3 Dividend Stocks to Own Today

Good dividend stocks are theoretically simple to shortlist. Dividend investors look out for companies who are able to sustain in the long run, hoping to own their shares and able to depend on their generous payouts in future and not dump them months later because the company slashed their payouts because they foresee big problems in their underlying business.

Good dividend stocks are theoretically simple to shortlist. Dividend investors look out for companies who are able to sustain in the long run, hoping to own their shares and able to depend on their generous payouts in future and not dump them months later because the company slashed their payouts because they foresee big problems in their underlying business.

In this article, I will be looking at some of the dividend paying stocks and shortlist three of them and share with you today.

Techie Business: Cisco Systems, Inc. (CSCO)CSCO logo - Investor Monkey

YTD Performance: +4.94%
Market Cap: $150 billion
Dividend Yield: 2.8%

People would usually not associate stocks of technical companies with dividend paying companies. This is due to their nature of business. Technical companies will usually require funds for their research and development department so that they can bring new and better products to the consumers. As such, rather than paying out their profits to shareholders as dividends, they will keep most of their profits as research and development funds for their next fiscal year.

Cisco Systems, Inc. (NASDAQ: CSCO) has been able to maintain and increase its dividend payout year-on-year even when there was a drop in earnings per share for the fiscal year 2014. Even with a reduction in their revenue, Cisco did not cut back on their research and development spending.  This was needed to ensure that their dominance in the fast growing network industries.

REITs: United Dominion Realty Trust, Inc. (UDR)UDR logo - Investor Monkey

YTD Performance: +5.00%
Market Cap: $8.64 billion
Dividend Yield: 3.4%

The topic of rising interest rates by the Fed have been much talked about and the news has hit especially hard on the real estate investment trusts (REITs). As prices of REIT stocks tumbled, it provides investors with a well-timed opportunity to enter the market, to catch a cheaper source of income.

United Dominion Reality Trust, Inc. (NYSE: UDR) is the REIT manager for various quality multi-family apartment communities across the United States. Bulk of UDR’s portfolio is located in high-income, high-demand metro areas. As such, UDR is able to deliver decent dividend growth.

Cheap Stocks: Star Gas Partners, L.P. (SGU)SGU logo - Investor Monkey

YTD Performance: +38.67%
Market Cap: $452 million
Dividend Yield: 4.6%

Although dividend investors should know that they should not be chasing after stocks with high dividend yield and sometimes the high dividend yield may just be because of the cheap price of the stock (since yield = dividends paid per share / price per share). However, this stock, being a master limited partnership, has the ability to pay high yields.

Being one of the largest retail distributors of natural gas in United States, Star Gas Partners, L.P. (NYSE: SGU) has a steady revenue stream that allows SGU to pay 9.5 cents quarterly to shareholders. The high dividend amount gives investors a very good stream of income now and in the future.

Trading Country Club Membership

I believe most of you who lived in Singapore in the 80’s and probably the 90’s should have heard before of the five Cs (Cash, Credit Card, Car, Condominium and Country Club). Many of us have been trying hard to possess these five items, in hope to impress others of their financial status. Because of that, the price to pay to own three of the five items, namely car, condominium and country club membership, have rose to new highs year after year.

I believe most of you who lived in Singapore in the 80’s and probably the 90’s should have heard before of the five Cs (Cash, Credit Card, Car, Condominium and Country Club). Many of us have been trying hard to possess these five items, in hope to impress others of their financial status. Because of that, the price to pay to own three of the five items, namely car, condominium and country club membership, have rose to new highs year after year.

After condominium, owning a country club membership is probably the next most expensive item on the list. With a one-time fees ranging from a few thousand dollars to up to S$250,000 for a membership to the Singapore Island Country Club, members still have to pay a monthly fee of up to a few hundreds as maintenance fees. Although people are slowly losing interest in owning a country club membership, trading the country club membership is still a means to make money.

Risks Involved

Well of course, with every money-earning opportunities there will be risks involved. Just recently, the Singapore Government announced the location of the Singapore-KL high speed rail (HSR) terminus to be located at where the Jurong Country Club is currently located. The club has since stopped all trading in its membership, citing that it would be unfair for unsuspecting buyers who does not know that the 67ha plot and the club will be handed over the Singapore Land Authority (SLA) by November 2016.

Singapore HSR terminus site - Investor Monkey

Opportunities Seen

While it may be bad news for the Jurong Country Club members, the announcement of the Singapore HSR site brought good news to some members from the other country clubs. Following the news of the announcement, the membership prices of the country club island-wide had spiked overnight, with at least two country club membership prices being traded at least S$2,000 more as members from Jurong Country Club are looking for other clubs to join before the club vacates its premises.

Like some speculators who will purchase private properties that are likely to be en-bloc, there are some speculators who are snapping up the Jurong Country Club memberships, before the freeze in the membership trading, in hope to gain a windfall from the payout as the prices tumbles from the news.

The Bottom Line

The Jurong Country Club is just once incident that portrays the risk involved in trading a country club membership. With a shortage of land in Singapore, it would be a matter of time when the Singapore Government will stop leasing the land to the clubs or even “buy” back the land from these clubs for public use before the lease is up. However, even with risks involved, it would not stop people from trading country club memberships.

Delayed or Instant Gratification

People nowadays yearn for and work towards ‘instant gratification’, which to us, means the fulfillment of our needs and wants in the present or immediate moment. Delayed gratification works by fulfilling the needs and wants at a later stage, presumably with a greater rewards or outcome.

People nowadays yearn for and work towards ‘instant gratification’, which to us, means the fulfillment of our needs and wants in the present or immediate moment. Delayed gratification works by fulfilling the needs and wants at a later stage, presumably with a greater rewards or outcome.

In stock investing, most of us hope that we can be trading for a living with profits they earned from each trade is able to replace their salary of their existing job. However, when we started investing, most of us want to use investment to build our retirement funds so that we can retire earlier.

Today, I shall be using Apple Inc (AAPL) stock price for the last two years as our example to show you the benefits of long term investing or “delayed gratification”.

Apple Inc stock - Investor Monkey

A long term investor may choose to enter the market when the 50 days simple moving average crosses the 200 days simple moving average and exits the market when the moving averages crosses again.

With that, the long term investor will only have entered a trade on 18 September 2013 and currently still holding on to that trade.

Entry Date Entry Price Current/Exit Price Profit/Loss
18 Sept 2013 $64.472 $125.80 95.12%

A short term investor, however, may have entered and exited multiple trades during the same period.

Apple Inc stock chart with entry/exit

Entry Date Entry Price Current/Exit Price Profit/Loss
14 Oct 2013 $68.915 $75.238 9.18%
21 Nov 2013 $74.266 $75.238 1.31%
19 May 2014 $85.193 $114.618 34.54%
21 Oct 2014 $101.626 $114.618 12.78%
22 Jan 2015 $111.958 $108.711 -2.90%
10 Feb 2015 $122.02 $130.415 6.88%
23 Apr 2015 $129.67 $130.56 0.69%
Total Profit 62.47%

Although the short term investor may see an instant gratification, the total profit a short term investor may not match the profit bagged by a long term investor.

Of course, this is just a simple calculation. There are other factors which will pull the differences in total profits apart.

  • Commission. Every trade made comes with a commission. Though it may be a small amount compared to the trade size, it actually eats into the profits of the investor.
  • Dividends. This only affects stocks that pays shareholders dividends. Because short term investors enter and exit a trade frequently, they do not wait for dividends to be recorded before they exit the trade thus they may miss some of the dividends paid to the shareholders.

Bottom Line

Instant gratification may seem to be more attractive to most of us as the profits from each trade means cash that we can use immediately, unlike unrealised profits. However, the funds that we are trying to build through investing is likely to be used for retirement in the future, thus even if instant gratification is received, reinvesting the profits would be a wiser move so that you will be able to build a bigger retirement fund.