Tag Archives: NYSE:ABBV

How To Save More Money

Do you find that you’re not saving enough even though you have a plan to limit your spending? Let’s go back to the basics to see how to save more money. These tips should lead you to more savings and money in your pocket.

save money

First, we have this savings formula: Savings = Earnings – Expenses

It tells us that:

  • The more you earn, the bigger your savings can be.
  • The less you spend, the bigger your savings can be.

So, let’s think of ways to increase your earnings and reduce your expenses.

Increase earnings

Increase earnings through passive income

What’s exciting to lots of people is to earn a passive income. You can earn a passive income by investing and renting out real estate properties to collect monthly rent.

However, that comes with managing properties and dealing with tenants. It could turn out to be more work than expected and would defeat the purpose of a passive income, which should require less work than an active income.

Perhaps a simpler way to generate a passive income is through a portfolio of dividend stocks. Less money is required for an initial investment compared to a real estate property.

Let’s say a condominium costs $300,000 and you rent it out for $1,500 per month, that’s a return of 6%, excluding the mortgage interests, maintenance fees, property tax, strata fees, and so on.

Historically, the market has returned 7-10% per year. Theoretically, you can buy quality dividend stocks when they’re on sale. After the commission fee for buying, you can hold and avoid paying any more commission fees that are required for sales.

Then, you can just collect passive income from dividends. It’s common to find 3-4% dividend yields that can grow at least 5% per year and 5% yields that may grow 2% a year.

Eligible Canadian dividends are favourably taxed if received in a non-registered (taxable) account for Canadians, and likewise, qualified U.S. dividends are favorably taxed for Americans. Canadians can receive qualified U.S. dividends in registered retirement savings plans (RRSPs) without the 15% withholding tax.

The business growth, which eventually translates to capital gains, is tax deferred until you sell, at which time, only 50% are taxed at your marginal tax rate (if you’re Canadian).

If Canadians buy and hold in a tax free savings account (TFSA), they don’t have to pay any taxes on dividends and capital gains!

If your goal is to generate a passive income, then, you don’t even need to worry about the sell side. Just focus on buying quality, dividend-paying companies when they’re at reasonable valuations and collect their dividends forever.

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High Dividend Stocks Priced at a Value: February 2015 Watchlist

When I say “high dividends”, I mean companies which are paying 1.8x (or 80%) more dividends than the index. For example, SPDR S&P 500 ETF Trust (NYSEARCA:SPY)’s Friday closing yield is 1.83%. So, a company paying out a high dividend would be one that pays at least a yield of 3.3%. Likewise, on the Canada side, iShares S&P/TSX 60 Index Fund (TSE:XIU) had a yield of 1.93%. So, a Canadian company paying out a high dividend must pay at least a 3.48% yield.

For February, I identified some high dividend/distribution companies in the US and a Canadian retail REIT that I’ve added to this month. Canadians can consider getting monthly income from this Canadian REIT.

High Dividend US Companies

This list shows the current yields, and I believe are good starting yields (with respective to the company’s historical yields) to start buying into these companies if you believe in the future of these companies.

  • AbbVie (NYSE:ABBV) – yield: 3.38%
  • Philip Morris International (NYSE:PM) – yield: 4.83%
  • Chevron (NYSE:CVX) – yield: 3.79%

Chevron was in the last watchlist: Dividend Stocks at a Value: January 2015 Watchlist. Since that article, Chevron’s yield has drop due to price rising a few dollars. Long-term income investors shouldn’t sweat the small changes in price though, as Chevron is still attractive at a yield of 3.79%.

AbbVie

AbbVie logo

AbbVie is a global biopharmaceutical company hardquartered in Illinois. It was spun off from Abbott in January 2013. It has around 25,000 employees and 7 research & development and manufacturing facilities around the world. AbbVie’s focus is on immunology and virology diseases. Currently, Humira, AbbVie’s top drug, makes more than 50% of the company’s profits. Fundamentally, both Morningstar and F.A.S.T. Graphs show it is priced in the fair value range. Technically, it is bouncing off of a recent bottom. Currently marked as in the fair value range by Morningstar, AbbVie is certainly worth considering on a pullback.

Philip Morris International

Philip Morris logo

Philip Morris is a leading global tobacco company, owning 7 of the world’s top 15 international brands, including Marlboro. Philip Morris holds 28% of the global market, excluding China. Other than to provide products to adult smokers, and to generate superior returns for shareholders, Philip Morris also has the goal of reducing harm caused by smoking by developing products which are close in look, feel, and taste to the conventional cigarettes but seem to be less harmful.
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