Investing for Dividends

Today the market is experiencing outright panic selling…indiscriminately across all names. On days like this, the big-cap value names sell off as badly as (if not worse than) the low-quality high-flier stocks that have a ton of debt and nothing more than a story…

Days like to today are when people like us build wealth.  Now is the time for investing for dividends. The market is selling out of panic. The market is offering great streams of passive income for 5-10% less than it was even yesterday…because of fear. This is the time to add to your passive income machine.

So what are the best buys now?

Chevron Corporation (CVX)

CVX is one of the biggest energy companies in the world.  The company has a stellar business model and a robust multi-year pipeline.  The company is trading down substantially in recent days with the broad market selloff as well as concerns that demand for crude oil will continue to fall as increasingly weak economic data suggests a deeper retrenchment by the US consumer.  The long-term risk to CVX is weaker than expected demand for oil.  We think this is unlikely…even with a slowdown in China (click here for more on this).  However, because of these fears, the market is offering up CVX at a big discount:

The company has a P/E less than 8 and is now yielding over 3%.  Furthermore, CVX is a dividend-friendly company that’s increased dividends 8x since 2000 and should continue to do so for the long-term.  Also, they have a DRIP option (which we’re big fans of).

Kinder Morgan Energy Partners (KMP)

Kinder Morgan Energy Partners, L.P. owns and manages energy transportation (pipeline) and storage assets. This MLP is a favorite among high-yield dividend investors and has consistently increased distributions since 1997.  There are 3 ways to invest in this company which is very well outlined here. Note, KMR doesn’t pay a dividend but instead uses that cash to purchase addittional shares of KMP. Regardless of which vehicle you choose to invest in (depending on your tax status), this is a great long-term play with a dividend yield approaching 7%.

Procter & Gamble (PG) / Johnson & Johnson (JNJ)

These are two of our favorites that we talk about here.

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