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Dividend Stocks, Free Lunch Experiment #11

August 25th, 2011

I haven’t followed my Dividend Stocks Experiment for the past few months, and I have to admit, it was a mistake not doing so.

Dividend Experiment Update

My last post on this topic was in May, and instead of using the money to buy lunches at work, I instead planned on buying food and making it at home once a week for the family. This however, fell through since I underestimated how busy my family is. So I decided to channel the money back into free lunches for work.

As I prepared the spreadsheet information below, I notice that the dividend for ANH went up (yay), but unfortunately the dividend for CIM went down… Now the weekly amount I have for spending on lunches is only $13.64. While not a bad amount, I would have preferred that it continue to go up. I may have to re-examine the CIM stock and the inclusion of it in my portfolio.

And the the good news! I have saved another $1000 for another purchase by eating below my previous level. For my next update, I’ll identify the new (or old) stock that I decided to purchase for the experiment.


Dividend Stock’s Lunch Experiment

Stock Name	Anworth	EV Energy	Chimera
Stock Ticket	ANH	EVEP	CIM
# of Shares	260	45	600
Orig. Price	$7.84	$23.25	$4.01
Curr. Price	$7.11	$64.21	$3.00
Orig Cost	$2,038.14	$1,046.25	$2,404.80
Curr Value	$1,848.60	$2,889.45	$1,800.00
Annual Yield	14.06%	4.74%	17.33%
Act. Div/Qtr	$65.00	$34.25	$78.00
		Total Dividends	$708.98
		52 weeks	52
		Dividend / week	$13.63

		Total Gain in
		Stock Apprec.	$1,048.86

		% Change	19.11%


		Amt Loaned to myself:	$0
		Amt paid back to date:	$0
		Amt Still Owned:	$0


	Totals
	Cumulativie Stock Value:		$6,538.05
	Dividend Payout / Yr.:		$708.98
	Dividend Payout / Qtr:		$177.25
	Dividend Payout / Wk.		$13.63

Hopefully next month will be better!

MR

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Posted in Investments

Tags: dividend stocks using dividend to pay for lunch using dividends from stocks

Dividend Stocks, Free Lunch Experiment #10

May 23rd, 2011

I thought my experiment would have a setback with the downturn in the market, but surprisingly, since my last update, it’s still up.

Dividend Experiment Update

It’s been two months since my last update, and I after some passive thinking, I’ve come to the realization that my goal for the experiment has change on me. I no longer want to spend much on lunch, and going out once a week would be just fine with me. My lunches are now a production time where I work on blogging.

So the question is, should I continue to use the dividends on spending?

I’ve decided yes I should, but instead of lunches, I’m going to spend the money better foods for my family. I will use the money to make more nutritional food at home. I’ve been wanting to expand into this area for a long time, and this money will help both me and my family (at least at a nutritional level).

Dividend Stats.:


Dividend Stock’s Lunch Experiment

Stock Name	Anworth	EV Energy	Chimera
Stock Ticket	ANH	EVEP	CIM
# of Shares	260	45	600
Orig. Price	$7.84	$23.25	$4.01
Curr. Price	$7.20	$54.04	$3.94
Orig Cost	$2,038.14	$1,046.25	$2,404.80
Curr Value	$1,872.00	$2,431.80	$2,364.00
Annual Yield	12.22%	5.63%	17.26%
Act. Div/Qtr	$57.20	$34.20	$102.00
		Total Dividends	$773.60
		52 weeks	52
		Dividend / week	$14.88

		Total Gain in
		Stock Apprec.	$1,178.61

		% Change	21.47%


		Amt Loaned to myself:	$1,726
		Amt paid back to date:	$1,726
		Amt Still Owned:	$0


	Totals
	Cumulativie Stock Value:		$6,667.80
	Dividend Payout / Yr.:		$773.60
	Dividend Payout / Qtr:		$193.40
	Dividend Payout / Wk.		$14.88

On with the Update:

Overall, the “Total Return” of my investments since investing in 2009 is up 21.47%. Note, the change is not per year, but simply the percentage gain of what was originally invested vs the current value.
The ”Cumulative Value” of my investments equal $6,667.80! This is money that would have went to the restaurant owner and to the waiter in tips. But now it’s sitting in my brokerage account earning me a dividend!
With a dividend of $14.88 a week, it appears nice, but it’s based on dividends that may not be sustainable.

Since I’ve change the goal of this experiment, I don’t think I will need as much as I use to need on a weekly basis. So, I’m thinking about shifting some (if not all) of my investments into less risky (from a dividend perspective) stocks. I’ve had a great ride, so I’m not in a rush to do this, but since the goal is more serious, I think that my investments should be too.

As far as the experiment goes, it’s been a great success and exceeded my expectations. The change in my lunch rituals was an unexpected surprise and one that will get me one step closer to a purer state of frugality.

Cheers,

MR

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Posted in Experiment

Tags: dividend stock experiment dividend stocks

Using Dividend Stocks For Extra Spending Money

February 25th, 2011

I would like to buy some dividend paying stocks so I can use the dividend for Extra Spending Money instead of using money from earned income.

First let me say that each month I thought I only spent $250 as my personal Extra Spending Money, but I was wrong! I spend well over $300. While I’m going to use $300 as my basis for the calculations below, I want to go back to the $200 to $250 that I use to consume someday.

My current formula for using money for my “Extra Spending Money” is a more of a consumption based model. This is where once the money is gone, it’s gone! Here are my simplified steps:

The money I have allocated for spending, all gets spent
I have zero dollars left at the end of the month.

My future formula for using my “Extra Spending Money” will be a investing-spending hybrid model. I envision it as the following steps:

I save $200 of the $300 that I have allocated.
$100 of the $300 is for spending.
Invest the savings into a stock that provides a 5% dividend.
After year 1use the dividends to help supplement the $100…
Eventually as the dividend become big enough, stop spending the $100 and have it go into the dividend stock.

This process will be similar to my Free Lunch Experiment, but this experiment require much more money invested and time than the Lunch experiment. So I’ll have to do it gradually over years, unless I come up with a way to speed up the investment contribution.

For example, just to generate a monthly $50 from the stock, I’d have to have $12,000 lump sum at an interest rate of at least 5%. So that would mean some far off future day, to get up to the minimum $200 level, I would need to save at least $48,000 to $50,000 at a similar 5% interest rate. and this isn’t even taking into account taxes and inflation! I could envision the true amount that I would need for the month $200 payout being more in the range between $80,000 to $100,000.

I will provide more details in the future, thanks!

-MR

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Posted in Investments

Tags: dividend dividend stocks dividends free spending money personal spending money

Hidden Value In Owning Dividend Paying Stocks

January 31st, 2011

With non-dividend yielding stocks, you have to sole depend on capital appreciation of the stock price to get ahead. Admittedly, you could latch onto a great stock and ride it up to the moon, but more than likely, this will not be the case.

So today, I’m going to talk about the advantages of stocks that do yield a dividend. Perhaps a good example would be McDonalds (MCD), it has a decent yield (3.3%) and a chance for stock price appreciation to boot.

In Volatile Markets

When there is scandal or a major concern in the country (or world), stock prices get pummeled. This can create stress and even temporarily depress investors. Currently, there is instability in Egypt that has caused the stock market to decline by 166 points this past Friday. While I’m very concerned about this, having dividend yielding stock takes some of the edge off of the stress about the stock market.

Why, you might ask?

Because for the most part, dividends that stocks pay out aren’t determined by current events. Temporary drops in the stock market do not affect the dividend payout by the companies that elect to pay a dividend. Mainly profits and executive decisions are what determine what the company will pay out as a dividend (at least at the better companies). Some companies (like REITs) are required to pay out around 90% of their profits for the year to be classified as a REIT (Real Estate Investment Trusts).

Since most dividends are paid out quarterly, current news is immaterial and may have resolved by the time that the dividend payout amount is determined.

Another positive value is that fact that the dividend payouts reduce the downward action of the dividend yielding, stocks price. People are less apt to give up the juicy dividend, so the decline of the price of the stock moves slowly. The reason for the slow downward movement of the stock price is because if there is a drop in the stock price, the dividend yield become more appealing because the payout percentage will be higher. This naturally motivates people to jump in and grab hold of that great percentage yield before the stock price starts to go up again!

Caveat!

Just because a stock pays a dividend, doesn’t mean that they are still viable! Do the proper research to make sure that the dividend paying stock is a solid investment (don’t by any typewriter stocks!).

As an alternative to purchasing individual dividend paying stocks, Nicole at “Grumpy Rumblings of the Untenured” suggests and go out and buy a mutual fund that is oriented towards paying out a dividend or actually only purchases dividend paying stocks (watch out for high fees though). This way you reap the rewards while a professional manages your dividend portfolio.

-MR

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Disclosure, I do own a very small position in McDonalds stock.

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Posted in Investments

Tags: dividend dividend benefits dividend stocks dividends hidden value in owning dividend stocks hidden value of dividends stock dividends

Paying Allowances From Dividend Stocks

January 13th, 2011

Paying Allowances From Dividend Stocks:

First let me start by saying that I wish I had thought of this 10+ years ago! The following is an idea that I would have liked to pursue for my kids, and while it’s still possible, the upfront investment for such a dividend stream is a bit steep for me right now. So instead, I will introduce the idea to see if others may find value in such simple idea.

What I wish I would have done was buy some solid, reliable dividend stocks each year and have the dividend payout from the stock go to my kids as an allowance instead of me paying for their allowance out of my wallet each and every week. Of course, the earlier years of the dividend payout would go directly back into the dividend paying stock during the ages when the child was too young to receive such an allowance.

I might even have the kids receive the payout once a quarter, just to get them use to quarterly payouts instead of weekly ones.

The following chart calculation is a very simplified table that will give a ballpark number.


			Div Payout	Div Interest
Year 1	Contribs.	Principle	Percent	Amount
1	1200	$1,200	0.05	$60
2	1200	$2,460	0.05	$123
3	1200	$3,783	0.05	$189
4	1200	$5,172	0.05	$259
5	1200	$6,631	0.05	$332
6	1200	$8,162	0.05	$408
7	1200	$9,770	0.05	$489
8	1200	$11,459	0.05	$573
9	1200	$13,232	0.05	$662
10	1200	$15,093	0.05	$755

				52
				$14.51

So using the table above, the payout in a childs 10th year could be $14 dollar based on a 5% dividend payout rate. The table above doesn’t take into account taxes, so the actual dividend payout will be a bit lower that the number suggested in the table, but not enough to discount the value of the information!

Yet Another Stealth Emergency Fund:

Recently, I wrote about my stealth emergency fund, and these stocks could be used as yet another form of an emergency fund. Would I be tempted to use these dividend stocks for an emergency first? No, only after the regular savings from an emergency fund has been depleted would I consider these stocks. That said, it’s still definitely a consideration!

Conclusion:

I was considering trying this idea, but after writing about it, I think I may have missed the boat on the implementation of this concept. It would have be easier to implement the idea earlier while your kids are very young! So while I really like this idea, I will put my money in dividend yielding stock for other purposes than and allowance fund. If I have the other ideas fully funded, I make come back to this one and give it a try.

Have you consider creating such an idea for your kid allowance needs? It’s kind of a win-win if you think about it. You get to pay your kids an allowance, and at the same time you have a portfolio of dividend stocks that may continue to grow!

-MR

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