Value Investing News

Last year I introduced the Stock Ideas list and it has proven to be immensely popular. The list consists of Dividend Aristocrats, US Broad Dividend Achievers and U.S. Dividend Champions. Here are some highlights on this year’s changes:

I am a firm believer that asset allocation plays a significant part in a portfolio’s long-term results. Recently, I received a question asking if you could have a diversified portfolio of dividend stocks. It is an interesting question that deserves further examination.

Dividend investors are paid for holding common stocks, which is one reason why a company which keeps paying a stable or rising dividend does not fall as much during bear market declines. The dividend returns are always positive, which provides a safety cushion even in the worst times possible.

Chevron Corp. (NYSE: CVX), the second biggest U.S. oil company by market capitalization, is scheduled to release its fourth quarter 2009 earnings before the opening bell on Friday, January 29, 2010. Analysts, on average, currently expect the company to report earnings of $1.71 per share on sales of $40.45 billion.

Investors who are worried about inflation but want to protect their principal are often told to invest in Treasury Inflation Protected Securities, which are indexed for inflation. In other words, investors yield and principal are indexed to the CPI and adjusted as the CPI rises over time. This sounds like the perfect deal of a lifetime, except for two caveats.

There are certainly many ways to categorize the different styles of investing in dividend stocks, including yield, risk, growth, etc. Over the years, I have found that most dividend investing styles fall into one of the three major categories listed below:

Deep-down in my soul, I am a contrarian. I felt a sense of excitement entering October. This is the month that stocks have traditionally gone on sale. I was prepared to make a double allocation depending on the level of the markets decline. It didn’t happen.

We all want to succeed in everything that we do, including investing in the stock market. Though I have no analytical data to back it up, I am convinced that most people will lose money in the stock market over their lifetime. So why do so few people succeed at investing?

With the recent decline in the U.S. dollar, investors are thinking more about international diversification. This can be accomplished by many different means. However, one method that is often overlooked is buying a large U.S. multi-national company.

What makes investing in dividend stocks so intriguing is the power of compound dividends. Compound interest is what occurs when interest earned is added to the principle and is considered when calculating future interest–i.e. earning interest on interest. Compound dividends are like compound interest, but much better.

Many retirees who are seeking current income from their assets invest in fixed income securities, most of which provide a stable stream of income. Fixed income investments do have some disadvantages relative to stocks that pay dividends, and thus retirees which fail to account for these, could end up with no income at the worst time possible .

This week’s distribution increases were mainly focused on two of the energy majors and several master limited partnerships. In one occasion with master limited partnerships both the general and the limited partners received distribution increases, while in another only the general partners received a raise in quarterly distributions.

Dividend increases aren’t the only thing the Kellogg Company (K) is known for. For anyone over the age of two, Snap, Crackle and Pop are very familiar characters. Since 1933 the three elf characters have been the spokesmen for Kellogg’s Rice Krispies.

Reinvested dividends have contributed most all of the stock markets total returns over large periods of time. Some dividend investors automatically reinvest their distributions over time, which leads to compounding of their interest. Others do not re-invest automatically and instead wait for distributions to accumulate before adding onto existing positions or initiating new ones.

Dividends represent a tangible return on investment, which investors can choose to reinvest, spend or just keep in the bank. Unlike capital gains, which can disappear quickly, dividends cannot be taken away from you once you have received. In addition to that, dividends tend to provide the only source of total returns during sideways and bear markets.