July 3, 2013

High Dividend Stocks

Investing in dividend stocks, especially high dividend stocks, provide a stream of income that is taxed at a
maximum rate of 15% or 20% no matter how much money you receive from your investments.  I say 15% or 20% because for any amount of income equal to or below $450K - you'll be taxed at 15%, and for any amount above $450K - you'll be taxed at 20%.  You should know that for this article I am making the case to accept cash payments today in lieu of deferring income and re-investing the dividends in return for more stock.

Also, listed in this blog are 3 dividend stocks that are paying investors over 20%!  

The reason for investing in dividends and accepting cash in lieu of stock is because most of us have our earnings and/or savings for retirement already invested in stocks/bonds by way of our 401K, IRA, 403b, etc.   So we need to diversify.  Plus, when an investor invests, he/she is looking for their return on investment (ROI) rather quickly...not 30, 40, or 50 years down the road in most cases.

Basically, I'm making the case that if we were to use our lifetime working to build up multiple streams of income, instead of using our lifetime working to save up for an uncertain future...we'd be better off when our "golden years" inevitably came around.  Put it this way - if I showed up at your front door and said "pack your bags because we are going on a trip"...but I excluded details about the trip, or how long we were staying, or how much money you will need....you'd probably have a ton of questions for me...or wouldn't go on the trip.

This is the same as saving for retirement...life has already knocked at your door and said "pack your bags because we're going on a trip"...and you've already jumped in the car without a clue of where you're going or how much money you're going to need for this trip.  So you save a little and spend a little on this trip...without having a clue of how much you're going to need at the end of this trip...(i.e., the end of your working years).

If you've followed my twitter account recently, you'll notice on June 29th I made a post stating that "money is not a store of value, which is proven by the disproportionate number of people who can't retire via savings or 401K".  This means that you can only increase your steams of income ...so that you can have additional income coming in whether you're working or not.  You can't store money because it's liquid...it'll leak away from you.

--OK back to dividends--

Investing in dividends and taking cash payments today increases your discretionary income to invest in other things or use the money to live your life more abundantly. For example, if you're investing in dividends and making $400/month after taxes - you can spend (if you so desire) $400 every month because you will be receiving more money the next month...without working for it...because your money is working for you.

Some people may feel like they'd rather keep the money reinvesting into stock and making more money instead of taking out the cash payments.  That's totally up to them and nothing is wrong with that.  But obviously the increase in cash flow is far more important than storing or saving  up all of your investments...for retirement's sake.

There are 3 huge stocks that I'd like to point out because they have the strongest corporate earnings, have a very diversified energy structure, and pay over 20% of your investment in dividends!  The stocks are listed below:
  1. CIG – Companhia Energetica Minas Gerais (ADR) — 21.10% in dividend annual yield
  2. CVRR – Coffeyville Resources – 21.02% in dividend annual yield
  3. NTI – Northern Tier Energy LP – 20.48% in dividend annual yield