Date: July 2012
by | Posted 7.31.2012 | Post Comment (No Comments)

Last year, I wrote about my financial rules of thumb – a moderate list of financial principles we try and live by. Upon reflecting on this older post recently, I wondered if we are actually living these financial values. In some cases, there are clear indications we do what we say. In other instances, we’re a bit weak. A year later, it is interesting to read what I said we would do and what we actually do today….

Continually reduce our mortgage debt by using prepayment privileges every month.

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by | Posted 7.31.2012 | Post Comment (No Comments)

Investing in dividend growth stocks is a long-term proposition. One of the beauties of following a dividend growth strategy is that you don’t have to watch your portfolio or the market on a daily basis. For the most part, daily, monthly and yearly movements are just noise in the system.

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by | Posted 7.31.2012 | Post Comment (No Comments)

The technology boom of the late 90’s transformed nearly every arena of business, but the financial industry in particular was completely overhauled. The lively trading pits of Chicago and New York are today more of a memory than anything else. The days of traders shouting out buy and sell orders in the pits have been replaced by a technological age where bids and offers are communicated on a sub-millisecond basis as high frequency traders dominate financial markets. This technological innovation has occurred not only at the top of the industry, but also at the base level, or retail level.

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by | Posted 7.30.2012 | Post Comment (No Comments)

Just before Apple (NASDAQ: AAPL) reported earnings last week, the Wall Street Journal gave play to an astounding bit of short term thinking on the wisdom of holding the company’s stock. It was based in part on an analysis, conducted by investment bank PiperJaffray, that keyed in to the daily movement in Apple’s share price over the past 25 quarters. The article pointed out that Apple’s stock has averaged a gain of about 3% on the day after posting earnings. But, the article warns, investors should be cautious about those gains because that 3% bump was usually “fleeting,” and often disappeared over the days and weeks that followed. The conclusion was this:

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by | Posted 7.30.2012 | Post Comment (No Comments)

A few weeks ago, I was discussing when it’s time to sell a losing stock. When you lose money, sooner or later, you will want to get rid of the stock. But when you are making money… when is the right time to pull the trigger? I have two situations to look at with you today:

Major Event and The Stock Soars – Should You Sell or Ride The Stock?

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by | Posted 7.30.2012 | Post Comment (No Comments)

A large number of dividend growth companies announced plans to boost distributions over the past week. I define consistent dividend paying companies as ones that have managed to reward shareholders with higher distributions for at least five consecutive years in a row. This list typically helps me in observing the rate of change in distributions in companies I own or would like to own at some price point. It is also helpful in getting acquainted with other companies for further research. Because of the long list of companies boosting distributions over the past week, I have separated the list of announced dividend hikes from the past week in several groups:

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by | Posted 7.30.2012 | Post Comment (No Comments)

Linked here is a detailed quantitative analysis of 3M Company (MMM). Below are some highlights from the above linked analysis:

Company Description: MMM is trading at a premium to all four valuations above. The stock is trading at a 34.0% premium to its calculated fair value of $65.39. MMM did not earn any Stars in this section.

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by | Posted 7.30.2012 | Post Comment (No Comments)

Republic Services Inc. (RSG) is the second largest collector and disposer of trash in North America.

-Seven Year Average Annual EPS Growth Rate: 6.2%
-Seven Year Average Annual Dividend Growth Rate: 20%
-Current Dividend Yield: 3.34%
-Balance Sheet Strength: Quite Leveraged

Republic Services is quite leveraged, but the stable cash flows from this dominant position in an essential industry lead me to conclude that while the current valuation is not excellent, investing in the company should result in reasonable long term returns for investors.

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by | Posted 7.30.2012 | Post Comment (No Comments)

One of the continual challenges of holding a solid, long term dividend portfolio is to not only have stocks that can constantly increase their payouts over time but also have stocks that are diversified to ensure that if things do go wrong, the impact will remain limited to only part of the portfolio. I’ve already discussed the importance of:

-Reaching industry diversification
-International diversification

Another interesting way to diversify is to hold stocks that decide on their payout in different ways. One of the latest trends is for some dividend stocks to pay their dividend not necessarily based on their cash reserves but rather on the prices of the commodities that they work with.

It’s A Win-Win!!

The fact is that such a policy works out well both for the company paying out the dividend but also you and I receiving the dividend.

How It Works

It’s quite simple, a company that holds gold reserves has a business that is very much linked to gold. No matter what the price of gold, the costs of exploiting it are almost identical. The revenues on the other hand are very variable and depend on the prices it can sell its gold a great deal. Thus, it makes a lot of sense for the company to make the following deal:

For Commodity Producers

-When gold prices increase by 5-10%, we will also increase our dividend to you by that percentage. We will have extra money so it makes sense to pay it out to shareholders. We will also appreciate the flexibility of paying less if ever prices did end up declining.

For Shareholders

-If one of our goals is to not only maximize our dividends but also get diversification, this is a rather unique way of getting it done. Does the dividend become a bit less stable? Yes, but as I’ve written about in the past (especially concerning stocks that pay annual dividends or in my criticism of dividend aristocrats), it’s not always about stability. It’s about making sure that the portfolio will increase dividend payouts by a strong percentage every year.

Who Does This?

This is fairly new so there are only a few companies that currently operate this way. I do expect this to change though and would be very happy to see an oil producer go ahead. In the meantime, we have:

Gold-Linked Dividend: Newmont (NEM): CEO Richard O’Brien said the policy was sustainable in the long term and that “it helps to enforce discipline in the company’s “capital spending and other spending requirements to ensure that we can keep the balance.”

Eldorado (EGO) has also done the same

Hecla Mining Company (HL) pays a dividend linked to the price of silver. Its dividend remains low but hopefully it will rise enough to become a decent play

What are your thoughts on commodity linked dividends? Do you intend to hold such a stock in the near future?

by | Posted 7.29.2012 | Post Comment (No Comments)

In my line of work, I live with change every day. Actually, it’s part of my job title.

When I think about my own financial journey, my objectives to achieve financial freedom, I see many parallels between good financial management and good change management principles. Let me share with you what I mean, including an 8-step recipe I’ve adapted by a change management guru to help you and I both get better at it.

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