How To Invest $15,000 In The Stock Market

A reader of my blog asks me for help by investing 15k of his money. Here is his question:

“I am a Canadian beginner, 56 years old, 29 years with the Federal Govt. I want to retire next year. I have $15K to start, and I don't know where to start...what would you recommend? Right now I have $5K CP, $5K CNR, $1K Sprint...and they are just not doing much right now.

Another question: If Sprint is bought by DISH, will the stock go up, or cease to exist and I would loose my holding? I am holding approx $1000. at $7.15 per share. I don't want to loose my investment to stupidity...Thanks again for your time.”

My first thought is that 15k is enough to start investing. I also started to buy stocks with a similar amount in EUR. Ten years later my net worth developed to a six-figure amount and I’ve received a total dividend amount of more than 30k.

My second thought to your current holdings is that they are not really diversified. You have a strong focus on value. Canadian Railways stock could deliver a great stability for your portfolio but with only 3 holdings and 4k of cash it’s hard to make money if you have only two bets. $CNR has good fundamentals and the stock price follows. Canadian Pacific Railway $CP grows dividends but the earnings go down. The stock price explodes. Sprint Nextel $S received a bid from $DISH – They will be off. All have in common that they are infrastructure bets and deeply integrated within the economy and they all have a very low dividend yield. Infrastructure is a very capital intensive business and also very inflexible.

To your second question: You will receive cash in exchange for your Sprint shares if the deal passes through. DISH offers $7 per Sprint share.

I would recommend to increase your bets when the time is right to invest. If you have a cheap broker you can build a better portfolio by owing more stocks with a lower value. Some offer a $1 trade commission. It’s hard to make money and with 15k and a solid return of 8 percent coul result in $1,200 capital income per year of which $450 could be dividends, calculated on a 3% dividend yield. All you need is to be disciplined and diversified.

Below is a nice graphic about how to buy stocks and build a dividend portfolio with only $5,000.

How to Start a Dividend Portfolio Source: Intelligentspeculator.net

If you have any further questions, to not hesitate to contact me. If you like my answer, please give me a Facebook Like. You can also subscribe to my free e-mail list or follow me on Facebook or Twitter.

Happy Investing!

Tom Roberts

General Electic (GE) Is The Next Stock Buy For The Dividend Yield Passive Income Portfolio

After the recent buys of Unilever and Nestlé, I want to force the industrial sector in my Dividend Yield Passive Income Portfolio (DYPI). One big player within the sector is General Electric (GE).

General Electric Company operates as a technology and financial services company worldwide. The company's Energy Infrastructure segment offers wind turbines; gas and steam turbines and generators; integrated gasification combined cycle systems; aircraft engine derivatives; nuclear reactors, fuel, and support services; oil and gas extraction and mining motors and control systems; aftermarket services; water treatment solutions; power conversion infrastructure technology and services; and integrated electrical equipment and systems.

Dividends and Earnings Of General Electric (GE)

GE is a diversified machinery stock with $245 billion market capitalization and sales of $147 billion. The current P/E ratio amounts to 16.83 and the dividend yield is at 3.25 percent. Earnings are expected to grow for the mid-term by a double-digit rate. The forward P/E is 12.71.

I bought 65 shares for a price of 23.39. The total purchase amount was $1,525.35 and will give me around $50 per year in additional dividends. The total portfolio income is now forecasted at $1,131.18 per year.

The average portfolio yield is 3.56 percent and the yield on cost (yield when I bought the stocks) amounts to 3.75 percent). The yield ratio declined because of the small capital gain of 4.87 percent.

Dividend Yield Portfolio Overview (Click to enlarge)

Latest Portfolio Transactions (Click to enlarge)

The virtual portfolio has now 21 stock holdings. Combined they have a current market value of $31,428.4. I purchased all stocks for a total cost of $29,968.25. Stocks of the DYPI-Portfolio are up 4.87 since the date of funding – October 04, 2012.

Only 30 percent of the 100k funded asset vehicle is currently invested. Roughly 70 percent or $70,177.80 in cash is still available for further stock acquisitions. With this money, I plan to increase the total number of stocks to 50-70 by the end of this year. With this in mind, the whole dividend income should grow to $3,000 to $4,000 per year. Over the next decade, this amount should double.

The total portfolio performance is 1.61 percent of which 1.56 percent was generated this year.

Dividend Yield Passive Income Portfolio Performance (Click to enlarge)

GE is a high debt loaded company. The total long-term loans amounted to $414 billion as of Q4/2012 and cash of $125.7 billion was accounted. The company has also a strong cash flow of $33 billion and an EBITDA in a range of $18 billion. So the EV/EBITDA ratio is around 17 - that's a damn high value. But capital business works different. In times of rising financial costs or financial crises, the business model could be hurt.

Sym	Name	P/E Ratio	Dividend Yield		Buy	# Shrs	Income	Value
TRI	Thomson Reuters C	11.95	4.31		28.90	50	$64.25	$1,496.00
LMT	Lockheed Martin C	10.47	4.74		92.72	20	$83.00	$1,762.40
INTC	Intel Corporation	9.51	4.37		21.27	50	$44.25	$1,021.00
MCD	McDonald's Corpor	17.57	3.05		87.33	15	$43.05	$1,428.75
WU	Western Union Com	8.22	3.06		11.95	100	$42.50	$1,402.00
PM	Philip Morris Int	18.01	3.52		85.42	20	$65.58	$1,868.40
JNJ	Johnson & Johnson	19.76	3.2		69.19	20	$48.80	$1,525.00
MO	Altria Group Inc	17.1	4.83		33.48	40	$68.00	$1,412.80
SYY	Sysco Corporation	17.95	3.34		31.65	40	$43.60	$1,310.00
DRI	Darden Restaurant	12.78	4.31		46.66	30	$57.90	$1,386.90
CA	CA Inc.	12.41	4.1		21.86	50	$50.00	$1,228.00
PG	Procter & Gamble	17.49	2.92		68.72	25	$56.20	$1,924.75
KRFT	Kraft Foods Group	17.04	4.21		44.41	40	$80.00	$1,898.40
MAT	Mattel Inc.	18.2	3.19		36.45	40	$51.60	$1,620.80
PEP	Pepsico Inc. Com	19.22	2.82		70.88	20	$42.56	$1,511.40
KMB	Kimberly-Clark Co	20.79	3.22		86.82	15	$44.40	$1,417.50
COP	ConocoPhillips Co	8.64	4.54		61.06	20	$52.80	$1,164.00
GIS	General Mills In	16.73	2.86		42.13	30	$38.85	$1,370.10
UL	Unilever PLC Comm	20.02	3.14		39.65	35	$43.89	$1,408.05
NSRGY	NESTLE SA REG SHR	19.34	3.06		68.69	30	$63.15	$2,079.33
GE	General Electric	18	3.1		23.39	65	$46.80	$1,520.35
							$1,131.18	$31,755.93
							Average Yield	3.56%
							Yield On Cost	3.75%

Best Yielding Railroad Stocks

The Most Promising Dividends in Railroads By Fool. Dividend payers deserve a berth in any long-term stock portfolio. But seemingly attractive dividend yields are not always as fetching as they may appear. Let's see which companies in the railroad industry offer the most promising dividends.

Below, I've compiled some of the major dividend-paying players in the railroad industry (and a few smaller outfits), ranked according to their dividend yields:

Company	Recent Yield	Payout Ratio	5-Year Avg. Annual Div. Growth Rate
Guangshen Railway	3.50%	32%	-1.60%
Norfolk Southern (NYSE:NSC  )	2.70%	32%	18.60%
CSX (NYSE: CSX  )	2.50%	19%	23.80%
Canadian Pacific Railway(NYSE: CP  )	2.30%	34%	10.70%
Union Pacific (NYSE: UNP  )	2.20%	26%	20%
Canadian National Railway(NYSE: CNI  )	1.90%	23%	14.90%
Trinity Industries (NYSE:TRN  )	1.50%	25%	10.60%
Westinghouse Air Brake Technologies	0.20%	1%	24.60%

Related Ticker:
NSC, CSX, CP, UNP, CNI, TRN,

Source: Fool.com