Dividend Stocks

Part of the reason why I started this blog was to help me learn about the wonderful world of investing. Every time I learn something new, I try to post it on "Saving 30" to help me keep an investing diary.

There are a couple of different schools of thought when it comes to selecting a stock to purchase. Some folks like stocks that pay dividends while other like to stay away from dividend paying stock.

I used to think that dividends are like free money, which in some aspects, they are.

I've read that once a stock pays out it's dividend, the stock price will drop (roughly) the same amount of the payout.

For example: If my Nokia stick is currently trading at $3.50 a share, and they decide to payout a dividend of $0.25 per share, tomorrow, Nokia should be trading closer to $3.25 a share.

So, this month, I have a couple of stocks that are executing dividend payments. This will give me a chance to test the dividend-stock price drop theory.

Stock #1 - Nokia
Dividend Amount - ($0.18 a share)
May 6th Trading Price (closing bell, a day before D) - $3.41
May 7th Trading Price (opening bell, day D was paid) -

Stock #2 - Starbucks
Dividend Amount - ($0.21 a share)
May 7th Trading Price ( closing bell, a day before D) -
May 8th Trading Price (opening bell, day D was paid) -


Stock #3 - Activision
Dividend Amount - ($0.04 a share)
May 14th Trading Price ( closing bell, a day before D) - $15.14
May 15th Trading Price (opening bell, day D was paid) - $15.10


Stock #4 - Callaway Golf
Dividend Amount - ($0.04 a share)
May 17th Trading Price (closing bell, a day before D) -
May 18th Trading Price (opening bell, day D was paid) -

Stock #5 - Wendy's
Dividend Amount - ($0.04 a share)
May 29th Trading Price ( closing bell, a day before D) -
May 30th Trading Price (opening bell, day D was paid) -

Obviously, it's going to take about a month to test the dividend/stock price drop, but for now, let me try and analyze the dividend conundrum.

PRO - DIVIDENDS
- Free money
- If the stock pays a quarterly dividend, it's a constant source of income (not alot if you look at my little portfolio, but it's a source none-the-less)
- Great for long term investing (if you re-invest your dividends back into the stock)

CON - DIVIDENDS
- If you're in a retirement situation, dividend stocks might not be great. The stock price drop (if it actually happens) might be less beneficial than the actual dividend return. In my head this makes sense, might not exactly come across well on paper.

Read More

Bitcoin

Every couple of days, when I log onto CNN's Money portal, I see articles about this new digital currency called "Bitcoin".

As I continue to use this website as a tool to learn and grow my investing knowledge as I try to reach a $20,000 savings goal, I'll need to do some research on these new trendy investing options.

So what exactly is Bitcoin?

According to Wikipedia, Bitcoin was "first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it a peer-to-peer, electronic cash system. Bitcoin creation and transfer is based on an open source cryptographic protocol and is not managed by any central authority. Each bitcoin is subdivided into 100 million smaller units called satoshis, defined by eight decimal places. Bitcoins can be transferred through a computer or smartphone without an intermediate financial institution.

According to their website, Bitcoin is an experimental form of digital currency:

"Bitcoin is an experimental new currency that is in active development. Although it becomes less experimental as usage grows, you should keep in mind that Bitcoin is a new invention that is exploring ideas that have never been attempted before. As such, its future cannot be predicted by anyone."

Bitcoin has multiple "apps" that help you manage your "wallet". Bitcoin-QT, Multibit, Armory, Electrum, and Bitcoin Wallet are all multi platform apps that help you manage your digital currency.

After signing up, you receive an email address. Similar to Chase's Quick Pay, a user's email address is linked to the account and is all that's needed to make a payment to the user.

Bitcoin keeps popping up in my CNN Money newsfeed. 

At the most recent Birkshire group annual meeting, Warren Buffet and partner Charlie Munger said the following about Bitcoin:

He says doesn't know much about Bitcoin, the virtual currency that has been gotten a lot of buzz lately. Buffett's partner Charlie Munger said that he has no confidence that Bitcoin will become a viable meaningful currency. Buffett said he thinks the dollar will remain the world's default currency for years to come, perhaps forever. "Of our $49 billion, we haven't moved any of it into Bitcoins," says Buffett.

To me, that doesn't sound like a ringing endorsement from one of the world's most savvy investors.

In an April 11, 2013 article, Bloomberg's Matthew Zeitlin made the case that, due to it's volatile nature, you really can't count on Bitcoin as being the future of currency:

If you wanted to make the case for Bitcoin as a feasible and useful digital currency, yesterday wasn’t the best day to do so. According to Mt. Gox, the largest Bitcoin exchange, the currency started out at $230, spiked to $266, touched a low of $105 and then settled at just above $170 (it’s now $123). That’s, in the course of the day, a 15 percent jump followed by a 60 percent plunge off the day’s high and ending with a substantial loss.

When currencies can fluctuate substantially over short periods of time, merchants not only have to continually update their prices, an inconvenience and added cost typically borne by the customer, but they also are forced to become currency speculators, adjusting prices and inventory in accordance to data from a possibly hacked online currency exchange. Merchants who accepted Bitcoin payments yesterday morning were much better off than merchants who sold goods at the same price this afternoon.

So, looking at this from my point of view, I don't see the need to jump on the Bitcoin bandwagon right now (or even ever). 

Lessons I Think I've Learned:

Bitcoin has an odd way of tackling supply and demand. If there's a limited number of Bitcoins available, you would think that the demand would grow. But if the demand for Bitcoins isn't overwhelming right now, what's the point of owning one?

If Warren Buffet doesn't own it, neither should I.

Read More

Support and Resistance

In my little quest to save $20,000 over the course of the next two years, I'm eventually going to run into little roadblocks along the way.

I like using this site to help me figure out the complex world of the stock market, so today's post is going to help me figure out what the hell "support and resistance" means in relation to the stocks I own!

This morning I was reading an analyst's take on Walt Disney's recent success in the stock market. I own a couple of shares and have been pleasantly surprise to see the stock doing really well!

In a Market Intelligence Center article, the author kept talking about support and resistance levels. I haven't got the foggiest clue what that means, so I turn to my trusty edumicators over at investopedia:

Support: The price level which, historically, a stock has had difficulty falling below. It is thought of as the level at which a lot of buyers tend to enter the stock.

Saving 30 Translation - If a stock has a support level of $50, I believe that means buyers will start attempting to acquire the stock at $50. If the stock price falls from $55 to $50 and people buy the stock (thus increasing the price of the stock) the Support Level stays at $50. If the stock price continues to drop below $50, the support level is erased, and a new one will be determined once the stock settles and recovers.

Resistance: A chart point or range that caps an increase in the level of a stock or index over a period of time. An area of resistance or resistance level indicates that the stock or index is finding it difficult to break through it, and may head lower in the near term. The more times that the stock or index has tried unsuccessfully to break through the resistance level, the more formidable that area of resistance becomes. 

Saving 30 Translation - Let's say your stock's resistance level is $55. If the stock approches the $55 mark, but can't break past it, the $55 mark becomes the resistance level. Sometimes, if the stock breaks through, the resistance level could become the new support level. 

Read More