Buying Altria (MO) For Dividends and Growth

I just executed a limit order for 8 shares of Altria (MO) at $34.15.

 

MO closed up at $34.24 yesterday.  The same day the DOW Jones closed at 14,253.77. This is the DOW Jones' new all-time high.

 

Therefore, I anticipated some profit taking so I predicted that MO would at least go down to $34.15 maybe even lower.  My gambit paid off and my limit order was completed earlier today.  I could have gone lower since MO went as low as $34.01 but I think my conservative bet was good enough.  I just want to almost guarantee that I would get those 8 shares of MO.  The main reason why is because we're approaching MO's Ex-Dividend date of March 13, 2013.  The next valid Automatic Investment Plan date is on Tuesday, March 12, 2013.  That is cutting it close since I have to buy the shares a day before the Ex-Dividend date in order to qualify for the dividend pay out.  I decided to execute it early just to make sure plus the trading fees are now $6.95 (down from $9.95) so the $3 difference would be paid for by the dividends.

 

So why Altria (MO)?  First, the dividend pay day is coming.  Second, MO's dividend pay outs increased from $0.41/share in July 2012 to $0.44/share from October 2012.  I love stocks of companies who increase their dividend payments because it tells me their earnings are doing well (after reviewing their financials of course) and they want to reward their investors with more cash. Finally, I am counting on Altria's growth prospects as the global economy improves.  As the global economy improves, MO's customers would be more willing to spend money to buy MO's E-Cigarettes, high-end cigars and wine products.  Even if MO's regular customers do not feel the improvement, they'll still continue buying Marlboro cigarettes (and other MO brands).  If there's one thing I've learned from my siblings (and Mad Men), cigarette smokers have brand loyalty. 

 

So that's pretty much my Altria thesis.  I'll buy more shares in the future and as long as smokers smoke, I'm bullish on Altria's growth prospects.

Dividends and Updates

Happy New Year!

 

So the US did not end up over the Fiscal Cliff (we came close though).  I was not surprised that a deal would be made but was surprised with the amount of time it took for them to do something.  Anyway, we're currently not in financial Armageddon and the Stock Market moved on.

 

So here are some updates:

 

The Social Security Tax holiday ended on January 1, 2013 which resulted in smaller take home pay.  I still have to see how much impact this new development will have in my (our) investing capabilities.  I highly doubt it would affect us much but as I always say, if a 2-5% tax increase would hurt you, you're doing it wrong.  Luckily, we kept expenses are low and we built a huge emergency fund so as much as it hurt, I think we'll be fine financially speaking. 

 

To offset the loss of a few hundred dollars, I'm happy to report that our portfolio got paid some dividends.

 

On 01/14/2013, Mondelez paid $1.53 in dividends.  It was reinvested and bought 0.0558 shares of MDLZ at $27.42/share.  On the same day, Kraft also paid dividends.  We got $1.96.  It was reinvested and bought 0.0423 shares of KRFT at $46.34/share.

 

Also, on 01/10/2013, Altria paid $4.71 in dividends.  It was reinvested and bought 0.1476 shares of MO at $31.91. 

 

Granted these dividends are small peanuts compared to the "lost" take home pay but over time, these reinvested dividends would compound and make us more money in the long term.  Besides, it's better than nothing.

 

By the way, I'm not concerned with Apple's over 200 point drop.  As long as Apple manages to use or save  the over $150 Billion dollars in cash in the bank, I am confident they will find a way to release more exciting products either by in-house development or through acquisitions.  But we'll have too see with their earnings call next week.  I have a feeling that even if Apple bottoms out at $400, it would just be a perfect buying opportunity to get more shares and we'll have to have on as it goes back up to around $600.  Besides, the stock is still cheap compared to it's competitors.

 

Meanwhile, I'll keep investing in other sectors that would hedge the current hatred with Tech Stocks.

 

More to follow!

 

Smoking Hot Dividends and the Hot Summer

The good old Big Tobacco company Altria (MO) just paid me a dividend.  I got paid $4.28 which I then reinvested to get 0.1217 shares at $35.17.  

As much as I was disappointed that Prop 29 failed, it is nice that I still profited from Big Tobacco's win.  For the uninformed, Prop 29 would have imposed a $1.00 tax on each pack of cigarettes sold in California.  Supporters claim that the additional tax would have paid for cancer research, tobacco law enforcement and smoking reduction programs.  As one might expect, Big Tobacco spent $46.8 Million (Altria/Philip Morris alone spent $27,531,416 - full disclosure).  Far outspending Prop 29 supporters' $12.3 Million.  The silver lining for anti-smoking supporters is that it was a tight race: 50.3% No vs. 49.7% Yes. The fact that the difference of 0.6% was all the extra $34.5 Million could buy, perhaps they'll be more successful next time. 

Now I bet I'm confusing some people with my 2-sided position.  How can I own tobacco stocks (MO) and yet support a ballot measure that would severely affect the Tobacco Industry?  Simple, I want a cure for cancer.  If the additional $1.00 tax would bring us closer, then so be it.  I also believe that smokers would not stop smoking even if they have to pay an additional dollar per pack of smokes.  They are too addicted to smoking and it would be a hard habit to break.  Either way, I'll still profit for the habit of addiction.  

In other news, I just posted a LIMIT order for 5 shares of Lululemon.  Yes, I did a limit order instead of my usual Automatic Investment tactic.  So what did I get for the extra $5.95 in fees?  Well, I got 5 shares of LULU at $55.90 (currently LULU is at $55.85 - 8:36AM).  I do not think waiting till next Tuesday for the order to post would have made the difference.  I believe LULU will be higher than $55.90 by next Tuesday. I would rather pay a bit more in fees to catch the downward movement now than save the $5.95 only to ride the possible rally next week.  I'd rather be wrong and next week and still end up with 5 shares of LULU than be right and end up with less than 5 shares of LULU.

So here is my Lululemon thesis:

LULU peaked at $80.30 on May 3, 2012 (52-week high of $81.09) and has been moving down since then.   I believe LULU has been dragged down by the Euro crisis.  I believe this decline would reach the bottom soon and LULU, along with it's athletic retail competitors would experience a boost during the summer months and of course, the Olympics.  I am confident this would happen because of what I've been seeing on the streets and at the gym.  People are out and about walking in the streets, working out and trying to get fit.  I still see a huge number of LULU gear on women and some men.  LULU's business model and their steady expansion in North America would be enough for them to keep growing and put money back in my pocket.

The summer Olympics would be another catalyst I'm looking at.  Fans would be watching the world's best athletes and would be "inspired" to buy some athletic apparel.  Sure, Nike, Reebok and Addidas would take the lion's share of the new active wear purchases but I believe the Lululemon brand would start capturing new customers.  If LULU managed to sponsor at least 1 medal winner, this could be big boost for LULU.  Even if the athlete wore Nike or Reebok during the events, if those athletes start wearing Lululemon for their other activities... like yoga sessions perhaps, LULU would be poised to benefit from this.  Only time will tell.

One more thing about LULU.  I have noticed that the women who wear Lululemon yoga pant also wear those pants as part of their daily apparel.  It is almost like what happened to UGGs (Deckers - DECK).  I would not discount the possibility that Lululemon apparel would become more than just yoga pants and workout gear.  It may even become an UGGs-style phenomenon.  However, unlike UGGs, LULU yoga pants look great and even if the yoga wear as daily wear trend dies down, people women would still need to buy yoga pants for their yoga sessions.  

With these points in mind, I predict LULU would do the head and shoulders movement and would rise back up to it's $80-$90 mantle within the next 12-16 months.  So yes, I am long term investor of LULU.

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.

Getting In on APPLE (AAPL)

The market has been down lately... especially on Tech Stocks.

Today, AAPL closed 15.33 down off it's 52-week high. Over 4% drop from the high and from today's range, almost broke the 5% pullback.

I think it's time to get in on AAPL.

Here's why:
1. Close to 5% pullback.
2. WWDC 2011 is coming up in June where Apple is expected to release it's new OS (Mac OSX Lion).  Also, the iPhone 5 might make an appearance (although highly doubtful per analysts and sources close to the matter).
3. A version of the iMac just came out with 2 Thunderbolt ports.
4. The white iPhone 4 finally came out and on WWDC, Apple would probably announce how much white iPhone 4's they sold.
5. RIMM is bringing Black Berry Messenger (BBM) to Android and iOS. This might convince BB users to finally switch to iOS or Android.  Either way, AAPL will have a greater profit margin since they control hardware and software distribution of the iOS devices.
6. Analysts and project AAPL to reach $400 in the next few months.

Therefore, I took $1000.00 from my reserves (which I will not do often) and put in my new Automatic Investment  Plan (to be executed on Tuesday, May 10).  I put in $750 for AAPL which would buy me 2.13 shares (@$350/share + $4 fee).  The $140 will be used to buy LULU that would fetch me 1.44 shares (@$94/share + $4 fee).  LULU is down 9.33% off it's 52-week high of $102.83.  A great way to buy some more LULU ahead of it's expected 2 for 1 stock split and Annual Stockholder's Meeting.  Finally, I allocated $110 to buy 2.94 shares of XLNX (@$36/share + $4 fee).  XLNX has bee rebounding lately and the X-Dividend date is coming up (May 16).  Might as well get those juicy dividends.

I know with my AAPL purchase, I may have 2 tech stocks and would unbalance my diversification.  However, with XLNX rebounding and the dividend distribution coming up, it makes good sense to keep XLNX and AAPL is also a great long term investment.

I will review my opinion of XLNX after the dividend distribution and earnings call.

First Automatic Investment Plan

My recurring deposit on April 11 will be available on April 12.
The automatic investment plan will be executed on April 12.

Here's what I put in: $300

$150 for (GLD) SPDR GOLD TRUST ETF
- My gold hedge.  I plan to have 10% of my portfolio in gold.  Since I cannot afford to stock the actual gold, the ETF would do.

$80 (WM) Waste Management
- Another dividend play. With a 3.60% dividend yield, this Industrial/Waste Management stock is very attractive to me.  Add to the fact that they have multiple streams of income (Collection/Recycling/Transfer/Disposal of waste, Recycling Materials (aluminum,etc) Brokerage, Rental of Port-o-Lets to municipalities and commercial customers, Self-storage, Street Sweeping and Land Fill contracts).  Only hindrances are Government regulations, Competitive market and fuel costs.

$40 (XLNX) Xilinx Inc
- Building up my position before the next earnings date 04/27/11.

Total Investments = $270
Total Fees: $12 ($4 each trade)

Finally Got LULU

Today I finally got LULU at $89.00.

It's 4 points up from when I started following it on 03/28/2011.  Thanks to a pullback where people took in some profits, LULU is back down from $92 to where i finally got my LO of $89.00.

Also, today I just got the $50 account bonus for opening a new account.  This money will be used to buy more stocks.  I'm looking at Energy Transfer Partners, L.P. or ETP.  I need to do more homework.

Stay tuned.