Investing

Tips, strategies, failures, success and more in investing.

Understand How To Choose Your Dividend Stock Picks Wisely

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What Type Of Companies Pay Dividends?

To find good dividend stock picks, look for a long, solid history of the company.

When you look for things like this, you are doing a type of research called fundamental analysis. Fundamental analysis is basically the study of a company’s fundamentals.

The other type of stock search is called technical analysis. This is mainly the study of a company’s price chart. But don’t worry, for dividend stock investing, you wont need to learn any technicals.

Companies that are steadily growing or rapidly growing are less likely to pay dividends. These companies are wise stock investments for the long term, just not for dividends. When a company is growing, it is wise for the company to re-invest they’re earnings back into themselves.

Larger companies often do offer dividends. This is sometimes taken as a sign that the company has exhausted all it’s options for growth. It can also be taken as a sign that the company has faith in it’s future.

Getting The Most For Your Money

When choosing your stock picks, it may seem obvious that you would want to choose the one with the greatest return on your investment, right? For now, lets just say yes.

Another important thing to look for is dividend growth.

This is when the dividends paid out increase at a certain percentage over time. So, like most investment strategies that I have discussed in previous articles, you must decide what is best for you. Higher payout now or higher payout later?

Picking The Perfect Payment Schedule… Five Times Fast

As well as looking at the above two factors when determining your dividend stock picks, you should also consider how often dividends are paid out.

Often dividends are paid out a few times a year. Some companies also surprise they’re investors with extra payouts.

Not As Easy As 123

There are a few more things I would like to discuss with you when choosing your dividend stock picks. From there, you should be armed with enough information to get started.

I have skimmed over a few important things to look at when choosing you dividend stock picks. It may seem all fine and dandy up till now. But, heres the nitty gritty of it.

Will I Actually Get My Dividend Payment?

As I said before, high dividend-paying stocks are more attractive. But, there is a flip side to that.

Let me start by saying, it would be wise to choose a stock that will be paying dividends on a consistent basis in the foreseeable future.

When a stock is paying very high dividends, this should throw up a red flag. You should be aware that this company has a better chance of missing a few payments throughout the year (this would be scary) than a company that is conservative with they’re payments.

When a company misses a promised payment, this damages the trust in the company. Think about it, you want your money, right?

This trust may take years to gain back. Companies know that. So, the good ones try extra hard to manage they’re money wisely in order to continue paying dividends on a scheduled basis. Thus, building they’re shareholders’ faith.

This is why often, steady companies that look promising don’t pay such high dividends. So, take the good with the bad and find a cozy medium that works for you.

Coca Cola (NYSE: KO) Can Coca Cola stock keep growing?

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In this report, we’ll be looking at Coca Cola Company. The Coca Cola stock price has rebounded on the basis of a good business model, a good profit margin, increasing dividends and a great PE, even Buffett seems to like owing this stock. Shouldn’t you?

The Coca-Cola Company (NYSE: KO)

Coca-Cola is a product that is consumed in over 200 countries and territories worldwide. Lesser known is the fact that most distribution of the products is carried out by franchisees, as Coca-Cola only make the original syrup which is then shipped to bottlers and canners worldwide. In fact, one of the biggest bottlers trades under the symbol ‘Coke’ and could be easily confused with the original company.

The Early Fizz

Dr. John Styth Pemberton formulated Coca-Cola in 1886 as a medicinal drink, realizing sales of $50 in that year at five cents per glass. Today Coca-Cola’s products are sold in 200 countries and people around the globe consume more than one billion drinks per day!

And yes, Coca-Cola did contain a small amount of cocaine because Dr. Pemberton’s creation depended on the coca leaf for much of its medicinal qualities. By 1929 technology had advanced enough for the company to eliminate the 1/400th of a grain of cocaine in each bottle and none of the millions of people who were loyal to the drink noticed a bit of difference in the taste or refreshing qualities of Coca-Cola.

Coca-Cola continued to thrive in the 19th century and well into the 20th. Striving to make it distinctive and memorable, the company settled on a contour bottle that would make Coke instantly recognizable even if a person were to touch the bottle in total darkness. Even when broken, people would recognize the pieces! Of course, when glass bottles were phased out Coke made an equally distinctive aluminum can.

The Magic: Shaken, not stirred!

Coca-Cola doesn’t produce the cans and bottles of Coke that we all know and love. The company actually manufactures the syrup the drink is made from and sells it to bottlers throughout the world who mix, bottle and distribute Coca-Cola. This means that Coke’s overhead is fairly low, raising its profit margin and lowering the risk. Coca-Cola is sold to restaurants, food service distributors, grocery stores, concessions, sports stadiums and nearly every establishment that serves food and drink or entertains in some way.

By 1999, the company decided to diversify and bought Cadbury Schweppes, maker of Dr. Pepper and other popular soft drinks. The two companies thrived from their merging and Coca-Cola decided to try its hand at other drink products. By 2006, it had capitalized on the sports drink craze and could boast of over 400 brands worldwide. It also manufactures carbonated waters, still waters, and enhanced water drinks.

Added to this you can find juices, juice drinks, teas and even coffee drinks. While you may recognize the carbonated beverages marques of Coca-Cola, Diet Coke, Fanta, and Sprite, you may not realize that Dasani (waters), Nestea (iced tea drinks), and even Fruitopia (fruit drinks) are also their own brands.

While it’s the top soda in many markets world-wide, China and the Far East pose challenges to the soda business. Top drinks in many of these countries are typically green teas, juices, and fruit drinks. Even in Japan, its canned coffee is its top selling product. But Coca Cola hasn’t let that stop it developing an international business by developing and/or buying up other companies or products.

Its Winning Formula

Coca-Cola is the world’s large beverage company and markets the top five nonalcoholic carbonated beverage brands in the world. Although the company had a significant drop in profits in the fourth quarter of 2007, it has recovered nicely using sound business sense and creative advertising and continues to perform well.

The 2008 Olympics gave sales a big boost, too, and Coke’s sponsorship of other sporting and charity events keeps it visible and in demand. Coca-Cola rarely suffers losses because they’ve taken steps to insure that their popularity crosses generations as well as cultures. Coke is an affordable and popular product whose returns are consistently steady and whose stock is a reliable investment.

This company clearly survived the downturn, expanded in Asia (which drinks largely tea), and created new brands. So I wouldn’t bet on the Coca Cola stock price falling much, that’s for sure. But at what point does it become a ‘buy’ for you? I do like those increasing dividends, which grew at over 250% over 10 years. That’s a nice return, there!

The Coca Cola Stock Price

The stock for this company has largely languished since it hit a high of $85 in 1998. Though in the early part of this decade, it has risen to the 60’s on several occasions. If you had bought at a high in 1998, you’d likely still be sitting on a loss of nearly 40%.

Fortunately, this poor performance in Coca Cola stock price would have been compensated by a large jump of 290% in the annual dividend from just 60 cents a share in 1998 to a $1.76 in 2010.

The Coca Cola stock price is not cheap by any means, its PE ratio stands at over 18, and the company carries nearly $12 billion dollars in debt. However, this is more than compensated by a robust profit margin of 23% and plenty of cash in the bank.

While the stock rocketed from just $1 and change in the 70’s to its current position, it’s not likely to do that again! After all, when you can grow to over 200 territories, could you really grow your business that much again? So what’s your take on the Coca Cola stock price, business prospects, or markets in 2010~11?

Play the CashFlow 101 game: Explains why your cash is low?

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cashflow-101-game.html

Is anyone here a fan of CashFlow 101 game? Did you ever play the game before? I’ve been a keen player of the game for some time now. I’ve even introduced to some of my students over the years, even the younger ones enjoyed playing the game.

What is CashFlow 101?

Cashflow 101 is an educational board game designed by Robert Kiyosaki (author of Rich Dad, Poor Dad).

The aim of the CashFlow 101 game is to teach the players about investing and making their money work for them. The game provides a setting that is challenging yet informal while helping players some basic lessions in financial literacy. In playing the games, players find it easier to learn and use the basic principles of personal financial management.

Interview with the CashFlow 101 Game Designer

The CashFlow 101 game board is divided into two stages. The first is "the rat race" in which the player is given a basic bank account, spending habits, personal and mortgage debt and a salary. As the game starts, each roll of the dice determines what opportunities you have or what expenses you must make.

There are four sets of cards that determine different the assets and liabilities that you must take on. And each expense or income has to be adjusted. Players go around the rat race trying to accumulate the amount of money that will allow them to enter the fast track.

The promotion criteria is quite simple: that passive income generated in the game must exceed the expenses of the player. Given the different jobs, salaries and financial pictures, this can be quite a challenge!

Personal Comments

Cashflow 101 is actually one great board game. While I won’t go into the rules, as other websites cover this well, I will say that is quite an educational game. I’ve found it quite instructional in a number of ways:

  1. it can model our behavior patterns in a number of ways, esp. our spending patterns, our consumption patterns, our lack of savings as a financially less than capable society, etc
  2. it can model changes in behavior as people try out different strategies, occupations, savings rates, etc.
  3. it can show the longer term consequences of our actions by very quickly showing the results of our dependence on particular aspects of our financial management.
  4. it can show people how to monitor and record aspects of their financial situation, their balance sheet, etc.
  5. it is actually a lot more challenging to play than monopoly.
  6. and, as if you needed another one, it is actually fun to play, we can share our own ideas about money management and financial planning, because, oddly , as our societies consume, it seems there is less and less discussion of the positive aspects of financial management amongst people, and muce more talk about consumption.

You can watch this YouTube video that shows a CashFlow 101 game being played (in Russian, I think) but the game is English and it shows you what the game looks like, and give you a sense of how it is played.

Suggestions, Notes and Improvements

There are some flaws in the CashFlow 101 game that need some working on:

  1. you can ‘learn’ how to win the game, because you know which cards are likely to come up if you play this game more than a few times, there are fewer risks for those who gamble by borrowing money;
  2. stocks are grossly overly simplified, as are houses. You can generally do well investing in stocks, if you know what cards are likely to come up. Again, being more familiar with the cards can help you analyze which cards, so when you hear the offers, you buy them;
  3. there needs to be more challenge to the game for those who played more than a couple of times – so I’d suggest creating a book of separate missions that you can use to play your part in extending the games playability, perhaps increasing the difficulty of individual player’s positions by recreating real-life scenarios;
  4. and, the fast track is spectacularly dull to play, there is little complexity or variety. I think the Rat Race is far more interesting to play.

Financial Education: Commonsense at a price!

Overall, though, it is an expensive game for people to play at nearly $220. If you are interested in playing, perhaps head on over to the Rat Race Players’ website for clubs near you. It’s worth a rainy or cool spring Sunday afternoon!

[For those seeking more of a challenge, you can play CashFlow 202 which is an additional set of cards for the basic game board.]

Have you ever played? What did you think about the CashFlow 101 game? Did you enjoy it? Why? Return from CashFlow 101 game to Successful Stock Trading Page