For some reason General Dynamics caught my eye. I looked at it through my criteria filter to see if it would fit within my investment strategy. The first thing I noticed that $GD was paying a very nice dividend payout of $4.40/share. How did this compare to the share price? The dividend yield is 3.03%, which is better than the industry average. So far so good. I wasn’t too happy with the share price of $144.62/share at the time I am writing this. Ten shares would cost me $1446.20 and yield me $44.00. This would give me another 0.30 shares of stock, if the share price remained the same for a year.
I also noticed that the stock was trading at around the mid-point of its 52 week range and the trend looks to be heading down. This stock may go down a bit more. Earnings look strong. As a matter of fact, the fundamentals for the company look very good. The stock looks like it would be a good one to invest in. But for me I’ll take a wait and see approach. I’ll wait to see if the stock price continues its downward journey and wait for a buying opportunity.
Since the beginning of the week I took notice of Intel Corp ($INTC) stock price. Seeing as my investment funds are limited, I was hesitant in putting this stock on my watchlist. Upon careful review I think that this would be a prime candidate for my dividend portfolio.
What am I seeing? I’m seeing a stock trading at the low end of its 52 week range while at the same time paying out a very decent dividend of 2.67%. That’s something that I look for. Higher dividend payout relative to its share price. Its revenue growth is above the industry average, and there’s room to grow the dividends because it is below the industry average.
So, I’ll add this company’s stock price to my watchlist and see what happens. If the share price drops further than the dividend yield goes higher and makes this stock more desirable for me. I prefer a dividend yield that is high relative to its price. To me it is more important to have a high, sustainable payout per share than just high share price. Dividends are paid on a per share price so I’m interested in picking up as many shares as I can.
I also have certain criteria for choosing specific dividend stocks. As I mentioned before, a high dividend yield. I like my yields around 5% or higher but based on the company, its dividend history and growth, I can tolerate around 2% or higher. If the company pays out a decent dividend payout but the yield is below 2% then I’ll wait for the share price to drop. There are a few companies out there that pay a very decent dividend but their share price is too high for what I would get in dividends, as noted by a low (under 2%) dividend yield. To me that would be like paying a premium price.
I haven’t been investing for that long of a time. I’ve acquired a few company stocks and ETF’s. But my sales have been few. Right now I’m looking for sell all of my Obalon (OBLN) stock because it is one of the first ones that I bought when I was first starting out. At that time I really didn’t have a clear idea of what I wanted to do. I didn’t have a strategy. I bought Obalon and and a couple of others because they were companies that were in the healthcare industry. That was it. None of them paid any dividends and there wasn’t any real growth with them.
After developing my own investment strategy I decided that the money I had invested in those companies could be better used with other investments. I sold the others at a bit of a profit but held Obalon because it was trading under what I paid for it. I decided to wait to see if the price would come back.
When I first started investing I opened an investment account with Robinhood. When I did that I received a free stock for Lyft. I decided to hold that one for a little while. When I was given that share of stock the price was around $42/share. It also wasn’t paying any dividends. I held that stock for a little while and the price dropped down to the low $30’s per share. The stock fluctuated in that neighborhood for a while. I finally decided to sell my share and put the money to better use.
Now I have developed my own investment strategy and I feel confident that I know more than I did when I first started. I now invest in dividend stocks. If a company doesn’t pay dividends then I don’t have a real interest in investing my money with them. Am I missing out on windfall returns? Maybe. But I’m also missing out on catastrophic losses. I’m at an age when I can ill afford to lose money because I don’t have as much time to recover from major losses. Also, if I am going to be investing in a company for the long term then I want to get paid for my time that I am waiting for the stock to grow, thus the dividend payout. The dividend payout is the company’s payment to me for being patient and sticking it out with them.
So, based on all of the above when do I sell my stock? I will only consider selling my stock when either of the two conditions below are met:
1. The company drastically cuts their dividend payout 2 times or more in a row.
2. The stock price increases 200%+.
So far I’ve been lucky in that none of my investments have had their dividend payouts cut. But I will tolerate 1 such payout cut but if they go to 2 in a row, they’re history.
Here’s another video tutorial from Learn To Invest that I found interesting and informative. As I watch this video I can see that my investment strategy has to change. I learned something else to help me attain my goal.
If you’re interested to learn how to put together a portfolio for big dividends then you need to start with this video. Like you, I’m in the process if learning everything I can about dividend investing. As I go through them I’ll feature the ones that I feel are the most useful and informative. If you want to see what other videos are available from Learn to Invest, click here. Enjoy the video.
A few people have asked me what stocks & funds have I am invested in. As I have stated in previous posts I tend to lean toward funds (mutual & index), ETFs, and REITs. I’m seriously contemplating to expand to other areas.
Why so many different accounts? Because each serves a different purpose. Robinhood & TD Ameritrade are the only ones that I actively trade stocks on. PCS holds my 401K from my job and the company decided that is where they want those shares to be managed. Raymond James was one I added for my retirement distribution from a corporation that I use to work for and vested my retirement fund. I’ll leave that one there until the end of 5 years.
I’ve wondered if it’s better to take all of your investment money and put it into 1 stock/fund or invest in multiple stocks/funds. I then remembered reading about diversification. But let’s look at it mathematically. Using the following example:
$1K invested in Stock A pays $71 in annual dividends $1K invested in Stock B pays $84 in annual dividends $1K invested in Stock C pays $83 in annual dividends
Totaling the dividends earned for these 3 you’d have a total of $238 in dividends.
Now, if you invested all $3K in any one of those you’d earn: $3K in Stock A, $213 or $3K in Stock B, $252 or $3K in Stock C, $249.
So, it seems that investing all $3K in either Stock B or C would have earned you more money than spreading among all 3. But here’s the rub. Putting all your investment money in 1 stock is like putting all your chicken in 1 basket. You’ve heard that expression before as in “Don’t put all your chickens in 1 basket” because you could lose everything if anything goes wrong with that stock. That one stock carries all the risk, Spreading the investment among the 3 stocks spreads the risk. If something happens to 1 you still have the others and you can still recover.