Wednesday, May 29, 2019

Important Dates for Dividend Investors

Dividends on stocks, mutual funds and ETFs can enhance your investment return and can provide income in retirement. Most dividends are paid quarterly, but many ETFs pay monthly dividends. Some also get preferential tax treatment, in that they are not taxed at your normal income tax rate, depending on your tax bracket. See this article for more information on that. 

A dividend payment procedure follows a chronological order of events and the associated dates are important to determine the shareholders who qualify for receiving the dividend payment.

  • Announcement Date: Dividends are announced by company management on the announcement date, and must be approved by the shareholders before they can be paid.
  • Ex-dividend Date: The date on which the dividend eligibility expires is called the ex-dividend date or simply the ex-date. For instance, if a stock has an ex-date of Monday, May 5, then shareholders who buy the stock on or after that day will NOT qualify to get the dividend as they are buying it on or after the dividend expiry date. Shareholders who own the stock one business day prior to the ex-date - that is on Friday, May 2, or earlier - will receive the dividend.
  • Record Date: The record date is the cut-off date, established by the company in order to determine which shareholders are eligible to receive a dividend or distribution.
  • Payment Date: The company issues a payment of the dividend on the payment date, which is when the money gets credited to investors' accounts.
Note that usually the ex-date and record date are either the same or within a day or two. However, most brokerage firms, such as Schwab, require a couple of business days to record your purchase of the stock, so if you purchase it on the record date, you may not be included in that dividend. This is called the settlement date when you purchase your stock. You can check with your brokerage for their requirements. 

If I'm buying a stock and want the the next dividend, I normally buy it at least three days before the record date, which will be included in the announcement. 

For example, here's a recent announcement for Spark Energy's quarterly dividend, which pays a 7+ percent annual dividend. 

Regular Dividend of $0.1813 to go Ex: SPKE trades ex-dividend Thursday (5/30/2019) and will be payable to shareholders of record as of 05/31/2019 on 6/14/2019. 

On the flip side, if I sold the stock after the record date, but before the payment date, I'd still receive the dividend.

For more information see this article at Investopedia, which by the way, is a great source of information.  

Happy investing!

Friday, May 24, 2019

Is the Housing Market Weakening? Or Not?


I wrote back in September of last year that I thought that the housing market was showing signs of weakness. This is important because it is a large part of our overall economic outlook. But there are currently differing opinions, depending on the source.

From the American Institute of Economic Research on May 23: Housing Outlook Remains Weak
Sales of new single-family homes fell 6.9 percent in April to a seasonally adjusted annual rate of 673,000, down from a multiyear high of 723,000 in March.
Sales fell in three of the four regions, with only the Northeast - the smallest region by volume - posting a gain.

Total inventory of new single-family homes for sale fell 0.9 percent to 332,000 in April, pushing the month's supply to 5.9 months, up from 5.6 months in March.

Slowing sales and rising inventory are coinciding with slowing permit issuance.

Overall, despite weakness in housing, the economy continues to be supported by a tight labor market, rising incomes, solid balance sheets, and reasonably high levels of consumer confidence. The main risks on the horizon are the fallout from escalating trade wars and uncertainty about global economic conditions.
Read the entire article

From Forbes, May 23, 2019.
The U.S. housing market is healthy. The important indicators confirm it, so we can ignore the negative reports that use existing home sales data.

What about a recession? Could one negatively affect the housing market? Of course, because it would adversely affect employment, thereby raising personal income concerns. Such a scenario is not yet indicated.

Read the entire article

From Seeking Alpha: Housing Collapse 2.0 Continues As Predicted, May 23
For several months, it was mostly just sales that were down. As I said at the time, it would take a while for prices to follow because sellers are highly resistant to dropping the value of their number one asset; so, the squeeze needs to be on for a while for median prices or average prices to fall. Well, the squeeze has been on long enough, and sellers are starting to capitulate to the long drop in demand. 

Prices are falling.
There are other parts of the country where prices are going up, of course, but overall, the trend is down for sales and starting to move down now for prices. Prices had risen in most parts of the country to the same housing bubble heights of the last time around.

Read the entire article.
My take:
From everything's rosy, to gloom and doom. What are we to think? But it pays to watch these markets because they are indicators of where the economy is headed. While new home sales fell in April, I'm not seeing all the gloom and doom yet.

The housing market where I live in Austin remains strong, but is becoming expensive. It pays to be aware of trends. I don't see a bubble and collapse, but anything can happen. I have five percent of my portfolio in real estate, so my exposure is limited. And watch stocks like Home Depot and Lowe's. They can be an indicator also.

This chart is not pointing to a gloom and doom scenario -- yet.

Thursday, May 23, 2019

Ignorance Doesn't Mean You're Dumb

In old English, the word "idiot" actually meant ignorant. Think about that. And I'll take this one further. All the knowledge in the world is useless if you don't act on it.

Wednesday, May 22, 2019

"Rich" People Are Rich Because "Poor" People Get Poorer

Democrats, Socialists and Liberals in general believe in the zero sum game. In other words, in order to get "rich" you must take from someone who is "poor." (Only criminals do that, and I assume you're not a criminal. Not a good career move).
From Daniel Mitchell, Phd at TownHall Finance 
In the debate over “fairness,” my statist friends mistakenly see the economy as a fixed pie. This leads them to claim that rich people are rich because poor people are poor.
But there’s no data to support this position (other than in kleptocracies such as Venezuela where a ruling socialist elite steals wealth).
So some folks on the left will back down from that extreme claim and instead assert that the rich are the only ones enjoying more prosperity as time goes by. 
For evidence, they cite data showing that incomes have been mostly flat over the past 30-40 years for poor people and middle-class people, particularly when compared to the rich.
But there’s a big problem with their data. They look at income levels in some past year and then they compare that data with income levels in a recent year. 
But, as I wrote back in 2015, this means they are comparing apples and oranges.
There is considerable income mobility in the United States, which means today’s rich and today’s poor won’t necessarily be tomorrow’s rich and tomorrow’s poor.
I don’t necessarily expect people to automatically believe me. So if you’re one of the skeptics, watch this video from Russ Roberts. It is almost eight minutes and it is filled with rigor and data, but it’s worth watching since it masterfully demonstrates that lower-income and middle-class households actually enjoy larger gains than rich households.

Monday, May 20, 2019

Are there lessons learned from the Australian Election?

From CNBC's the Exchange" newsletter May 20, 2019, quoted in its entirety. We should pay attention.
The Australian dollar saw its biggest rise of the year overnight after a shock win by the conservative* coalition led by Prime Minister Scott Morrison, who replaced Malcolm Turnbull just nine months ago. 
The results were such a surprise the win has been called a miracle and a bombshell--and it's right in line with Brexit and Trump's victory in terms of major electoral upsets that have caught experts and pollsters flat-footed.  
After all, as the BBC noted, "For well over two years, the coalition has trailed behind Labor in the opinion polls, and the assumption had been it would be Labor's turn to govern." (Emphasis mine.)  
Morrison thanked "the quiet Australians" who turned out to vote: 
"It has been those Australians who have worked hard every day, they have their dreams, they have their aspirations, to get a job, to get an apprenticeship, to start a business, to meet someone amazing," he said. "To start a family, to buy a home, to work hard and provide the best you can for your kids. To save for your retirement. These are the quiet Australians who have won a great victory tonight!"  
Labor leader Bill Shorten had run a very different campaign, on raising taxes for the wealthy and lowering greenhouse gas emissions. (The New York Times: "It was supposed to be Australia's climate change election. What happened?" was, and that approach lost.) 
Here's why that lost: "Labor scrutineers told [that] older voters have punished the party for its higher-taxing agenda. States where the economy is not thriving – such as Queensland, WA and country areas – have backed the [conservatives]’ agenda focused on the economy and jobs." 
It's a lesson politicians all over the world continue to ignore--at their own peril. -- Kelly Evans
*Technically, it's the "Liberal-National Coalition," using "liberal" in its original sense

** Voting in Australia, by the way, is compulsory, with a $20 Australian dollar fine (or about $14 U.S. dollars) for not turning out. That means their turnout--a key campaign focus on the U.S.--is often well over 90%.

Stock picks by others: Caveat Emptor

From Barron's this weekend

5 Cheap Stocks to Ride Out the Trade War
After stocks tumbled on trade tensions this past week, Wall Street quickly offered more repositioning advice than a yoga class, with none of the relaxation .Get defensive. No, defensive stocks look expensive. Avoid companies that import from China. No, buy them, as long as they have enough pricing power to pass along higher costs to customers. Reduce large-caps. No, look to them as havens.
Not so fast. If you're taking stock picks from writers in magazines, I'd hesitate.  Look before you jump. 

Here's was my response to Jack Hough's article (which by the way was well written, but still caveat emptor.)
I have certain criteria that must be met before I invest in a stock. P/E is just one. If a stock is trading at a historical low p/e, I want to know why. Other factors such as 5-year P/E growth, revenue growth, ROI, Free Cash Flow, Dividend growth (if it pays a dividend, which is not a deal killer); I'll even look at corporate governance, i.e., is the CEO ethical and not a dirt-bag. I use a screener (free to use at my Schwab account) that looks at five years ROE (5 year trend at a minimum), Current Ratio (less than 2) Rev Growth Rate (at least 15%), EPS Growh (15%) can Cash Flow per share (above 5). Then I look a dividend growth, if there is any, and it can be a plus, if i'm looking for an income play (not a deal killer, but if it's paying divs, are they growing?) Then I get into technicals. I don't want to buy a company that my be overvalued. Only REGN made my initial list from the stocks above on my initial screen. I do not invest in stock picks made from this or any other magazine. But I do like the market analysis in Barron's and the ideas I might get for future investments. My advice: ALWAYS DO YOUR OWN DUE DILIGENCE. Don't invest in companies or sectors you don't understand. If you don't know how, learn how. Otherwise, my advice would be turn your money over to an "advisor" and hope for the best.

**P.S. On a side note: I don't care how much hyperbole there is in the media or the markets, I don't like to invest (buy) companies with liabilities greater that they can pay for in three years with free cash flow, and that don't make money. Make sense?

Saturday, May 18, 2019

Things Smart People Don't Say

These ideas are from Entrepreneur magazine and apply to the workplace. But I think they should apply to life in general. What you say reflects your attitudes toward yourself, others and the world in general.

No matter how talented you are or what you've accomplished, there are certain phrases that instantly change the way people see you and can forever cast you in a negative light. It's important to think about what you say before you engage your mouth. 

I have not included the entire list here, but these were always my pet peeves.

1. It's not fair. 

Everyone knows that life isn’t fair. Saying it’s not fair suggests that you think life is supposed to be fair, which makes you look immature and naive. Don't fall into the entitlement trap. Do not be the victim. 

2. It's the way we've always done it.

Einstein said that trying the same thing over and over again and expecting different results was a sign of insanity. Saying this is the way it’s always been done not only makes you sound lazy and resistant to change, but it could make your boss wonder why you haven’t tried to improve things on your own. If you really are doing things the way they’ve always been done, there’s almost certainly a better way.

3. It's not my fault

It’s never a good idea to cast blame. Be accountable. If you had any role -- no matter how small -- in whatever went wrong, own it. If not, offer an objective, dispassionate explanation of what happened. Stick to the facts, and let your boss and colleagues draw their own conclusions about who’s to blame.

The moment you start pointing fingers is the moment people start seeing you as someone who lacks accountability for their actions. This makes people nervous. Some will avoid working with you altogether, and others will strike first and blame you when something goes wrong.

4. That's not in my job description

This often sarcastic phrase makes you sound as though you’re only willing to do the bare minimum required to keep getting a paycheck, which is a bad thing if you like job security.

If your boss asks you to do something that you feel is inappropriate for your position, as opposed to morally or ethically inappropriate, the best move is to complete the task eagerly. Later, schedule a conversation with your boss to discuss your role in the company and whether your job description needs an update. This ensures that you avoid looking petty. It also enables you and your boss to develop a long-term understanding of what you should and shouldn’t be doing.

Friday, May 17, 2019

The Green New Deal: Bad Policy

The Austin City Council recently voted to endorse the Green New Deal. Most idiotic thing I've heard in some time. This "policy" is based on ignorance, plain and simple. 

From the Texas Public Policy Foundation:
Writing in Forbes, Jude Clemente points out five practical problems with the Green New Deal, including the spacing needs for renewables, their unreliability and the fate of humans who are denied access to cheap, dependable energy. 
“I’m only going to mention cows, airplanes, tearing down homes and buildings, railroads from the West coast to Hawaii, a $93 trillion price tag, and a hundred other things that you can do your own research on,” Clemente writes. “I’m going to limit my focus here: not a bash fest but a reality check. We need it… The quiet reality: more renewables inevitably mean more fossil fuels.”  
The TPPF Take: Advocates of the Green New Deal (and similar legislative efforts) must face facts—the plans are unworkable. 
“The Green New Deal and its many counterparts surfacing in city council chambers across the country aren’t just expensive, they’re impossible to implement,” said TPPF’s Jason Isaac. “Even if they would help the environment, wind and solar power just aren’t powerful or reliable enough to fuel the largest economy in the world. But then again, we all know the Green New Deal isn’t about the environment— it’s about signing over control of the American people’s lives to the federal government.”

 For more detail, read "The Green New Deal is a Government Takeover, Not an Environmental Policy." 

Wednesday, May 15, 2019

Around and around we go

The Dark Reason So Many Millennials Are Miserable and Broke
From Barron's: You’re not going to like this. Millennials spend more time on social media than older generations: People ages 25-34 spend 141 minutes per day on it, versus 105 for the 35-44 set. And that could be hurting both their finances and mental health.

5 Stocks to Ride the Coming Wave of Millennial Spending
Also from Barron's: This year, the oldest millennials are turning 38—a prime age for young families and household formation. Spending tends to rise with income as consumers reach their late 30s and 40s, and then tapers off in their 50s, according to Census Bureau data. 

Stocks Drop As U.S.-China Trade War Escalates
From Schwab, via Seeking Alpha: Volatility is often a wake-up call for investors who haven't been engaged in their portfolios. If you're not comfortable with your risk level, it may be prudent to dial back the overall risk in your portfolio, while taking into account both short- and long-term goals.

13 Financial Mistakes That Will Haunt You in 10 Years
From EndThrive: Good advice, repeated over and over. The key is just to do it. 

A manufactured crisis
From Townhall: ...Instead, they [Democrats] participate in a cynical game in which they attack the system of checks and balances itself. That's far more dangerous than any action taken by the Trump administration to date. The same Democrats who claim today that they are deeply concerned about the system of checks and balances are proclaiming from the rooftops that they would be happy to shatter the system to facilitate their agenda...

Top Five Consumer Cyber Security FAQs

By Equifax Business, technology, environmental and economic changes are a part of life, and they are coming faster all the time. All of thes...