Uncle Sam's Cash Back, Apple Goodness, Promos and Some Cheesy Dividends

Our household recently received our State and Federal tax refunds.

After spending $1000 to help pay down my wife's car payment, we decided to split the remaining cash equally between the two of us.  Then my wife asked me: "What would you buy with your share of the refund? An iPad?"  I answered: "I'll buy more mutual funds for my Roth IRA and some stock for our taxable investment account."

She smiled.

For the past four years, I have used my tax refunds to invest in my Roth IRA.  I figured, why spend money and pay more taxes (sales tax) when I can just make more "tax free" money in my Roth IRA?  The answer is a no-brainer.  Reinvesting my tax refunds in my Roth made me more money and gave me more satisfaction compared to whatever gadget I would have bought.  I love making (easy) awesome decisions.

So what did I buy with the money?  I checked our portfolio and checked which stock had the closest Ex-Dividend date.  It turns out Kraft (KFT) would have their ex-dividend date on March 28, 2012 (next Wednesday).  I then transferred money to the account and set-up the Automatic Investment Plan for Tuesday, March 27, 2012.  This should be enough time for me to get the stock before the ex-dividend date and be eligible for the dividend.

Here is a breakdown of my transaction:

1. I transferred $350 to the account (the rest of the money will go to my ROTH).

2. I set-up the automatic investment plan.

3. I'll buy $350 worth of KFT shares - Potentially 9.1217 shares @$38.37 (as of 9:47am today).

4. There is no fee this time due to a promo (Thanks!)

5. I'll potentially own 11.6310 shares of KFT.

6. KFT currently pays a $0.29/share dividend - $3.37299 potential payout.

Thanks to Kraft, I'll have a nice and "cheesy" dividend. LOL

In other news, last Monday, Apple announced that they would pay a 1.8% dividend ($2.65/share quarterly, $10.60/share annually) to its investors.  Apple will also spend $10 billion to do a stock buyback.  This will reduce the number of stocks outstanding which would mean every remaining investor would own more of the company.  This obviously is good news for me.

The dividend payout would allow "value-oriented" mutual funds to invest in Apple.  In my opinion, this is both good and bad news.  The good news is that Apple would be exposed to more mutual funds and the bad news is that this opens Apple to more volatility as mutual funds' dollars goes in and out of Apple depending on how the stock and the market performed on a given day.  This also makes diversification a bit tougher as I expect a flood of new mutual fund investors.  I suggest checking your mutual funds' holdings and try to be as diverse as possible.

The dividend is a welcome bonus for me as an investor.  Although the dividend yield is not as huge as HP, Microsoft and the others but the growth rate and performance of Apple more than makes up for the comparatively "small" dividend.  Besides, I'm more bullish of Apple than HP.

Tempting as it is to get more Apple stock, I'll keep my emotions in check and keep our portfolio as balanced as possible.  We still have a long way to go.

Chasing Altria's (MO) Ex-Dividend Date, Dodging Yelp, Xilinx Inc. (XLNX) and Energy Transfer Partners (ETP) Pays Me Some Dividends and Can Anyone Stop Apple (AAPL)?

I just bought 7 more shares of Altria (MO).  

I executed a limit order for $30.41 which bumped my shares of MO to 10.3151.  It cost me $222.82. I bought 7 shares for $212.87 plus the transaction fee was $9.95.  This order was $5.95 more than what it would have cost if I had waited for the Automatic Investment Plan.  I did not wait for the AIP because it would buy the shares on MO's Ex-Dividend Date (Tuesday, March 13, 2012) which would make me ineligible to receive the dividend (per SEC definition of the Ex-Dividend Date).  This would have been a loss of $2.87 (7 x $0.41/share).

Where would I gain the $3.08 difference?  That would come from stock price appreciation (MO's chart has been trending up and today it closed at $30.46) and yield (I'll be paid dividends for 10.3151 shares instead of 3.3151).  I would be able to use the $4.22 ($4.2291 rounding down) to reinvest in MO pushing my yield higher.  

The dividend would be paid on April  9, 2012.

Speaking of dividends, Energy Transfer Partners (ETP) and Xilinx Inc (XLNX) just paid me some nice dividends.  XLNX paid $1.19 and ETP paid $5.91.  These dividends were reinvested in the stocks my yields.  I love dividends.

In other news, Yelp (YELP) went public recently.  Just like LinkedIn (LNKD), Zynga (ZNGA), Pandora (P) and Groupon (GRPN), I avoided these new IPOs since I did not get any shares pre-IPO and I do not have enough cash (and time) to get in the deal at the moment of the IPO.  With the exception of LNKD and in some way, ZNGA, these new tech IPOS have no profits to speak of.  Their business models rely heavily on Online Advertising and "Eyeballs" while their costs are going up (content licensing, customer acquisition and labor).

Although I'm not a total Bear on these tech stocks, I am not risking my hard earn cash investing in companies that make no money.   I am even on the belief that even Facebook would fail to satisfy Wall Street post-IPO.

Only time would tell.

Finally, Apple (AAPL) just announced their first major product launch since the death of Steve Jobs.  The new iPad is poised to keep Apple's lead in the tablet market and is targeting the market share of laptop makers.  During the keynote presentation, Apple CEO Tim Cook declared the iPad as the major leader  of the  Post-PC era.  Mr. Cook and company did really well during the keynote and even though it lacked the Steve Jobs Halo Effect, the recent keynote was filled with oohs and ahhs from the crowd and the tech community.  The new iPad boasted the new Retina Display, 4G LTE, a faster graphics processing chip and an amazing battery life all in the same "low" starting price of $499.  Apple also kept the iPad 2 at a lower $399 price.  Tech pundits and analysts predict AAPL would sell at least 10-15 million units on the first weekend.  I'm even willing to bet they would sell up to 20 million units.  My only fear with this prediction is whether Apple has enough iPads to sell that weekend.  I'm sure the workers at FoxConn worked double/triple overtime since November producing these magical devices.  

AAPL's stock price played around $528-$536 during the announcement.  Normally, an Apple event brings down the stock price low enough for a nice re-entry but this time, the stock price held its own.  Perhaps Tim Cook symbolized stability in the company and not seeing a frail looking Steve Jobs made investors "feel" secure about Apple.

Although Apple fans including me would have preferred seeing Mr. Jobs work his magic on stage, his presence, in spite of his health issues, was sorely missed.  As for AAPL's future, I am bullish that this company would keep printing money for years to come.  Their stock price though high, is cheap compared to it's competitors.  The PEG ratio is at 0.66, making it the cheapest of my positions (believe it or not).  The product line, high profit margins and brand equity would keep AAPL on top for a while.  As long as the company continues to innovate and execute, I would keep investing in Apple (and buy a product or two).