Saturday, December 12, 2015

7 Best Dividend Investing Tips From the Experts

I am an avid dividend investor. I think owning dividend paying stocks are a great way to supplement and diversify your income streams. As the saying goes "you shouldn't have all your eggs in one basket", meaning you shouldn't rely solely on one income stream (i.e. your job).

You might be asking yourself, what is a dividend? Firstly, companies can issue shares of their company in the form of stocks to raise expansion capital. When you purchase company shares, you are investing in the company, thus becoming a part owner of the company. This entitles you to the company's profits (if there are any). Typically when a publicly traded company earns a profit there are two ways in which they can use them to benefit the shareholders: 1) The company can retain the earnings with the intent of eventually increasing the share price, or 2) The company can give some of the profits to the shareholders in the form of a dividend.

What are the best tips when it comes investing in dividend stocks? I recently stumbled onto an article by Jimmy Atkinson at Dividend Reference entitled "101 Dividend Investing Tips from the Experts". You can find it here:

I've selected what I found to be the seven best dividend investing tips from the article above:
  1. Diversify but don’t over diversify. Adding one stock to a 10-stock portfolio adds a great deal of value, but adding 10 stocks to a 100-stock portfolio may not add any value. Most studies show that a diversified portfolio of 15 to 30 stocks is the optimal number of individual investments.
    — Ken Faulkenberry, The AAAMP Value Blog
  2. While dividend yield has its importance, an intelligent investor should pay greater attention to a stock’s dividend growth rate and yield-on-cost. An investment that pays 3 percent on your cost is good, but what’s even better is an investment that pays you 10 percent on your cost down the line. Divided growth is what makes this possible.
    — Quinn Mohammed, Dividend Beginner
  3.  Be a net accumulator. Contrary to what the financial media blitzes us with on a minute-by-minute basis, there’s nothing glorious about buying and selling stocks. If you ascribe to that manic strategy of trying to cycle in and out of equities, you’ll wind up emulating the proverbial hamster on the wheel rather than Warren Buffett. Don’t get me wrong, I’m not blindly advocating buy and hold either. What I am suggesting is that you focus on being a net accumulator of assets; my favourite being dividend growth stocks. In my years of investing, I have only sold a single stock.
    — Ryan, Get Rich Brothers
  4. I like to buy shares (new position or adding on) soon after the ex-dividend date. Share prices tend to hit a short term peak just before ex-dividend and the price will often drop below the ex-dividend share value in the couple of weeks following ex-dividend. In many cases the price savings will be several times the just paid dividend amount. This strategy will produce a lower average cost per share and higher effective yield.
    — Tim Plaehn, Investors Alley
  5.  To gain an instant dividend portfolio consider low-cost indexed mutual funds or ETFs. Vanguard offer several dividend focused funds with low fees which pay qualified dividends.
    — Trevor, Dividend Life
  6.  A good portfolio is like a garden. It takes maintenance, time and attention to detail, but ultimately should grow by itself. It should not take continuous work, but occasional pruning. A well understood and well balanced portfolio can be a piece of beauty.
    — AlphaTarget
  7. The first place any investor should look for high quality dividend stocks is the Dividend Aristocrats list. This is how I constructed my own long term dividend investing portfolio. It’s a great starting point for further filtering and research to find some of the highest quality companies that have a long history of annual dividend raises.
    — Keith Park, Div Hut 
In addition, here is Dan Caplinger from The Motley Fool with three things you probably didn't know about dividend investing:

Friday, September 25, 2015

Big Savings with Airbnb! Top 5 Booking Tips

I recently finished a two week cross-country road trip starting from Vancouver and ending in Toronto. I decided to go through the US because I had not seen much of the interior US and I thought gas and accommodations would be cheaper (even with a weak Canadian dollar of about 70 cents to the US dollar).

Gas did end up being cheaper, even with the US exchange rate. One of the biggest savings came from staying at the many Airbnb’s available along my route. Since the US has more populated city centers than in Canada it wasn’t hard to find an affordable Airbnb at each destination. Also, with more Airbnbs to choose from at each destination, the competition usually kept the prices lower. It helps if you have a vehicle and are able to travel to the Airbnb since lower prices are usually available outside of the city centers. Airbnb’s website provides a price filter which helps you find the cheapest places to stay around your destination.

Another important note when using Airbnb is that you should book your stay a few days in advance, since your booking requires the host’s approval. It’s important to keep an up-to-date profile (on Facebook or Airbnb). There are however “instant books”, which do not require a host’s approval. With “instant books” you get the room booking as soon as you submit your payment information.

I always stayed in a place with a few reviews (the more the better), always with a score of at least 4 stars out of 5. This will also factor into the price, since places with great reviews may charge a slight premium over rooms with no review history.

The most expensive Airbnb I booked was just outside of Yellowstone National Park. This area had few Airbnbs to choose from and because of the park’s popularity the hosts were able to charge a premium. The cheapest Airbnb I booked on my trip was in Chicago. I booked a room just outside of the Chicago city center which saved tens of dollars a night. I was still able to access downtown via the subway.

To sum up my 5 Airbnb user tips:
  1. Keep an up-to-date profile (either through Facebook or Airbnb). This will help your hosts get to know you and therefore accept your booking request. The more information you give them the better, so be sure to send them a friendly message about yourself and your trip. As you stay at more Airbnbs you will also be reviewed as a guest, good guest reviews will help your future booking requests.
  2. Choose a high population destination. More people usually equates to more high quality Airbnbs and lower prices.
  3. Have a car. If you can get to Airbnbs slightly outside of city centers you can usually save more.
  4. Book in advance. Unless you’re booking with an “instant book”, you’ll have to book a day or two in advance to give your host a chance to review your profile and to accept your booking request.
  5. Check the review. Be sure to book accommodations with a few reviews (the more the better), with a score of at least 4 out of 5 stars. If there are no reviews it may be cheaper, however you run the risk of having a creepy host or accommodations that do not match the description.
Here's a video with more Airbnb booking tips:

Sunday, March 1, 2015

9 Most Affordable Places to Retire

I'm currently living in one of the most expensive cities in the world, Vancouver, British Columbia, Canada. This got me thinking that instead of trying to save and earn more so that I can one day retire, I could retire earlier and live a better lifestyle in a more affordable city.

The fast lane to your retirement may lie in finding a locale that is more affordable than the place you're currently living. Of course it also needs to be close to family and friends, and provide the lifestyle you currently enjoy. You may not need to live all year round in your retirement getaway, but perhaps a few months a year.

I found this article in US News that lists the 9 most affordable places to retire overseas:
9 Affordable Places to Retire Overseas

I've summarized the locations and sorted them by the average monthly budget:
Montly Budget (US$)
Nha Trang
Chiang Rai

See you in the south of France!

Here's a video which lists "25 Of The World's Cheapest Places To Live":

Wednesday, February 4, 2015

Blue Chips or Purple Chips?

In the world of investing blue-chip stocks are defined as a stock of a  large, well-established and financially sound company that has operated for many years. A blue-chip stock is generally the market leader and is often a household name. While dividend payments are not absolutely necessary for a stock to be considered a blue-chip, most blue-chips have a record of paying stable or rising dividends for years. The term is believed to have been derived from poker, where blue chips are the most expensive chips.

In John Schwinghamer's Purple Chips, he further refines his investment strategy to purple-chips, stocks that are of the highest quality blue-chips. What are the criteria for a blue-chip stock to pass as a purple-chip stock? Here are the three criteria listed in Purple Chips:
  1. A minimum 7 years of positive earning per share (EPS) growth.
  2. Smooth and predictable growth in EPS.
  3. A minimum market capitalization of $1 billion.
In addition to these three criteria John lists three Financial Health Ratios that helps separate the purple-chips from the blue-chips:
  1. 5-year return on equity is greater than 10%.
  2. 5-year return on assets is greater than 10%.
  3. 5-year net profit margin (average) is greater than the industry average.
Here's a short video introduction to the book: