Yesterday, on MSN there was a side show of 12 of the biggest brands in the US and how they were named. The 12 Brands are shown were Coca Cola, Oreo, Google, Arm & Hammer, Nike, Starbucks, Twitter, Doritos, amazon, Domino’s and Five Guys and Slinky. As a dividend investor, you are interested in them because they are now successful, but remember all the brands started with small sales . Eventually the companies behind them reached a stage where stock was sold, but that was an opportunity for growth investors. Dividend paying company investors watch, wait for the opportunity as the brands grow and reach into the average person’s buying habits.

As a dividend paying company investor you will miss some early opportunities, however you know the size and complexity of the marketplace rules – for every one winner, there were countless others who did not achieve success. You might miss a big opportunity, but the ones you latch onto, you can latch on for years to come.

An example is Apple computer stock price – if you examine the stock chart from 2005 to July 2008 if you had bought the company you made no money, received no dividends, for the stock price ended up in the same place, likely you would made more money in the bank account. Then the climb started and now if you owned the stock, you would be very happy. The company has declared a dividend, maintains a greater than 40% margins with very hot products in the marketplace  and a large cash holdings, there is no reason not to like the company.

There are always more questions than answers, till the next time – to raising questions

In various parts of the newspapers, editors use fillers to fill the papers. One such filler in the general media was about itching powder. The example illustrates wonderfully the dividend paying stocks advantage. The story is the owner of The Famous Joke and Trick Shop in Hull, England bought up or has a monopoly on the world’s supply of E Series Itching Powder. If there is an E Series there must have or are others, the E Series among itching powder followers is the best one and with the formula lost, they are not making more of it. The price of the powder has fetched over $ 100 for a tenth of a gram on eBay In the world of commerce, there are many opportunities.

Asides from the jokes, the example shows if a company has a solid market share or near monopoly and they do not abuse it, chances are good the company will continue to have a high market share. Given the market share and good margins, the dividends you receive will be paid for number of years, which from an economic point of view is good.

There are always more questions than answers, till next time – to raising questions

The writer owns a bike that has two speeds, slow and slower unlike the Olympics’ motto of higher, stronger, faster. On a recent bike ride, after acknowledging the slow speed, there was the ability to concentrate on the positivies of riding at a slower speed. Along the river trail were flowers, birds, different colours of green and the slow moving river (at times faster than the rider). There was also bike riders zipping along for their concern was racing, at a slower speed, the writer reached the park for a picnic in plenty of time. My slow bike is similar to dividend paying stocks, the price of the stock may not be the faster rising, but looking back over history the returns tend to be greater, the dividend paying stocks with their history of strong cash flow and less risk is a great advantage to hold.

There are always more questions than answers, till the next time to raising questions

Hopefully you have heard about Venture Capital (VC) and understand people can make lots of money. In our economy there is an important role for the VCs, but as a dividend buyer, this role is not necessary for you. VCs play a valuable role in nurturing start up companies, helping them to increase in size to meet the solutions needed in the marketplace. A good book about how VCs work is Mastering the VC Game by Jeffrey Bussgang published by Portfolio in 2010. Mr. Bussgang works for a VC firm and offers insights into what the objectives and expectations of the VC firm are. Anyone looking for money from VCs should read the book. One of the expectations is how much money a VC company needs to make from an investment into a company – they often look at 5 times investment. To to get there, the VC companies typically examine hundreds of companies, trying to find the gem of an idea, the right fit for their company and nuture it, and then sell it to redo the same thing.

As dividend buyers, none of the VC firms investments meet the criteria of companies paying dividends. It is interesting to see how other players in the industry work and function. The dividend paying companies are prospective buyers of the companies, then they become divisions of larger companies, which is one of the methods dividend paying companies continue to pay dividends.

There is always more questions than answers, till the next time – to raising questions

The writer was reading an analysis of a stock by someone who does technical analysis by charts. In all worlds of information, it is important to look at more than one path to get to the same ending. All paths have their plus and minuses, the chartists look at the trading or momentum of the stock. Charts are available by the minute, hour, day, month and year and one tries to determine what makes the stock move or when the stock moves up and dowm. At the point where the stock tends to move up, is a buying opportunity. The theory being investors act for all types of reasons, and when the stock moves up, investors as a whole have decided there is greater value in the stock. You may hear examples the use of river – rapids of the river indicate a fast upward movement; waterfalls means downwards movement; the lazy stream means not much is happening; and so forth. If you can catch a rapid, money is to be made. After examining the chart, the questions of what’s happening? and why is it happening? are asked.
As a dividend buyer with the objective of holding the stock for the reaccuring dividends, charts are useful and should be looked at but not on a minute, hourly or daily basis, you can check them monthly and that will be good.

There are always more questions than answers, till next time – to raising questions

The writer recently read the book Dynasties — fortunes and misfortunes of the world’s great family businesses by David Landes Viking 2006. The book discusses the history of a number of families which tend to prevalent in today’s global business world. Among the generations of family business two in particular are Ford of Ford automobile and trucks and Rockerfeller of Standard Oil now called Exxon. Both Henry Ford and John D Rockerfeller paid themselves a small salary, they became rich because of the dividends paid to their large shareholdings. As your shares grow through reinvestment, you can not be promised Ford and Rockerfeller fortunes unless you own millions of shares, but you can be expected to receive a larger amount every year. For most of us, it takes a long time to build up to what is considered to be a good income, but it works. Dividend paying stocks will reward you over the long term.

There are always more questions than answers, till next time – to raising questions.

Everyone who lives in a home or apartment, eventually wants to fix up something. For the little repairs, we can all do it yourself or DIY. For major repairs we call others including a professional. Buying growth stocks expecting prices to increase in the short term, you need advice from someone who is in the market on a daily basis. Buying dividend paying stocks which you intend to hold for a long period of time, you can easily do it yourself or DIY.
The reason why you can DIY is the narrow field of stocks to chose from. Most stocks that trade on the stock exchange do not paid dividends, they exist for their possible increase in stock price, therefore you do not have to pay attention to them, you can strike them off your list. You have greatly narrowed the field, the stocks you are paying attention to are dividend paying, and have paid dividends for a number of years.
The names will tend to be mature companies that make money, the difference each year is how much money the company makes? not if? A few columns ago the example of General Mills and JP Morgan Chase was used, both made money, both pay dividends, both made less money last year, but still made money. The question was not will they earn a profit, but how much? Sticking to companies such as these over the long term benefits you.
After you have your list, you will group the companies by what they do or by sector. Then you decide based on your resources which one do you buy? In the case of heavy machinery sector Caterpillar or John Deere? This is your judgement or where your bias comes in. In this instance both companies have very good things about them, both make money, either one or both should be a great choice. In the long term combining the stock price and dividend, you will do well. In this case you might ask do you like yellow tractors or green tractos better? When you have a choice of quality, it is often the little things that make the difference.

There are always more questions than answers, till the next time – to raising questions

The baby boom generation (births from after WW II) is aging and has begun to retire, many will retire on a pension. If you understand pensions, you understand dividend paying stocks. After working or investing your time and energy in the company, a return or pension is paid. The pension is a stream of income; you are the owner of it and hopefully your pension is indexed to inflation or the amount you receive increases each year.
In the case of dividend paying stocks, the dividend is a stream of income, and if it increases every eavery year, the stock price is also likely to increase too. Over the long term a good return will be received from both the dividend (income) and stock price. If you stick with mature companies which have paid dividends for a number of years, over the long term the shares will split to keep within the same trading range meaning the number of shares you own and your dividends will also increase.

There are always more questions than answers, till the next time – to raising questions

In one retail company, the writer worked at my boss, often said. “You can walk by and not see what I see, this area needs improvement.” My boss’s focus was on presentation of the merchandise and our focus waw getting a paycheque. It could be easily noted communications – his teaching skills needed improvement, buy maybe our listening skills needed improvement.

When the writer looks at dividend paying stocks, the easiest method is a large number of mutual funds are listed in the financial section of the newspapers, rather than focusing on what they did today or last week focus on the 3 year plus returns of the funds. You will notice the dividends, equity, index, bonds, country funds, etc. Compare the dividends (which are meant to be lower risk) and equity (trying for capital gains and higher risk). You will likely find the lower risk funds doing as well or better than the higher risk funds, plus the cost of administration is less for the lower risk funds (meaning more money stays in your pocket). After looking at the family of funds, you can determine do you wish to buy the mutual fund or the indivdual stocks (top 10 holdings) of the funds you like best. The reason history will repeat itself is stocks increasing their dividends each year tend to go higher and stocks which pay dividends have two rates of return – the stock price and the dividend. You always receive two for one with a dividend paying stock which makes it a good buy.

There are always more questions than answers, till next time, to raising questions