Monday, April 11, 2011
Some of my favorite stocks that are not penny stocks
Okay, in the meantime I will address another strategy of investing. This is basically at the other end of the spectrum. Here we will look at dividend paying stocks. Now dividend paying stocks come from many different sectors of the market so here are some of the things I find that make some more attractive than others. This of course can vary greatly in relation to the risk level you are comfortable with among a multitude of other factors.
For me personally I look for the highest yield I can get but this must be tempered with everything it takes to offer stability and longevity. First we need to determine that the financial standing of the company is solid. Once that is established I like to look for a company that has preferably not missed any dividend payments and ideally have never decreased a dividend payment. A couple of the main companies that we will find that live up to all requirements would be Procter and Gamble (NYSE:PG) or McDonald's Corporation (NYSE:MCD). These are the type of companies that younger investors as well as older investors should look to for stability. Another aspect that is extremely important for the young investor is many of these companies have what is referred to as a DRIP program. This stands for Dividend Re Investment Program. The way this works is when you have bought shares in the company you can then sign a form instructing the company to reinvest any monies owed to you as dividend payments and purchase as many shares as possible with the dividend payment. This may not seem like anything significant until you start to literally figure it out. I might add that some companies will also allow you to invest a certain predetermined amount with the dividend reinvestment. Also most if not all DRIP's have no commission charged thus saving you even more money. This method of investing is the same method that the likes of Warren Buffet have utilized for years.
If a person was to invest in either of the companies mentioned you would receive a yield of 3.1% or 3.2% respectively as of today's closing price. For obvious reasons it is much to your advantage to try and choose as low of an entry as you believe realistic to attempt to achieve. Personally I have yet to ever be able to pick the lowest possible entry. I can almost count on the price dropping at least a little bit but this is not really going to affect your portfolio excessively in the long term due to the fact that these types of stocks do not fluctuate greatly usually.
There are many companies that pay dividends and you can find yields that vary from fractional amounts to others that yield 9% to 10%. As always you need to remember the higher the return the higher the risk generally. Another thing to remember is that many of these companies come from completely different sectors. This can make a material difference in the outcome of some of the higher risk companies but in the instance of either PG or MCD they are nearly recession proof. Some of the oldest and wisest investors claim that these are the type of stocks you buy and forget about meaning you buy and never sell them. One must always be sure that the company has remained stable over the year, which is just a matter of checking the news occasionally and of course looking at the financials for the company which are available on line at the companies website or on the Security Exchange Commission (SEC) site for US stocks and Sedar or Sedi in Canada.
In closing this post I would like to hear from some of you as to your views on this blog and any questions or comments are always good. Here's to your success in the world of stocks.
Posted by brujacman at 4/11/2011 09:30:00 PM