Tuesday, September 20, 2011

Show Me the Money!

Everyone remembers the catch phrase from Jerry Maguire. That pretty much sums up where I am going post-MFI. I turn 52 this month and with the ups and downs of the stock market, it is comforting to me to have stocks that pay and more importantly increase their dividends. I just had two get substantial increases, both in the MFI space.

MSFT - Does anyone have more cash than MSFT (Microsoft Raises Quarterly Dividend 25%)? Maybe Apple. Mr Softie announced their dividend is increasing 25% today. Let us see, they pay 64 cents, so 25% would be a 16 cent increase to 80 cents. The nice thing is that I don't need the dividend income right now... so I just automatically buy more MSFT. Using the "rule of 72", my Microsoft shares would double in 24 years, just from the dividend reinvestment... assuming they never raise the dividend again.

PM - Ok, I own a tobacco stock. They also had a big bump last week (Phillip Morris Delivers Another Smoking Hot Dividend Increase). Their increase was by 22%, which has the stock yielding 4.5%. In today's world, that is great.

While I have not done much with my cash from MFI sales, I did buy a CEF (closed end fund) called KMF the other day. This is kind of like a mutual funds of pipeline companies. I got them under $22 a share and they pay a dividend of 7.3%. The reason I like the CEF is that they trade at about a 9% discount to their net asset value (NAV). You can see all CEFs and how they trade vs their NAVs here (CEF Connect).


Tim Zheng said...

How are you deciding when and which stocks from MFI to liquidate? I am considering a similar move. Some stocks have dropped so much and it's very difficult psychologically to liquidate.

Marsh_Gerda said...

Tim - My only plan is to hold on to the dividend stocks in my portfolio longer. I am the last guy to ask for advice since as soon as I sold SNDK it went up 15%.


Tim Zheng said...

Marsh, the bad timing of your SNDK sale happens to everyone.

Dividend paying stocks are a tried and true way to invest. However, I do have one concern about them. Considering the fiscal situation of the US now, the dividend tax treatment might get a little worse coming 2013. If it happens, this might affect dividend paying stocks. Even for retirement account, the market value of these stocks might be adjusted down once.