Investing 102

[GregWeld]

Originally Posted by chichirone

OUCH! I appreciate the candor and levity!

So here's our thinking...would love your feedback.

Amy and I have the rainy day fund in place. A years worth of cash on hand. We have invested in actively managed mutual funds for over 15 years, accumulating a 7 digit nest egg for longer term retirement. Our current goal is to generate more cash flow for mid-term money for our bridge years age 40-65. Managed growth over 5/10yr horizons with dividends reinvested is something we are very comfortable with. Your comment on it being a personally managed mutual fund resonates with us.

We have been looking at the following dividend stocks. I'd like to get your feedback on my "analysis" based upon share price and dividend yield. I really want to make sure I am looking at these stocks through the right set of lenses. We do not have a high tolerance for risk so the High-flyers don't interest me too much now, but as we build the portfolio, a TSLA or GPRO will become more attractive.

Symbols that interest us are:


KRFT

First off -- I'd deem Kraft a "steady eddie"... boring - low growth - increases the dividend - relatively low dividend percentage... but you can take this one to the bank 20 years from now and never loose a single nights sleep.



COP



Connoco Philips is one of the energy plays... It's another steady eddie - sleep well... 171% 5 year Total Return! Can't beat that with a stick! And you're getting 3.62% dividend!



XOM



I'd make a choice here and either hold COP or XOM but not both. COP has been the stellar grower and pays a far better dividend so I know which one I'd choose just off the stats. EXXon's problems could stem from their issues dealing with the Gulf oil spill and that may have held people back from wanting to own it.



F




Ford is a good recovery story - well run now that Bill Ford isn't at the helm... As long as the economy is perking along Ford should do just fine. Look for them to increase the dividend along the way. Good choice. It's powered by a 5 year Total Return of 142% which when you do the math - compare 142% TR to your SMG's 55%... :>)


PFE



I don't like the drug stocks... I can't keep up with who has the latest greatest next gen coming out. Frankly - I couldn't tell you what company makes what and that is something I can't invest in because if I don't actually know what they're doing -- then I don't understand my investment.


MRK




Merck --- Ditto above. If I had to have a big pharma.... I'd have ONE not both.




SMG




Scotts Miracle Grow - I can't even imagine why you came up with this one.... LOL... unless you work there. Dismal 5 year total return of 53%.... pretty low return - and given that it also pays a smallish dividend -- then you're not getting the growth in capital to offset the small payout. I'd find a better one than this. Even you're above big pharma choice MRK had a 123% 5 Year Total Return... and Pfhizer had a 5 year of 118%

In compounding TOTAL RETURN is everything... and there's just a monumental difference between 100% and 50%...




T



AT&T -- is one of my sleep well stocks -- good dividend -- good well run company - slow growth but I use it to get a good dividend and to make me comfortable. 5 year Total Return 69% not good frankly but it's still kicking' SMG!!




MDT




Medtronic is another one I can't keep up with what it is they do... or who the competition is. If you're a Doctor you probably understand them. I wouldn't own it for that reason --- and mostly because of the under 2% dividend. At least it had a 92% 5 year Total Return --- so the growth in share price offset the measly dividend. The problem I have with under 3% payers -- they don't keep up with inflation and it gets worse when the market sucks... I want my dividends to be enough to make/keep me happy when the market is horrible. 1.8% wouldn't do it for me.




KO





Coke is a good well run company. They pay a near 3% dividend and have a 5 year Total Return of 86% -- which in my book is decent -- and enough growth to cover the under 3% dividend. It's also a sleep well stock.





Our plan is to invest a portion of our monthly revenue, buy shares with the intent to receive dividends over the next 10 years. I am prioritizing the investments based upon yield percent of share price to get started which seems to be a low "risk" option when I evaluate the 10yr charts. I like your strategy of 5% return on the stock performance, reinvesting the dividend, and then building a portfolio that has 20-25 stocks with no more than 5% of the total invested in any one share. Time for you to tear it apart and push our thinking...I look forward to your response.

I think you have too many small dividend payers --- I'd shop for a couple that are 5% and have better TR's that a couple of your picks.

In order to diversify -- try not to double up -- i.e. the COP/XOM and the PFE/MRK...


You're to be commended by the way on your already sizable holdings -- I bow to you.