Dividend Payouts, Apple (AAPL) Worries and Automatic Investment Plans

April has been mostly good for our portfolio.  

We got paid dividends twice in April.  First, Altria (MO) paid me $4.23 in dividends on April 9, 2012.  With my Dividend Reinvestment Plan, I was able to purchase 0.1358 shares of MO at $31.15.

Second, Kraft (KFT) paid me $3.36 in dividends on April 15, 2012.  Again, my Dividend Reinvestment Plan bought me 0.0900 shares of KFT at $37.33.

This may seem peanuts to the untrained eye but that's $7.59 of free money.  Plus, I got more shares of a company which can increase in value over time.  Besides, $7.59 will not pay my bills so it might as well work harder for us in the stock market.

On top of that, WM, MO and LULU have been pulling their weight with the appreciation of our portfolio.  Apple still owns the bulk of our growth but the Cupertino company has been beaten up these past few days.  Rumors of supply issues and that mobile carriers were sick of Apple plagued the stock price which  dropped to $560 from an all-time high of $644 (04/10/2012).  I'm not worried.  It's just some profit taking and rumor-mongering (although that patent infringement judgement against them can be an issue).

Now, I have some cash to spend and I'm looking to buy more shares to add in our portfolio.  

Currently, I'm looking at Xilinx Inc (XLNX) and Waste Management (WM).

XLNX looks tempting because of it's upcoming Ex-Dividend date (May 14, 2012 with a dividend date of June 5, 2012).  I also expect XLNX to increase their net profits due to the upcoming technology purchases by consumers (back to school/college CPU purchases for example) in the near future.  Intel has also launched their IVY Bridge chips which would spur a new line of products that would come from Xilinx and it's competitors.

However, the trend of XLNX and the possible competitive arms-race may not bode well for my stock position.  Also, Wall Street's estimates does not give me confidence either.  In addition, if I buy more XLNX, my asset allocation would be heavy on Tech ahead of the summer Tech Sector slow down.  Furthermore, the PEG ratio of 4.89 would suggest XLNX would be an expensive stock to buy (AAPL is at 0.66 - my cheapest stock purchase).

Given my concerns and with Analysts' HOLD recommendation, I would seriously reconsider my plan of buying more XLNX.

On the other hand, WM has been showing better news than XLNX.

WM has seen profits grow at the average of 1.2% year-over-year.  WM has managed to capture the methane gas from their landfills and transformed it into energy for their trucks and possibly households.  Also, WM has E-Waste recycling services contracts with electronic companies such as Sony.  I've been an environmentalist even before being "Green" became cool and this news caught my attention and made me feel better with my investment. Besides, worse case scenario, people would still need WM to get rid our their trash... a sustainable business if you ask me.  Furthermore, I'm a bit underweight with my WM position (Business Services Sector at 5.83%) at $187.99 (4.6% of total portfolio).

So perhaps, I'll use the $525.00 dollars I have in cash to buy some WM...  or perhaps split it with some Energy Transfer Partners ETP as part of my Natural Gas/Greener Fuel play.

All right, I have decided:

ETP = $200 - $4 fee = $196/$47.72 as of 04/24/12 1:15pm = 4.1072 shares

WM = $225 - $4 fee = $221/$35.98 as of 04/24/12 1:15pm = 6.1423 shares

I'll leave the $100 cash in the sidelines and wait for more opportunities to get in the stock market.

Update: I've decided the use the $100 to get as much XLNX as possible.

XLNX = $100 - 44 fee = $96/$36.67 as of 04/27/12 9:38am = 2.6179 shares

Aside from the upcoming dividend payout, something tells me that XLNX will be key yo the increase of data use by smartphone users.  Especially the 4G LTE group...  perhaps, a new 4G phone from a Cupertino company?

The Automatic Investment Plan will execute on May 1, 2012.

Let us wait and see.

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).

New Year, New Stock Positions

One of my New Year's Resolutions is to find new companies to invest in.  Even though my portfolio did well in 2011 in spite of the end of year Euro woes, I still need to have more diversity that would shore up my performance and hedge my bets from volatility.

In 2011, I noticed most of my gains came from AAPL and at times, LULU.  I am grateful but I believe I need something that would perform well and would take the load off AAPL and LULU.

Therefore, I'm looking for companies that would be a great fit in my portfolio.

I am currently looking at Altria (MO). This company is in the Consumer Goods sector where it is in good company with Pepsi (PEP, General Mills (GIS), Clorox (CLX) and Kraft (KFT).  Basing on the PEG rations, only KFT beat MO in terms of being "cheap" in an apples-to-apples comparison.

Looking at the charts, both MO and KFT trended closely together throughout 2011.  Both outperforming the S&P 500.

MO's financials looks solid according to their latest 10-Q filing and they are cash flow positive this last quarter thanks to a debt refinance that was done in the previous quarter.  MO had a pre-tax judgement made against them, however, they have been proactive in lowering their yearly guidance and enacted some cost-cutting measures in order to preserve the dividend yield and business did well enough to off-set the additional expense for this quarter.  Even though there was a slight decrease of market-share among smokers, the success of the e-cigarette helped boost MO's earnings.  As sad as I am to say this, as long as people smoke, I would remain bullish with MO.  I'll just watch out for government regulations, additional taxes and class-action lawsuits against MO.

Altria's Numbers: Jan 10, 2012 end of trade day
last trade = $28.91
day's range = $28.78-$29.00
52 week high = $30.40 low = $23.20
P/E = 17.30
EPS = $1.67
Div & Yield = $1.64 (5.70%)
PEG = 1.74

Kraft's Numbers: Jan 10, 2012 end of trade day
last trade = $38.02
day's range = $37.90-$38.15
52 week high = $30.21 low = $38.05
P/E = 20.74
EPS = $1.83
Div & Yield = $1.16 (3.10%)
PEG = 1.66

Kraft is in the diversified foods industry and keeps MO company in the consumer goods sector.  It would be almost impossible to not find a KFT product in a typical household pantry.  In the Nov 4, 2011 10-Q filing, KFT proposed to spin-off its businesses into 2 independent public companies: 1) The Global Snacks Business and 2) The North American Grocery.  Of course, this would be subject to regulatory review and it would probably cost the company a lot of money and might trigger some sell-off from nervous investors.  KFT posted an increase in net revenues and is expected to keep growing as the operating costs would go done as soon as the integration of Cadbury is complete.

Not everything is rosy in KFT as they have a legal dispute with the Starbucks CPG Business over breach of agreements concerning the control of the Starbucks packaged coffee products in the grocery store.  This dispute can be a distraction and legal fees might eat in the gross profits of KFT.

KFT's income statement looked solid although the cash flow statement made me a little uneasy.  As I mentioned before, I am wary of companies who have a negative cash flow.  Although KFT can explain this by the Cadbury acquisition and the spin-off proposal, I still worry about debt repayments that are due and interest payments from these loans.  I'm sure management would refinance and pay down these debts but the prospect of not having enough cash could mean a cut in the dividends or massive lay-offs just to keep the stock price from dropping.

My worries were alleviated a bit by the knowledge that Berkshire Hathaway and the Vanguard Group are invested in KFT.  Cramer also recommended getting some KFT along with wallstreet analyst giving it a strong buy.  If I were to buy KFT, I would base it it's growth estimates and customer mind share.  Besides, packaged food is not a cyclical product as people would still eat in spite of the recession.

Here's what I'll do:

I'll buy MO and KFT.  I'll put in $100 in each position which after fees would yield me 3.32 share of MO and  2.52 shares of KFT (est based on today's closing prices).  My target to ride the current upward trend of these stocks and to keep buying if these stocks end up in a sell off.  I'll use these positions as my recession defense stocks which I expect would take the load of my AAPL and LULU stocks.