General Electric (GE) – An Unloved Dividend Stock with Long-term Potential
GE is one of the most unloved blue chip stocks. Almost anywhere you read a GE article on the internet, commentators are quick to rip into CEO Jeff Immelt, the company’s poor capital allocation decisions, the dividend cut during the financial crisis, the bureaucracy, the lack of capital returned to shareholders, the company’s deceptive PR efforts, and more. And why not - there is plenty to be frustrated about if you are or were a long-term GE shareholder. Since Immelt took over the role of CEO from Welch in 2001, GE’s total shareholder return (includes dividends) is a whopping 0%. Without dividends, the stock is down more than 35% compared to the near doubling of the rest of the [...]
10 Dividend Stocks to Consider Before the Ex-Dividend Date
With thousands of dividend stocks out there, finding good ideas is no small task. No two dividends are created equal, and chasing high dividend yields, high growth rates, or dividend aristocrats alone can be very dangerous. When we look for a dividend investment, we prefer to invest in companies that have survived over long periods of time, demonstrated consistent sales and earnings growth along the way, shown a commitment to shareholders by paying out increasing dividends, maintained a conservative balance sheet for their type of business, and trade at reasonable to cheap prices compared to their intrinsic value. How can you even begin to find dividend stocks checking all of those boxes? The following table displays the results from [...]
10 Misleading Elements of Time-Honored Investment “Wisdom”
Howard Marks, Chairman of Oaktree Capital Management, publishes memos that we enjoy following. He has been investing since the 1960s and maintains a very successful track record. Excerpts from his most recent memo, “It’s Not Easy,” are worth sharing. In the 15-page piece, Marks reviews more than 15 popular nuggets of investment “wisdom,” pointing out their potential flaws and misconceptions that lead investors astray. Marks describes them as "a collection of time-honored bromides that range from (a) only effective part of the time to (b) just plain wrong. These investment myths are pervasive but of little help. That fact leaves the investor to struggle in a complex, challenging environment." We will review 10 of the investing rules of thumb [...]
Will Rising Interest Rates Hurt Dividend Stocks?
Will rising interest rates hurt dividend stocks? Many income investors are asking themselves that question as it finally appears 2015 could be the year of higher interest rates. Many so-called “experts” expect the U.S. Federal Reserve to raise key interest rates by the end of the year. The last time the Federal Reserve raised rates was prior to the global financial crisis in June 2006. As you can see below, the federal funds rate, which is the rate at which the Fed’s member banks lend to one another, has been kept near 0% since the financial crisis, a level unseen in the prior 50+ years of US history. In reality, investors really haven’t dealt with persistent interest rate gains for more [...]
Why Philip Morris Has Underperformed and What It Means for the 5% Dividend Yield
PM was spun off from MO in 2008, with MO serving the U.S. and PM retaining all international operations. With an industry as simplistic to understand as tobacco, there is temptation to assume that the major players are all similar enough to each other. As you will see, such an assumption is often dangerous...
Caterpillar’s Dividend Looks Attractive for Patient Investors
Charles Dickens might as well have been describing the nature of highly cyclical businesses like CAT when he wrote, “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” CAT’s experience during the Latin American debt crisis in the early 1980s provides a perfect example – the company sold 1,200 machines a year in Argentina in the late 1970s when times were good. Once the crisis struck, CAT sold [...]
Be Realistic About McDonald’s Future Dividend Growth
Investors were excited by MCD’s recent announcement that it would start selling all-day breakfast beginning next month. The stock finished up nearly 3%, outpacing the market (+1.8%) and its peers (+1%). We are less confident that all-day breakfast will reverse declining domestic store sales and keep MCD out of our Top 20 Dividend Stocks list for now – the dividend payment is nice and secure, but the stock’s total return and dividend growth potential appear much less certain to us. START A FREE TRIAL AND FIND THE BEST DIVIDEND STOCKS – CLICK HERE Many of MCD’s competitors already sell breakfast items throughout the day, so joining the foray could help it reclaim some market share. Although breakfast already accounts [...]
Top 5 Dividend Stocks Owned by Warren Buffett
At the end of June 2015, Warren Buffett owned nearly $120 billion worth of equities and more than 80 businesses. Buffett’s investment success is largely derived from his exceptional ability to combine common sense valuation principles with impeccable business judgment. Once he finds a company he believes will continue earning reasonably high returns on capital and reinvesting at similarly high returns, he loads up when the price is reasonable. Not surprisingly, these types of companies have often withstood the test of time and established difficult-to-replicate market positions for various reasons – brand strength (e.g. Gillette), low cost operations (e.g. Nebraska Furniture Mart), and more. While Berkshire Hathaway does not pay any dividends, many of Warren Buffett’s holdings do. Given [...]
Can XOM’s Dividend Weather the Oil Storm?
As long-term dividend investors, beaten down dividend aristocrats always pique our interest. We often screen through the 150+ dividend stocks that have increased their dividends for at least 20 consecutive years, looking for those that have fallen out of favor. XOM has been one of the twenty worst performers on the list due to, you guessed it, the oil crash. We love finding sources of safe, predictable, and growing income, but we hate dividend cuts. Anytime a long-term winner has fallen as fast and as hard as XOM has, you need to ask yourself if something has truly changed to warrant such a crash in the company’s valuation. If the events causing the downfall are deemed to be short-term noise, [...]
What Shrinking Tobacco Demand Means for MO’s Dividend
As long-term dividend investors, we are primarily concerned with finding sources of safe, predictable, and growing income. We do not hold ourselves up nearly high enough to judge what is morally or ethically right or wrong, as practically every company has plenty of issues (both visible and hidden) that could be picked on – the media just enjoys targeting the most visible and widest-reaching issues. Despite the controversial nature of the tobacco industry, MO is a core holding in our Top 20 Dividend Stocks list, which consists of stocks with the safest, fastest-growing dividends that are also trading at a relatively attractive dividend yield today. Another tobacco stock – PM – is in our dividend portfolio for retirees, which [...]