Archive for October, 2008


What To Do With Five Dollars? – Invest In Wendys!

Filed Under: Stock Pick of the Day by Bill — 1 Comment
October 9, 2008

Begin to Make Money One Share and One Burger at a Time

Buy Some Shares Then Buy Some Food

Buy Some Shares Then Buy Some Food

If the market, economy, tax man is hitting you like it’s hitting me these days you’re probably lucky to have a 5 spot in your wallet.  But if you do this is the perfect investment!  WendyArbys (Ticker: WEN) is on a fire-sale at $4 per share.  To put that price in perspective WEN has only increased in price by 2.4% per year since 1993! 

To me the kicker is the 8% dividend yield.  Being part of the fast food culture as I am I’m fairly certain drive-thru dinners will only be more common in an ailing economy.  If this wasn’t true California wouldn’t be trying to remove fast food restaurants from lower income neighborhoods to improve public health.  If they were more expensive then eating at home, lower income households would just eat at home.

  If the stock price doesn’t want to cooperate until the economy turns around I’d be happy to collect my $0.32 per share while I wait. 

In fact I think I may just buy a share and take my spare dollar and buy a burger, then write some more beginning investment tips.

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Dividend

Filed Under: Glossary by Bill — 2 Comments
October 9, 2008

The dividend is a portion of earnings that is issued to the shareholders.  The board of directors will decide how much goes to which class of shareholders.  You must own the stock before the stocks ex dividend date in order to recieve your share on the dividend date.

Dividend funds drip into your investment account

Dvidend funds drip into your investment account

Dividends need not be cash, they can also be in the form of stock or property.

It is often generalized that low growth companies make up the return difference with dividends, though with careful consideration a low growth company picked up at a low price can offer good returns with the safety and stability of the dividend.

Most importantly you need to not look at the amount per share the stock is paying but the dividend yield.

Yield is calculated as -  [Dividend Per Share Per Year] / [Stock Price]

For instance you have two companies – Mega Bahemoth (Ticker: BIG) and Average Joes (Ticker: AVE).  BIG is priced at $100 per share and has a dividend of $2 per share annualy.

Average Joes is prices at $10 per share and has a dividend of $0.20 per share quarterly.  It’s easy to fall into the trap of thinking about which dividend is largest if that’s the income you are looking for.  First let’s calculate the yields.

BIG: [$2] / [$100] = 0.02 or 2%

AVE: [$0.80] / [$10] = 0.08 or 8%

You have to watch the payout on the dividend; in the case of AVE with the quarterly payout you have to multiply by 4 to get annual payout.

In this fictitious example the person investing in AVE will get 4 times more dividend income then investing in BIG!  Remember to watch those yields and keep learning more about the stock market.

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Stock

Filed Under: Glossary by Bill — 1 Comment
October 9, 2008

Definition of Stock:

A stock represents ownership in a corporation.  In the hustle and bustle of stock trading, and the convenience of on-line investing it is easy to forget that you are buying and selling a true physical asset.

When one purchases a share of a company they are purchasing ownership, a percentage of assets, a right to vote, or a right to future earnings.  This is often laid out between the definitions of common stock or preferred stock.

The common mantra for stock trading is still “Buy Low Sell High” and is still the best starting point for beginners.

Google's Certificate of Stock - A physical asset

Google

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Invest in Pfizer Inc. (PFE) for Good Income

Filed Under: Stock Pick of the Day by Bill — 4 Comments
October 7, 2008

A Best Choice Stock Investment in a DOWN Market

Fundamentals:

Pfizer (Stock Ticker: PFE) is a company that develops, manufactures and markets prescription drugs. The price per earnings ratio (P/E) is currently 8 while the industry and sector hover around a 13.5. While growth expectations for Pfizer’s stock (4% per year) are lower than the competition’s (8%) I believe there are other reasons to buy this stock.

The dividend on this stock is nearly 7%. That’s 7% of your invested money being returned just for owning the stock. Add that to the 4% growth expectation and you’re looking at a “safe” 11% per year. This sure beats betting on the bank of your choice in today’s markets and this stock should fare even better.

Even considering yesterday’s 7% drop and just over 30% fall from this year’s high Pfizer has returned its shareholders 13% per year for the last 25 years and this doesn’t include dividends!

Technical Analysis (TA):

I’m going to keep this one simple, if you want to fine tune your buy in you’ll probably want to wait.

Here is a simple chart of the last year with 50 and 200 day moving averages. (Coming soon will be tutorials on what this and other easy to learn stock market techniques.)

Not Quite Time to Make Money on PFE Stock
Not Quite Time to Make Money on PFE Stock

With the 50 day average below the 200 but attempting to turn I’d keep my eye on this stock and watch for that infamous cross over to make some long term money and enjoy that 7% dripping income.

Conclusions

I’ve already purchased Pfizer to be upfront and honest and I believe it’s a good long term potential for those looking for good investments for their retirement accounts or longer term low tax rate strategies.  I personally see Pfizer stock at $40 per share in three to five years.  However, how I made the price expectation is for another post on another day.

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