Everyday Freethought

Here are a few dividend updates.

I bought more shares of Emerson (EMR). I also bought some shares of ConocoPhillips (COP).

Eaton (ETN) announced that they will raise their dividend 12%.

I have started listening to the “Sound Investing” podcast from Merriman. One of the hosts has said a couple of times that companies are making dividends a lower priority, and that you should not invest looking for dividends. I generally agree with what they say, but I think that dividends are the way to go. I also think that companies that pay dividends are commited to paying them. Just tonight I saw the CEO of Eaton on “Mad Money”. He said that Eaton is commited to paying out increasing dividends year after year.

I got the annual report for Emerson Electric Company. On the cover it said, “55 Years of Increased Dividends”. On the inside cover it says, “For the 55th consecutive year, Emerson increased its annual dividend to shareholders”. I was pretty happy to see that.

Emerson Electric is on several dividend stock lists: Dividend Aristocrats, Dividend Achievers and Dividend Champions.

I have some shares, and I may buy some more this week.

Image from Emerson website

S & P has updated its list of the Dividend Aristocrats. This is the first dividend list that I became aware of. If you want to use a dividend list as an investment plan to follow, this might be a good one since it is the smallest.

The stated criteria is that it consists of stocks that are in S & P indices have raised their dividends every year for at least 25 years. Yet there are many stocks that have increased their dividend for 25 or more years that are not on the list. Some of the additions this year are some of those stocks that were not on the list despite meeting the criteria.

Some other lists are the Dividend Achievers and Dividend Champions. The Dividend Champions list has a lot of stats and in my opinion is the best download of the three groups of lists. Some people prefer these because they are larger lists and more consistently adheres to their entry criteria than S & P.

The stocks that were added that I already own are AT&T (T), Colgate-Palmolive (CL), Illinois Tool Works (ITW) and Sysco Corp. (SYY). The stocks that were added which I do not already own are Franklin Resources (BEN), Genuine Parts (GPC), HCP Inc. (HCP), Medtronic, Inc. (MDT), Nucor Corp. (NUE) and T. Rowe Price Group (TROW). CenturyLink Inc. (CTL) was deleted. I never bought that one.

Quite a few of the new stocks that I do not own are financial stocks. I generally avoid financial stocks.

Dividend Achievers, Dividend Aristocrats and Dividend Champions are trademarks owned by other people. Google them.

There was a post last week on the New York Times Bucks Blog about whether or not people should automatically reinvest their dividends. It is pretty timely. I first saw a link to it the day before the Fed announced Operation Twist and the market went down 3% in one day.

The argument is that reinvesting dividends is the reason that dividend investing can be so successful. By doing it automatically, you do not have to engage in market timing. If you reinvest when a stock is going down, it can lower your cost basis.

I was automatically reinvesting, but now I am having my dividends go to cash. Reinvesting lower can lower your cost basis, but you could also throw money down a hole. Bank Of America paid a good dividend for a while, but it cut its dividend and kept going down.

Dividend investors are not as concerned about price as are investors who invest for capital gains. But you could still lose money. For the time being, I plan on having my dividends go to cash for a while. I do not think that we will have a depression or a deep recession, but I do think that stocks could go lower for a while. I think that going to cash for now is the way to go.

Image from Wikipedia

Originally posted 2011-07-26 22:05:38

ITW went down 8%, even though their profits were up 20%. Yikes!

I have still not put in any stops, but I may do that later tonight. I will see what Cramer has to say. He was not upset by the averages yesterday. We will see what happens.

Cramer has said a few interesting things as to why stocks might be a good place to be going forward. The main one that I can remember is: Many companies have better balance sheets than governments.

One counter argument is that if there is no debt deal, the commercial paper market could freeze up. I am sure that a lot of companies are in better shape than they were in 2008, but if things completely locks up, then what happens?

Originally posted 2011-06-30 02:28:40

A few nights ago on Mad Money, Jim Cramer looked at tobacco companies. He went over four: Altria (MO), Phillip Morris (PM),  Lorillard (LO) and Reynolds American (RAI). I have MO. He recommended that people only hold PM.

The federal government wants to put more warning labels on cigarettes, so this will hurt cigarette sales in the USA. Smoking has been on the decline in the USA for decades. Plus it can be an expensive habit. So it will probably decline further.

PM gets its sales from other countries. The other three get all or most of their sales from the USA. MO is getting into products other than cigarettes, but he called it a “good house in a bad neighborhood.” I think I will sell MO. I don’t know if I will get PM, or use the money to buy something else.

MO has gone down a lot over the past few days. The other three went down a bit, but seem to have recovered. Revere the power of The Cramer. I have held MO for about a year.

Disclosure: Own MO, thinking about getting PM

Image from Altria Twitter Profile