A Contrarian’s Top Five Dividend Plays


In this crazy stock market with extreme volatility and sensitivity, I re-examined my income producing stock strategy and realized there may be a different approach to earning great dividends while waiting for good companies to recover some value in great industries. Let’s take a look. First, let’s look at some assumptions. This is what I came up with:

  1. The oil industry in America will eventually recover
  2. Interest rates will eventually go up
  3. Health care demand will continue to grow
  4. Real estate, over time, will continue to grow in value
  5. Autos will continue set sales records due to the pent up demand since 2008

Given this scenario, I purchased these five dividend producing stocks. Here I list what I bought, why I bought it and the expected return, both in terms of dividends and long term value.

Stock # 1: Kinder Morgan, KMI, $29.40/share, 6.7% Dividend Yield. I expect the price of oil, natural gas and CO2 to normalize over the next 18 months, which could bring the price per share back into the $40/share range for a 30% upside.

Stock #2: Medical Properties Inc, REIT, MPW, $11.55/share, 7.7% Dividend Yield. I expect health care and the need for hospitals to be in increasing demand, in America and abroad. Yes, interest rates raising may put negative pressure on the stock but a 35% forecasted growth rate in assets could bring a stock price upside of 25%.

Stock #3: General Motors, GM, $29.40/share, 4.9% Dividend Yield. With the pent up demand for autos, the currently low oil prices, and GM’s strong position in high margin SUV’s and trucks, I expect GM to return to historical PE levels (10.8) which gives the stock a 48% upside.

Stock #4: Southern Co, SO, $29/share, 4.99% Dividend Yield. With the recent conversions to natural gas and looming interest rate hikes, this stock has upside of 5-7% annually.

Stock #5: Wells Fargo, WFC, $51.40/share, 2.87% Dividend Yield. With interest rate increases expected, this stock could return to its historical PE ratio (16.2) which gives the stock a potential 32% upside.

There you have it. It is a portfolio that returns an average 5.5% dividend yield and a significant stock share price upside if you believe the assumptions listed above and have the time to wait for each catalyst to materialize.

What do you think?

Where To Start In Making A Budget

Budgets – Where Do We Start?

Looking to make a family budget but don’t know where to start? I know, it can be daunting. How much should we allocate for housing? autos? eating out? Although each family is unique, based on lifestyle and total family income, the percentages of income allocated for each budget category fall within a fairly tight range. Here is a time-tested starting point for families to build upon based on their goals and lifestyle.

Net Spendable Income

Before we get started, we need to have a common starting point and that is your Net Spendable Income (NSI). What is net spendable income? It is your gross income for the month, minus your taxes, deductions and giving. Your NSI is the amount of money you have each month to allocate towards your life expenses and savings.

Budget Starting Point(s)

First, there are a couple different starting points depending upon the family having a) consumer/school debt and b) children. These allocations will be denoted by having a “d” or “c” respectively.

Second, there is one golden rule: The budget can total no more than 100% of NSI. So if you have debt or children expenses, you have to adjust other categories so that don’t go over your budget.

Third, and we advocate this, if you are striving for financial freedom we would make a few changes: Eliminate debt by allocating a higher portion of the budget toward it until it is gone, and reducing entertainment and other allocations to put the money towards savings. In this case, I would prioritize debt elimination above all else, then boost savings to 20% or more of NSI.

Budget Allocations: Starting Point

Category:                      % of NSI        Includes:

Housing:                          35%               Mortgage/rent, utilities, HOA, cable, internet, taxes

Savings/Investments:   16%               Emergency fund, retirement, investments, savings

Autos:                               12%               Auto payments, gas, car insurance, repairs

Food:                                 12%              Groceries, snacks, nutritional products, supplements

Debt:                                   5% d           Credit Cards & Student Loans

Entertain/Personal:       15%              Eating out, clothing, pets, beauty, vacations, gifts, entertainment

Med/Dental/Insurance:   5%              Medical expenses, life insurance, prescriptions

Children:                            5% c           School lunch, babysitters, activities, supplies, etc

Misc:                                   5%              Cleaning products, home repair, everything else

Remember, the total can not exceed 100% of your NSI, so if you have children or debt service, you must reduce the other categories to ensure the budget is balanced. These allocations listed above are a healthy place to start when you want to develop a balanced budget. Now personalize it to meet your needs. Maybe you have higher housing costs? Maybe you want to drive a little bit more car that costs more money to run? That’s fine but requires you to downsize other budget categories to make the budget balance. Make your plan, discuss it with your spouse and live by a balanced budget that meets your goals and objectives. Live financially free!


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Top 10 Leaks in Your Discretionary Spending Budget

Does this sound familiar? You commit to a set of financial goals for you and your family. You get real excited, building a balanced budget complete with emergency savings and retirement savings factored in. You have a plan to save money for something big or life changing. You focus on the big ticket items, like your home, auto, grocery and debt expenses, making sure they are not too big or restricting. Only to find out, several months later, that you are far off your savings mark. What happened? For many of us, it’s the dreaded “budget leaks”.

What Is A Budget Leak?

Budget leaks occur when we amass a number of small, seemingly innocuous expenditures on minor items that add up over time and blow your budget. A small splurge here, a little expense there, what’s the big deal? The big deal is that they can add up to something that breaks the budget and more importantly, prevents you from meeting your financial goals.  In fact, a recent US government report stated that Americans spend (leak) 22% of their discretionary budget on things that they don’t recall or appreciate purchasing. What does that mean? It means we purchase things with our spending money, usually small items, maybe unknowingly or by habit  that add very little to our enjoyment or financial goals, that over time add up. Here are the top ten leaks to look out for in your daily spending.

Top Ten Leaks

    • Indulgent Drinks. I’m not talking about alcohol, that comes later. I’m talking about those refreshing drinks we have during the day to pick us up, like gourmet coffee, protein shakes and infused teas. I recently helped a lawyer friend with her budget and found she spend over $700/month on these drinks based on habit and routine!
    • Memberships and Subscriptions. Magazines, streaming video services, the gym, airline clubs, gaming and investment services. They add up. If you aren’t using your subscriptions monthly, then get rid of them.
    • Eating Out. It seems like it is an institution where I live, (Austin, TX), that we eat out, regularly. But it can also break the bank. Set a budget for eating out and keep it. If you are like me, you will find that limits and a little planning helps reduce unnecessary expenditures.
    • Pet Expenses. Taking care of your pet is important. But endlessly buying toys, collars, clothing and fashion accessories are not. Believe me, your pet will do just fine with some love and attention. Skip the designer label booties and matching jacket!
    • Nutritional Supplements. Vitamins, Amino Acids, Thermogenics, Anti-oxidants, Protein Powders and more. New on the list with our health conscious lifestyles. Endless pursuit of that special something to make you look and feel better. Do your homework, pick supplements wisely and figure out if they work before you buy more.
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  • Alcoholic Beverages. Having a beer with friends at a local tavern at the end of a busy week may be warranted. Weekly buying beers for everyone within earshot is a budget breaker.
  • Presents and Gifts. Ever feel like you have to match or “out give” others in social situations? Me too. Here’s a tip. Budget money for presents, keep to your budget, and personalize your gifts with thoughtful messages or personal touches to make it special.
  • Sales that are “Too Good To Pass Up”. Indeed, buying items on sale is smart, but buying stuff you don’t need or really want just because it is on sale is a budget leak. A sale is only a bargain when you actually need it and have a budget for it.
  • Extensive driving. Americans love to drive and we love our cars. But many times we forget to factor in the cost of gas when we plan trips or excursions. Another thing, it doesn’t make sense in time or money to drive across town to buy gas for five cents a gallon less. Factor in fuel costs when you plan to travel in your car.
  • Impulse Purchases. You knew this was coming. Product placement in stores is engineered to encourage impulse buying but many times you a) don’t need it, or b) don’t want to break your budget for it. Be aware of product placement at cash registers and on the end cap of aisles in the store and resist impulse buys. Having a list before you go in the store helps.

The Take Away

It is easy to have leaks in our discretionary spending from purchases of items we don’t truly need, want or appreciate. Americans leak almost a quarter of our discretionary income, many times on the items listed above. The keys to prevent such leakage is to have a budget that supports your financial goals and to eliminate spending that does not support your plan.

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Top Ten Not So Obvious Ways To Save An Emergency Fund


Everyone knows that an Emergency Fund is vitally important to living a life of financial freedom. Our emergency fund allows us to get and stay out of debt when life throws us unexpected trouble. For many of us, though, funding that emergency fund is difficult to get started. There are several frequently mentioned ways to start your emergency savings: 1) Pay yourself first from your paycheck, 2) Work extra hours in your job to earn more money, 3) Eliminate services, like lawn care, and mow your lawn yourself to fund your account. This is all good and may get you started. But, for many, they are stumped on how to find the money for their emergency fund. Here are some creative, not so obvious ways to save money for your emergency fund:

  1. Sell stuff you haven’t used or needed in the past year on Ebay or Craigslist
  2. Collect all spare change. You laugh? I couple recently saved $72/month collecting their spare change!
  3. Don’t want to do the work of collecting change? Try Acorns! Go to http://www.acorns.com and automate it.
  4. Skip eating out twice a week. Your fund will be full faster than you think.
  5. Cancel cable TV and go with Netflix.
  6. Yard sale or better yet, use the local Facebook swap site to sell stuff.
  7. Rent a bedroom in your home.
  8. Sell gold or jewelry. At $1200/ounce an old gold ring or earrings can be worth quite a bit.
  9. Walk the neighbor’s pets. Many people are doing this with a lot of success. Neighbors like it too!
  10. Sell your blood. More specifically, your plasma. I have a friend that makes $200/month doing this!
  11. Bonus: Become an Uber driver. One friend is making $300/week doing this on the side!

The old English proverb, “If there’s a will, there’s a way”, comes to mind here. This list is not exhaustive but is indicative of an attitude that says if you want an emergency fund bad enough, you can find a way to fund it. I think we all should work hard to fund our emergency fund because it is the first defense when (not if) unexpected trouble comes our way. What is the alternative? A credit card. Meaning debt. Meaning interest that eats into our lifestyle and before long can be suffocating.

How much of an emergency fund do we need? I think that depends on where you are in life. Some experts say an emergency fund must be at least $1000. Some say it should be between 3-6 months of income. I would add that your disposition towards money should help define the amount too. If you have limited obligations and you live simply, you can get by with a lesser amount in your emergency fund than if are you a nervous Nellie with many obligations? Another way to think about it is to ask: What amount of money in an emergency fund would allow me to sleep well at night?

I leave you with three simple do’s:

  1. Do have an emergency fund. It is considered the most important resource to prevent personal debt.
  2. Do start saving now, no matter how much you can put towards it.
  3. Do make funding an emergency fund a priority each week until you are satisfied with the amount.

I’m not saying it will be easy. I’m just saying it is worth it! Live in financial freedom!


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Top Ten Cares And Care Nots Of The Millionaire Next Door

The millionaire next door, we’ve heard a lot about him, but what does he looks like? Does he look rich? How does he act? Does he act rich? It is hard to generalize what a rich neighbor looks like or how he acts because each person is different. There is no one way to look or act rich. But there are common characteristics that each of our rich neighbors possess. Those characteristics include a set of cares they focus on and “care nots” they don’t concern themselves with. Here are the top ten CARES and CARE NOTS of the millionaire next door:

Care/Care Not #1: He cares about spending less than he earns, always, in every season. He doesn’t care how his limited spending is viewed by neighbors and friends.

Care/Care Not #2: He cares about value, like the value of drinking coffee at home vs. going to Starbucks or driving his older, paid-off car vs. buying new cars regularly. He doesn’t care what you think of his value-based buying decisions.

Care/Care Not #3: He cares about the financial freedom to get stuff if he chooses. He doesn’t care about the stuff!

Care/Care Not #4: He cares about paying himself first in the form of savings and investments. He doesn’t care about keeping up with his neighbor’s spending.

Care/Care Not #5: He cares about completely paying off his credit card each month. He doesn’t care about the interest rate or costs to borrow money because he doesn’t buy things on credit.

Care/Care Not #6: He cares about saving over time and the value of compound interest. He doesn’t care about speculative gambling or “get rich quick” schemes.

Care/Care Not #7: He cares about protecting his limited material assets with insurance and proper maintenance. He doesn’t care about having so many material things that he can’t take care of them.

Care/Care Not #8: He cares about making plans for success, including having a budget, making savings goals and retirement planning. He doesn’t care to control everything because he has a plan and is prepared for when “life happens”.

Care/Care Not #9: He cares about owning everything he has. He doesn’t care about having more than he can comfortably own.

Care/Care Not #10: He cares about being “full”: joyful, full of content and grateful. He doesn’t care about “ests”: richest, biggest (home) or fastest (car).

There it is. The millionaire next door may not look or act very different than you or me, but they live in complete financial freedom with a set of cares and care nots that allow them to live richly and accomplish precious life goals.

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About the author: Mike Valiton is a Finance Pastor in Austin, TX that is passionate about helping people live abundantly and in financial freedom.