Dividends and the Europe Recession

First some portfolio updates:

Since my last post, I have received dividend payments from Xilinx Inc. and Waste Management.

Xilinx Inc paid me a total of $1.97 in dividends which I reinvested and bought 0.0618 shares at $31.88.

Waste Management paid me a total of $4.14 in dividends which I reinvested and bought 0.1277 shares at $32.42.

On deck is Kraft (KFT).  Tomorrow is their Ex-Dividend date (06/27/12) and I'm speculating a dividend date sometime in July or August.

I recently became aware of a Real Estate Investment Trust (REIT): Realty Income Corporation (Ticker symbol: O).  What struck my fancy was the monthly dividend payments this REIT pays.  It's current dividend yield pays at 4.40% and has been up about 3 points since I got introduced to it.  

On the surface, this looks like a great investment but I still have to do my homework (and accumulate enough capital to buy a sizable position) to see if the monthly dividend is worth having another position to manage.

Meanwhile, Europe has been pulling the global economy down... at least it feels that way.  Spain and Greece are currently experiencing what the US had gone through in 2008.  Basically, all the US can do is wait and hope that Europe would figure out a way to fix this recession.  

I'm just happy that my portfolio and retirement accounts have managed to survive this Euro situation.  I'm sad that I currently don't have enough capital to double down on my positions and mutual funds (car repairs would do that).

Hopefully this would be an opportunity for me to keep buying while everyone seems to be selling.  Good times for the bullish!

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).

Dodging Bullets - How I Saved Money By Avoiding Zynga (ZNGA), Groupon (GRPN) and Linkedin (LNKD)

Zynga (ZNGA) IPO'd today at a $10 per share valuation.  It opened at $11.50 and is currently down at $9.31. A close to 7% decline in today's performance.  Granted it might have been victimized by the poor market performance due to the Euro crisis but this drop shows an interesting fact about IPOs:

The people who make bank on IPOs are the early investors, underwriters and those who are extremely lucky.

As shares of LNKD, GRPN and ZNGA drop, we are witnessing how volatile the IPO market is.  Up until recently, these companies have not shared their earnings and balance sheets to the public so there are no easy (and legal) way to know if these companies are solid investments.  Most of these valuations are fueled by early investor valuation statements/estimates, analyst speculation and plain good old rumors and media coverage.

Out of these three new IPOs, one is currently losing money (GRPN) and LNKD seemed to have a solid business model.  Zynga on the other hand, is rumored to make millions of dollars through in-game purchases for their popular Facaebook games such as Farmville.  However, I do not play Farmville and perhaps, Zynga's popularity at least with the tech media is waning due to the annoying Farmville invites and lack of originality in gaming IPs.

Unfortunately, with the lack of the 10-k and 10-q filings from these companies, small investors are trading/investing blind when considering putting money in these companies.  We do not know the cash flow, debt, operating expenses, net income and growth estimates from these companies.

I have heard people get excited with the new batch of IPOs especially the impending IPO of Facebook.  However, investors must also learn if they can manage the risk of investing with almost zero info about the companies financials and business prospects.

My best bet is to avoid IPOs in general because of the reasons I gave above.  I like to have my info on the table and make my decision based on the numbers not by speculation, rumors and estimates.

Unless of course someone is willing to sell their Facbook shares to me at a pre-IPO price... lol