Archives for February 2005

I woke up early today to watch the stock market open, as Neville does. I’ve been thinking of buying some shares of Scholr Pharma (Symbol DDD) for some time now. I won’t go into details why, but I just put in a limit order for 100 shares of DDD at $4.80, good till cancelled, in my Freetrade “Play Money” account. This should be a short-term position, I intend to set another limit sell order soon. We’ll see if it fills today.

Now where did I put that disclaimer? Oh, here it is.

Another semi-conservative option I am considering for my Ameritrade side-bet goal is buying stocks with high dividends. Due to their favorable tax rate of 15%, a semi-sluggish stock market, and itty bitty bond yields, dividend-paying stocks are getting popular. Here are some of my findings:

There are many ways of getting into the action, my leading favorite is the ETF iShares Dow Jones Select Dividend Index fund (DVY) that invests in dividend-paying stocks. DVY owns the 50 highest-yielding stocks in the Dow Jones Total Market Index, excluding real estate investment trusts (they don’t get the 15% tax rate). The expense ratio is also a very reasonable 0.40%.

Dogs of the Dow is a strategy that involves picking the ten stocks of the Dow Jones (DJIA)which have the highest dividend yield within the last year. I have heard some good things and more bad things about this strategy. Here are some performance comparisons, note that they lag the S&P 500 in the long-term, but are much more stable.

Here is another article on ADVDX, an actively managed fund that seeks income through dividends.

Even the semi-famous bull Siegel now has modified his position to support buying dividend paying stocks. An interest except is the assertion that the 100 highest-yielding stocks in the S&P 500 have done better than the index as a whole over the past 50 years. Hmm, but could you identify those stocks ahead of time?

I find it interesting that E*Trade announced that it would cuts its fees and commissions just a month after I moved all of my accounts out of their brokerage. I guess I wasn’t the only one to do so. Capitalism in action! $19.99 per trade + bogus $3 “handling fee” coupled with subpar customer service is simply not competitive. I like the CEO Lilien’s quote – “If we treat (small investors) right, they will become the larger investors”.

Very true, but too little too late, Mr. Lilien. You guys even charged me $120 ($60 per account) to leave and it was worth it. I definitely intend to become a larger investor, but it sure won’t be at E*Trade.