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Sunday, May 26, 2013

SAFE INVESTMENT MANAGEMENT= Dividends and Best Performers; '13

Each year, MCD has increased its quarterly dividend. 2009 ($.50), 2010 ($.55 to $0.61), 2011/12/13 ($0.61 to $0.70)

Since January, McDonlds and UPS have doubled in price.

Let's have a look at the dividend ["d"] payments for each, since 1-1-13 ( or near):

McDonalds pays dFEB, MAY, AUG, NOV

11-29-12 Dividend Payment of $0.77 per share
02-27-13    ''  $0.77 per share
05-29-13 upcoming...

Let's hypothetically state that investor "jaguar-panda" owns 25 shares of MCD.  If we assume MCD will make their end of May dividend- then here's a look at the dividend return/yield:  $38.50 in cash dividends.

UPS, quarterly, has paid the follwing d:  2008/2009:  $0.45, 2010: $0.47, 2011: $0.52, 2012: $0.57, 2013: $0.62

UPS pays d: FEB, MAY, AUG, NOV.

How is our friend jaguar-panda - if he also owns 25 shares of UPS since 1-1-3 = $11.50 in FEB and $11.50 in May; or $23.00 in cash. [In the U.S., d are taxed at the tax rate of the indy].

Facts: MCD and UPS met the requirements of their d policy AND each stock has doubled in price since 1-1-13 (a px return of 100%).


U.S. indices are peaking. The story is holding true - About 280 companies in the US control 85% of the wealth. This is what the pyramid is all about - they like to ( only if they are wealthy) remind everyone that a small group is rich and everyone else is not. Would you not do the same? Would you not expose your greatness?

Anyway, Wendy's is trading at about 6 bucks. The fundamental lesson here is that - even though it is a good investment, you need to be careful when considering MCD or UPS. Why? I mean, for me, I don't care - I would buy the stock because I think they are killing it ( slang for doing well).

The prudent approach involves not buying stocks when they are near highs - I know IBD - the paper - suggests that a new high is a break-out. Well, if your stock doubles in 6 months - there are two reasons ( and selling it or taking half off the table is a good play) But back to the point - here are possible reasons why a stock doubles in price (excluding the horrific influence that analyst have on effecting the px movement of a stock, which historically has been evidenced that it is difficult to keep a chinese wall between investment banking and research - after all if a company goes to Morgan Stanley to retain them in a potential new offering of capital- best or preferred, etc, they are going in with the hope that , as a customer of MS's , they will have the support of the organization, which includes analysts ( this is why independent research shops like vickers and argus are so great - they can fly free an not have to worry about... :

1. Company's net income (year over year, yoy) has grown at a percentage rate ten points higher than average. Remember, it does not matter how much revenue a company brings in... what matters is the % growth yoy ( costs fixed).

2. There is a lot of big money out there... and they need to put it somewhere.

Remember, you can earn twice as much from stock dividends (if the stock, on an annual basis does not decline in price) than you can earn on CD from a bank or a treasury note - at current rates.

CONCLUSION: If you are looking at investing in MCD or UPS, two names that have doubled in price over the past six months, you need to consider the following: What goes up, must come down, and another adage: buy low, sell high. Also, if you have a long term time horizon, and your plan is to buy the names you like, with a holding period at or greater than one year, then that is different from a trade that has a goal of being closed out after a two point gain. Also, be aware that there will be money managers who think that stocks exhibiting a 100% gain in price over 6 months are goo targets to short.

CONCLUSION II: Be careful out there, paper trading is a good practice. Remember the dividend.

Conclusion III: Be safe and read alot.


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