RRR - Risk Reward Ratio

With a good bit of student loan debt paid off, the dividend investment portfolio now has room for a good purchase.  I plan on purchasing AFL, and just by chance a fellow blogger named PullingOurselvesUp just made a great post about Aflac.

With the millions of factors going into a stock purchase, I like to look at the RRR.  I call this the risk reward ratio, which is a simple way to compare the risks and rewards that stocks provide.  My ideal stock pays huge dividends with very low payouts.  Here is a quick glimpse into how the RRR works, and how AFL stacks up against a few dividend champions.

The RRR is simply the Yield/Payout (there are other names for it im sure).  The idea is if the yield goes up, and the overall payout goes down, the RRR value goes up.  AFL is currently very under-valued, which helps the yield % and also leaves room for great stock-price hikes when the market corrects itself!

Like AFL, MCY is also an insurance company.  Both companies have similar stock prices, but MCY pays almost twice as much dividends, with twice the payout amount.  I think there is more long-term potential for AFL since it pushes harder for earnings while maintaining the low payout.  Since MCY focuses on automobile insurance, while AFL focuses on supplemental insurance, owning both would be a possibility if someone couldn't make up their mind between the two =).

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Dividend Investing - Month 6

The average monthly dividend payment experienced a significant increase this month.   A 16.77% jump was the result of making a quick sale and investing the proceeds into other companies.

I have been good so far at separating my emotions from the facts and focusing on the RRR values of my positions.  As mentioned in my previous post, the RRR value of WMT just couldn't cut it anymore, and I had no problem dropping this position and picking up new ones to take its place. 

I figured my emotions wouldn't get in the way of the transactions but sometimes you just never know.

Using my RRR theory about evaluating stocks, price gets pushed to the side and allows me to focus on the long term benefits of my positions.  This is the average monthly dividend payments!  Watching stock prices constantly rise and fall make me dizzy, while watching these payments consistently rise gives me hope for the future.  But do remember, higher stock prices lead to lower RRR values ~ which will help you sell when stock prices go up.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

1 Sale = 3 Purchases

I sold half of my holdings in WMT and purchased CVX, TCAP and UHT this month.  This will help my dividend income stream while providing additional diversification in the portfolio.

WMT: I set a personal price target of $68.50 for WMT and as it stands, has been overvalued for a bit.  With the release of their most recent earnings, I knew stock prices would decline if it didn't beat the 'stock analysts' expectations, so I had to be proactive and sell.  Seeing a yield of 2.15% didn't slow me down either...

TCAP = Triangle Capital has a great management team and if you visit Pulling ourselves up financially you can see a good fellow blogger's review of the company.  Using my dividend investing strategy, TCAP had an RRR value of 10.05 at time of purchase.

CVX = In my opinion this stock is way under-valued.  With a 26% payout, there is lots of room for the dividend to grow over the years.  The RRR value was 11.88.

UHT = a REIT that deals with hospitals and other medical facilities, this great dividend play had a yield around 5.75% and an RRR value of 14.50

In case you didn't know, the RRR is simply pairing up the payout ratios with the dividends themselves to measure the "Risk Reward Ratio".  You can learn more about the strategy at here on my blog.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Dividend Investing - Month 8

The dividend investing portfolio has reached $48.91 for the average monthly dividend.  This is a solid 5.67% gain over the previous month.  There are two reasons for this gain:

1 - Aflac (AFL) increased its dividend by 6.1%.  Even at $50.94/share, this stock still carries an RRR value of 11.86.  With the low payout ratio of 23%, we still  have room to for this dividend to continue growing!

2 - Resource Capital (RSO) paid out another dividend.  RSO is still the top-yielding stock of the dividend investing portfolio.  And it continues to have less of an impact on the total portfolio, since free funds are being used to purchase other high quality companies.  RSO has been in the portfolio since the beginning and it continues to better itself with each passing quarter.  As long as its earnings continue to supports its dividend, and interest rate hikes remain unlikely, I will keep RSO.  I want to avoid over-exposure to single stocks and segments of the markets.


Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets. 

Intel - INTC

Analysts have been picking on Intel with their earnings expectations, putting downward pressure on the share price.  I have been monitoring Intel for some time now, looking to add technology into the dividend portfolio.  With earnings being released this Tuesday, now may be a good time to initiate a purchase.  Here are a few quick stats:

Price = 21.48
Dividend = $.90
Payout = 38%
RRR = 10.99
13% debt


Although INTC has steadily dropped over time, here are a few reasons why it may be a good idea to get in soon:

*Shares have a 52-week high in May at $29.27, and have fallen to their new 52-week low of $21.48. This is nearly a 31% drop in price!
*Current dividend yield is 4.19%, this acts as a support for the stock price.
*There have been 9 consecutive years of raising dividends, this dividend challenger should become a dividend contender soon!
*Of the last 7 quarters, INTC managed to beat earnings estimates, surprising analysts 5 of those quarters... do you think INTC might provide another surprise?
*What will the share price be when INTC gets involved in the ever-growing tablet market?

I will conclude this post with a quick glimpse of INTC from fastgraphs:

Intel appears to be quite undervalued at current price levels.

What do you think of INTC as a current purchase?  If not INTC, what technology stock would serve as a good alternative?



Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.