Although there are a couple of exceptions, there are very few things that send people to this site quite like searching Google for advice on how to start the beginning stages of dividend investing. It’s obviously a question I find complex enough to have written 536 posts here at The Conservative Income Investor and 536 over at Seeking Alpha (I wanted to mention that because I am currently at that magic point of equilibrium, like when Stan Musial finished his career with 1,816 hits at home and 1,816 on the road) so one post on the topic will be incomplete. But I can talk about the state of the mind that is important to establish with dividend investing and building wealth.
Henry Ford once said—if you can measure it, you can manage it. Too often, when people get started investing, they choose the wrong metric by which to judge their … Read the rest of this article!
Because of the coincidence that I wrote an article about AT&T’s merger with DirecTV on the eve of the Dow Jones announcement that Apple would be replacing AT&T in the Dow Jones Index, I received quite a few e-mails from readers asking whether that kind of move should be treated as a signal that Apple should be purchased or AT&T should be sold. I did not get a chance to respond to any of those readers, but hopefully my discussions here will provide an adequate answer to the question.
First, the Dow Jones Index has little rational bearing on actual buy-and-hold decisions these days, despite the fact that it is widely circulated in the news. If you turn on the TV at 10 o’clock and watch the news, it is likely that the reporters will give you both the results of the S&P 500 and the Dow Jones from that … Read the rest of this article!
Since 2008, AT&T has established the custom of raising its quarterly dividend by a penny per share, or $0.04 annually. That pattern has taken the $1.60 dividend in 2008 up to $1.88 here in 2015. The slow rate of dividend growth during these past seven years has served an important purpose: It has given AT&T the chance to increase the amount of its annual profits that aren’t earmarked for dividends. Retained earnings are in important ingredient in establishing future growth because it represents the available cash to sink into new initiatives without having to borrow from banks or dilute shareholders.
In the past ten years, the dividend has gone from consuming 83% of AT&T’s profits to 68% of AT&T’s profits now. That starts to give the company wiggle room for buybacks, growth investments, acquisitions, or even dividend bumps at a faster pace. Lately, there has come news that AT&T will … Read the rest of this article!
For a company with a wildly impressive track record of rewarding shareholders, Best Buy sure is an ugly company. Since 1985, Best Buy has compounded wealth for shareholders at a rate of 20.58% annually for shareholders. Yes, this is a company that has been even better than the quintessential dividend stock of the Old Philip Morris, which has rewarded shareholders with huge dividend checks that now come from Altria, Philip Morris International, Kraft, and Mondelez. A mere $10,000 invested into Best Buy in 1985 would be over $2,612,000 today. Millionaire status could have been reached with a mere $3,850 investment in Best Buy.
Yet, we are here to talk about the future (as Buffett said, the investor of today does not profit from yesterday’s growth) and the particularly difficult insights to get right are the ones that the future departing from the past. In the case of Best Buy, it … Read the rest of this article!
From 1926 through 1991, a company called Eastern Airlines flew an unofficial monopoly over the northeasterly American skies. Headquartered in Miami, it was one of the “Big Four” airlines and featured hubs in Chicago, Orlando, and Tampa Bay. During the 1960s and 1970s, it had an extended period of delivering shareholders very good returns at a rate of 15.2% annually. That was because the company was reporting earnings per share growth of 13% and paid a small dividend, and investors were enamored with the stock. Around the mid-1980s, the stock started trading in the valuation range of 10-13x earnings, leading many people to think that the stock was cheap and worthy of purchase for the value investor.
If Yahoo Finance had existed back then, it would have shown steady growth and a low P/E ratio and a superficial look at the company may have induced you to buy the stock. … Read the rest of this article!