of talk about a company's financials and they are certainly important to review. However, I see a lot of people look at the future potential of a company and perhaps look at the forward looking P/E but usually the conversation and research stops there. At the same time these people will say "the past is no guarantee of the future." Fair enough I would agree with that statement, but why isn't there more research on that future?

There are no real solid numbers for the future. Of course because it hasn't happened yet. So the best we can do is make reasonable guesses.
1: Walmart has been successful in the past leveraging their size to offer low priced items people want or need.
2: They are using that in new ways and new markets.
You don't need to write out a 20 page thesis and employ a team of researchers to see the potential value in that.
How confident am I that I am right? 15% confident as that is how much of the Investing money is going into this position. As time goes on and I get more positions, 20-25 total, I'll only be 4%-5% confident


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial adviser, accountant, or tax advisor. 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

Dividend Investing: 7 - Dates

Keeping the different dates for dividend investing separate can be confusing at first...

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.

Buying on the ex-dividend date and expecting to get the dividend is a frustrating thing... believe me. Not only do you miss one dividend but you are as far away from the next one as you can get.

Still, once you get the different dividend dates down you can really bring in some timing on your side as I described with the declaration date. Most other investors blow it off as the least important one. But for timing your purchases? It is the most important one if you are familiar with a company's dividend history.

Here is the SEC's info on dividends
http://www.sec.gov/answers/dividen.htm


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.

Listing out the Goals of the Investing Account, Phase 2

With Phase 1 of the investing account for the Model Portfolio done I move on to Phase 2.

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.

25 positions for a 4% portfolio risk is important for me. Yes the solid Dividend Aristocrats have paid and raised dividends for 25+ years. Who knows what will happen in the future. Look at bank stocks. They used to be the cornerstone of many dividend income accounts. Not only did they cut their dividends after 2008 but their share price was devastated.  If you were going to move your money to something else... you might as well have to start over you would have easily lost 50% or more of your position.

The 25 stock and ETF for the Investing Account phase 2 are going to be across multiple sectors. Consumer staples, restaurants, real estate, health care. I have read too many horror stories of people who went "all in" with a couple of companies. 1 or 2 don't work and they lost everything.



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.

Listing out the goals of the Investing account, Phase 1

If I am going to manage a dividend growth investing account for 15+ years I need to set out my goals...

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.

In the video I mention that getting paid weekly was important for the dividend investing account. I want to talk a bit more about that. When selecting stock and ETFs it was the last thing on the list of important things I needed. Safety, stability, a good yield, strong potential for future growth and the other topics I discuss in my other videos take priority. ERF was the final piece of getting paid in week 3 of each month. But if I didnt feel that it was a good income source with stability and everything else I look for in an investment? I wouldn't have picked it up. To be honest, I got lucky that it pays during week 3.

I'm pretty pleased with how Phase 1 of the Investing account turned out. I do not have TLT yet but its just a matter of being patient and controlling emotions in buying when it's the right time. The move to Sharebuilder in the long run maybe a good thing as now I can DRIP and let compounding take over.


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.

Dividend Investing: 6 - Payout Raito

I continue my investing series with another statistic that can give a lot of light onto the dividend policy of a company...

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.

There are a lot of different ways to look at the ideas behind what a payout ratio represents. It can be based on EPS, free cash flow, free cash flow before capital expenditures, before debt is calculated in, etc.
The key point is to figure out in some way...
1:  How much money the company generates.
2:  How much they keep to grow the company in the future
3:  How much money they have to pay as a dividend.



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.

Dividend Investing: 5 - Dividend Growth Rate

You can have all the dividend raises in a row you can get but if they are too small they aren't worth it...

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.

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.

Dividend Investing: 4 - Consecutive Years of Dividend Raises

I continue my series on dividend investing by looking at something I have talked a lot about in other videos, the consecutive years of dividend raises...

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.

I want to expand and clear up something I mentioned in the video. That was how a dividend company vs a non dividend company grows and expands their business.
Now I am not saying that non dividend companies expand recklessly. But when they choose to grow they are not restricted by having to increase the dividend the next year. So their moves can be longer term or if their expansion is not as profitable as they thought then no big deal, they will work it out later.

The dividend paying company though has to be sure it will start generating income to pay for the higher dividend. It could take a few years before any growth will see increased income from any one expansion of buying another company or building a new factory. This forces the company to plan out more so they have several projects in the pipe. They also have to really be sure that they are on target because if there are delays then they will not have enough growth to increase the dividend and investors could become concerned or start to sell.


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 advisor. 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.

Dividend Investing: 3 - Yield and Yield on Cost

Yield and Yield on Cost are pretty similar in how they are calculated but the one difference is a big one...

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.

In the video I ended with saying that I don't want to pay someone $20 to get $0.66 a year back which is what happened with AOD. That's a 3.3% yield on cost but isnt that what I am doing now if I were to buy a JNJ or KO?

I am not buying today's dividend dollar payout I am buying the 15 year in the future one.
I want to stress this point because its THE #1 cornerstone of dividend investing. Its something I will be repeating over and over and over again probably to the point of beating it to death. I see too many investors missing this point that they don't even consider dividend investing. If it doesnt fit for a person's strategy that is perfectly fine but at least understand it enough to be able to make that decision.

Let's break down the math of my Coca-Cola comment in the video.
KO in June 1989 was around $4.80 with a $0.0375 quarterly payment (adjusted for splits). That's a 3.1% yield.
Today it goes for $68.48 and has a $0.47 quarterly payment, $1.88 a year. That's a 2.7% yield. A person only thinking about yield would probably have skipped it. Maybe even returned to KO and thought its still not paying much.
Yield on cost? That $4.80 spent is making $1.88 a year.... 39% yield on cost. Don't even get me started on if they had reinvested the dividends all those years.

So when I say I do not want to give someone $20 to get $0.66 back a year what I really mean is I want to give someone $20 and get $7.52 back a year (having bought 4 shares of KO).

Whose to say what will become of funds like AOD 20 years from now. All I know is that has cut its payment twice while KO and other companies have raised their payment. When I am jobless I don't want the worry of having to rebalance my bills after having took a paycut.


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 advisor. 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