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PostPosted: Wed Apr 11, 2012 7:09 pm 

Joined: Thu Jul 22, 2010 10:43 pm
Posts: 505

I'd appreciate some advice from the dividend growth investors (and anyone else that wants to way in).


I am thinking about buying some CLX, currently yielding about 3.48% ($0.60 per quarter) with a P/E of 17.x It is ex-dividend on 4/23/12; so if I buy now, some portion of my purchase price is going to be returned almost immediately as a taxable dividend. Is there any downside to waiting until a day after the ex-date to buy? I realize that the stock price should drop some, but perhaps not a full $0.60, as a reflection of the missed ex-date.


Thoughts?




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PostPosted: Wed Apr 11, 2012 7:17 pm 

Joined: Wed Jul 28, 2010 3:28 am
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Location: Orygun

That yield is low enough that I wouldn't expect the price to be noticeably impacted by going ex-dividend. Day-to-day price swings can easily swamp the dividend value.


If you like today's price, then buy it.


Now if we were talking about a yield over 6%-7%, then ex-dividend timing should be a factor in your decision and it's well worth looking at the historical prices to see if there's a dip.


When you get up into the BDC and mREIT yields, 9%-25% range, then ex-dividend dates will make or break your purchase in the short term.




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PostPosted: Wed Apr 11, 2012 8:06 pm 

Joined: Mon Dec 26, 2011 3:17 am
Posts: 78

My personal opinion is that we may see CLX go lower with the next dip. It was only recently that we saw around 67ish. 69 seems slightly rich for me for this particular company (which still has a bit of debt on its books that investors are slightly concerned about).


However, the dividend will be raised in a couple of months so we may be seeing investors piling in in anticipation of the next dividend raise (as we recently saw with ADP). As part of a diversified dividend portfolio, I applaud buying any of the aristocrats and locking in a yield of over 3.5%.


Bottom line, be happy with your gut instinct and sleep well at night.


In conclusion, I would probably be more concerned with the broader market dipping (giving you a better purchase price) than before/after ex date purchases especially in regards to the aristocrats. I also have seen CLX cheaper in recent past, but am also concerned that investors are bidding it up in anticipation of the next dividend raise. Finally, I hope this helps you more than confuses you:)


I highly recommend investors observe the daily gyrations of their positions and positions they watch so as to spot their "personalities" and how they act in various market conditions, and to sort of grasp their trading ranges.


With some more thought...I actually have seen the aristocrats slightly dip after the ex-date...Plus "sell in May, go away"....I think you might have a better purchase price after the CLX ex-day. That is my opinion...Bottom line follow your gut and be happy with your decision, you will be fine either way as George implies.


EDIT: Plus it's up nearly 1 percent today...I'm kind of allergic to buying in "in the green".




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PostPosted: Wed Apr 11, 2012 9:30 pm 

Joined: Thu Jul 22, 2010 10:43 pm
Posts: 505

@JoeShmoe, @GTOO

Thanks. I agree with Joe that today's spike made me wary to pull the trigger; so I figured I'd wait to see if the dip after the ex-date put the yield north of 3.5% again. I just hate letting cash rot on the sidelines, but valuations are steep with the S&P 500 PE Ratio >22.8


I did buy PEP on the dip last month, locking in a YoC of 3.2% I'm not trying to knock it out of the park at this stage; just ensure that the YoC starts at >3.0% for solid stocks with dividend growth potential.




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PostPosted: Wed Apr 11, 2012 11:12 pm 

Joined: Sun Apr 08, 2012 3:01 am
Posts: 9

George, what is the "BCD" investment you referenced above? I'm on a steep learning curve, but very curious.




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PostPosted: Thu Apr 12, 2012 12:01 am 

Joined: Wed Jul 28, 2010 3:28 am
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Location: Orygun

BDCs are "Business Development Companies", a term which has a specific tax code for them in the USA. They loan money or otherwise invest in individual companies.


Like REITs, the dividend distributions are taxed at your marginal rate.


Like REITs, they tend to be leveraged and must sell shares to grow, so in general one shouldn't fear the dilution of your shares. Pay attention to NAV (net asset value) and cashflow when purchasing.


Here's a good series on the primary BDCs that's not too out of date: http://seekingalpha.com/article/290304-bdc-review-part-1-the-newbies




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PostPosted: Thu Apr 12, 2012 1:07 am 

Joined: Mon Jun 27, 2011 3:31 am
Posts: 1949

On a related point: I've been interested in AOD, which tries to exploit inefficiencies in the ex-dividend date on dividend stocks. It posted a loss last quarter, but it essentially automates trying to time buying dividend stocks, so I'm interested in getting in. Anyone have experience with funds like this?




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PostPosted: Tue Apr 17, 2012 3:47 pm 

Joined: Mon Dec 26, 2011 3:17 am
Posts: 78

My unsolicited opinion is to buy JNJ right now if you don't own any.


Someone else's article which breaks some things down...I own a large position already.


http://seekingalpha.com/article/503071-2012-is-looking-like-a-turning-point-for-j-j


As for CLX I'm still keeping an eye...Obviously it's been hovering around the 70 mark, but it may fall in Early May when the sell in May people start selling.

Or the olympics, peace talks with Iran, and encouraging economic data might keep the market up...

Who knows...I look for bargains when there are bargains around...I am looking for a correction though.


EDIT: At the time of my writing JNJ was at about 63.50.




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PostPosted: Tue Apr 17, 2012 6:54 pm 

Joined: Wed Jul 28, 2010 3:28 am
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Location: Orygun

Just going over my notes on CLX... it's on my shopping list, but not at this price.


I'm looking to nab it as close to 4% yield as possible, so will be hoping for a price drop before the summer dividend. That summer dividend is when they're expected to announce the next dividend increase.


On the conservative side, the new dividend should be at least $0.64, so a 4% yield would be buying CLX at 64 between now and then. At the optimistic side, new dividend of $0.66 makes 4% yield a price of 66.




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PostPosted: Tue Apr 17, 2012 7:19 pm 

Joined: Wed Jul 28, 2010 3:28 am
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Location: Orygun

Using similar logic for JNJ (which has not been raising their dividend as nicely as CLX), I come up with a range of 60-64 as being a good price to buy JNJ. 63.50 is thus ok, but not a huge bargain unless their situation truly is improving.




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PostPosted: Tue Apr 17, 2012 7:30 pm 
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Joined: Sun Jul 03, 2011 2:20 pm
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Location: Stepford USA

You should be able to get JNJ at a better price during the seemingly annual stock panic towards the end of the summer. JNJ in particular seems to dip every Aug/Sep.




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PostPosted: Tue Apr 17, 2012 10:04 pm 

Joined: Thu Jul 22, 2010 10:43 pm
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Alas, I am already overweight JNJ and pharma in general (though I like ABT recently and might add to my position in that). I've been trying to diversify a bit more. I already have PG and KMB, so CLX isn't ideal; but it is steady. About the only sectors I'm completely out of right now are financials (except for some BAC that I foolishly clung to during the meltdown) and consumer durables.




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PostPosted: Tue Apr 17, 2012 10:19 pm 

Joined: Fri Jul 23, 2010 12:41 pm
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Take a look at CSX. It does not yield 3%, but the dividend growth rate is outstanding, they just beat earnings and another dividend raise should be right around the corner. I've been accumulating shares on the dips and I expect to break the 3% yield on cost barrier very soon.


Larry




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PostPosted: Wed Apr 18, 2012 5:23 am 

Joined: Mon Dec 26, 2011 3:17 am
Posts: 78

Gotcha, Maus.


JennyPenny, from your mouth to God's ears. If JNJ is 59 again in August I shall be there with outstretched arms to scoop it up. You can never tell with big companies. A new CEO, new management, and bam, you might miss the boat. Then again patience is a virtue with stocks...


Larry, agree about CSX. It should have a good couple of decades with its fuel cost advantage.




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PostPosted: Thu Apr 19, 2012 3:16 pm 
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@JoeScmoe--if JNJ gets any closer to $62.50 today I think my patience will run out. I won't "scoop it up," but I'll open a position.




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PostPosted: Wed Apr 25, 2012 7:39 pm 

Joined: Thu Jul 22, 2010 10:43 pm
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Well, I waited until the 24th to buy CLX, and...

I paid almost exactly what I would have if I'd bought it two weeks ago. So, the wisdom of GTOO prevails and I won't be agonizing over this issue in the future.


And what to people think about NSC? Now, I'm working up a railroad play, and I like this better than CSX because of the greater yield (approx. 50bp).




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PostPosted: Wed Apr 25, 2012 8:57 pm 

Joined: Wed Jul 28, 2010 3:28 am
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Location: Orygun

NSC looks like a very well run railroad. They were hurting during 2008-2009 and wisely held the dividend constant for 1.5 years to ensure the turnaround was real before resuming dividend increases.


What I don't understand is how they do grow their business. The numbers show it grows (apart from severe recession), but the why escapes me.


Historically, the current yield is on the high side, which indicates that investors are a bit cautious about its future. The yield is about 40% lower than during 2008-2009, so we know Mr. Market has a reasonable amount of confidence in the business. Price is sure volatile, so I wouldn't be inclined to make a full purchase at this time.




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PostPosted: Thu Apr 26, 2012 6:39 am 

Joined: Mon Dec 26, 2011 3:17 am
Posts: 78

Congrats on your acquisition, Maus!


I have a tingly feeling that the market may fall in the next couple weeks/months, but in my book, it's never a bad time to buy a dividend aristocrat at a decent yield. My general hurdle rate is around 3.3% with the "classics" (PG, KO, PEP, CL, etc) so you did great in my book.




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PostPosted: Mon Apr 30, 2012 5:57 am 

Joined: Sat Apr 28, 2012 7:18 pm
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I wouldn't be investing for dividends in this market at all. There is a real risk of "picking up pennies" in front of the train today.


Everyone wants yield and I get that, but the math doesn't work. Spanish bond yields are near 6%, and equities around pay 0-3%. Retail investors have been net sellers of equities for a while now. You have high margins based on cutting costs, but top line growth for the S&P does not warrant a 20x multiple. Dividend yields are near multi-decade lows. What it will take to return them to the mean are lower equity prices.


Remember, investing is relative, not absolute. I don't advocate market timing, but the macro picture needs to be taken into account. Keep your powder dry.




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PostPosted: Wed May 02, 2012 3:02 pm 

Joined: Mon Dec 26, 2011 3:17 am
Posts: 78

This scenario is pretty much what I was imagining...May 2 (sell in May, go away), earnings disappointed, I assume (I just woke up, haven't read about it yet)...


CLX 67.76 currently...


Still it doesn't make that much of a difference because share price doesn't affect your yield that much. We are talking about like an eighth of a basis point of yield or something like that. So you still did great.




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