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The Allure of Dividend Stocks

When I first started investing, I was never really was interested in dividend stocks.  I wanted appreciation.  I wanted to find the next Google (GOOG), Apple (APPL), Microsoft (MSFT), that next stock that will leap 1000% in appreciation retuns.  The further I have gone into stock investing the more I understood that its rare to find these good stocks.  I also know for retirement accounts which do not get hit with capital gain taxes when you sell that they are perfect for dividend stocks.

If I have a choice to a brokerage account or retirement account, you always want to invest the dividend stocks into the retirement account.  You get the interest without any of the taxes involved.  If I had bought the dividend stock in my normal after-tax brokerage account, I would have to pay taxes on the interest.  Therefore, I rather load up my retirement accounts with dividend stocks that will pay for the long-term.  This means I am looking for dividend stocks that have continued to raise their dividend year-after-year and they have a long-term track record of stock rising.  It doesn’t matter that it appreciates only a little at a time because I am getting the nice dividends.

In the past year, I have advocated oil stocks like Chevron (CVX).  It pays a nice dividend but it also has appreciated rapidly since my recommendations.  The price makes it more tough to recommend such a stock since that means the dividend percentage is lower when you purchase at the price currently at $113 which gives it a 3.87% dividend.  This isn’t bad but I also think the price is a little high.

I rather look at stocks that are weak now and undervalued.  With the Fed planning to meet in the middle of December, there is a high chance that they will raise interest rates.  This means strong dividend stocks will most likely get sold off.  I am setting my radar on Omega Healthcare Investors (OHI) which pays over 8% dividend.  I am also looking at New Senior Investment Group (SNR) which pays over 10% dividend.  I have discussed them in the past article and I think they will be nice long-term holds that will continue to pay the dividend and hopefully raise it long term.

Dividend Stocks that Work in Rising Interest Rates

With the presidency of Donald Trump, there has been a steady growth of news that interest rates will rise.  The rates even jumped the first week of his presidency.  Dividend stocks also have taken a slight drop.  Why would people want to invest in dividend stocks when they can get the same interest rate in the bank account?

Well, it will be a while before your bank will give you a similar rate if ever.  Most banks are giving 1% or less in the savings account.  Even with rising interest rates, I highly doubt that you will see rates rise to a point where it makes sense to move your monies from stocks.

Today, I want you to look at a couple REITs both in the industry of senior housing care.  Both are under the radar with good reason.  First, their prices have dipped as people expect interest rates to rise.  Again, I don’t expect big jump in interest rates.  This also has caused their prices to drop recently and it gives better reason to start investing in them.  I do think that an increase in December rates maybe the BEST time to get in.

Why invest in Senior Healthcare Facilities?

First, the baby boomers are getting into retirement age.  They don’t need a house anymore.  The kids are out.  They want community still and most importantly they want nursing care to live out their senior years.  This is an industry that will be a great investment for many years.

Second, they pay a nice dividend that I expect will continue to increase. OHI, Omega Healthcare Investors, offers a 8% dividend.  The stock has dropped from $38 to less than $29 in the past year.  This means you get a substantial discount on a dividend that will keep on giving.  The CEO has bought stock recently which is a great sign.  Scott Black, the president and founder of the Delphi Management fund, has also purchased into this company.  This company gets lots of revenue from Government sponsored programs like Medicare.  If you expect a cut in these sponsored programs, it may not be a good stock to invest in.  With a market cap over $5 billion, I believe this is a fairly stable stock that will continue to pay forward.

The second company is a more risky REIT that was recently spin-off in 2015.  It offers a bigger dividend than OHI and I believe it has plenty of reward vs risk.  It was once a $20 stock but now trades at 50% that price offering a nice discount.  It also offers a 10% dividend at today’s rates.  The stock is New Senior Investment Group with stock symbol SNR.  With a market cap of less than $1 billion, there isn’t much coverage nor many funds that want to get into this one.

I believe this gives you more risk but the 10% dividend and for the smaller investor you can get into a stock with a substantial discount with plenty of upside.  It did recently miss on revenue estimates.  However, SNR gets all of it revenue from private payments.  It doesn’t get affected by government sponsored programs.  You don’t get the risk of the government cutting the program and you know that baby boomers will pay for the care.

Both of these stocks look like good plays for future investment.  I expect the december rate hikes that I assume will happen will be a great time to get in one or both of these stocks.  Please do your due diligence and research.

Who will buy Twitter?

Twitter has been on the market news the past couple weeks as suitors like Disney and Salesforce have been on rumor to acquire the company.  Twitter has plenty of data and there are many reasons these two companies would be interested in Twitter.  However, another suitor and probably the best company to acquire Google has got into the mix.  They have hired an advisor to evaluate such a deal.

Think about the possibilities for Google: more data, more remarketing, better advertising targetting.  Google would be the perfect company to acquire Twitter.  From the current standpoint, I see many reasons for Twitter to get acquired.  It will be a matter of Jack Dorsey, the major stock owner and CEO with the board to make a decision who is the best suitor.

Twitter’s stock price has risen as the number of suitors has increased as well.  I do believe they will eventually be acquired.  I don’t know the timeline but I believe it should happen within the next year.  I expect holders will get some premium from the current market price.  I don’t have any hard research but I assume it should go for at least $30.

Is Deutsche Bank the start of the bear?

First, we have the fake accounts from Wells Fargo.  Now, we are looking at Deutsche Bank dropping to 52 week lows.  DB has been having issues for quite a while but today it has made news across the world after hitting an all-time record low on shares.  Investors that have had money or investments with Deutsche Bank are quickly moving away which is also bringing their stock price down.  Only time will tell but I still think there is a lot of time to go before we see a bear market.

What’s to buy these days? Dividend Healthcare REIT?

With the stock market reaching new highs, its tough finding good deals.  I haven’t bought anything recently but I still hold stocks that I bought cheap and continue with buy and hold.  For those that are looking to invest money on the sideline, I would recommend you stick with dividend stocks for your retirement funds since you are not paying any tax on that.

HCP, a healthcare REIT,  currently yields over a 6% dividend that has a stock price that has remained fairly steady for half a decade.  Even though the stock price didn’t move much, you had a nice dividend that is much better than a savings account getting less than 1%.  This stock has underperformed in analysts books and it even went as low as $26 earlier this year.

HCP is planning to spinoff part of its real estate portfolio into another REIT.  Shareholders of HCP will get shares in the new spinoff that will consist of senior housing and post-acute real estate.  HCP will become a stronger more stable REIT after the spinoff since the new REIT SpinCo is considered more risky.

The baby boomers are reaching senior age.  The percentage of senior population is expected to rapidly increase in the following years.  With the advances in healthcare, you can expect people to be living longer which means more demand for senior housing.  This should help HCP in the long-term.

In the short term, HCP has had bad management and it has poorly used shareholder capital.  The SpinCo REIT will get rid of its bad assets.  Many investors thing that HCP might be worth looking into investing after the spinoff which is another play on the stock pick.

I personally think that the spinoff would help both companies.  The SpinCo REIT would be more interesting to investors with a stronger aptitude for risk and gains.  It would also mean a cash infusion to HCP.  I do expect that HCP’s stock price will eventually start moving up again which would mean you would continue to get the dividend and a nice appreciation on the stock price.

IBM Bottoming and Ready for Long-Term Play

I have looked at IBM many times within the past year but I have not made a purchase yet.  One of the main reasons is that big investors like Warren Buffet continue to purchase more and more stock every quarter.  With a low PE and a nice dividend, there really isn’t much downside in the stock.  We have seen a recent run up in the stock price and it looks like it could have reached a bottom.  It started a decline beginning in 2015 but there is plenty of growth to go into the stock.

Why haven’t you invested in it yet?

I still need to do my due diligence in the fundamentals and technicals.  I still don’t understand all parts of the business.  The numbers look good.  The technical indicators need some more positives.  I’m willing to wait until I see a good trend on the technical side but I also need to see some good recommendations for the stock.

When Warren Buffett continues to buy, he must know something that normal investors do not have access to or inherit knowledge that it will be a great long-term play in the future.  Naysayers will say that he does not invest in technology stocks so his purchasers might be risky to his investors.

It would be nice if some more big names start accumulating IBM.  I believe we should see this happen more often as the technical indicators work to the positive.  This wouldn’t be a stock I would purchase right now but I would continue to watch and add to your radar.  In the past week, I have already mentioned a couple stocks Ford (F) and Walmart (WMT) that will work well for you since you get a nice dividend while you wait for the stock price to rise to its market value.

Warren Buffett likes to buy when people are fearful and sell when people are outright bullish.  He is an investor that is mainly for long-term growth but is known to make mistakes as well.  He bought Tesco thinking it would be a great global player in the retail space but he had to sell when he found out that it would take much longer than expected to get the returns to his investor and he was not happy with the management.

IBM still could be in a downward trend and Warren Buffet would happily continue to purchase if he believes the long-term growth play.  I recommend you watch his purchases quarterly.  Of course, if he ends up making a mistake, it is much easier for us to get out compared to him.  You might see him sell a little saying that he needs to “rebalance the portfolio” or any other reason.  I would see this as a reason to sell or remove it from your radar.  Either way, I think this is one to look further at and it should play out nicely in your portfolio.

Chevron for Future Growth

Chevron is a major oil & gas play that has seen bad times in a couple recent quarters.  It has a yearly high of $112.20.  It has dropped more than 20% since that high and even reached lows at $69.58.  For the long-term investor, expect this stock to eventually reach the highs and surpass it.  In the recent times, you can even get a nice dividend of almost 5%.

It’s not possible to get that dividend in your savings account.  You can expect this stock to only to continue to move up as the economy improves globally.  Oil is still the main resource used for energy and it will only to continue to be used more in the future.  You can be patient with this stock and I actually would just hold on to it.  I have no reason to sell when I get a nice dividend and fundamentally sound stock like Chevron.

Has Ford Reached the Bottom?

Ford was at a bottom at $11.45 in the last week.  It has leaped up a nice 15% since it achieved this new 3 year low.  This increase was caused by a 20% increase in sales in February which included increases in passenger cars, utilities, trucks, and overall sales in 2016.  This is the first big stock increase we have seen in over a year.  It should see some downward action soon as people try to break even and close up stock positions before the tax date

For the long-term investor, you get a nice 4% dividend while you wait for this stock to get back to proper stock valuation.  Remember, many people still are holding onto their cars approaching or over 10 years old.  Most people would change cars in 3 to 4 years but the economic downturn has caused a damper on the consumer spending.  This should change in the new few years and I expect for the patient investor that they will be rewarded greatly by Ford’s stock price and dividend.

Chevron Takes off on Price Target Upgrade

Chevron has taken a nice leap this morning of over 4% after one of the analyst upgraded the PT to $96.  Weren’t there just naysayers saying that oil will never rise again?  I think this stock is still undervalued and there is plenty of room to the upside.  Even if it doesn’t go up, you still get a nice dividend of over 4%.  I don’t see much downside especially for a company that focuses on energy through not only oil but through natural gas, solar, wind, and energies of the future.

Walmart Finally Making Traction

When I go to Walmart (WMT), I always see long lines of people buying tons of stuff in a huge warehouse that contains goods for eating, playing, working, and everything that you need to do whatever you want and need. It is one of the only warehouse where their are crowds of people that are coming in and out of a store. It sometimes is annoying to have to stop and go for the crowd of people because any Walmart is always so crowded with shoppers.

Also living nearby their distribution center for Walmart.com, I know that they are taking great strides to play in the internet market. They know that internet distribution is key but they also have the volume and revenue to play in a space only reserved for Amazon.com. The great thing about brick and mortar stores that have an online presence is they can offer you the option to not only order and deliver to your house but the more quick option would be the pick-up at their stores where you can get in two hours.

Remember, that they also have the Sam’s Club brand which competes with the fiercely competitive Costco warehouse stores.  In February 2016, they started accepting Visa which means they allow all major credit cards which also include American Express, Discover, and Mastercard.  This will allow a huge network of consumers to shop in their stores and it should mean more growth for the company overall.

Employee morale is higher with proper hourly wages.  They have gotten rid of the strange welcome people in their stores and replaced them with security to check the consumers purchased items before exiting the store.  I feel that they are making all the necessary steps to perform at a much more competitive market.  They recently had a beat in their quarterly earnings and I expect this to continue in the future.  With a PE that is less than 15, there is really not much downside in the stock.  It has already seen the worse and it will continue to improve going forward.

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