6 Tips for DRIP Investors
Dividend Reinvestment Plans (DRIPs) are an appealing way to put your financial future on auto-pilot. And given that the number one reason by far that most people underperform the market is overtrading, anything you can do to take emotions out of financial decisions is often a very good thing. However, as with most things in the world of finance, the devil is in the details. Let’s look at six specific tips that DRIP investors need to keep in mind to best maximize the chances of meeting their long-term financial goals. Tip 1: Selecting the Right Kind of Stock to DRIP The best thing about DRIP investing is that it’s a powerful tool that helps you to [...]
Preferred Stock Investing Guide
Preferred stock is one of the many types of high yield stocks that many income investors are increasingly turning to with interest rates remaining near historic lows. There are a number of differences between preferred shares and common dividend stocks, as well as bonds. However, many preferred stocks offer higher yields and solid income security, making them a potentially appealing choice for retirement income. Let’s take a closer look at preferred shares to help you determine if preferred stock could be an appropriate part of your conservative dividend portfolio. What Are Preferred Stocks? At the end of the day, debt and equity markets exist to provide companies with access to capital to help them meet their [...]
Toronto-Dominion (TD): A High Yield Bank Stock Paying Dividends Since 1857
Up until the financial crisis, when many U.S. banks were nearly destroyed by disastrous amounts of leverage and risky bets on mortgage backed securities and complex derivatives, banks were a favorite sector among dividend investors thanks to their generous yields and solid histories of payout growth. The memory of the great financial crash is still fresh in the minds of many, which is why some income investors have sworn off banking stocks entirely. While most bank stocks fall outside of my circle of competence and have opaque balance sheets, there are a select few banking institutions that have truly impressive track records of very conservative banking principles and deserve a high Dividend Safety Score. Toronto-Dominion Bank (TD) [...]
Icahn Enterprises (IEP) Offers a 12% Yield and Trades at a Four-Year Low, But Is It Safe?
One investing school of thought is that you should find an amazing investor and ride his or her coat tails to fun and profit. This certainly worked out well for those who bet on history’s greatest investor, Warren Buffett, by investing in Berkshire Hathaway (BRK.A, BRK.B). You can view Buffett’s high dividend stock portfolio here. After all, if you invested $10,000 in Berkshire in 1965, your position would be worth a staggering $88 million today. Of course, the odds that Buffett can recreate that kind of success in the coming years is all but impossible due to the massive size of Berkshire; something he himself freely admits. However, there are still ways for investors to invest [...]
Why CSI Compressco LP’s 50% Distribution Cut Didn’t Have to be a Surprise
CSI Compressco LP (CCLP) surprised many income investors last week when it announced a 50% cut to its distribution, sending its stock price tumbling by nearly 20%. The company has been in business for more than 45 years and paid steady dividends until 2016, adding to the surprise and disappointment. However, CSI Compressco was sending off a number of warning signals well in advance of its dividend cut. Let's take a closer look at the business and learn how income investors can avoid painful situations like these in the future and stay focused on safe high dividend stocks instead. Business Overview CSI Compressco provides compression services and equipment for natural gas and oil production, gathering, transportation, processing, [...]
Dividend Aristocrat Grainger (GWW) is Down 24% Since February: Buying Opportunity or Amazon Victim?
Grainger (GWW) has seen its stock price slide by more than 20% since early February, catching the attention of many value-focused dividend growth investors. After all, it’s rare to see such a high quality business tumble so quickly, and one of the most effective habits of dividend investing is to let market volatility work for you. With 45 consecutive years of dividend increases, Grainger is particularly notable because it is one of the dividend aristocrats. You can learn more about all of the aristocrats here. Despite Grainger’s impressive long-term track record, the company’s past success doesn’t necessarily mean the future will be just as bright. That could be especially true if Amazon (AMZN) increasingly threatens Grainger’s [...]
Dividend Aristocrat Cardinal Health (CAH) Drops 12% – Buying Opportunity or Value Trap?
Cardinal Health (CAH) updated its guidance Tuesday morning, causing its stock price to plunge nearly 12% on the day. The company previously cut its profit guidance in October 2016, but today's news was clearly still a big surprise. Many investors like owning dividend aristocrats such as Cardinal Heath because they have been less volatile than the broader market (learn about all 51 dividend aristocrats here). Let's take a closer look at why the market was so disappointed with Cardinal Health's business update and if the stock could be an attractive investment opportunity for our Top 20 Dividend Stocks portfolio. How does Cardinal Health make money? Founded in 1971, Cardinal Health is one of the largest healthcare [...]
“What Should I Do if Another Verizon Happens?”
One of our members emailed me after reading through my recent Verizon article, which analyzed the scary-looking drop in free cash flow that the company reported. Many investors worried that the company's dividend could be at risk. I dug through Verizon's financial statements to show why I believe Verizon's dividend remains safe and why the lower free cash flow appears to be noise rather than a reason to head for the hills. After reading the article, our member asked me the following question: "If I see apparently-cautionary stats like a spike in the payout ratio, and a sudden decline in free cash flow per share, but the Dividend Safety Score is high, do I ignore my instincts to avoid the stock, [...]
Seagate Technology (STX): High Yield Dividend Income or Value Trap?
Many of the most popular high yield stocks are real estate investment trusts (REITs), master limited partnership (MLPs), and business development companies (BDCs). All of these industries are designed to pay very high dividends. When it comes to regular corporations, however, a very high dividend yield can be a warning sign that something is fundamentally flawed with the company’s business model. Many of these companies tend to have relatively low Dividend Safety Scores, indicating that their dividends could be at risk of being cut in the future. Let’s take a closer look at Seagate Technology (STX), which offers a high dividend yield above 5% and has paid higher dividends for six straight years, to see if the [...]
Clearing the Air on Verizon’s Dividend Safety
A number of readers have emailed me in recent weeks wondering about Verizon’s (VZ) dividend safety. Their anxiety developed after reading several articles online that suggested Verizon’s dividend was no longer sustainable because the company’s free cash flow did not cover it last year. However, Verizon scores a 93 using our Dividend Safety Scores, indicating that its payout remains very secure. I believe Verizon is one of the best high dividend stocks for current income, so I was interested to review what all of the fuss was about. I will do my best to walk through Verizon’s financial statements (grab some coffee now to stay awake) and objectively review the company’s dividend safety. Let’s start [...]