Investing 102

[GregWeld]

First off -- understand that the dividend is paid as a DOLLAR amount... but the PERCENTAGE of dividend YOU receive is based on your cost. The Dividend is paid as a set amount... your stock cost is fixed... as the Dividend payout grows -- you're getting a higher and higher percentage on your cost basis.

DIVIDENDS are paid every QUARTER. You'll therefore get 4 payouts per year.

Don't forget to multiply the quarterly dividend by FOUR to get the annual dividend payout.


KO - pays .31 per quarter (X's 4 = 1.24 per year) - based on Fridays close that is 2.91%

Mathematically expressed as --- Dividend (annual) divided by the cost basis = a decimal answer. In this case 1.24 / 41.88 = .029608

Move the decimal 2 places.... 2.96%


Your cost of 41.40 makes the dividend 2.995%


You're calculation ANNUAL percentage dividend yield.


Total RETURN --- is the stock price appreciation (if any) with dividends reinvested - over a period of time. Total return - imho - is the most critical thing you can go for with your investments. It's the real return on the money you've invested. If you were lucky enough to see 100% total return in 3 years and then manage to keep that percentage of return going for every three year period --- you can only imagine the growth of your money. Good luck with the kind of return... LOL But it does happen!!!

Originally Posted by AMSOILGUY

So using the Oct 30th cost and the equation given with the Oct 31st close date I get the decimal given. So what does that number mean to me. I'm thinking you multiple that number by the cost of the stock to get a $ amount you earned?

What is the time frame you should use?

Sorry guys this is the first I have really ever paid any attention to this stuff. I will say that I had my son figure out the decimal listed so he is learning also. I wish somebody would have taken the time to try and teach me this at 11.

Also, what is the Div/Yield? Is it Daily/ What time frame?

KO=Div/yield .31/2.95 and cost 41.40
Oct 31st Cost 41.88 =.018863419
DPS=Div/yield .41/2.38 and cost 68.94
Oct 31st Cost 69.25 = .010493864
PEP=Div/yield .65/2.74 and cost 95.65
Oct 31st 96.17=.012232096

[68Cuda]

Originally Posted by GregWeld

Total RETURN --- is the stock price appreciation (if any) with dividends reinvested - over a period of time. Total return - imho - is the most critical thing you can go for with your investments. It's the real return on the money you've invested. If you were lucky enough to see 100% total return in 3 years and then manage to keep that percentage of return going for every three year period --- you can only imagine the growth of your money. Good luck with the kind of return... LOL But it does happen!!!

Yep, either have to find something in the right stage of development or a real bargain. For example, I am planning on off-loading INTC tomorrow, it no longer meets my requirements of a bargain stock. I bought 230 shares @21.47 in Nov 2012, and another 220 shares @ 20.97 in April 2013. So my total cost was $9560 and change. Between reinvesting dividends and the current price above $34 I will sell for more than $16,600. When I bought the stock the dividend was close to 4%. Now it pays 2.6% and no longer fits the profile of the stocks I want. The way I look at it is that it was a bargain @ $21 and a good company, and it was undervalued based on the high dividend. Now that the ratio of dividend to price has dropped it is now closer to the correct value. Time for me to sell and find another stock that has an artificially depressed value.

Now do not get me wrong, Intel is a great company, and I will keep an eye on them in the future.

[GregWeld]

Michael ---

Those are good thoughts and good points.... except that I'd have to correct the misinformation that the stock now pays a smaller percentage dividend. YES --- Based on todays price the dividend is a smaller percentage of yield....


BUT ---- Always the big butt....


The percentage of dividend you have been collecting has been on YOUR lower cost - so you were still collecting a 4% dividend on your cost basis! The dividend didn't go DOWN... the share price simply has appreciated.

And --- if these are taxable accounts - you've now created a taxable event by selling. Long term capital gains with a low percentage of tax for sure... but taxed non-the-less!

NOW don't get me wrong --- there's nothing with taking a nice capital gain and feeling that you can do better somewhere else. Nothing wrong with that at all. I just didn't want to CONFUSE THE NEWBS by saying the percentage was no longer in your favor. It was still paying YOU a decent percentage dividend on your cost.


I like your thinking though!! I might have sold HALF the shares -- choosing the best tax lot... and let the other ride. But that's just me. The TOTAL RETURN on INTEL (INTC) hasn't been all that "hot" at 55% for 3 years -- 110% for 5 years...



HEY ----- MAKE SURE YOU DON'T SELL THEM JUST AS THEY'RE GOING EX!!!!

[68Cuda]

Originally Posted by GregWeld

The percentage of dividend you have been collecting has been on YOUR lower cost - so you were still collecting a 4% dividend on your cost basis! The dividend didn't go DOWN... the share price simply has appreciated.

Yes - I understand the math, cost basis and all. But now that the stock price has appreciated I can take the profit and buy something that pays 3.5% to 4% on the current dollar amount. Still INTC is a good company, hard to make that jump, maybe I will do the 1/2 thing you were suggesting.

Originally Posted by GregWeld

And --- if these are taxable accounts - you've now created a taxable event by selling. Long term capital gains with a low percentage of tax for sure... but taxed non-the-less!

NOW don't get me wrong --- there's nothing with taking a nice capital gain and feeling that you can do better somewhere else. Nothing wrong with that at all. I just didn't want to CONFUSE THE NEWBS by saying the percentage was no longer in your favor. It was still paying YOU a decent percentage dividend on your cost.

Good points - this is inside a 401k, so no taxes. I did run into something annoying in that respect recently. I was taxed on a dividend inside my 401k on a foreign owned company. That is dirty pool!

Originally Posted by GregWeld

HEY ----- MAKE SURE YOU DON'T SELL THEM JUST AS THEY'RE GOING EX!!!!

Wow - thanks for the reminder, guess I will wait until the 6th! (Maybe 7th to be safe)

[AMSOILGUY]

HEY ----- MAKE SURE YOU DON'T SELL THEM JUST AS THEY'RE GOING EX!!!![/QUOTE]


What is the EX you speak of?

[captainofiron]

Originally Posted by GregWeld

Coke (KO) is an "institutional" brand... and they own many more products than just soft drinks. Soft drinks have a LOT of competition in the last 5 years or so... I don't even try to keep up with what everyone is drinking these days. The beverage aisles at the grocery store are loaded with brands of stuff... many of which are just subsidiaries of the big boys. But what you have with Coke - is power... and global... and cash flow... and Warren Buffet... and I sleep just fine owning it. And theres's NOTHING in the rule books of investing that says if you own KO you can't also own a Monster (MNST) or own Pepsi AND Coke. I used to own Verizon AND AT&T... and I slept just fine knowing the dividend would be paid on time and that I wasn't suddenly going to wake up to a DOWN 25% investment.

A lot of the time the "noise" or discussion is the very same discussions that are going on at the board level. These people aren't idiots. They know what's going on. They have feedback from the customer. Their customers are HUGE. They have the clout to buy or invest in anything they see that will aid them going forward. They're not "nimble" and they might not always get it right and they might even have let a competitor get the jump on them... but they're NOT going away.

There has been a fundamental shift away from carbonated drinks. I don't think I have single can in my house. But the big guys own more than just carbonated drinks. Coke (KO) doesn't just own Coke - they own Dasani water - Minute Maid - Schweppes - Powerade - Vitamin Water... They're invested partners in Green Mountain Coffee... There are SEVENTEEN brands that are BILLION DOLLAR BRANDS on their own...

In other words - it's not the greatest make you millionaire next week investment... but owning it gives you the confidence you need to hang in there when the market sucks... and allows you to dabble in the "millionaire of the week" hot investment going forward when you're ready.

Great! Thanks for clearing that up.

Originally Posted by WSSix

captain, I've got Coke as well for many of the reasons Greg mentioned. Plus, I'm in the south. Pepsi tastes terrible. Don't bring that crap around here, lol. I've been doing some reading on KO though because like you, I'm hearing a lot of potentially worrisome information. I bought it as a steady eddy so I'm not trying to get rich off of it. However, I don't want to lose my money on it either. Since I'm long term on Coke, I have no intentions of selling at this point. I fully expect there will be times when it goes down. I fully expect there to be big changes over the course of years for all soft drink companies because people are changing their habits and preferences. In 10 or 20 years, I expect to be able to say I've made plenty of money on my investment in KO. To me, everything we're hearing now will be looked upon as noise in a few years when looking back.

Haha, yea I know what you mean. Im in Texas and there are few meals that I can think of when I wouldnt have a bottle/can of Coke next to me

[68Cuda]

Originally Posted by AMSOILGUY

HEY ----- MAKE SURE YOU DON'T SELL THEM JUST AS THEY'RE GOING EX!!!!

What is the EX you speak of?

Ex-Dividend date.

Declare date: 9/12/2014 - this is the date Intel "declared" they were paying a $0.225 per share dividend on 12/1/2014.

Ex-dividend date: 11/5/2014 - If you own the stock before this date you receive the dividend, if you acquire it this day or after you do not. If I sell you my stock on or after 11/5/2014 you buy it "Ex-dividend", without the dividend.

Record date: date the company records the owners for the purpose of the dividend. A few business days after the Ex date.

Pay date: when the dividend pays out.

So, since I will own this stock tomorrow, I will get the dividend on 12/1 even if I sell it before 12/1.

[AMSOILGUY]

Originally Posted by 68Cuda

Ex-Dividend date.

Declare date: 9/12/2014 - this is the date Intel "declared" they were paying a $0.225 per share dividend on 12/1/2014.

Ex-dividend date: 11/5/2014 - If you own the stock before this date you receive the dividend, if you acquire it this day or after you do not. If I sell you my stock on or after 11/5/2014 you buy it "Ex-dividend", without the dividend.

Record date: date the company records the owners for the purpose of the dividend. A few business days after the Ex date.

Pay date: when the dividend pays out.

So, since I will own this stock tomorrow, I will get the dividend on 12/1 even if I sell it before 12/1.

Once a stock goes EX-Dividend does that mean it will never pay a dividend again as long as it is traded? Can the company later on down the road say we are going to pay a dividend again on a later date?

[Vortech404]

amsoilguy
You would just miss that dividend payment for that quarter only.

John

[AMSOILGUY]

Originally Posted by Vortech404

amsoilguy
You would just miss that dividend payment for that quarter only.

John

AHHH ok!

Thanks John


Now doing research over the last week I have noticed something. The majority of the stocks I have looked at are all up. Is the market overall up and it would be hard to choose something stable that isn't going to be up? Just because it is up does that mean its not a good time to get in? I have mainly been focusing my efforts on dividend paying stocks and ones that I feel are products my family uses. Along with the TR that was brought to my attention

I'm going to follow your advice Greg and split the 1500 over 3 stocks. He actually has 1600 to start with so the extra were going to put in FB which actually is the less exspensive of the 3 I am leaning towards.

I like the mention of FB everybody I know and all businesses have a Facebook page. That is going to be the higher risk and the only one that doesn't pay a dividend.

I'll throw the other two stocks out there that I'm leaning towards and if anybody has information to add I'll take it. I would love to get started today but the up market worries me some.

JNJ
PG

Thoughts anybody?