Dollar Wise Decisions

Friday, September 29, 2006

DWDI vs SPDR - 9/29 Recap

Major Markets, DWDI & SPDRs ended today as follows
Market% ChangeValue
Dow-0.34%11,679.07
S&P 500-0.25%1,335.85
NASDAQ-0.51%2,258.43
---
DWDI-0.47%1,015.22
SPY-0.08%1,016.05
Personal Portfolio -0.28%

The 10 Stocks that make up the DWD Index
Stock% ChangeValue
Anheuser-Busch-0.96100.76
Biomet-1.3899.90
Fastenal-2.89101.36
Home Depot-1.17100.86
Johnson&Johnson0.06101.53
Medtronic0.1999.66
Microsoft-0.18102.59
Wal-Mart-0.98102.13
Washington Post0.17103.70
Wrigley0.09102.72

Looks like everything starting with the letters "Mi" on were the biggest winners for the week with the Washington Post scoring the biggest with a total gain of 3.70%

Biomet and Medtronic are two stocks that can be bought cheaper today than at the beginning of the week. They are also two stocks I've wondered about because both of them are in the Medical Equipment catagory and when only 10 stocks comprising the index I've been concerned about the unequal weighting in the Healthcare Services (HS).

The S&P 500 has a weighting of 12.29% in HS while the DWDI has a 30% weighting in HS. Johnson & Johnson makes up the third stock in the healthcare sector. (each stock initially made up 10% due to the equal weight distribution of $100 invested per company)

There are a few different ways to look at this index (or potential portfolio) - as a portfolio I don't think I would want both Biomet and Medtronics in the mix. Consumer services is like the Healthcare Services because we have both Home Depot and Wal-Mart in the mix and honestly, neither of those two companies are initially appealing to me. I haven't cared for Home Depot because of their management decisions and MorningStar would seem to agree with that assesment by giving HD a Stewardship Grade of a 'D'.
Wal-Mart is personally interesting because it was one of my first "big buys" when I was younger. I had bought 150 shares of the company at a bit over $60/share ...$64 seems to come to mind and I believe they split shortly after I bought the shares. This was back in the mid '80s and was also when I started to realize that I could start to become my own bank because, after the stock split, I used those 300 shares in what's called a "perfected lien" and secured a loan at very favorable interest rates. To this day, I'm still not sure why I needed to use $9,000+ worth of stock for a loan or what the money was used for ...maybe someday I'll figure that out.
But, we're talking about 20 years ago and now-a-days I generally don't care to shop at Wal-Mart as much as I used to however, a few weeks ago I did stop by a Wal-Mart on a Monday morning around 8 a.m. and actually found the shopping experience to be pleasureable.

I've got a few different topics going here ...I had mentioned the different ways to look at an index. The DWDI is clearly not a specialized portfolio nor would I want it to be. I like the below average risk factor inherent with the stocks.

What I wouldn't mind doing is replacing Biomet with a Financial Services company, perhaps a bank. I would be keeping Metronics for the same reason most girls pick certain football teams to win - because either they've heard of one team more than another or they like the uniforms. I'm not sure what uniforms Metronics has but I have heard of them more than Biomet.

In the Manufacturing Economy sectors we have Consumer Goods, Industrial Materials, Energy and Utilities. I've got a 20% weighting in Consumer Goods with Anheuser-Busch and Wrigley ...talk about different ends of the spectrum.
Now, which one of these should be kept? which one to replace ...
here is a good example of the psychology of money/investing and probably a good difference between men and women when it comes to the stock market. Overall, men tend to see money as a source of power while women will generally tend to view it in terms of security.
To say you own Anheuser-Busch with it's ultra cool stock symbol of BUD is quite a bit more macho than saying you own the chewing gum company, Wrigley with it's not so attractive stock symbol of WWY.

Still, these 10 stocks come from a screening and one of the major criteria I think I may have forgotten to mention in yesterdays post is the fact that all 10 of the DWDI stocks have increased their revenue and earnings per share every year for the past 10 years.

Thursday, September 28, 2006

DWDI vs SPDR - 9/28 Recap

Major Markets, DWDI & SPDRs ended today as follows

Market% ChangeValue
Dow+0.25%11,718.45
S&P 500+0.19%1,339.15
NASDAQ+0.29%2,270.02
---
DWDI+0.55%1,020.23
SPY-0.04%1,016.89

Personal Portfolio +0.26%

The 10 Stocks that make up the DWD Index

Stock% ChangeValue
Anheuser-Busch1.18101.74
Biomet0.37101.30
Fastenal1.20104.39
Home Depot0.66102.06
Johnson&Johnson0.12101.47
Medtronic0.8399.46
Microsoft-0.15102.77
Wal-Mart0.63103.15
Washington Post0.17101.26
Wrigley0.48102.63



For those of you just joining our program, I did a stock screening on Sunday, September 24th, 2006 from MorningStar which looked for 5 Star stocks that were currently selling for well below their fair value (as estimated by MorningStar) and were below average in risk. The results were the 10 stocks you see above. I then created a tracking portfolio which purchased just enough shares of each stock to equal $100 per stock thus creating a total portfolio value of $1,000 or an index value of 1000

As a benchmark, I also purchased enough shares of an ETF called Spiders (SPY) to also equal $1,000 so now we may track the benchmark Spiders (which track the S&P500) against the index of 10 stocks obtain via the MorningStar screening.

Since this blogsite is called Dollar Wise Decisions I decided to call the index the Dollar Wise Decision Index or DWDI.

I am also curious how purchasing the DWDI stocks via dollar cost averaging will compare to the one time $1,000 purchases. I am considering purchasing $25 worth of each company once a month - ...and by "considering" I guess what I'm really saying is I'm trying to figure out how I can afford an additional $250/month outlay of cash that I hadn't really planned for. It will be important to be able to maintain that purchase level for at least a year and maybe two years (as an initial guess) I already have DRIPs for JNJ and BUD which require a minimum monthly investment of $25 which is why I decided on that dollar amount for all of the stocks so my investments in each company will be equally weighted.

DWDI vs SPDR - 9/28 Recap

Major Markets, DWDI & SPDRs ended today as follows
Market%ChangeValue
Dow+0.17% 11,689.24
S&P 500+0.02%1,336.59
NASDAQ+0.09%2,263.39
---
DWDI-0.09%1,014.81
SPY+0.12%1,017.27

Personal Portfolio +0.38%

In the DWD Index we had six stocks lose ground today with BUD and WPO losing the most, Fastenal was nearly unchanged dropping only a penny and Biomet, Home Depot and Medtronic all dropping 0.28, 0.16 and 0.31 respectively.
Johnson & Johnson was up 0.15, Microsoft up a respectable 0.88, Walmart up 0.51 and Wrigley up 0.95.
In the last five days Medtronic has dropped from $47.61 to todays close of $45.97 which is a drop of about 3.4%. The Fair Value Estimate for MDT is $64 which would represent a handsome 38% gain by just getting to fair value. The consider buying price for MDT is $54.50, below average risk (as are all the companys in the DWDI) a wide economic moat (like the rest) and a Stewardship Grade of 'A'
Medtronics is a Large Growth stock which kind of surprised me. I had heard of the company before but didn't realize they had such a large cap. It also looks like at around todays prices that this company is as inexpensive now as it was back in 2003. hmmm - looking back at my previous post I suppose I should have realized MDT was a large growth stock because that's how I had it classified on my post from Monday, Sept 25th!

I'm curious to see how these stocks fared against others in the MorningStar style box. MorningStar shows how well each type of company fared each day. Below we'll examine how each type of stock fared overall today and then compare it with the DWDI
ValueCoreGrowth
Large0.0%-0.1%0.2%
Mid-0.1%0.1%0.2%
Small0.3%0.3%0.5%


DWDI performance below
ValueCoreGrowth
Largena0.22%0.28%
Midna-0.89%-0.58%
Smallnanana

Wednesday, September 27, 2006

DWDI vs SPDR - 9/27 Recap

Major Markets, DWDI & SPDRs ended today as follows
Market%ChangeValue
Dow+0.17% 11,689.24
S&P 500+0.02%1,336.59
NASDAQ+0.09%2,263.39
---
DWDI-0.09%1,014.81
SPY+0.12%1,017.27

Personal Portfolio +0.38%

In the DWD Index we had six stocks lose ground today with BUD and WPO losing the most, Fastenal was nearly unchanged dropping only a penny and Biomet, Home Depot and Medtronic all dropping 0.28, 0.16 and 0.31 respectively.
Johnson & Johnson was up 0.15, Microsoft up a respectable 0.88, Walmart up 0.51 and Wrigley up 0.95.
In the last five days Medtronic has dropped from $47.61 to todays close of $45.97 which is a drop of about 3.4%. The Fair Value Estimate for MDT is $64 which would represent a handsome 38% gain by just getting to fair value. The consider buying price for MDT is $54.50, below average risk (as are all the companys in the DWDI) a wide economic moat (like the rest) and a Stewardship Grade of 'A'
Medtronics is a Large Growth stock which kind of surprised me. I had heard of the company before but didn't realize they had such a large cap. It also looks like at around todays prices that this company is as inexpensive now as it was back in 2003. hmmm - looking back at my previous post I suppose I should have realized MDT was a large growth stock because that's how I had it classified on my post from Monday, Sept 25th!

I'm curious to see how these stocks fared against others in the MorningStar style box. MorningStar shows how well each type of company fared each day. Below we'll examine how each type of stock fared overall today and then compare it with the DWDI
ValueCoreGrowth
Large0.0%-0.1%0.2%
Mid-0.1%0.1%0.2%
Small0.3%0.3%0.5%


DWDI performance below
ValueCoreGrowth
Largena0.22%0.28%
Midna-0.89%-0.58%
Smallnanana

DWDI vs SPDR - Daily Recap & More

SPDRs up 0.83% to 1016.05
DWDI up 0.41% to 1015.78 1/2

Major Markets & DWDI ended today as follows

Market% ChangeValue
Dow+0.81% 11,669.31
S&P 500+0.75% 1,336.34
NASDAQ+0.55% 2,261.34
---
DWDI+0.41%1,015.78
SPY+0.83%1,016.05


What makes me feel best here is when I look at my personal portfolio and see that it was up 0.93% for the day which beats everything up there. hehehe

For the DWDI only two stocks went down. Medtronics by 0.19 and Wrigley by .07
I would like to do more analysis on the S&P and see which stocks drove it up the most. I've been surprised that the correlation between the S&P and the Spider ETF doesn't track more closely day to day. They certainly chart well together and I suppose I've just never looked this closely before.

I did learn a little more about MorningStars 5 star rating system and that 5 star stocks with below average risk (as we have in the DWD Index) are expected to gain an annualized return of 15.5% over the next three years. 5 star stocks with high risk are expected to return 30.5% over the same annualized time frame.

In my personal portfolio, ConocoPhillips and ExxonMobil let the pack with gains of 1.99% and 2.11% respectively. In the Lisa Portfolio, recently acquired Worthington Industries (WOR) was up 2.77% and good old Canadian Oil Sands Trust (COSWF) was up 2.89%

Compass Minerals International (CMP) rose a pleasant 1.47% today. That company is up 19.8% for the year and is one I choose for my IRA after completing my funding for 2006 in April of this year. It's one of those boring, non-sexy stocks that Warren Buffet would seem to love and after deciding on it I've been able to capture over a 10.6% return in less than 5 months. A nice perk to CMP is that they pay a 4.2% dividend.

That high dividend makes me think of a company called Tuesday Morning (TUES) which is a closeout retailer of upscale home furnishings. They opened 732 stores in 46 states as of 12/31/05. It's an interesting store because they're only open during periodic sales events lasting from four to five weeks and are usually closed during January and July, which tend to be weak months for retailers.
TUES is currently at $14.29/share and Morningstar has a FairValue of $28 which is right around it's 52 week high. A nice bonus w/ TUES is they pay a 5.70% dividend. The company is 97.3% institutionally owned. Pat Dorsey, CFA & Director of Equity Research at Morningstar also believes that if MorningStar is wrong about their valuation and the company's price stays where it is that TUES could be taken private again at a nice premium to todays stock price.

Vonage (VG) is another company worth a second look. VG just had its IPO on May 23rd of this year. So, on May 24th we find that five different insiders bought some of the Vonage stock for $17/share - three people bought 100 shares each and two others bought 2,500 and 5,000 shares. VG started tumbling and has fallen to $6.95/share right now but what's very interesting is that from August 4th through Aug 21 the insiders have come out in force and didn't just buy a hundred or a few thousand shares, this time they acquired over 500,000 shares of VG with prices ranging from $6.45 to $6.82

At the end of 2004 VG had 390,000 subscribers, by EOY 2005 that number grew to 1,269,000 and ending in June of 2006 that number is up to 1,853,253.
VG is a small-cap growth company, brand spankin new to the stock market and has 3 yr revenue growth of 552.1%
I don't have any small growth companies in my current portfolio and this would also diversify me w/ some telcom but probably a bigger reason I'll keep this company under consideration is the fact that every person I've ever talked with that has Vonage has been very pleased with their service.

Tuesday, September 26, 2006

DWDI vs SPDR - 9/26 Recap

SPDRs up 0.83% to 1016.05
DWDI up 0.41% to 1015.78 1/2

Major Markets & DWDI ended today as follows

Market% ChangeValue
Dow+0.81% 11,669.31
S&P 500+0.75% 1,336.34
NASDAQ+0.55% 2,261.34
---
DWDI+0.41%1,015.78
SPY+0.83%1,016.05


What makes me feel best here is when I look at my personal portfolio and see that it was up 0.93% for the day which beats everything up there. hehehe

For the DWDI only two stocks went down. Medtronics by 0.19 and Wrigley by .07
I would like to do more analysis on the S&P and see which stocks drove it up the most. I've been surprised that the correlation between the S&P and the Spider ETF doesn't track more closely day to day. They certainly chart well together and I suppose I've just never looked this closely before.

I did learn a little more about MorningStars 5 star rating system and that 5 star stocks with below average risk (as we have in the DWD Index) are expected to gain an annualized return of 15.5% over the next three years. 5 star stocks with high risk are expected to return 30.5% over the same annualized time frame.

In my personal portfolio, ConocoPhillips and ExxonMobil let the pack with gains of 1.99% and 2.11% respectively. In the Lisa Portfolio, recently acquired Worthington Industries (WOR) was up 2.77% and good old Canadian Oil Sands Trust (COSWF) was up 2.89%

Compass Minerals International (CMP) rose a pleasant 1.47% today. That company is up 19.8% for the year and is one I choose for my IRA after completing my funding for 2006 in April of this year. It's one of those boring, non-sexy stocks that Warren Buffet would seem to love and after deciding on it I've been able to capture over a 10.6% return in less than 5 months. A nice perk to CMP is that they pay a 4.2% dividend.

That high dividend makes me think of a company called Tuesday Morning (TUES) which is a closeout retailer of upscale home furnishings. They opened 732 stores in 46 states as of 12/31/05. It's an interesting store because they're only open during periodic sales events lasting from four to five weeks and are usually closed during January and July, which tend to be weak months for retailers.
TUES is currently at $14.29/share and Morningstar has a FairValue of $28 which is right around it's 52 week high. A nice bonus w/ TUES is they pay a 5.70% dividend. The company is 97.3% institutionally owned. Pat Dorsey, CFA & Director of Equity Research at Morningstar also believes that if MorningStar is wrong about their valuation and the company's price stays where it is that TUES could be taken private again at a nice premium to todays stock price.

Vonage (VG) is another company worth a second look. VG just had its IPO on May 23rd of this year. So, on May 24th we find that five different insiders bought some of the Vonage stock for $17/share - three people bought 100 shares each and two others bought 2,500 and 5,000 shares. VG started tumbling and has fallen to $6.95/share right now but what's very interesting is that from August 4th through Aug 21 the insiders have come out in force and didn't just buy a hundred or a few thousand shares, this time they acquired over 500,000 shares of VG with prices ranging from $6.45 to $6.82

At the end of 2004 VG had 390,000 subscribers, by EOY 2005 that number grew to 1,269,000 and ending in June of 2006 that number is up to 1,853,253.
VG is a small-cap growth company, brand spankin new to the stock market and has 3 yr revenue growth of 552.1%
I don't have any small growth companies in my current portfolio and this would also diversify me w/ some telcom but probably a bigger reason I'll keep this company under consideration is the fact that every person I've ever talked with that has Vonage has been very pleased with their service.

DWDI - Betas & Short Term Stock Ratings

I was pleasantly surprised when I looked up the Beta's for each of the companies in the Dollar Wise Decisions Index (DWDI) because, with the exception of Home Depot, which had a beta of 1.51 and Microsoft which had a beta of 1.02, all the other stocks had beta's no higher than 0.68

Recall from my last post that a beta indicates a company's volatility and that betas greater than one indicate greater volatility than the market and betas less than one indicate less volatility.
For instance, many utility stocks have betas less than one while many Nasdaq stocks have a beta greater than one.

This is exactly what we saw with yesterdays market results. The market was up in general and the NASDAQ was up 19 basis points higher than the DWDI however as mentioned, since NASDAQ stocks generally have a beta higher than 1 we would expect a greater gain from those stocks when the market is up - however, when the market is down we would also expect a much greater loss.

Betas and Stock Scouter Ratings for DWDI stocks

CompanySymbolBetaRating
Anheuser-BuschBUD0.26

6

BiometBMET0.08

6

FastenalFAST0.68

5

Home DepotHD1.51

8

Johnson & JohnsonJNJ0.29

8

MedtronicMDT0.41

9

MicrosoftMSFT1.02

7

Wal-MartWMT0.60

6

Washington PostWPO0.29

6

WrigleyWWY0.17

6


Average Beta = 0.531
Average Rating = 6.7

These are really great results, we have a portfolio here with an average Beta of 0.531 which means this portfolio as a whole is about 1/2 as volatile as the Market. If we take HD out of the mix our average drops to 0.42
The lowest msn Stock Scouter Rating comes from Fastenal (which is a bit of a surprise) at 5 but according to msn, at a rating of 5 Fastenal is expected to outperform the market with less than average risk. For a stock like BUD, rated at a 6, the outlook is to match the market with very low risk.

Keep in mind, these are all 5 star stocks according to MorningStar and one of the criteria in our initial search was below average risk so it's nice to see the Betas and msn Stock Scouter ratings confirm this below average risk.

Also, with such robust ratings for each of these stocks we should see the divergence between the DWDI and the S&P 500 (as portrayed by SPY) increase. The DWDI should go up more than the S&P on days when the market is up and fall by less than the S&P when the market is down.

Monday, September 25, 2006

DWDI vs SPDR - daily recap

Spider index was up 0.77% to 1007.68 while the
DWD index was up 1.17% to 1011.61

In terms of percentages the biggest gainer in the DWDI was Fastenal (FAST) up 3.18% to $39.28
The only loser today in the DWDI was Medtronic (MDT) which gave up $0.13 but, given that MDT is valued at $46.47 per share it may have been that the last trade of the day was a sell for MDT and the $0.13 simply represents the spread.

Major Markets & DWDI ended today as follows

Market% ChangeValue
Dow+0.59% 11,575.81
S&P 500+0.88% 1,326.37
NASDAQ+1.36% 2,249.07
DWDI+1.17% 1,011.61

DWI - Security Style Analysis

So far today, the Dollar Wise Index (DWI) seems to be in sync with the S&P500 and, in fact, moving just slightly ahead of the S&P which makes me wonder about the beta* of each stock as well as the average beta of the DWI portfolio as a whole.
Initially though, i'm curious about the distribution of these companies within the morningstar Stock Style box and have derived the following information;

Large Core Stocks

  • Anheuser-Busch Co.
  • Home Depot
  • Johnson & Johnson
  • Microsoft
  • Wal-Mart


Large Growth Stocks

  • Medtronic
  • Wrigley


Mid-Cap Core Stocks

  • Washington Post Co


Mid-Cap Growth Stocks

  • Biomet
  • Fastenal

So, this portfolio is biased towards Cor & Growth in both the Large & Mid-Cap sectors.

Overall and generally speaking I like this basket of stocks. I've seen many of them touted by different publications and analysts. Fastenal and Wrigley both had a video recomendations by Pat Dorsey, CFA and Director of Equity Research for MorningStar. Fastenal is also under accumulation by the NAIC's investment clubs around the country. It's hard not to find Microsoft and Wal-Mart toted all over the place and companies like Johnson & Johnson & Home Depot (among others) appear in Jubak's Journal among the 50 greatest stocks to own.

One other thing I may add to the mix is actually investing in the portfolio with my own money. At first I was considering plunking down $1,000 to buy $100 worth of each of the ten stocks but being acutely aware of the benefits of dollar cost averaging I am now considering monthly investments of $25 per stock for a total of $250/month. A $10/month level seemed too low and then I realized I already have DRIPs in place with Anheuser-Busch and Johnson & Johnson which require minimum deposits of $25/month so, I figure we'll go $25 across the board.

I like this scenario because I'm considering an initial time frame of two years which will give a total of principle invested of $6,000 after that time period. We'll have to establish a few rules governing the portfolio and for now, I'd like to add the suggested selling price of each stock for reference. Portfolio rebalancing is another aspect that should be addressed but, we'll get to that in due time.


From TheFreeDictionary.com -
*Beta - Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2 it's theoretically 20% more volatile than the market.

Many utilities stocks have a beta of less than 1. Conversely most high-tech Nasdaq-based stocks have a beta greater than 1, offering the possibility of a higher rate of return but also posing more risk.

Sunday, September 24, 2006

The Dollar Wise Index

Tonight we'll create our own index and pit it against the S&P 500.
The Dollar Wise Index (DWI) vs Spiders
DWI ...what an acronym! ...so be it ...
The DWI is comprised of 10 stocks which have all had terrific 10 year records. These companies have boosted sales every year for 1o years straight. Additionally, we're looking for value so I looked for stocks selling below their fair value (fair value as determined by MorningStar) , we also looked for below average risk and a stark lack of competition (wide moat in morningstar lingo)
To summarize;

  1. Revenue increases for 10 years straight
  2. Earnings per share increases 10 years straight
  3. non-distressed companies
  4. current price below Fair Value price
  5. Below Average Risk
  6. Wide Moat
CompanySymbolCurrent
Price
Fair
Value
% below
Fair Value
Anheuser-BuschBUD47.1557.0017.3 A/19.5
BiometBMET32.2239.0017.4 B/19.8
FastenalFAST38.0753.0028.2 A/31.2
Home DepotHD35.9644.0018.3 D/12.3
Johnson&JohnsonJNJ63.9676.0015.8 B/17.2
MedtronicMDT46.6064.0027.2 A/19.9
MicrosoftMSFT26.6634.0021.6 A/22.2
Wal-MartWMT48.2958.0016.7 A/17.6
WashingtonPostWPO710.65100028.9 B/20.8
Wrigley WWY44.8459.0024.0 C/26.4
The last column shows how far below (in terms of percentages) the current price is relative to the Fair Value price. I've also added some additional information. The Letters (A, B, C or D) is the stewardship (how well the company is managed) grade assigned to each company by morningstar and the number after the grade is the companies P/E ratio. Call me old school but I still prefer to see a low P/E ratio.

This is going to be a very easy index to track (at least that's what I tell myself now!) I've entered these stocks into MorningStars portfolio manager and designated enough shares of each to equal a $100 for each company, thereby giving me a total price (or starting index) of 1000. Additionally, I've entered in 7.6063 shares of Spiders (SPY) which, at $131.47/share comes out to a value (or starting index) of 1000 also.

Tuesday, September 12, 2006

"Give me a K!"

K is the stock symbol for Kelloggs! So far, Kelloggs has the most easily accessible Direct Purchase Plan I've come across in quite some time. With the 30 stocks listed in the previous post, most will allow you to join their Dividend Reinvestment Plan by either already being a shareholder or making an initial purchase of anywhere from $250 to $1,000 via their transfer agent. With Kelloggs the initial purchase is a mere $50! (their transfer agent is Wells Fargo) After that initial purchase, you are allowed to make additional monthly investments of $25. Other than when you sell the stock the only fee is a $10 startup fee which is included in the initial purchase of $50; everything else is totally free or, more accurately stated, paid for by Kelloggs. The only way cheaper I know of to obtain a share of K to get started in the plan would be to join BetterInvesting.org (for $50) then use their Low Cost Investment Program which charges only a $7.00 fee but that option also includes paperwork and having to use snail mail and waiting. I'll opt for the $10 route which, in fact I did upon reading the fees in Kelloggs Prospectus and some quick research.

I already had a reasonably favorable opinion of Kelloggs but a couple things really stood out. First, according to MorningStar, K's business risk level was Below Average and even though it only ranked 3 out of 5 stars on MorningStar's rating system, I noticed a graph of the companies 10 year performance compared to the S&P 500. If you had invested $10,000 in the S&P500 then after 10 years you would have ended up with close to $10,000 but the same investment in Kelloggs would give you a balance of nearly $20,000.
Now, granted, money doubling in 10 years only requires an annual rate of return of about 7.2% and Kelloggs average 10 year return was 7.1% so I'm kind of looking at this stock as sort of a beefy savings account. That's one way of looking at it but more-so, it looks like large cap stocks are on their way back into favor after being left in the dust the better part of this decade by small and mid caps. Also, the fact that the YTD return on K is currently at 18.0% with a 3 year trailing return of 17% is somewhat favorable as well.
Even Warren Buffet is getting back into the game with Large Caps stocks as evident through his recent purchases of Conoco Phillips, General Electric and UPS after spending so many years on the sideline and watching the market.

Keeping in mind this site is for "normal" people and not trust fund babies with $10,000 per month in extra disposable income I'd say Kelloggs could be an excellent start for someone just looking to get into the world of investing or stock junkies like me who love a great value with a superb company.

Kelloggs currently has 14 analysts covering their stock with 8 giving it a Strong Buy, 4 giving it a Moderate Buy and 3 saying Hold which pretty much how the recommendations have been for the last 3 months.

What a deal! 10 bucks to cover all the initial cost and enrollment, then free stock purchases for as long as you want!

Saturday, September 09, 2006

30 DOW Stocks Summary Table

30 DOW Stocks Summary Table

Co.

Where to Buy
or Register

Initial
Purchase

IP/mo
Option

Setup
Fees

Min$/
Month

Trans
Fee$

MMM

Wells Fargo

(1)

-

$0

$10

0

AA

EquiServe

(1)

-

$0

$25

0 - 1

MO

ComputerShare

(1) $500

$50

$15

$50

2.5 -5

AXP

BankofNewYork

(10)$1000

?

$6

$50

3 - 6

AIG

EquiServe

NA

NA

NA

NA

NA

T

ComputerShare

(1) $500

-

$10

$50

1 -2.5

BA

EquiServe

(1)

-

$0

$50

1

CAT

Mellon Investor

(1) $250

$25

$0

$25

0-2.5

C

Citibank

-

-

-

-

0

KO

ComputerShare

(1)

-

$0

$10

0 - 1

DD

ComputerShare

(1)

-

$3

$20

0 - 3

XOM

EquiServe

(5) $250

$50

$0

$50

0

GE

BankofNewYork

(1) $250

-

$7.5

$10

1 -3.5

GM

ComputerShare

(1)

-

$0

$25

0 - 2

HPQ

ComputerShare

(10)

-

$0

$50

1.25-2.5

HD

EquiServe

(1) $500

$50

$5

$50

2.5

HON

American Stock

(1)

-

?

$25

?

INTC

ComputerShare

(1) $250

-

$10

$50

2.5 - 4

IBM

EquiServe

(1) $500

$50

$5

$50

1 - 5

JPM

Mellon Investor

(1) $250

$50

$15

$50

2 - 5

JNJ

EquiSerive

(1)

-

$10

$25

0 - 1

MCD

ComputerShare

(10) $500

$50

$0

$50

1.5 -6

MRK

Wells Fargo

(1) $350

$50

$0

$50

2 - 5

MSFT

Mellon Investor

(1) $1000

$50

$10

$50

2 - 5

PFE

EquiServe

(1) $500

-

$0

$50

0

PG

Proctor&Gamble

(1) $250

-

$5

$50

1 - 2.5

UTX

EquiServe

(10)

na

$0

$100

0

VZ

EquiServe

(1) $500

$100

$5

$50

1 -2.5

WMT

EquiServe

(1) $250

$25

$20

$50

1 - 5

DIS

Walt Disney

(10)$1000

$100

$0

$50

1 - 5



AXP, PG, DIS - online purchase not available
CAT - no fees when total shares owned is less than 200

Thursday, September 07, 2006

15 DRIPS – The Rest of the Dow 13-17 of 15

Today we take a look at J.P. Morgan Chase & Co (JPM), Johnson & Johnson (JNJ) and Microsoft (MSFT).

J.P. Morgan Chase & Co. (JPM) - DPP & DRIP
Initial Setup.
Initial Purchase$250 - $250,000
OR per Month Option$50.00 for 5 months
One Time Setup Fee$15.00
Shares to Qualify for DRIP1
..
Purchase Limits.
Min Purchase$50.00
Max Purchase$100,000 /year
..
Transaction Fees.
Optional Cash Investments$5.00 or $3.50 if debit
Automatic Investments$2.00
Dividend Reinvestments$0.00
..
Fees per Share.
From a Purchase (including initial)$0.03/share
From a Sale$0.05/share
..
Sales Fee$15.00
..
Plan Brochure.

Transfer Agent --->

Mellon Investor Service


Johnson & Johnson (JNJ) - DPP & DRIP
Initial Setup.
Initial PurchaseNA - DRIP Only
One Time Setup Fee$10.00
Shares to Qualify for DRIP1
..
Purchase Limits.
Min Purchase$25.00
Max Purchase$50,000 /year
..
Transaction Fees.
Optional Cash & One time Bank Debit$0.00
Automatic Investments$1.00
Dividend Reinvestments$0.00
..
Fees per Share.
From a Purchase$0.00/share
From a Sale$0.12/share
..
Sales Fee$15.00
..
Plan Brochure - available at website.
Transfer Agent WebsiteEquiSerive.com


Well, I learned something here about JNJ - I've always had JNJ listed in a Bill Pay section of one of my checking accounts so I could save the $1.00 fee on the automatic purchases but, I've learned that one time purchases done electronically are not subject to the $1.00 fee. So ...I thought I would test this out by making an additional $25 purchase via the EquiServe website (just to confirm). Today is 9/7/06 and the estimated Debit date shown to me upon confirming my purchase is 10/4/2006 and estimated Purchase Date is 10/9/2006! Yikes! about a month away so, I'd have to conclude these single purchases from everyone that purchases like this are made on a single day each month and I must have just missed that day.
Anyway, we'll push this purchase through and maybe in a couple weeks I'll try another test purchase to see if maybe I get the same debit and purchase dates.


Microsoft (MSFT) - DPP & DRIP
Initial Setup.
Initial Purchase$1,000
OR Per Month Option$50
One Time Setup Fee$10
Shares to Qualify for DRIP1
..
Purchase Limits.
Min Purchase$50.00
Max Purchaseunlimited
..
Transaction Fees.
Optional Cash Investments$5.00
Automatic Investments$2.00
Dividend Reinvestments5% to $3.00 max
..
Fees per Share.
From a Purchase$0.06/share
From a Sale$0.12/share
..
Sales Fee$15.00
..
Plan Brochure.
Transfer AgentMellon Investor Services


Here's another company that's listed on other sites as a DRIP only site but when we take the time to look we find it also offers a Direct Purchase Plan. I can't say I'm crazy about all their fees though.
What the heck, there's only two more companies to look at and since I now have a template to use for formating the information I find, let's knock out the last two companies in the DOW.

United Technologies Corporation (UTX) - DPP & DRIP

Initial Setup.
Initial Purchase$1,000
OR Per Month Option$50
One Time Setup Fee$10
Shares to Qualify for DRIP10
..
Purchase Limits.
Min Purchase$100
Max Purchase$120,000/?
..
Transaction Fees.
Optional Cash Investments$0.00
Automatic InvestmentsNA
Dividend Reinvestments$0.00 max
..
Fees per Share.
From a Purchase$0.00/share
From a Sale$0.00/share
..
Sales Fee$10.00
..
Plan Brochure by Mail.

Transfer Agent Website --->

EquiServe.com


Well, here we have the Transfer Agent, Computershare saying we need a minimum of 10 shares to start in UTX's DRIP and DirectInvesting.com says only 1 share. I would be inclined to believe the Transfer Agent over DirectInvesting but am not positive so I've requested Plan Material from UTX to find out for sure.
Several things worth mentioning here. For one thing, I've started linking the companies website to the full name of the company at the top of the table. The symbol, in this case UTX, provides a link to the Investors Relations webpage and in the case of UTX, their Investors Relations page is very interesting as it relates to a conversation I had with a co-worker today.
He made the comment that the DOW was not the place for us to be because it didn't earn enough and since we were considering a relatively shorter investing period of about 20-25 years he figured other, perhaps more aggressive investment vehicles such as a Diversified International type of fund was more appropriate.
Specifically, we were talking about Fidelity's Diviersified International Fund (FDIVX) which both of us have in our 401(k) plan (and are currently quite happy about!)
But, let's compare FDIVX with UTX over the last 10 years
From the Fidelity website (for FDIVX data) and moneycentral.msn.com (for UTX data) we find the Year to Date return for FDIVX at 11.25% and 13.7% for UTX. Next let's look at 1, 3, 5 and 10 year returns for each investment. (data is through 8/31/06)

Average Annual Total Returns (%)

.FDIVXUTX
1year21.5025.4
3 year22.9618.9
5 year14.8415.5
10 year13.1717.8


Verizon Communications (VZ) - DPP & DRIP

Initial Setup.
Initial Purchase$500
OR Per Month Option$100
One Time Setup Fee$5
Shares to Qualify for DRIP1
..
Purchase Limits.
Min Purchase$50
Max Purchase$200,000
..
Transaction Fees.
Optional Cash (check or Internet)$2.50
Automatic Investments$1.00
Dividend Reinvestments5% - $1 min/$2 max
..
Fees per Share.
From a Purchase$0.03/share
From a Sale$0.07/share
..
Sales Fee$10.00
..
Plan Brochure, go to EquiServe.comProspectus By Mail
Transfer Agent WebsiteEquiServe.com


What a bunch of CRAP! A $1.00 minimum on Dividend Reinvestments?!
So, when you're starting out and receive dividends on $100 (which at a current dividend yield of 4.56%) comes out to $1.14 for the quarter then Verizon is going to charge you $1.00 of the $1.14? What Crap! Even with $200 invested you'd still be losing close to 1/2 of your dividends on that $1 minimum fee ...Even with $500 invested and a $5.70 dividend that dollar (out of the $5.70) still represents a fee of 17.5% of your dividend - yeah, it's only a dollar but heck ...so many other options to buy where dividend reinvestments are FREE! This is on top of the $1 - $2.50 fee for every purchase you make ...
OK, I'm settled down ...I guess a buck a month to invest via auto investing is pretty decent ... anyway ...

That would be it for the DOW stocks ...so I'll have to change the title of this post to 13-17 of 15!
Next, I'll have to get some tables set up which summarize all this data and improve on some of the links but we'll have something rather nice ...and basically something who's accuracy will far exceed anything else I've been able to find on the internet. Actually, the base information is quite a bit better also.




15 DRIPS - The Rest of the Dow, 10 - 12 of 15

15 DRIPS – The Rest of the Dow 10 – 12 of 15

Originally, I thought 27 out of the 30 stocks that make up the Dow offered either Direct Purchase Plans (DPPs) or Dividend Reinvestment Plans (DRIPs) with 12 of the companies offering DPPs and 15 offering DRIPs only.

Well, what I’ve learned so far is that I haven’t found a single source on the internet yet that is wholly accurate so we’ll have to wait until I go through each individual company in the Dow and that means learning the Transfer Agent for each company and reviewing any prospectus, plan or brochure that may be available. On some occasions I’ve ordered Investment Kits directly from any company I had questions about just to help ensure accuracy.

When I get through the final six stocks I’ll get them in a table with the most relevant information and then I’ll also have details available for each company.

Today, we investigate Hewlett-Packard Co. (HPQ), Honeywell International Inc. (HON) and Intel Corporation (INTC).

Hewlett-Packard Co. (HPQ) DRIP
Initial Setup.
Initial PurchaseNA - DRIP Only
One Time Setup Fee$0.00
Shares to Qualify for DRIP10
..
Purchase Limits.
Min Purchase$50.00
Max Purchase$10,000 /month
..
Transaction Fees.
Optional Cash Investments$2.50
Automatic Investments$1.25
Dividend Reinvestments.lessor of 5% or $2.50
..
Fees per Share.
From a Purchase$0.08/share
From a Sale$0.08/share
..
Sales Fee$10.00
..
Plan Brochure.
Transfer AgentComputerShare



Honeywell International Inc. (HON) DRIP

Honeywell is either a bit of an odd duck or amazingly refreshing depending upon how you want to look at it. I've been to the company website at the Investors Relations section to learn about a supposed DRIP they offered but, all I found was a recomendation to go to www.Sharebuilder.com and use their service if you want to buy Honeywell stock!
After looking at how expensive it is to get into Hewlett-Packard's DRIP program we may be inclined to think Sharebuilder isn't such a bad idea and in reality, it's not a bad idea. Sharebuilder.com is a premier investing site, very professional and well established. I've had a couple of accounts with them since the year 2000.

Sharebuilder.com is a benchmark I have in my head that I use to compare with all these DPPs and DRIPs we are discovering because I know at Sharebuilder you'll never pay more than $4.00 for a single purchase and for only $12.00 you are allowed to make 6 different purchases in a given month which means only $2.00 per transaction plus, the dividend reinvestments are always free.

But, there are gems to be had with reference to DPPs & DRIPs. For example, companies like ExxonMobil, 3M & Pfizer which don't charge a dime for anything except the sale of the stock.

Even with some other companies like Johnson & Johnson or Coca~Cola the most you'll be charged is a single dollar for monthly purchases. So, let's keep looking for more of these gems with our next stock, Intel.


Intel Corporation (INTC) - DPP & DRIP
Initial Setup.
Initial Purchase$250
One Time Setup Fee$10.00
Shares to Qualify for DRIP1
..
Purchase Limits.
Min Purchase$50.00
Max Purchase$100,000 /year
..
Transaction Fees.
Optional Cash Investments$4.00
Automatic Investments$2.50
Dividend Reinvestments$0.00
..
Fees per Share.
From a Purchase$0.05/share
From a Sale$0.05/share
..
Sales Fee$4.00
..
Plan Brochure.
Transfer AgentComputerShare


Here, the information on the Transfer Agents site differs with the Intel provided Plan brochure. Computershare says additional cash purchases invoke a $5.00 fee while the Intel brochure clearly states on pages 6 and 7 that the fee is $4.00. In this case the companies brochure will supersede the information found on the transfer agents summary page. Just noticed that the sale fee differs also - Computershare site list 10 cents for per share fees while the brochure list 5 cents.

Again, the minimum monthly purchase here comes out to $2.50+ which exceeds what you would pay on Sharebuilder w/ the $12 option but, I suppose if someone doesn't want to make six purchases per month then it is a bit cheaper than the $4.00 price at sharebuilder for a single purchase.

Next post we'll continue our investigation into the DOW by looking at J.P. Morgan Chase & Co (JPM), Johnson & Johnson (JNJ) and Microsoft (MSFT).

After those stocks we only have United Technologies and Verizon to consider then we can provide some accurate information in some easy to read tables. I'm sure we'll have one table with the stocks in alphabetical order but then we'll rank them in order of expense, from FREE to not so free.

Tuesday, September 05, 2006

15 DRIPS – The Rest of the Dow, 7 - 9 of 15

Forging Ahead …This post will examine Coca-Cola Co. (KO), DuPont (DD) and General Motors (GM).

Coca-Cola Co. (KO) DRIP
Initial Setup.
Initial PurchaseNA - DRIP Only
One Time Setup Fee$0.00
Shares to Qualify for DRIP1
..
Purchase Limits.
Min Purchase$10.00
Max Purchase$125,000 /year
..
Transaction Fees.
Optional Cash Investments$0.00
Automatic Investments$1.00
Dividend Reinvestments.
..
Fees per Share.
From a Purchase$0.00/share
From a Sale$0.12/share
.
Sales Fee$15.00
..
Plan Brochure.
Transfer AgentComputerShare


E.I. DuPont deNemours (DD)
Initial Setup.
Initial PurchaseNA – DRIP only
One Time Setup Fee$3.00
Shares to Qualify for DRIP1
..
Purchase Limits.
Minimum Purchase$20.00
Maximum Purchase$5,000 /month
..
Transaction Fees.
Optional Cash Investments$3.00
Automatic Investments$0.00
Dividend Reinvestmentsnot yet confirmed
..
Additional Fees/Share.
From a Purchase$0.03/share
From a Sale$0.12/share
..
Sales Fees$10.00
..
Plan Brochure.
Transfer AgentComputerShare


General Motors (GM)
INITIAL SETUP.
Initial PurchaseNA - DRIP only
One Time Setup Fee$0.00
Shares to Qualify for DRIP1
..
PURCHASE LIMITS.
Minimum Purchase$25.00
Maximum Purchase$150,000 /year
..
TRANSACTION FEES.
Optional Cash Investments$0.00
Automatic Investments$2.00
Dividend Reinvestments$0.00
..
Additional Fees/Share.
From a Purchase$0.00/share
From a Sale”nominal brokerage commission”
..
SALE FEES$15.00
..
Prospectus.
Transfer AgentComputerShare

15 DRIPS – The Rest of the Dow, 4 - 6 of 15

This post examines DRIPs for AT&T, Boeing Co., and Citigroup. I was again pleased to discover that AT&T also has a Direct Purchase Plan (DPP). We are starting to standardize the information from each company into a table for greater uniformity and ease of reading.
Hmmmm, it would appear that tables in MS Word do not copy and paste well into a Blog. I'll have to set up some html tables later on.

AT&T Inc. (T) – DPP & DRIP
INITIAL SETUP
Initial Purchase
$500
One Time Setup Fee
$10
Shares to Qualify for DRIP
1

PURCHASE LIMITS
Minimum Purchase
$50 Per Investment
Maximum Purchase
$120,000 Per Year

TRANSACTION FEES
Optional Cash Investments
$2.50 +$0.05/share
Automatic Investments
$1.00 +$0.05/share
Dividend Reinvestments
5% up to $2 max +$0.10/share

PURCHASE Fee/Share
See above, varying amts

SALE Fee
$10.00

SALE Fee (per share)
$0.10


Boeing Co. (BA) - DRIP
INITIAL SETUP
Initial Purchase
na – DRIP only
One Time Setup Fee
Shares to Qualify for DRIP 50

PURCHASE LIMITS
Minimum Purchase
$50
Maximum Purchase
$100,000/year

TRANSACTION FEES
Optional Cash Investments
$1.00
Automatic Investments
$1.00
Dividend Reinvestments
$1.00

PURCHASE Fees/Share
Plus proportionate share of brokerage commission

SALE of Stock
$10.00
SALE Fees/Share
Plus proportionate share of brokerage commission

Transfer Agent Website: www.EquiServe.com


Citigroup Inc. (C) – DRIP – DRIP Prospectus -
INITIAL SETUP
Initial Purchase
NA – DRIP only
One Time Setup Fee
NA
Shares to Qualify for DRIP
?

PURCHASE LIMITS
Minimum Purchase
NA
Maximum Purchase
NA

TRANSACTION FEES
Optional Cash Investments
NA
Automatic Investments
NA
Dividend Reinvestments
$0.00

PURCHASE Fees/Share
$0.00

SALE of Stock
$15.00
SALE Fees/Share
$0.12/share

Transfer Agent: Citibank Shareholder Services

Monday, September 04, 2006

Technorati Claim - Delete after 24 hours

Technorati Profile

15 DRIPs - The Rest of the Dow, 1 - 3 of 15

For those of you who have joined our program late, we are studying the 30 stocks which make up the Dow Jones Industrial Average or, more simply, the Dow. The average of those 30 stocks provides us a barometer like indicator, reflective of the economic health of the country (US economy). 27 of the 30 companies which make up the Dow offer Dividend Reinvestment Plans which are commonly referred to as DRIPs. DRIPs are a low cost method of making relatively small monthly contributions in a company’s stock with the added feature of having the dividends paid out by those companies automatically used to purchase more stock in the company. To enroll in a DRIP program, some companies, such as the 12 already mentioned, have what is known as Direct Purchase Plans or DPPs where an individual can purchase either via the company or the company’s transfer agent thus bypassing having to use a broker at all. 15 companies in the Dow offer the DRIP option but not a DPP so we’ll have to use a service to purchase our initial share(s) of stock before enrolling in a DRIP. So far, we’ve mentioned using either DirectInvesting.com or the Low Cost Investment Plan via a BetterInvesting.org membership to acquire our initial share(s).
I would now like to delve into the remaining 15 companies in the Dow which offer DRIPs to learn more details of each. The first three we’ll study are the 3M Company (MMM), Alcoa Inc. (AA) and Altria Group, Inc (MO).

3M Company - Minnesota Mining and Manufacturing Co. (MMM)Current PriceDRIP Plan via MMM siteDRIP info via Wells FargoCurrent Opinion
(from the company website) - For more than 100 years, people around the world have looked to 3M for products and ideas that solve problems and make their lives easier and better. With more than 55,000 products, 30-plus core technologies and leadership in major markets served worldwide, 3M continues to develop ingenious solutions to meet your varying needs.
Here is a bit of History also copied from the company’s website – “3M was founded in 1902 at the Lake Superior town of Two Harbors, Minn. Five businessmen set out to mine a mineral deposit for grinding-wheel abrasives. But the deposits proved to be of little value, and the new Minnesota Mining and Manufacturing Co. quickly moved to nearby Duluth to focus on sandpaper products.
Years of struggle ensued until the company could master quality production and a supply chain. New investors were attracted to 3M, such as Lucius Ordway, who moved the company to St. Paul in 1910. Early technical and marketing innovations began to produce successes and, in 1916, the company paid its first dividend of 6 cents a share.”

I am pretty much in awe of 3M and, at one time, was seriously considering buying it via the DirectInvesting.com website when the fee price was on special for only $10. Looking back, I wish I would have but, as I recall the share price at that time was over $100 and, I guess, maybe a bit too rich for my blood back then. I have to wonder if, back then, I realized that 3M pays for everything and that the minimum monthly investments can be as little as $10! Maybe in part because I was born in Minnesota or the amazingly easy to absorb low monthly cost of investing in 3M or maybe because 3M is just such a powerhouse of a company but, I am rather certain I will probably end up owning shares of 3M and participating in their DRIP.
I suppose my reasons for buying the company aren’t exactly the most financially rigorous reasons and perhaps a bit emotional but, keep in mind that we are looking at companies which make up the Dow – basically the strongest and most financially sound companies in the world which means, there are far worse things one could spend their money on.

INITIAL SETUP
Initial Purchase – NA – only for DPPs
One Time Set-up Fee $0.00
Shares to Qualify for DRIP = 1

PURCHASE LIMITS
Min $10.00
Max $10,000 per dividend quarter

TRANSACTION FEES
optional Investments by check $0.00
Via automatic ongoing monthly investments $0.00
Dividend Reinvestments $0.00

SALES
Sale of Stock $10.00 + $0.10/share

2) Alcoa Inc. (AA) –

INITIAL SETUP
Initial Purchase – NA – only for DPPs
One Time Set-up Fee $0.00
Shares to Qualify for DRIP = 1

PURCHASE LIMITS
Min $25.00
Max $5,000 per month

TRANSACTION FEES
optional Investments by check (cash) $0.00
Via automatic ongoing monthly investments $1.00
Dividend Reinvestments $0.00

SALES
Sale of Stock $10.00 + $0.12/share

3) Altria Group, Inc. (MO)
This company used to be known as Phillip Morris, which is where the symbol MO comes from. And here is an ALERT – THIS COMPANY HAS A DPP! I had been referring to several sites for initial information and stock1.com is a site with a really nice list of the DOW stocks and had MO listed as a DRIP only company so it is a good thing that I’m doing my own research and checking out both the transfer agents and company websites for information. Another site called the DripAdvisor.com has a nice set up for looking up companies and a worthwhile formatting of information but also appears to be full of badly outdated information. A search for Altria at the DripAdvisor shows no match because the site still has Altria listed under it’s former name of Phillip Morris which changed quite some time ago. When doing a search under the symbol MO we get much outdated information. The transfer agent is listed as First Chicago Trust which was actually bought out by EquiServe which was then bought out by Computershare and the min/max investments allowed and all the fee amounts are wrong …at least compared to the official pdf of Altria’s DSP & DRIP plan as provided by the transfer agent, ComputerShare and dated 4/06.

In all honesty, I think the DripAdvisor site is no longer active because at their home page the latest article provided is of a Weekly Progress Report on their DRIP Portfolio dated 12/05/05 – 12/09/05.

INITIAL SETUP
Initial Purchase – $500 OR $50 /month for 10 months
One Time Set-up Fee $10.00
Shares to Qualify for DRIP = 1

PURCHASE LIMITS
Min $50.00
Max $250,000 per month

TRANSACTION FEES
optional Investments by check or one time debit $5.00 + $0.03/share
Via automatic ongoing monthly investments $2.50 + $0.03/share
Dividend Reinvestments 5% up to max of $3.00 + $0.03/share

SALES
Sale of Stock $15.00 + $0.12/share

MO has a typical purchase schedule of at least twice a week, usually on a Tuesdays and Thursdays which is for optional cash investments by check or One-time online bank debits. Periodic Automatic deductions from a bank account are done twice per month; on the 1st and/or 15th of the month. Sales of MO stock may occur daily.

Sunday, September 03, 2006

Our 12 DPPs - Considering the DRIP Option

If nothing else, I hope we have shown by now that it does not take a lot of money to get started investing in Stocks. Heck, you don't even a broker!

But, one of the criteria we are interested in is not only how we can buy stocks of some of the best companies in the world without a broker but how we can do so as efficiently (or cheaply) as possible.

A Direct Purchase Plan allows us to bypass the broker to get involved with a companies Dividend Reinvestment Plan (DRIP) but, another way to get started in a companies DRIP program is to already be a shareholder of the company (with the stock registered in your name).
The best part about many DRIPs is that quite often you only need to own a single share of stock before enrolling in a DRIP. So, what we are going to do next is to look back over the companies we have already examined for their DPP details and now see how many shares we must own of each company before we are eligible to enroll in their DRIP. In some cases we will see that purchasing a single share of stock outside of a companies DPP and then enrolling in the DRIP can be a less expensive way of getting started, especially when compared to the Initial Purchase amounts necessary. Also, for the remaining 15 stocks in the DOW currently under our consideration, they only can be started by already owning stock in the company.

Min Number of Shares Required to Enroll in DRIP
Company Name

Symbol

Shares to Qualify

American Express

AXP

10

Caterpillar

CAT

1

ExxonMobil

XOM

1

General Electric

GE

1

Home Depot

HD

1

IMB

IBM

1

McDonalds

MCD

10

Merck

MRK

1

Pfizer

PFE

1

Proctor & Gamble

PG

1

Wal-Mart

WMT

1

Walt Disney

DIS

10





For 9 out of the 12 companies listed we only need to own one share of stock before being allowed to enroll in the company's DRIP. For a company like Pfizer this is a worthwhile option to consider, especially if you don't have the $500 necessary to cover the Initial Purchase price required for joining through the company's Direct Stock Purchase program.

In order for your share of stock to be considered valid for joining a DRIP program it must be registered in your name. When you buy stock through a broker the stock is generally held in what's known as "street name" which means the name of your broker would appear on the certificate instead of your name. For extra fees most brokers could get the stock put in your name but, there are companies which specialize in such services. The two we will currently consider are found at www.DirectInvesting.com and through the Low Cost Investment Plan offered by that National Association of Investors Corporation (NAIC) which can be found at www.BetterInvetsing.org.

At DirectInvesting.com to obtain a single share of stock you'll pay the price of the stock, a 10% cushion to cover any price fluctuations between the time you submit your order and the actual time the stock is purchases, a $40 fee and 50 cent commission. If we continue with our example of Pfizer we would have the following total cost for PFE if bought via DirectInvesting.com

CompanyPriceSharesCushionFeeCommCost
PFE$27.561$2.76$40$0.50$70.82


If you become a member or buy a subscription to certain publications listed at the site then you can have the fee dropped to $20 which would make the above purchase only $50.82, about 1/10th of the $500 required for the DPP option. The cheapest membership option I could find which still offered the lower fee was the Drip Club Membership for $75. A complete list of membership options may be found at the Subscription Options page. Direct Investing has 1,293 companies listed from which 1 to 100 shares of stock can be purchased. Another nice feature is that if a DRIP is offered for the company you are purchasing then DirectInvesting.com will automatically enroll you in the Company's DRIP.

The other option is via BetterInvesting.org which, according to page 45 of their September issue of BetterInvesting magazine, has a fee of only $7. Now, with DirectInvesting you can buy a share of stock whether you are a member or not by simply paying the $40 fee. With BetterInvesting.org you have to be a member to get the $7 fee option. A one year membership to BetterInvesting is $50 and renewals are $25/year. With BetterInvesting you will also get a years subscription to BetterInvesting magazine, full access to their website BetterInvesting.org and a host of investment educational opportunities. A membership to BetterInvesting is required to get into any of their Investment clubs and another great benefit is that you can go to www.betterinvesting.mystockfund.com and make a stock purchase each month completely free of charge for one year.
To me, it seems like joining BetterInvesting.org is the better alternative to DirectInvesting.com however, I am currently not sure of exactly which or how many stocks are available through BetterInvesting.org so, I recently joined the organization to find out and as soon as I get my membership number I'll be sure to post back more details about the BetterInvesting Low Cost Investment Plan (LCIP).
For now, I am under the impression that the LCIP might be paper based which can be inconvenient but, in the BI magazine I've also read that members are given access to a discounted initial purchase required for a company's Direct Purchase Plan.
Besides the fee difference in the two programs, the LCIP has you add a flat $10 to cover price fluctuation. Either case isn't too big of a deal because any extra is simply sent back as a check. That's been my experience with DirectInvesting.com ...some time ago DI used to have a new stock every two weeks with a super discounted fee of only $10. I haven't seen that in a while but if anyone knows how to get back on the mailing list for those great deals (assuming they still exist) please leave me a comment.