Dividends , Portfolio


At this time of year our thoughts usually turn to the holiday festivities, family gatherings and such. While no different for me, I usually have one more activity at this time of year that puts me in the Christmas spirit, the creation of an investing wish list.

Making an investment wish list, in this case a Christmas wish list is a great investment activity. Its like investment practice, or studying for an exam. With such a list at hand when an opportunity presents itself you will be ready to pounce. The list does not need to be detailed but should at least have the investment, the reason to own it, and most importantly the price you would be willing to establish a position.

With that short intro here are the first 5 investments on my wish list. I don’t think you will be surprised that they are all individual stocks that pay dividends. Here they are;

1. MO, Altria: this is maybe the greatest stock in history. I’m not kidding. As of the early 2000s it was the highest returning stock in the history of the SP500. And it continues to perform. It has a virtual monopoly in the tobacco business. Barriers to entry for competitors are extremely high. It pays out most of its earnings via dividends and grows the dividend every year. This would be a must add for me at 20 to 22 a share.

2. NLY, Annaly Mortgage: a dividend stock that most dividend investors tell you to avoid. Why? Because their dividend fluctuates with the economic cycle. When mortgage spreads are high the dividend is high. When mortgage spreads are low their dividends are low. As long as you understand this and focus on total return over the long term this a great investment. Any time this stock trades at or below 1.1 times book value its a great time to buy. Currently it is just above this and has a 15% dividend yield.

3. FFH.TO, Fairfax Financial. Maybe all I need to says is that these guys are the Berkshire Hathaway’ of Canada, except 10 times less in size. Since 1986, when the current CEO Prem Watsa took over, book value has grown at 25% a year. This is what I call a stealth dividend stock. It pays a meager dividend on the surface but inside the company their investment portfolio pays significant dividends. This is a long term keeper and currently trades just above book.value. any entry at or near book value is a great investment.

4. EPD, Enterprise Products: probably the best performing MLP today in terms of operations. They operate a predominantly fee based business with a huge network of pipelines and other gas processing infrastructure. They bought out their general partner recently making them even more competitive. Only problem is that investors have caught on and the shares have become a bit expensive. Wait for a 7% yield or greater.

5. KMP, Kinder Morgan: probably the MLP with the most diversified and stable asset base. Amazing historical performance record and extremely share holder friendly. My wish here is for a higher yield, of 8%, and resolution of a couple of issues; the high general partner splits and the KMR share discount.

Well, those are the first 5 stocks on my wish list for his holiday season. Let me know what you think and any alternatives you may have. I have at least 5 more on my wish list which I will post on soon.

Also, this is the first post I have done from my Droid X phone. Its an amazing device. My apologies for any formatting errors.

Disclosure: long EPD, KMP, FFH.TO

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7 thoughts on “ Christmas wish list, part one

  1. Great list! Couldn’t agree more with MO and KMP and appreciate the others I have not looked into. I really like the Bloomberg app for IPhone and add your recommendations when you give them. Also like your reservations, as well. Thanks again. So, when are you going to write a book? 🙂 you can self publish on createspace.com (part of Amazon) and just a PDF format submitted to Kindle. Have a good one!

  2. Great Post Paul:

    I am going to beat you to the pole.

    I want:
    Low interest rates, taxes and inflation.
    Water in the form of WTR or PHO.
    To diversify my diviend base with FTR and ETP
    Steady dividends in REITS and JNK
    An 8% total return end of 2011 would be nice.
    Save another 24K in the 403b
    Double C and BPOB and sell some GTS@ 22.
    Learn to use market indicators to avoid losses.

    Grow Cathy’s love for me
    Remain healthy, happy, work and play able.

    Take the Napa train ride vacation.
    a Colorado mid summer vacation / learn to fly fish
    and Corpus spring and fall windsurfing vacations
    1 hour a day gym session and serious part time work load negotiations with all the bosses for same present pay.

    Pledge… A solid work year with little whining.

    Meet Paul and Nina if they wonder into Houston.

    Have not had this much fun since I was a radio ham operator KP4DGE in the 70s

    What’ya think?

    Rick and Cathy / Houston

    1. Great list Rick. We’ll be passing through Houston later this spring/early summer so maybe we could meet up. I better get cracking on the rest of my list. I’m doing the fly fishing thing in CO this summer.


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