Dividend stocks have gotten more popular than ever as a source of income, but what if you don't need the cash that dividends provide? Reinvesting dividends often makes a huge difference to your long-term performance, but there are cases when it's the wrong move.
In this installment of our "Ask a Fool" series, Fool contributor Dan Caplinger answers a reader's question about when you shouldn't reinvest dividends. Dan notes that reinvesting dividends can work out badly if a stock stumbles, and so you should closely evaluate each dividend payer in your portfolio to see whether dividend reinvestment is appropriate. He also gives some guidelines for other situations when you should think twice about reinvesting your payouts.
Despite its plunge during the financial crisis, Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.
Hot Oil Service Stocks For 2015: Prospect Capital Corporation(PSEC)
Prospect Capital Corporation is a mezzanine finance and private equity firm that specializes in late venture, middle market, mature, mezzanine, buyouts, recapitalizations, growth capital, development, and bridge transactions. It makes secured debt and equity investments. The firm typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors. It invests in oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sectors. The firm prefers to invest in the United States and Canada. It seeks to invest between $5 million to $50 million in companies with EBITDA between $$ million and $75 million, sales value up to $500 million, and enterprise value of up to $250 million. The firm also co- invests for larger deals. It seeks control acquisitions by providing multiple levels of the capital structure. Prospect Capital Corporation was founded in 1988 and is based in New York, New York.
Advisors' Opinion:- [By Grass Hopper]
Examples of the first class of publicly ��raded private equity firms include Kohlberg Kravis Roberts & Co. L.P. (KKR), The Blackstone Group L.P. (BX), and Oaktree Capital Group, LLC (OAK). Examples of the second class are Wendel SA (MF FP), Exor SpA (EXO IM) and, to some extent, Reinet Investments SCA (REI SJ). Examples of the third class are American Capital, Ltd. (ACAS), Main Street Capital, Gladstone Capital Corp. (MAIN), and Prospect Capital Corp. (PSEC).
Top Dividend Stocks To Invest In Right Now: H&R Block Inc. (HRB)
H&R Block, Inc., through its subsidiaries, provides tax preparation, retail banking, and various business advisory and consulting services. It operates in three segments: Tax Services, Business Services, and Corporate. The Tax Services segment offers H&R Block At Home, an income tax preparation software, as well as a range of online tax services, including tax advice, professional and do-it-yourself tax return preparation, and electronic filing services through its Web site at hrblock.com primarily in the United States, Canada, and Australia. This segment also provides the H&R Block Prepaid Emerald MasterCard and Emerald Advance lines of credit through H&R Block Bank, as well as other retail banking services, including checking and savings accounts, individual retirement accounts, and certificates of deposit; and sells refund anticipation loans and refund anticipation checks offered by third-party lending institutions, as well as offers income tax return preparation course s to the public. The Business Services segment provides tax and consulting services, wealth management, and capital markets services to middle-market companies. The Corporate segment engages in various operations, which include interest income from the United States passive investments, interest expense on borrowings, net interest margin and gains or losses relating to mortgage loans held for investment, real estate owned, residual interests in securitizations and other corporate expenses principally related to finance, legal, and other support departments. The company was founded in 1946 and is headquartered in Kansas City, Missouri.
Advisors' Opinion:- [By U.S. News]
Alamy Personal finance author Barbara Stanny realized she was earning too little money when she interviewed women bringing home six figures or more for one of her books. "Of the first 15, three of them were writers. It was such an empowering thing for me to see. There were people doing what I was doing, but they were making more," she recalls. She committed to follow their lead, and before she finished her book, she had started earning six figures herself. Earning too little money, which Stanny defines as earning less than you need or desire, despite efforts to do otherwise, is a problem so common that Stanny started giving workshops on the topic. Eventually, it became the subject of her next book, "Overcoming Underearning." Others have also tackled the issue: Underearners Anonymous, a support group based on a 12-step program, is dedicated to helping people who find themselves trapped in a low-income cycle. And Bari Tessler Linden, a popular financial therapist, addresses the topic in her work, too. Tom Anderson, a freelance writer based in New York, wrote about visiting an Underearners Anonymous meeting for the financial website LearnVest earlier this year. "The median age was mid-40s, and it was a pretty diverse bunch of people from all different socioeconomic backgrounds," he told U.S. News. The session focused on improving time management skills, goal setting and being more career focused, he says. After the meeting, he says, "I did adjust my own expectations for my finances and what revenue targets I wanted to hit." Anderson says he would recommend the experience to anyone who is comfortable with the spiritual side of 12-step programs and who is not doing a good job of valuing their time, which often has a negative impact on earning power. (Underearners Anonymous did not respond to requests for comment.) Financial therapist Linden says in order to overcome her own struggle with underearning (in her 20s, she worked in hospice and as a counselor, and
Top Dividend Stocks To Invest In Right Now: Cedar Shopping Centers Inc (CDR)
Cedar Shopping Centers, Inc., real estate investment trust, engages in the ownership, operation, development and redevelopment of supermarket-anchored community shopping centers and drug store-anchored convenience centers in the United States. As of December 31, 2007, it owned 118 properties, aggregating approximately 12.0 million square feet of gross leasable area primarily in Pennsylvania, Massachusetts, Virginia, Ohio, Connecticut, New Jersey, Maryland, Michigan, and New York. Cedar Shopping has elected to be treated as a REIT for federal income tax purposes and would not be subject to federal income tax, if it distributes at least 90% of its REIT taxable income to its stockholders. The company was founded in 1984 and is based in Port Washington, New York.
Advisors' Opinion:- [By Bill Smith]
Valuation
Lastly, because of the negative perception the entire industry has received, prices in this sector have been absolutely pummeled. ESI now trades at the lower end of all of its historical valuation bands: P/E, P/B, and P/S.
Bullish Points
Guru ownership and avg price: ESI owned by Hussman ($76.15), Weitz ($75.32), and Greenblatt ($73.29)Over 35% of shares are short, potential short squeezeStock buyback plan: ESI reduced outstanding shares by 19% yoy at the end of the 4th quarter. They repurchased 370K shares in 3Q11.The business model is scalable; the incremental cost to educate each additional student is low, leading to high marginsESI acquired Daniel Webster College, giving them a regional accreditation which they can use to broaden their reach in online classes
Bearish Points
High costs of education, in general, rightly or wrongly attract government intervention and could squeeze margins over time. Total student debt surpassed credit card balances, and sits at $1 Trillion as of the end of 2011.Subject to compliance with Dept of Education's 90/10 rules, which states a college can't collect more than 90% of revenue from students participating in federal loan programs.Cohort Default Rate (CDR): for-profit colleges must monitor the federal loan default rates of students who graduate or leave the school. If a school's CDR exceeds 25% for 3 consecutive years, or 40% in any one year, its students won't be eligible for federal financial aid.ESI competes on quality of product which is measured by graduation rates and ability to secure employment. For 2010, 70% of ESI graduates got employment in positions using skills taught in their program of study within 1 year. As of Oct 2011, this rate was 600 bp higher. The average annual salary reported by employed 2011 grads was $32K, compared to $32.4K for 2010 grads.With an improving economy, there's a potential ESI would see declining new student enrollmentsOver 35% of shares are short
Summary
Top Dividend Stocks To Invest In Right Now: China Nepstar Chain Drugstore Ltd (NPD)
China Nepstar Chain Drugstore Ltd. operates retail drugstores in the People?s Republic of China. The company?s drugstores provide pharmacy services and other merchandise, including prescription drugs; over-the-counter drugs; nutritional supplements, such as healthcare supplements, vitamins, minerals, and dietary products; herbal products, including drinkable herbal remedies and packages of assorted herbs for making soup; and private label products. Its stores also offer personal care products, such as skin care, hair care, and beauty products; family care products, including portable medical devices for family use, birth control products, and early pregnancy test products; and convenience products, such as soft drinks, packaged snacks, other consumables, cleaning agents, and stationeries, as well as seasonal and promotional items. The company operates its stores under the China Nepstar brand name. As of December 31, 2009, its store network comprised 2,479 retail drugstores located in approximately 71 cities in Guangdong, Jiangsu, Zhejiang, Liaoning, Shandong, Hunan, Fujian, Sichuan, and Hubei provinces, as well as in Shanghai, Tianjin, and Beijing municipalities of the People?s Republic of China. The company was founded in 1995 and is headquartered in Shenzhen, the People?s Republic of China.
Advisors' Opinion:- [By Garrett Cook]
Non-cyclical consumer goods & services shares dropped around 0.20 percent in today’s trading. Top decliners in the sector included K12 (NYSE: LRN), China Nepstar Chain Drugstore (NYSE: NPD), and Du Pont (NYSE: DD).
Top Dividend Stocks To Invest In Right Now: R.R. Donnelley & Sons Company(RRD)
R.R. Donnelley & Sons Company provides pre-media, printing, logistics, and business process outsourcing products and services to private and public sectors worldwide. The company operates primarily in the commercial print portion of the printing industry, with related product and service offerings designed to offer customers solutions for communicating their messages to target audiences. Its products and related service offerings include magazines, catalogs, retail inserts, books, directories, financial print, direct mail, forms, labels, office products, statement printing, pre media, and logistics services. The company also offers business process outsourcing services that comprise transactional print and outsourcing services, statement printing, direct mail, and print management services; and product configuration, customized kitting, and order fulfillment for technology, medical device, and other companies. It distributes its products to end-users through the United Sta tes postal services, retail channels, electronically, or by direct shipment to customer facilities. R.R. Donnelley & Sons was founded in 1864 and is based in Chicago, Illinois.
Advisors' Opinion:- [By Selena Maranjian]
Commercial printer R.R. Donnelley (NASDAQ: RRD ) , also up 28%, yields 7.3%. It sells labels, packaging, and more to the private and public sector and prints many thousands of forms for the SEC, too. Donnelley bought Edgar Online last year. Some have worried about the company's debt load, though it is free-cash-flow positive. (But it has posted net losses in recent years, too.) The company needs to do more digital business to succeed, which explains a recent eBook deal with Harlequin.
Top Dividend Stocks To Invest In Right Now: Telefonica SA(TEF)
Telefonica, S.A. provides fixed and mobile telephony services primarily in Spain, rest of Europe, and Latin America. Its fixed telecommunication services include PSTN lines; ISDN accesses; public telephone; local, domestic, and international long distance and fixed-to-mobile communications; corporate communications; video telephony; supplementary and business-oriented value-added services; network services; leasing and sale of handset equipment; and telephony information services. The company?s Internet and broadband multimedia services comprise Internet service provider service; portal and network services; retail and wholesale broadband access; narrowband switched access to Internet; naked ADSL, a broadband connection; residential-oriented value-added services; companies-oriented value-added services; television services, such as IPTV, cable television, and satellite television; and Fiber to the Home, a service for high speed Internet access and digital video recording. Its data and business-solutions services principally include leased lines; virtual private network services; fiber optics services; the provision of hosting and application; outsourcing and consultancy services; desktop services; and system integration and professional services. The company?s wholesale services for telecommunication operators primarily comprise domestic interconnection services; international wholesale services; leased lines for other operators? network deployment; local loop leasing under the unbundled local loop regulation framework; and bit stream services. It also offers various mobile and related services and products that include mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and trunking and paging services. The company has a strategic alliance with China Unicom (Hong Kong) Limited. Telefonica, S.A. was founded in 1924 and is headquartered in Madrid, Spai n.
Advisors' Opinion:- [By Amy Thomson]
AT&T has examined takeover candidates including Vodafone�� assets, U.K. mobile carrier EE -- a venture of Deutsche Telekom AG (DTE) and Orange SA (ORA) -- and parts of Spain�� Telefonica SA (TEF), people familiar with the company�� plans said in June. AT&T is attracted to Europe because of its relatively recent introduction of faster, fourth-generation networks, which have been available for years in the U.S.
Top Dividend Stocks To Invest In Right Now: ENSCO plc(ESV)
Ensco plc, together with its subsidiaries, provides offshore contract drilling services to the oil and gas industry. The company engages in the drilling of offshore oil and natural gas wells by providing its drilling rigs and crews under contracts with international, government-owned, and independent oil and gas companies. As of February 15, 2010, it owned and operated 42 jackup rigs, 4 ultra-deepwater semisubmersible rigs, and 1 barge rig. The company also has 4 ultra-deepwater semisubmersible rigs under construction. It operates in Asia, the Middle East, Australia, New Zealand, Europe, Africa, and North and South America. The company was formerly known as Ensco International plc and changed its name to Ensco plc in March 2010. Ensco plc was founded in 1975 and is based in London, the United Kingdom.
Advisors' Opinion:- [By 4Percent]
Offshore drilling companies have become a popular destination for income investors looking for high yields. But with the downturn in the industry, should investors be concerned with the safety of these fat dividend payments? Today we will look at one of those high yielders, Ensco Plc (ESV). With a current yield near 6.0% and a recent history of impressive dividend growth, Ensco offers an enticing income option.
- [By J. Royden Ward]
Ensco PLC (ESV) owns and operates shallow water and ultra-deepwater rigs, located in many parts of the world.
Two new drilling rigs are ready to begin multi-year contracts with major international oil companies. Six more rigs are under construction.
- [By Ben Levisohn]
Higher oil prices have helped offshore drillers like Ensco (ESV), Noble (NE), Diamond Offshore Drilling (DO) and Seadrill (SDRL) rally and now they’re getting another boost today after fleet updates from Diamond Offshore and Ensco.
ReutersDiamond Offshore’s fleet update was largely in-line with expectations, note Cowen’s J.B. Lowe and Roland Morris:
As previously announced The Ocean Lexington has been contracted to work for a term of 1,189 days starting in December 2014 at a dayrate of $160k/d with PEMEX. The rate reflects the weak pricing environment in the lower-end of the floater market, but squeezing out any cash flow over the next several years from this asset is a positive for the rig given that it would have likely been stacked had it not won the contract.
But Ensco’s fleet status update contained a shocker: It had contracted one of its offshore drillers at a rate well above what anyone thought possible in this weak market. Johnson Rice’s Georg Venturatos explains:
Ensco provided an updated fleet status report, which was highlighted by an initial contract for its ultra-deepwater newbuild drillship, Ensco DS-8 (12,000′), expected to begin work for Total (TOT) in Angola during 3Q15 (through 3Q20) at an initial dayrate in the high $610 range (vs. our estimate of $505k/day) with periodic increases equating to an average rate in the mid-$650 range over the 5-year program (ex-mob).
Cowen’s Lowe and Morris warn not to read too much into Ensco’s new contract:
The $650kd average rate is well ahead of the low-$500′s that we expected, as negotiations with Total began nearly a year ago, and the rig was initially bid over a year ago when the UDW market was significantly stronger. The current market remains challenged, with lower-spec ultra-deep water assets commanding rates as low as $350k/ d. We expect the current market weakness to last well into 2015. There are stil
- [By Ben Levisohn]
Offshore drillers like Ensco (ESV), Seadrill (SDRL) and Rowan (RDC) are sinking today, but shares of Transocean (RIG) have managed to stay afloat.
AFPTransocean has gained 0.9% to $41.85 at 1:22 p.m. today, even as Ensco has fallen 1.3% to $50.89, Seadrill has plunged 3.1% to $34.87 and Rowan has dipped 0.8% to $30.89.
Transocean’s gain comes a day after the offshore driller fell 4.3% following its better-than-expected earnings release. Howard Weil’s Dave Wilson explains why Transocean fell yesterday:
As we expected, the quarterly performance was discounted heavily as the outlook really did not change.� Even the achievement on the revenue efficiency front, hitting the highest level since early 2008, which we thought was great, did not carry much weight with investors.� At the end of the day, the Company still has roughly 20 floaters that are set to roll off contract in both 2014 and 2015 (��0 per year), which in this environment will leave investors cautious on the name.
The focus now is on Transocean’s ability to offload some of its rigs, explains Cowen’s J.B. Lowe:
Transocean’s next step in the company’s multi-stage process of divesting non-core assets and high-grading the company’s fleet is the creation of Caledonia Offshore. Transocean announced Monday that it will create its new entity with the purpose of divesting its North Sea semisubmersile rigs. The Sedco 704, Sedco 711, Sedco 712, Sedco 714, Transocean John Shaw, Transocean Prospect, GSF Artic III and the J.W. McLean which combined have an average age of over 30 years old (from build not upgrade) will all be part of the new entity. On the company’s 1Q14 earnings conference call, Transocean set the time line for the creation of Caledonia Offshore for 2H14 but said that the company would decide at a later point whether it would look to sell the company to a direct public or private buyer, spin the company or IPO.<
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