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Saturday, February 28, 2009

* General Electric (GE) Cuts Dividend

After months of saying the dividend was safe, the Board of Directors of General Electric Company (GE) Friday authorized a plan to reduce the Company’s quarterly dividend to $0.10 from $0.31 per outstanding share of the Company's common stock, effective for the second half of 2009. The company's news release stated the decision would preserve approximately $9 billion for the Company on an annualized basis. GE Chairman and CEO Jeff Immelt said:

Friday, February 27, 2009

* Inegrys Energy Group (TEG): Things That Make You Go Hmmm...

Utilities may not be the perfect dividend stock, but they should be one of the more predictible ones. This is not always the case. On Wednesday February 25th, Inegrys Energy Group (TEG) issued their earnings release after the market closed. In the release they forecast 2009 operating earnings of $2.51 to $2.66 a share, which unfavorably compared to the street estimate of $3.77/share. For the fourth quarter, TEG's earnings of $0.30/share fell well short of the street's estimate of $1.38/share. The market was not pleased. Yesterday (Feb. 26th), TEG's shares fell $9.77/share or 26.68%. Why?

Based on TEG's actions over the last several weeks, the market was completely surprised by its announcement. On February 17th, TEG issued a news release raising its quarterly dividend $0.01 to $0.68/share. As a dividend investor, I viewed this as a positive development and believed that management would only raise the dividend if it could be sustained. The annualized dividend of $2.72/share is in excess of the high end of its projected 2009 earnings range. Can TEG sustain its quarterly dividend at $0.68/share?

Looking at TEG's cash flow statement, I noted that free cash flow (operating cash flows less capital expenditures) was over three-quarters of a billion dollars negative in 2008, down from negative $154 million in 2007. More alarming is that operating cash flows in 2008 was negative. As I have previously noted in The Most Important Financial Statement, cash from operating activities should always be positive and greater than the company’s net income. Based on data from Morningstar, free cash flow has been negative for the last decade.

One might argue that management is counting on proceeds from the sale of its non-regulated business segment to sustain the dividend through 2009. If that is the case, I hope they have buyers lined up. Generally, these types of sales take time, a lot of time.

For me, the most concerning observation is the trading activity between the time the dividend announcement and the earnings release. In spite of the company's "good" news of its 51st year of consecutive dividend increase, the stock continued to fall on increasing volume. Year to date through February 17th, the stock's average daily volume was 719 thousand shares. From February 18th, the day after the dividend was announced through February 25th, the day earnings was released after the market, average daily volume was 1.2 million shares, or 66% higher. The 1.2 million average shares leading up earnings release were 87% higher than the 637 thousand average daily shares the week leading up to the dividend announcement (2/6 to 2/17). This could lead to an S.E.C. inquiry and/or shareholder suits.

I am all about personal responsibility. Yes, I am disappointed about the company's actions, including its shareholder communications, but I am more disappointed in myself for not spending sufficient time on diligence before purchasing TEG. In the end we will sometimes make bad decisions or have good investments go bad; we just need to learn from it and avoid the most dangerous investment.

Full Disclosure: Long TEG

Tags: [TEG]

Wednesday, February 25, 2009

* Utilities For A Well-Rounded Dividend Investment Portfolio

A well-rounded dividend investment portfolio just doesn't happen by accident. As noted in Charlie Munger’s 10 Rules for Investment Success, “Allocate assets wisely: Proper allocation of capital is an investor’s No. 1 job.” It is human nature to want to jump on the what's hot bandwagon and ignore what is considered boring, like utilities.

Tuesday, February 24, 2009

* Financial Crisis: Can You Spare A Dime For My Wealthy Friend?

So, the company you work for is starting to lose money and the layoffs have begun. You hold your breath as the names are read. Then suddenly it dawns on you - it just the working stiffs that are being affected. Is there something wrong with this picture? Where's the equity in this? Not to fear, after careful research I have determined this financial downturn is so bad, that even the well-to-do are suffering - at least in their own way. Consider the following:

Monday, February 23, 2009

* 3M Co. (MMM) Stock Analysis

This article originally appeared on The DIV-Net February 16, 2009.

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

Company Description: 3M Co. is a diversified technology company with a presence in various businesses, including industrial & transportation, healthcare, display & graphics, consumer & office, safety, security & protection services, and electro and communications.

Sunday, February 22, 2009

* Weekly Links - February 22, 2009

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Saturday, February 21, 2009

* My Holdings As A % Of Market Value And Income

As part of my full disclosure on stock analyses, I include the subject stock's percentage of my income portfolio (market basis) for securities I own. This prompted one reader to ask if I would disclose the percentage of each of my holdings. Below is a table of my income holdings and their relative percentages based on market value and annual income generated:

Friday, February 20, 2009

* Coca-Cola: A Real Dividend Aristrocrat

Coca-Cola (KO) is the real thing in more than one way. KO was the King of Pop, long before Michael Jackson was born and after raising its quarterly dividend 8% to $0.41 per common share KO can wear its aristocrat crown another year. The dividend is payable April 1, 2009, to shareowners of record as of March 15, 2009. After the announcement, shares of KO were yielding over 3.5%. This is the 47th consecutive year KO has raised its dividend. Linked here is my most recent analysis of KO.

Wednesday, February 18, 2009

* Ten Dividend Stocks With 50+ Years of Consecutive Increases

In every field there are winners and there are champions. The difference is subtle, but very real. A champion is driven for success and will not let anything stand in its way. Some dividend stocks can be classified as champions. Not surprisingly, I went to the Dividend Champions list to find these ten dividend stocks that stand alone with 50+ years of consecutive dividend increases. They are presented here in descending rank:

Tuesday, February 17, 2009

* Wells Fargo: Things May Not Be Well at Wells

I thought Bank of America (BAC) was strong enough to survive without cutting its dividend. It was better managed than Citigroup (C) and wasn't in near the dire straits that C was in when it was forced to cut its dividend. This all changed with the announced acquisition of Merrill Lynch. When a company such as Merrill is sold at a fire sale, there usually is a reason. BAC is now learning why Merrill was so favorably priced - they got what they paid for. Is this same situation playing out with Wells Fargo's (WFC) acquisition of Wachovia?

Monday, February 16, 2009

* Paychex Inc. (PAYX) Stock Analysis

This article originally appeared on The DIV-Net February 9, 2009.

Linked here is a detailed quantitative analysis of Paychex Inc (PAYX). Below are some highlights from the above linked analysis:

Company Description: Paychex, Inc. provides payroll and integrated human resource and employee benefits outsourcing solutions for small- to medium-sized businesses in the United States.

Sunday, February 15, 2009

* Weekly Links - February 15, 2009

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Saturday, February 14, 2009

* Pocket Change Portfolio - January 2009

On the second or third Saturday of the month I update the Pocket Change Portfolio (PCP). The table below reconciles the PCP from beginning of period to end of period for January 2009, Year-To-Date (2009) and Life-To-Date. The Portfolio Returns line provides the calculated return for the three displayed periods.

Friday, February 13, 2009

* 3M (MMM) and Manulife (MFC) Answer The Leadership Call

When the world appears to be collapsing in around you and things look their darkest, it is then when character is determined and leaders rise to the top. On Tuesday, U.S. Treasury Secretary Timothy Geithner called for a new program that combines public and private capital to be used in a fund that will buy troubled assets of up to $1 trillion, aimed at unfreezing credit markets. The the markets were underwhelmed. Many companies, such as Harley-Davidson (HOG) and Dow Chemical (DOW), used this smoke screen to slash dividends, but in the midst of the turmoil, an American Aristrocrat and a Canadian Achievier stood tall.

Wednesday, February 11, 2009

* The Best Dividend Stocks In The World

I couldn't begin to estimate how many different stocks are traded around the world on the various exchanges. Like everything else, there are many participants, but few players. Though the population of stocks may be large, there are only a precious few that are worthy dividend stocks. When spending my time looking for worthy investments, there are four primary places I look:

Tuesday, February 10, 2009

* Do As I Say, Not As I Do

The above editorial cartoon's humor is based on its underlying truth. It seems everyone has high ideals as to how others should behave, but somehow we (individually and collectively) always seem to be the exception.

Monday, February 9, 2009

* Stock Analysis: BP Plc (BP)

This article originally appeared on The DIV-Net February 2, 2009.

Linked here is a detailed quantitative analysis of BP Plc (NYSE:BP). Below are some highlights from the above linked analysis:

Company Description: This supermajor integrated oil company (formerly BP Amoco p.l.c.) is based in London and is the world's second largest publicly owned oil company and the fourth largest U.S. refiner.

Sunday, February 8, 2009

* Weekly Links: Carnivals & Articles - February 8, 2009

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Saturday, February 7, 2009

* Progress Update - January 2009

Once again it is time for a goals/progress update. I am pleased to say that my annualized dividend income increased for the month, keeping alive the string of 14 consecutive months of increases dating back to December 2007 when I began tracking it. As noted in December, 2009 will be a challenge to keep the string going. January saw Pfsier (PFE) cutting its dividend. With each cut and subsequent sale, my dividend portfolio becomes stronger. In January, I continued to lower my exposure to funds that appear headed to toward a dividend cut.

Friday, February 6, 2009

* Nine Companies Bucking The Trend And Raising Dividends

What if you don't want to spend your retirement managing and worrying about your portfolio? Put it on Auto Pilot, specifically on a Dividend Investing Auto Pilot. Dividends from a quality, well-diversified portfolio are much more predictable than capital gains and best of all, they are passive. You don't have to do anything, they just show up in your brokerage account each quarter. Inflation? Not to worry, the good companies routinely raise their dividends well in excess of the inflation rate.

Wednesday, February 4, 2009

* The Dividend Stock Life Cycle

The renewing of life. There is nothing more natural than the live birth of a child. In this birth there is life, hope, unlimited potential, and yes, eventually death. Though we don't like to focus on it, death is just as natural as birth. In much the same way, it is natural for a percentage of dividend stocks to fail each year, either in not raising their dividend or literally ceasing to exist. As we plan for out own death by buying life insurance and making final arrangements, we must have a plan in place for when inevitable happens and we must sell an under-performing dividend investment.

Monday, February 2, 2009

* Stock Analysis: Lowe's Companies, Inc. (LOW)

This article originally appeared on The DIV-Net January 26, 2009.

Linked here is a detailed quantitative analysis of Lowe's Companies, Inc. (LOW). Below are some highlights from the above linked analysis:

Company Description: Lowe's Companies, Inc. and its subsidiaries operate as a home improvement retailer in the United States and Canada. The company offers a range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance.

Sunday, February 1, 2009

* Weekly Links: Carnivals & Articles - February 1, 2009

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

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