10-Year Treasury Yield? Double It!

This article originally appeared on The Div-Net September 22, 2011

The 10-year Treasury is yielding 1.85% as of this writing. I currently have no exposure to bonds in my portfolio. This anemic yield is one of those reasons. Why would I want to lock in my capital for such a low yield, especially for a period as long as 10 years? Treasuries are, of course, extremely liquid and can be sold virtually at any time. Of course, if yields rise the value of your bonds go down. In that case, you'll be accepting a very low yield and also have a investment vehicle that will be losing value when the yields finally rise. No, thanks.

Let's instead look at three stocks that are currently yielding at least twice the benchmark 10-year Treasury. These stocks not only have double the yield payout as the 10-year, but also have a good chance for price appreciation as these businesses produce products that people need and will continue to buy. Double the yield and the chance of capital gains on top of it sounds pretty good to me.

Introducing The Dividend Growth Index

Very recently, Mike over at The Dividend Guy Blog spearheaded a project to get fellow dividend investment bloggers together to form what is now called the Dividend Growth Index. You can find more information here, but basically the index is a group of stocks picked by a total of seven bloggers, who picked three stocks each for a total of 21 individual stocks.

The point behind this index is not a stock picking contest to see which equity gains the most. The real success with dividend investing lies behind the power of compounding over time. Each blogger will keep track of his three stocks, collect the virtual dividends in a "cash account" and reinvest them back into one of the companies annually. We'll be posting quarterly reports so everyone can follow along in the fun.

I think this is going to be really interesting! The following bloggers are all participating; I'm including a brief synopsis of each blogger's background along with their three picks:

When Saving Money Costs You More

I started really analyzing my expenses last year and shrewdly cut activities and expenditures I felt were unnecessary or a waste of money. After cutting expenses, hindsight allows for a little perspective as to when saving money ends up really costing me more through a reduced quality of life or increased ancillary expenses. Some expenses, like a spare car in the driveway or trips to the trendiest restaurant in town, can be cut without regret. Other expenses, however, once eliminated can cause a disproportionate reduction in one's quality of life. These expenses must be analyzed a little more carefully to see if they can reduced instead of cut out completely, or perhaps they can't be changed.

At one point or another, the law of diminishing returns takes hold. Cutting out huge expenses like your car, overpriced rent and cable TV can yield huge savings. Once you get to the point of making your own clothes or laundry soap you'll likely be taking up a lot of time and seeing very little benefit.

I want to talk a little bit today about my personal experience in cutting expenses and yielding diminishing returns.

Philip Morris International - Dividend Increase

This article originally appeared on The Div-Net September 15, 2011

Philip Morris International (PM) recently raised its dividend by 20.3%! The new quarterly dividend is $0.77 per share, which is $3.08 annualized. This is a pretty hefty increase from the old quarterly dividend of $0.64.

Why A Low Payout Ratio Is Important

The payout ratio is an important metric to consider when analyzing a company and whether you would like to commit money to a position. Per Investopedia, the payout ratio can be defined as:

The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings.

Calculated as:

This sums it up pretty effectively. The payout ratio is basically a percentage of earnings paid out to investors in the form of dividends. A higher payout ratio means a company is paying out a higher percentage of their earnings to shareholders, while a lower payout ratio means a company is retaining a larger percentage of earnings to reinvest or grow the business. 

What If You Could Buy Time?

What if you could buy time? What if there was a store, like a Wal-Mart, that sold time in blocks...like 1-year increments? Would you purchase it? Time is the most interesting commodity of all, in that you can buy it but you can't purchase it. What do I mean by that? Well you can buy it...you can buy time by retiring early and exchanging future earnings for free time. You can't purchase it, because nobody has the power to sell it to you. This is an interesting phenomenon that is constantly on my mind.

Weekend Reading - September 17, 2011

Another week is behind us, and I sit here enjoying the fruits of my labor: a hard-earned restful Saturday afternoon. Seeing how retiring extremely early is my foremost personal finance goal, I am anxious for the time when every day is Saturday!

It was an interesting week. I'm not really into astrology, and very rarely look into the monthly horoscopes. However, at work, someone pressed me to read the September zodiac report as they felt it was supremely accurate. I am republishing this snippet exactly as it was printed in Style, a local magazine here in Sarasota. The horoscope was provided by an astrologer named Brian A. Hill, and you can view this report and more at  his website. I'm a Taurus, as I was born May 12, 1982. My horoscope for September is as follows:

"Taurus is the money sign of the zodiac. The Bull understands value more than any other sign.  This month these traits will enable you to squeeze a nickel and get six pennies. In every situation adhere to your budget, negotiate the best deal and choose the optimum value to quality ratio. In these economic times by trusting you skills, talents and abilities you will get the extra penny out of your nickel. That might not sound like much but realize that is a 20% return on your investment. Have you looked at the current yields on certificate of deposits?"

Pretty interesting stuff! I've earned a "reputation" of sorts at work. When people see me getting off the bus in the morning, and ramen noodles are consistently my lunch du jour, the word frugal (or cheap, to my dismay) is often used to describe me. When a co-worker read this article, he thought it was very funny. I hope everyone else has a horoscope as accurate!

Here are some excellent articles from fellow dividend growth investors, frugalists and personal finance bloggers from the past week.

Gold As An Investment

This article originally appeared on The Div-Net September, 8 2011.

This article is inspired by some of the posts I've seen lately around the blogosphere on the benefits and drawbacks of investing in gold. I've never really made my feelings on the shiny metal known on this blog before, so I thought I'd put it down in writing today. First off, I'm not a gold bug or a doomsayer. I'd like to consider myself a pretty level-headed guy, and in such I can see the pros and cons to owning gold. I don't necessarily think it's all-or-nothing. You can own many types of investments, and gold can be a part of your portfolio. That being said gold is very expensive at current prices, and price notwithstanding I dislike owning it for a number of different reasons. My thoughts on gold (and silver to a lesser degree) are as follows:

Recent Buy

I decided to make another move in this turbulent market. I can predict the future as well as the next guy...that is another way of saying I can't. I don't know if know is a great time to invest, but I do know that cash in the bank is a horrible investment. The more money I have working for me, and the larger my passive income stream grows the faster I can compound my growth. That's what it's all about for me.

I recently asked my readers what were they buying? A lot of readers seemed pretty keen on Aflac, Intel and a couple telecoms as well. As I've said a few times before, I like to walk the walk when I talk the talk. I don't post endless articles on this blog for pointless and endless reference. I rarely suffer from analysis paralysis. I share ideas with my readers and I engage an idea when I feel the time is appropriate.

Income/Expenses For August 2011

Each month I will post my income/expenses for the previous month. I track every dollar in and out, so what you see is exactly what I earned and spent (rounded to the nearest dollar).

Weekend Reading - September 10, 2011

Another weekend is upon us. I figured this weekend would come fast after the 4-day week after having Monday off for Labor Day. I guess when you're working nine hour days in a tense environment, the days don't end as fast as one would like. But it's all fine, as my day job provides me the necessary capital to continue investing in dividend growth stocks and retire early.

The markets continue to stay turbulent. Now, the buzz is that another round of quantitative easing is in store for us. I'm not a fan of the idea of QE3, as the first two rounds did very little but artificially prop up the markets. I'm a value investor who much prefers to buy equities on sale. I have no desire to pay more for my favorite companies because the Fed wants to intervene. We'll see what happens here. I'm hoping that they realize continuing to band-aid a gaping hole doesn't do much. This economy took many years to get into the position it's in, and it's going to take many years for it to get out of it. There's no magical fix.

But, I digress. It's Saturday afternoon. The markets are closed, the sun is shining and I'm not at work. It's  a great day!

Here are some excellent articles from fellow dividend growth investors, frugalists and personal finance bloggers from the past week.

Dividend Income Update - August 2011

This article originally appeared on The Div-Net September 1, 2011

August has come and gone and it seems like it just started yesterday. Sometimes I truly cannot believe how fast time flies by. I don't mean to say this as a cliche. I actually mean that time seems to fly by for me. This is just one of many reasons I would like to retire so early in life. Once time is behind you, there is no way to get it back. I want to harness as much of that limited time as possible!

I've tallied up the dividends received from August, and it's very close to the total received in July. It's not a huge number, and I've said before that my dividends are pretty small potatoes compared to other bloggers' dividends...but it's still just starting for me. I think it won't be long before I'm looking back on these totals with a big smile as I see where it all began.

What Are You Buying?

I've always been pretty open with my investment moves, for better or worse. I always let you know what I've recently purchased, usually within just a few days of buying. Doing so is part of my overall mission with Dividend Mantra, and that is to provide a live journal on the road to early financial independence. 

I've telegraphed a few of my purchases before, usually listing what's on my short list of stocks to buy before I purchase. I'm going to do that again today. I'm likely going to deploy some fresh capital later this week, as I will receive my monthly commission check from my employer this Thursday. I've put a few stocks on my watch list this month and I've narrowed down my options to just a few.

The DOW took a small dive yesterday, and was down as much as 300 points in early trading before rebounding significantly for a 100-point loss. I was actually hoping the markets would have stayed down significantly, as I prefer a drop before I make a purchase. Nothing like buying my favorite equities on sale!

I'm listing the equities I have my eye on for a couple different reasons. First, I like to show my readers everything I'm doing. Second, I'd like to know what you are interested in? Perhaps there is a great buy out there I haven't noticed. As I usually make just one purchase per month, I like to make sure I'm doing the right thing.

Here's my short watch list:

Freedom Fund Update - September 2011

Well, the time has come to update the Freedom Fund once again as we start another month. The Freedom Fund is my portfolio, and I think it's aptly named. My portfolio is my way to freedom; freedom from working at a job I don't enjoy to purchase goods I don't need to impress neighbors I don't care about.

The market has been all over the place lately. This past Friday seen a 2.2% drop in the DOW, and it seems like large jumps and drops in the market are a daily part of life lately. The volatility in the market is in direct correlation with the volatility in the overall economy. Every week seems to produce different stories about where we are headed. Unemployment is down, then it's up. Houses are being sold just before additional foreclosures deluge the the market. The talking heads are like bobbleheads....it's yes, then no and then sideways.

Weekend Reading - September 3, 2011

The Labor Day weekend is upon us, and this weekend always signifies the end of summer for me. I grew up in Michigan, where season changes are a major part of life. Now that I live in Florida the beginning of fall is less pronounced. What I gain in lieu of season changes are beautiful beaches, no state income taxes, plentiful palm trees and sunshine almost every single day. It seems like a fair trade.

I didn't post any weekend reading last week due to my big move. The new apartment has been interesting. When we moved in we found the toilets run incessantly, the freezer had mold due to cut electricity, the stove wouldn't power on and the the electrical outlet for the dryer was outdated. Other than that, it's closer to public transportation and much cheaper. It's not gated and doesn't have a fancy pool, but I'm more than happy to give up some amenities in life to get out of the rat race earlier. So far, so good!

I hope all my readers have a wonderful holiday weekend. I've been splurging a bit more recently; namely on food. I took my girlfriend out to a small Chinese dinner this past Wednesday, which is unusual for us as I usually eat sandwiches during the week for dinner. After eating a refreshing meal comprised of orange chicken and lo mein noodles, I cracked my fortune cookie to reveal my future: "YOUR FINANCIAL OUTLOOK IS EXCELLENT". Thanks, fortune cookie! Tonight, we plan on going to a great sushi spot downtown.

Here are some excellent articles from fellow dividend growth investors, frugalists and personal finance bloggers from the past week.

Recent Buy

This article originally appeared on The Div-Net August 25, 2011

How does the saying go? You can't keep a good man down? Well...you can't keep a value investor out of a depressed market! My available capital has been extremely limited lately, as I deployed all of my dry powder during my recent buy streak, adding to my position with CVX and initiating a position with COP.

I decided to pull some money out of my emergency fund to make a purchase. I have typically had a high amount, for my personal circumstances, set aside as an emergency fund for myself. I'm single, and I don't have any major liabilities. I don't own a home or a car. I am not married and I don't have children. Due to this, I think that carrying a smaller balance in my emergency fun in the short-term will be fine as I dry it up a little to make a purchase. I didn't alleviate the entire fund, just a portion of it. I'll likely build it back up over the next couple months as my expenses continue to decrease and my income (hopefully) increases in turn.