Weekend Reading – June 7, 2014

happyweekendThe weekend is here and summer’s just getting started.

Life is good!

I’m looking forward to a new regimen of frugality, which should allow me some free capital to continue purchasing high-quality dividend growth stocks at attractive valuations. However, while I believe I’ve got the savings side figured out, the stock market isn’t giving me a lot of opportunity right now. Perhaps I picked a great time to move up North and take a quick break from buying stocks?

The Dow Jones Industrial Average is coming up on 17,000 points – I remember when 12,000 seemed a little crazy. And while that number is irrelevant without some kind of valuation, the Shiller P/E ratio stands above 26 right now. I consider the Shiller P/E ratio a general “check on the weather” – a tool to gauge the broader market’s valuation. Now, while I don’t care for valuing the entire market – a fruitless and impossible exercise – I consider it useful to get a general idea on how far my dollars might go. And since the median Shiller P/E ratio is about 16 going back more than 100 years, we can probably assume that stocks in aggregate are pricey.

However, I value companies individually since that’s how I buy my stocks, so I’ll be looking for individual opportunities that make sense over the next week or two. I hope we get cheaper prices, which would open up even more opportunities. But I’ll take what’s there. Since I’m investing for the next 20-30 years, a slight change in the valuation of stocks doesn’t really make a big difference anyhow. Time is on my side in that regard, and has the power to overcome slightly expensive stocks.

In the meantime, I’ve got some interesting articles that I wanted to share with you readers. I’ve been spending more time than ever reading lately, so it’s a pleasure to share some material. I hope you all have a great weekend, enjoy the weather, and be safe. As always, thank you for the support!

Below, you’ll find a short list of articles I’ve recently read and enjoyed. I hope you do as well!

How much do you need to earn to be happy? 
Yahoo Finance recently ran a piece on a poll they conducted, asking people how much money they think they’d need to earn to be happy, and how much they’d need to feel rich. These articles are usually just fodder; however, this one was interesting in that they specifically pointed out that it’s not necessarily how much you earn, but rather how much you save that could lead to financial security. I’ve noticed that since I first started my journey back in 2010 that mainstream media has been picking up on this basic financial truth more and more lately. Hallelujah!

Baxter International (BAX) Dividend Stock Analysis 
Dividend Growth Investor took a look at Baxter International (BAX) recently, and concluded that it appeared to be a solid company trading for an attractive price. Couldn’t agree more, as it’s currently high on my watch list for a potential purchase this month. Solid numbers, and the split could lead to very interesting results over the next year or so.

A Wealth Poem – Recited by Guy on The Road
J. Money shared this wonderful poem, describing how wealth is a bucket. I really enjoyed this! I also feel the same – people focus too much on the spigot, ignoring the hole in the bottom of the bucket. While the spigot is important to building wealth, the size of the hole will determine how much wealth you keep over time. Good stuff.

Housing ‘crappy investment’: ‘Shark Tank’ Pro 
Kevin O’Leary – an entertaining and boisterous businessman and investor, of which I’m a fan – was recently on CNBC discussing how he believes real estate will be a bad investment over the next 10 years or so due to rising interest rates, stagnating prices, transaction costs, maintenance, and taxes. He believes most, especially young people, will be better off renting and plowing their excess capital into the markets, with 50% in stocks and 50% in bonds. His comment on being a vampire is typical O’Leary, and very funny. However, I think Kudlow made a great point on how real estate is an asset that should be considered based on your local market. For instance, homes are routinely sold in my area for $50k. In San Francisco that might buy you a closet. As always, an entertaining discussion.

Don’t Cut The Legs Off Your Successful Investments
Tim compared some wonderful companies against the S&P 500, and reminded us why it’s oftentimes a good idea to let winners continue to win. If you’re invested in a group of great companies that continue to reward you with rising dividends on the back of increasing profits, it’s generally best to shut up, sit tight, and let those businesses do what they do best.

Dividend Update – May 2014
Passive Income Pursuit earned $244 in totally passive income this past month. Just another solid step toward financial independence. Good stuff!

Give Yourself the Gift of Not Worrying About Money
MMM put together this great post, and it couldn’t have come at a better time for me. I recently decided to give myself the gift of not worrying about money, focusing now on writing and inspiring instead of pure income. It’s a wonderful feeling to wake up every day and now that I’m working on things that bring me joy and genuinely make the world a better place. And knowing that, in the end, I’ll most likely be alright melts the anxiety away. Of course, one has to have a little money in the bank in order to stop worrying about it, but that’s why I’ve been working so incredibly hard over the last five years. And the hard work isn’t over yet, as I’m actually “working” more hours than ever, even if it isn’t actual work to me.

Growth Update: May 2014
My Dividend Growth shares his progress over the month of May, and everything continues to fire on all cylinders. He’s setting new records for dividend income and portfolio value. Success begets success, and he’s off to a great start!

Monthly Dividend Income: May 2014
Starting From Zero also hit a record for dividend income in May. By the time he’s my age he’ll be far ahead of where I’m at now, and very likely will have the ability to retire in his 30s, if he so chooses. It’s wonderful to build options and flexibility for your future self.

Dividend Income Update – May 2014
DivHut had a very solid month of dividend income, with over $170 lining his pockets with no work on his part. The joys of being a dividend growth investor!

May 2014 Passive Income
And on the other end of the spectrum, you have My Dividend Pipeline, who received more than $850 in total passive income for the past month. Incredible stuff, and it takes a lot of time, patience, and persistence to do this. Rewards are there for those who work hard and stay consistent.

Best 2014 Dividend Stock Pick Returns – I’m Still Ahead
The Dividend Guy reviews his stock picks for the year, and he’s beating his benchmark by a pretty wide margin. Always nice to have some reassurance that you know what you’re doing!

June Buy: AT&T (T) or Verizon (VZ)
Dividend & Whisky is considering investing in one of the two telecommunications giants, and appears to be leaning slightly towards AT&T Inc. (T) right now. I think both T and Verizon Communications Inc. (VZ) offer solid yield in this market, but I also believe that growth will be limited going forward. I have small positions in both, and don’t plan to make either one a major core holding.

How to inspire change
Finally, we have an inspirational post from Richard Branson that talks about how personal stories can inspire change for the good in the world. I hold that same view, and this blog is my representation of that belief. I’m sharing my personal experience in a story format, which basically shows you that if someone like me can walk the path to financial independence, then it’s certainly possible for you to as well. And I hope to continue inspiring everyone out there in the process.

Full Disclosure: Long BAX, T, and VZ.

Thanks for reading.

Photo Credit: gubgib/FreeDigitalPhotos.net

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37 Comments

  1. Thanks for sharing that Kevin Oleary article. I agree with him on his outlook between buying vs renting right now. Interesting to see his bond mix at 50/50 with equities as markets getting toppy. Anyways good list of reading material.

    Good Day and Grind On!

  2. I am currently buying(selling puts) on GSK, PETS, UVV & PM. I loaded up on MO 6 months ago now a proud owner of 5.1k shares of MO, foreseeing that the market may continue to rise. Hoping QE end in the fall gives me some more buying opportunities.

  3. Just a differing opinion on T and VZ. Satellite phones were more of a novelty than a reality when I was half my current age, and now everyone has a cell phone. Add machine to machine (M2M) and it is more probable than possible that both T and VZ will see earnings growth that exceeds the market. But who knows what will happen? If I was better at predicting the future, I would already be retired! In the meantime, both T and VZ are in my top 25 holdings.

    The weather is great here in Troy, but the poplars are dropping cotton and it’s almost impossible to enjoy the outdoors today. Maybe we will get the predicted rain tomorrow and it will knock the pods out of the trees.

    I found it interesting the DGI did an article on BAX after you called it a possible buy. How did you get him to do your work for you? Haha! In all seriousness, I am glad to be a shareholder.

  4. Thanks for the list Jason. There are several I need to read. I must also say I enjoyed the O’leary article. I think the metrics are getting stretched, but like you said there are always opportunities. In my latest newsletter I was saying I think Consumer Staples, Utilities, and REITs have generally gotten ridiculous. There may be some opportunity in retailers in the near future, plus emerging markets aren’t too bad.

    The correction will come eventually. I just hope it’s soon 🙂
    -Bryan

  5. frank,

    5,100 shares of MO? Would you like to trade places in life? 🙂

    You’re in a great spot there!

    And I hope you’re right about better opportunities coming up here pretty soon. Now that I’ve got less free capital than ever to work with, every dollar has to get stretched.

    Have a great weekend!

    Cheers.

  6. KeithX,

    I hear you on T and VZ. Hard to say what’s going to happen here. I like them, and own both. But I’m just saying I wouldn’t put them in the same category as a PEP or JNJ. And it sounds like you’re in a similar spot there. I don’t see any of them going away anytime soon, but I also don’t see a ton of growth occurring in a very mature U.S. wireless market.

    I’m still having issues with mosquitoes up this way. I’ve never in my life seen anything like this, and I grew up here for all my life. It’s just nuts. I hope they die off or something here pretty soon.

    And DGI helped me out there with the analysis. It looks like we came to a very similar conclusion. And the key is to look at forward guidance. I generally use TTM P/E ratios in all my analyses because it’s apples to apples, but the guidance is so much higher than TTM earnings. I think this one goes a lot higher over the next 12-24 months.

    Thanks for stopping by!

    Best wishes.

  7. Bryan,

    O’Leary is nuts. I really enjoy him. He kind of reminds me of Trump (who I hate) in his mannerisms, but he seems to be a lot more intelligent. Almost every time I’ve seen him talk I’ve found myself nodding in agreement. His adherence to investing for income is particularly admirable and reassuring. The vampire comment had me rolling. 🙂

    I hear you on valuations. Not much to like out there. I’m still looking around here and there, but I guess maybe it’s a blessing in disguise that my cash is a bit tight right now!

    Enjoy your weekend, bud.

    Best regards.

  8. DM,

    I am not a big fan of Mr. O’Leary, but don’t worry I am a fan of Mr. O’Mantra.

    I don’t know whether real estate is going up or going down but, in my opinion you would be foolish to buy a house at this point in your life.
    Why do houses go for 50k? Because there is no demand.
    That means if you buy, you are stuck.
    There are too many changes in your life at this time to commit to a house. You have sought and earned your freedom – don’t tie yourself down.

    Also IMHO you are much better off just paying off the balance on your student loan. Market is up. Times are good. I think you are just fooling yourself by going into forbearance. The loan bill is still coming – it just isn’t being payed.

    You aren’t truly free until you are free of debt.

    Good luck,
    Roger H

  9. Hi DM,

    As always a BIG thank you for sharing my results with your readers and of course sharing news from other great sites and blogs. Look forward to more stories from your end.

    DivHut

  10. Jason,

    Thanks for the list of great reads and for including me. On Friday I got a 26% raise at my job! I was happy they found a lot of value in my work and wanted to make sure they didn’t lose me to better offers. I’m pumped up about putting the extra capital to work. I’m in a perfect spot because now I have a sound strategy. You’ve helped me tremendously in that area thanks to your ability to take complicated ideas and make them relatable, easy to understand, and achievable. I was glad to see you find so many places to slash budgets going forward. Routing for you to do much better than you hope in these trial months. May you keep that keyboard pounding and make that money doing what you love as long as you like!!!

    All my best,
    Ryan

  11. Jason, the mosquitoes were the worst I’ve seen in 57 years up until last weekend. This weekend I haven’t seen any, so maybe the ones up your way will be gone soon.

  12. Thanks for the list – some nice Sunday reading here. Hope you are enjoying your weekend and your new found freedom. Guess Sunday nights have a different meaning now? 🙂

  13. Roger H,

    Well, I’m glad you’re a fan of me. 🙂

    I hear you on the housing conundrum. I agree that there’s little demand, and for good reason. This area of Michigan doesn’t really offer much, and we’re not far from Flint (a pretty rough town). This is a small town with limited entertainment/amenities outside of your standard grocery store/pharmacy/gas station/post office lineup. However, one doesn’t need much more than that, and could live a very frugal, simple life here. But you’d have to drive quite far for any entertainment. To be honest, I’ve never had a burning desire to own a house. The pride of ownership doesn’t do much for me, which is usually what offsets all the maintenance and upkeep. So I’d be feeling all the drawbacks and little of the benefits, emotionally and physically.

    It definitely seems there is a consensus to pay off the loans. It would be incredibly difficult for me to sell of $18k worth of stock to pay them off, but at the same time it would immediately be accretive to monthly cash flow. The loss in dividend income would be more than made up for by the increase in cash flow, but the interest payments against dividend income are pretty similar. Of course, if a significant pullback is on the horizon now is the time to make a move like this. I only wish the younger me was a bit smarter and either never took the loans, or paid them off when he had the chance. To live and learn, right? 🙂

    Thanks for the perspective and the support. I truly appreciate it!

    Cheers.

  14. Ryan,

    Wow, congrats on the big raise. That’s fantastic!

    Looks like you’re going to blow away some goals this year, especially the capital invested. Looking forward to seeing what you buy next. Keep up the great work!

    And thank you for the support. I’m hoping I can keep pounding the keyboard as well. I’m thoroughly enjoying it thus far. 🙂

    Again, congrats.

    Best wishes.

  15. Nicola,

    You nailed it on the head there! 🙂

    Sunday nights used to be depressing. It was the end of freedom and the beginning of wage slavery all over again. Every Sunday evening was laundry time, and just throwing in my work clothes and getting them cleaned for the week depressed me a bit. Now I feel great because the weekends are a lull in creativity and writing for me because my family is off and I’m busy spending time with them. Now Sunday nights means I can get back to writing and working out and everything else I also enjoy. So Sunday nights are just the end of one great aspect of my life and the beginning of another.

    I wish you and your husband the best of luck with your continued journey toward early retirement by age 50!!

    Best regards.

  16. Thank you Jason for sharing the articles,

    I like to the post from Yahoo finance, “how much do you need to earn…”, surprise to see only 51% of Americans think they would be happy with 6 figures income, but other 49% say 6 figures income is not enough.

    If I can make 6 figures income, I am sure I will be happy; however, my real happiness is not how much I make, it is how much I save & invest.

    Cheers,

  17. S Arun,

    Just read about your new townhouse! Congratulations. That’s actually not a bad price, as I understand how expensive real estate is over there in Canada. I hope it works out for you. 🙂

    The Yahoo article was interesting. You still see similar trends where people associate income with happiness (rather than wealth), but I thought it was nice how savings was mentioned. Also, you seen a comment there where income and savings aren’t necessarily correlated. It seems that centuries-old common knowledge is starting to hit mainstream media!

    Take care.

  18. Dividend Mantra,

    Thank you for mentioning my analysis of Baxter International. Thank you also for providing a nice list of articles to read.

    Best Regards,

    Dividend Growth Investor

  19. Hi DM, Very very interesting ! Especially Don’t Cut The Legs Off Your Successful Investments ! A lesson for me.
    Thanks again for your site.

  20. Hey Jason,
    Thanks for sharing this blog with us. Keep up the great work bud.
    Good things comes to those who wait. Waiting and restraining ourselves from buying and spending so we have more to invest. It’s such a long road, always under construction. It’ll be worth it for sure for us dividend growth investors. 🙂
    As always, I appreciate the contents and will always support you.

    Cheers.

  21. DGI,

    No problem at all. Always enjoy your articles. And I appreciate the continued support. 🙂

    Hope you’re having a great weekend!

    Best wishes.

  22. Tyler Tran,

    The road is definitely under construction right now. But I also know every mile traveled forward is one mile closer to financial independence, even if the progress seems slow at times. I’m certainly not traveling as fast as I was before, but I suppose I have less risk for a speeding ticket now. 🙂

    Appreciate the support, as always. You guys mean the world to me!

    Best regards.

  23. Jason,

    Thanks for including my post, appreciate the support as always man. And I should mention thanks to your writings about it lately, Shark Tank is my new favorite show to watch. Very interesting how they value small businesses and the differences between valuing public and private companies.

    Have a great week,
    SFZ

  24. Mr. SFZ,

    No problem! Glad to include you.

    I’m glad you dig Shark Tank. I think it’s a great show. Obviously a bit over the top at times, but still a fantastic show to get an idea of what entrepreneurs are doing out there and how these investors value these small businesses. Good stuff!

    Cheers.

  25. I like these, I read that article by MMM and it was very inspirational and motivating. I have some questions not relating to the articles.

    1. Have you always wanted to be a writer or go into the creative sector?

    2. Do you think you’re going to have more or less pressure (providing an income for yourself) on your shoulders now that you’ve quit your job?

    J.D. Roth from GRS wrote that although he loves what he does now for a living, he previously worked for his family’s company as a salesman, that his relationship with writing had changed. It changed because he had to rely on his blog income to live on after he quit his family’s company.

    He did write that people should pursue careers they’re interested in and he did admit in one post that following his passion worked out for him. Whereas when he had worked as a salesman for the family company, he wasn’t the best at it. His point was when you rely on an interest you like for income, it does change your relationship with it, in that you rely on it for a salary and that can become stressful.

    However he has since sold his blog to a corporation and although he’s now a millionaire he still continues to write, so I do think he likes it enough to keep going at it to this day. Anyway I hope you keep us updated on how the whole blog/writing thing will go for you.

    3. Have you thought about selling some of your stock, going back to college and getting a degree?

    What is your take on college?

    4. Do you read the minimalists blog (themins.com) ?

    That blog was started by two best friends, who worked hard until they made six figures, they ended up unhappy and in debt. They decided that lots of stuff and six figures wasn’t the answer to being happy, but instead of cashing out (working) for the next 10-20 years they decided to become minimalists, sold their stuff, and now write full-time for their blog and have published books.

    I look forward to hearing from you, thanks. 🙂

  26. Lila,

    Great questions. I’ll do my best!

    1. I studied creative writing in college, so I have always had a desire to write in some capacity. I didn’t anticipate it being like this, but I’m very happy it turned out this way.

    2. More pressure, but not something that’s concerning. Unfortunately, without a conventional job there’s some pressure to earn from this. However, I also know that, if necessary, I can always go get a job of some sort and generate traditional income for myself. So I’m not putting myself under the gun here. I’ll try to continue doing what I was doing (writing and inspiring) and if it works then I’ll be very happy. If it doesn’t work then I’ll figure another way out. My worst-case scenario (getting a job) is most everyone else’s best-case scenario. I take a lot of comfort in that.

    3. I haven’t considered that. I think going back to college would only impede my progress. Selling stock is the opposite of what I want to do, and there’s no guarantee that a shiny college degree will do anything at all for me. I think college is overrated and overpriced for the most part. Now, that all depends on what you want to do for a living – some occupations require a degree, period. But college just provides an expensive piece of paper that doesn’t necessarily mean you’ll be a better, harder, or smarter worker than someone without a degree. And there are plenty of jobs out there that pay fairly well and don’t require a degree. I just stopped doing one of them.

    4. I have never heard of that blog before, but their story is very inspiring. Similar to what I’m doing. And I consider myself a quasi-minimalist. After all, everything I own fits comfortably inside of a Toyota Corolla. In fact, I could probably double everything I own and still fit it in there. Stuff, for the most part, is all crap. Most people equate money with stuff, whereas I equate money with time. I’m going to stop by the blog and poke around. Always enjoy new, interesting reading material! 🙂

    Thanks for stopping by Lila. And I’m an open book, so I’m happy to answer any questions.

    Best wishes.

  27. Thanks for writing back Jason!

    Totally hear you on college. My bf when he was growing up he learned how to program and when he was 19 he got his first junior developer job. He has taken some college classes since then but isn’t sure whether he wants to pursue any kind of degree any further, he has managed to made a decent living without one.

    I appreciate you taking your time once again. 🙂

  28. Hi Jason! I finally bought one of your recommended stocks (OHI) which wasn’t rated on Value Line. I didn’t invest a lot, but it’s a ‘fly by night’ play, with a solid dividend, and better yet, a growing dividend. I’d still recommend that your readers and you consider LMT, which, though a little pricey, continues to raise its dividends (expect another substantial increase in Dec) seems to be in position to continue to go up. Thanks for your help!

  29. ted johnson,

    OHI is a fantastic REIT, and I’m a big fan. I wish I would have bought more when I did when it was priced much less than today, but I honestly didn’t see it going on a tear. Solid yield, and the growth (just about every quarter lately) has been fantastic. Glad to have you on board as a fellow shareholder!

    I’ll consider LMT. I definitely regret passing on LMT when it was way below $100. I’d say my biggest two misses so far on companies I looked at heavily and passed on have been LMT and V. Both were within my grasp at MUCH cheaper prices and I let them go. But both have significantly improved profitability, and so the run is substantiated. I’ll have to take another look!

    Take care.

  30. J. Money,

    Definitely enjoyed that poem. I think it sums up what we’re all talking about succinctly, but eloquently.

    Thanks for stopping by!

    Best wishes.

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