Tag Archives: stocks

Is Apple Stepping Up its VR/AR Efforts with Faceshift Buy?

Apple Inc.AAPL has acquired Faceshift, a Zurich based “motion capture company” for an undisclosed amount. Reportedly, some of Faceshift’s employees have already begun working for the Cupertino based company. Rumours of the acquisition have been doing the rounds for

SPY Vs. Dividend Growth Portfolio

A couple of weeks ago, I asked you why you think you can beat professionals? This led to an interesting conversation about the difference between beating the market and reaching your goals. I think the most important thing is to reach your financial goals. It’s like registering for a run; when you register for a 10K, you don’t mind if you win the run or not; you focus on your own running objective. As long as you reach that goal, your run is a success. This is also a good mentality to apply when investing. After writing this article, I received an email from a reader asking the question about the difference between buying SPY (Spider S&P 500 ETF index) yielding nearly 2% and building a dividend growth stock portfolio: More often than not, I choose not to buy individual stocks when I compare their yield to SPY, which is a core holding in my account. Can you perhaps do a write-up of SPY? It has all the same advantages a good dividend stock has. It has dividend growth, it has a reasonable yield, dividends reinvested in SPY will have the same snowball effect. But, it has a KEY advantage that individual stocks do not – diversification. So how can I determine if an individual stock is a better buy than SPY? When is the decision to to buy an individual stock for its dividend better than my default position of “keep it in SPY”? What return should an individual stock give me for the risk of abandoning SPY’s diversification? What risk premium? I found his question quite interesting as it positioned a global well-diversified and dividend paying investment vehicle trading with very little effort vs. a handpicked dividend growth stock portfolio requiring continuous management. Let’s dig deeper to see what both strategies have to offer… SPY is Not a Dividend Growth Portfolio First, let’s be honest, SPY is not a dividend growth portfolio. This is not its function, regardless if the members of the S&P 500 pay enough dividends to have a yield around 2%. When you look at its past 10 year dividend history payment, you understand better why SPY can’t really replace a dividend growth portfolio: As you can see, dividend payments are quite hectic. This is normal as within the group of the 500 biggest companies, you will have a little bit of everything: Strong growth companies not paying dividend Classic dividend growth companies Companies going through troubles and cutting their dividend Etc. Being a “big company” is not a gauge of success and it is also far from an indication you will see your dividend payments growing. It becomes obvious when you compare the dividend growth in % over the past 10 years compared to a classic dividend growth company such as Johnson & Johnson (NYSE: JNJ ): JNJ dividend payments increased steadily year after year and offer double the dividend growth payment than SPY over this period. Besides the dividend growth test fail, there are many other reasons why I’m not a big fan in investing in SPY as a dividend growth investor: It doesn’t follow my dividend growth investing philosophy. Dividend payments are hectic. SPY includes too many “bad companies” I wouldn’t pick. The overall market is not what I want to buy. In the end, there are very limited similarities between a dividend growth portfolio and SPY. The dividend yield may confuse investors, but don’t fall in the trap; if you are looking for a dividend growth investing vehicle, SPY is not the one . What About a Dividend ETF Then? One question leading to another, I wanted to finish this article with a comparison of a dividend growth ETF vs. a handpicked dividend growth portfolio. I’m all about efficiency in life and if I could spend a big three minutes to initiate a transaction in a dividend growth ETF and forget about my investing strategy for the rest of my life, I would gain several hours each year to do other things than manage my portfolio and reading about the stock market. Let’s take the Vanguard Appreciation ETF (NYSEARCA: VIG ) dividend growth and compare it to JNJ again: I’ve taken the five-year view as there were unrealistic increases back in 2007 (dividends doubled within three quarters) and it wasn’t giving a good comparable. Still, even by using the five-year dividend growth period, we can see how JNJ shows a pure and systematic dividend increase while the VIG payment increase is quite hectic. Nonetheless, VIG dividend payment growth is double that of JNJ, one of the most appreciated dividend growth companies on the market. As far as stock price goes, we are at the same pace: In other words; while VIG dividend growth is hectic, any investor would have been better with the ETF than with JNJ. However, it is unfair to compare a diversified ETF with a single company. This is why I did the exercise with my top 10 dividend growth stocks as a portfolio vs. the same ETF: Unfortunately, I can’t perfectly compared this growth portfolio with the VIG as not all data can be used in 2011 and Disney (NYSE: DIS ) decided to pay dividends twice per year instead of once a year explaining the virtual drop on the graph (but it will go back up once the year ends as a second dividend payment will be issue. One thing you can see is that the dividend payment for most companies is steadily increasing without any big jump (besides BlackRock (NYSE: BLK ) in 2011). However, I can compare the price evolution of the portfolio: The average stock price gain is 114.65%, more than double the VIG. Conclusion The conclusion of using ETFs vs. handpicked dividend stocks is similar to the conclusion of my previous post: First and foremost; as long as you reach your financial goals – you probably have the right method, Second; market index ETFs such as SPY are too wide to represent a dividend growth investing strategy. They are good products, but not for dividend investors, Third; similar to market index ETFs, dividend ETFs often includes a too wide number of companies. Handpicked dividend growth stocks, if done wisely, can beat such products. In order to make sure my investment strategy works, I use the VIG as a benchmark. So far, I’m very happy with my results and they justify the efforts I make to manage my portfolio. I think dividend ETFs can help you achieve your financial goals as well if you are not interested in taking the time to manage your own portfolio but still wish to invest in a vehicle paying dividends. Then again; there are no right answers besides the one that makes you comfortable with your financial objectives!

Dividend Growth Stock Overview: NextEra Energy

About NextEra Energy NextEra Energy (NYSE: NEE ) generates, distributes and sells electricity to customers in 27 states and Canada. The bulk of the company’s customers are in Florida, served by its subsidiary Florida Power & Light Company. In addition to Florida Power & Light, NextEra Energy operates subsidiaries that generate renewable energy, provide electricity service to locations in Texas and New Hampshire, and sell fiber optic telecommunications services around the United States. The company employs nearly 14,000 people, and is headquartered in Juno Beach, Florida. Nearly 5 million customers are served by Florida Power & Light, which has 25,100 megawatts (MW) of electrical generation capacity. Over 90% of FPL’s capacity comes from natural gas and nuclear power. Based on 2014 figures (the latest year that’s available), over half of the operating revenues come from residential accounts, and another 36% come from commercial accounts. While wholesale revenues account for only 3% of the total, wholesale revenues were negligible as recently as 2012. NextEra Energy prides itself on using renewable power generation sources, and its promotional materials tout this effort; however, FPL’s two solar generation facilities provide only 35 MW of capacity. The company’s other major subsidiary is NextEra Energy Capital Holdings, Inc., which owns NextEra Energy Resources (NEE Resources) and NextEra Energy Transmission, LLC (NEET). NEE Resources is a wholesale generator of power and operates NextEra Energy’s competitive energy businesses (as opposed to its rate-regulated businesses). It also conducts energy-related commodity marketing and trading activities to mitigate risks from fluctuations in energy prices. NEET owns and operates two subsidiaries of its own, Lone Star and NHT, which provide rate regulated electricity service in parts of Texas and New Hampshire, respectively. NEET also owns FPL FiberNet, which leases internet network capacity to customers in Texas, New Hampshire and parts of the south-central United States. In 2014, NextEra Energy posted total income of nearly $2.5 billion on revenues of $17.0 billion. 60% of the total income was provided by Florida Power & Light, with the remaining 40% coming from NEE Resources. Earnings per share were $5.60 in 2014; NextEra Energy recently reaffirmed full-year 2015 earnings in the upper half of a range of $5.40-5.70, which translates into a year-over-year increase of between 1% and 2%. Based on the current dividend of $3.08, the company’s payout ratio is 56%. It expects to compound EPS at 6-8% a year through 2018, and is projecting EPS of $5.85-6.35 in 2016 and $6.60-7.10 in 2017. NextEra Energy has a share repurchase program that was authorized in February 2005 and reaffirmed in July 2011. Its repurchase activity is sporadic. The initial authorization in 2005 was for 20 million shares, and over a decade the company has repurchased less than 7 million shares. As of December 2014, 13.3 million shares, representing 2.9% of the outstanding shares, remained on the program. The company is a member of the S&P 500 index and trades under the ticker symbol NEE. As a member of the S&P 500, once NextEra Energy has increased dividends for 25 consecutive years, S&P will classify the company as an S&P Dividend Aristocrat. Given that NextEra has made a conscious effort to increase its dividend each year for 21 years straight, I expect the company to continue to do so. This would put it on track to become a Dividend Aristocrat at the beginning of 2020. NextEra Energy’s Dividend and Stock Split History (click to enlarge) NextEra Energy has compounded its dividend at 8% over the last decade. It has paid dividends since at least 1983, and has increased them since 1995. The company announces annual dividend increases in mid-February, with the stock going ex-dividend at the end of February. In February 2015, NextEra Energy announced a 6.2% dividend increase to an annualized rate of $3.08 per share. The company should announce its 22nd consecutive annual dividend increase in February 2016. Historically, NextEra Energy has increased dividends in the mid-single digits, but over the past few years, it has increased the growth rate. Over the last 5 years, it has compounded its dividend at 9.02%, while over the past 10 and 20 years, the company has compounded the dividend at 8.05% and 6.46%, respectively. The company has split its stock twice. The splits, both 2-for-1, occurred in January 1985 and March 2005. A single share purchased prior to January 1985 would have split into 4 shares. Over the 5 years ending on June 30, 2015, NextEra Energy stock appreciated at an annualized rate of 19.0%, from a split-adjusted $46.00 to $95.23. This outperformed the 15.0% compounded return of the S&P 500 index over the same period. NextEra Energy’s Direct Purchase and Dividend Reinvestment Plans The company has both direct purchase and dividend reinvestment plans. You must already be an investor in NextEra Energy to participate in the plans; if you own the stock in your brokerage account, you’ll have to have it transferred into your name in order to join the plans. The minimum investment for additional direct purchases is $100, and the dividend reinvestment plan allows for full or partial reinvestment of dividends. The plans’ fees structures are favorable for investors. Depending on the source of the shares purchased – and, unfortunately, you’ll have no control over that – you’ll pay a maximum of 3 cents per share purchased if they’re purchased off the open market; there’s no charge if the shares are purchased directly from NextEra Energy. When you sell your shares, you’ll pay a transaction fee of either $15 or $25 (depending on the type of sell order) plus a commission of 12 cents per share. You’ll also get charged an additional $15 if you go through a phone agent to sell your shares. All fees will be deducted from the sales proceeds. Helpful Links NextEra Energy’s Investor Relations Website Current quote and financial summary for NextEra Energy (finviz.com) Information on the direct purchase and dividend reinvestment plans for NextEra Energy Disclosure: I do not currently have, nor do I plan to take positions in NEE.