I recently purchased my first technology stock since selling all my technology stocks in late 1999. I have followed Seagate Technology for a few years and finally purchased some shares late this week. I had been looking to purchase a technology stock that paid dividends as well. The company cut it's dividend earlier this week but the stock still yields over 3%.

Seagate Technology is one of the world's largest manufacturers of hard disc drives. This technology is used to store information in computers and other electronic devices, and almost all of the company's revenues are derived from the design, manufacture, and marketing of these hard disc drives. A limited amount of revenue (less than 1%) is generated by its wholly owned subsidiary, EVault Inc., which provides data storage services for small to medium-size businesses. The company's products are marketed under the Seagate Technology and Maxtor Corporation brand names.

The company has used acquisitions to strengthen its core business, while also expanding into newer, but potentially lucrative end-markets. In January 2007, the company acquired EVault Inc. for $187 million and expanded into the online data storage market. In May 2006, Seagate acquired a key competitor, Maxtor Corporation, for $1.9 billion.

I believe weak demand, along with some price deflation, will hurt STX margins and net income during the rest of 2009 which should then look to rebound some in 2010. I expect restructuring will help lower the company's high cost structure. I explect STX to continue free cash flow generation later this year and to maintain its leading market share position.

Disclosure: The Div Guy owns shares of STX at the time of this post.

I have had a few of my dividend stocks cut or reduce their dividends over the past several months and it looks like that trend will continue into the new year. I am a holder of Pfizer (PFE) which just cut it's divdend in half. Here is a recent AP article by Rachel Beck. Dividends being cut at fastest pace in 50 years

Dividends are being cut at the fastest pace in at least 50 years, and many of the reductions are coming from U.S. companies investors have been relying on to provide income during the recession.

Already this year, seven companies in the Standard & Poor's 500 index have decreased their dividends, removing some $12 billion from shareholders' pockets in the coming months. On Monday, Pfizer (PFE) became the latest blue-chip company to do so.

These cuts serve up another hit to shareholders who have already been battered by the steep declines in the stock market. That is especially true of retirees, who tend to be attracted to so-called "widows and orphans" stocks that provide them with a steady cash flow.

If the trend continues, this will be the worst year for dividend cuts since 1958, when annual payments fell by 8.4 percent, according to new research from S&P.

"It is easy to say this is going to be the worst in 50 years, but the bigger question is whether it is going to be much worse than that," said Howard Silverblatt, senior index analyst at S&P.

That's not to say that companies shouldn't cut their dividends if they can't afford to pay them. The financial industry, for example, has been most active in slashing payouts because it had to -- companies need to cut costs and those that have gotten federal aid also have faced pressure from the U.S. government to reduce their dividends.

Of the seven S&P 500 companies that have said they will cut dividends in 2009, six are in the financial industry and all reduced their payouts by at least 50 percent, according to the S&P research.

The largest decrease has come from Bank of America (BAC), which said earlier this month it would slash its dividend from $1.28 a share annually down to 4 cents a share. That wiped out $6.2 billion in yearly payouts to investors.

The Charlotte, N.C.-based company disclosed its dividend cut as part of a deal with the government to inject another $20 billion into the ailing bank to help it absorb losses from its recent acquisition of investment bank Merrill Lynch. In total, Bank of America has received $45 billion in federal aid.

Only one financial company, Hudson City Bancorp Inc., has raised its dividend this year, from an annual rate of 52 cents to 56 cents. Ten other companies in industries retailing to energy have raised their payouts, too, but all by a tiny margin. In total, those increases equal about $200 million annually.

Companies in other industries haven't been able to escape the financial and economic malaise either. Their profitability and cash flows are under pressure, and they look to preserve cash by slashing their dividends.

"Over the longer-term, cutting a dividend might actually been seen as something positive" for the health of the company, said Paul Davis, a portfolio manager at Charles Schwab & Co. Inc.

But dividend cuts can surprise income-seeking investors who have increasingly turned to higher-yielding shares in sectors presumed to be safer than financials.

Pfizer's announcement on Monday that it would knock its annual dividend down to 64 cents a share from $1.28 a share caught many investors off guard, said Michael Krensavage, who runs Krensavage Asset Management and owns Pfizer shares.

That came as part of the news Pfizer was acquiring rival drugmaker Wyeth for $68 billion in a cash-and-stock deal that will solidify Pfizer as the world's largest pharmaceutical company.

Pfizer had long been a reliable dividend payer, raising its dividend annually for more than 40 years until December when it announced its quarterly payment would be flat when it made its next quarterly payout. But it still paid out the third-most in annual dividends among S&P 500 companies, trailing just General Electric and AT&T Inc.

Pfizer will drop to No. 7 when the Wyeth deal closes, with total payouts of about $5 billion, according to S&P's Silverblatt.

Pfizer chief financial officer Frank D'Amelio said during a conference call with analysts that the dividend cut was done in part to "redeploy capital" and assist in financing the transaction with Wyeth.

Dividend-seeking investors may want to take note of Pfizer's action when analyzing their own income-generating portfolios, said Josh Peters, editor of Morningstar DividendInvestor.

One rule of thumb that Peters employs is to look at the dividend yield -- the annual dividend per share divided by the price per share -- to see how it ranks with its sector's peers. That shows how much a company pays out each year in dividends relative to its share price.

Pfizer's nearly 8 percent yield had put it well ahead of its rivals including Johnson & Johnson and Abbott Laboratories, which had dividend yields closer to about 3 percent -- right about where Pfizer will be going forward.

Silverblatt has been looking for companies with estimates of earnings per share for 2009 that won't cover what they've promised in dividends. Of the companies in the S&P 500 that pay dividends, some 16 percent of them are what Silverblatt deems as "under stress."

Disclosure: The Div Guy owns share of PFE and BAC at the time of this post.

Kinder Morgan Energy Partners, L.P. (KMP) increased its quarterly cash distribution per common unit to $1.05 ($4.20 annualized) from $1.02 per unit ($4.08 annualized). Payable on Feb. 13, 2009, to unitholders of record as of Jan. 30, 2009, the distribution represents a 14 percent increase over the fourth quarter 2007 cash distribution per unit of $0.92 ($3.68 annualized). KMP has increased the distribution 35 times since current management took over in February of 1997. In total, KMP declared cash distributions for 2008 of $4.02 per unit, meeting its published annual budget and 16 percent higher than declared cash distributions of $3.48 per unit in 2007. Kinder Morgan Energy Partners (KMP) Increases Distribution 14%

Chairman and CEO Richard D. Kinder said, “KMP had a very good year, as we achieved our financial target for 2008 of $4.02 in cash distributions per unit. When you consider the tumultuous market conditions experienced during the past year, I’m very proud of KMP’s accomplishments. Our diversified portfolio of stable assets generated strong cash flow with total 2008 segment earnings before DD&A and certain items of $2.8 billion, up 24 percent from $2.2 billion in 2007.

KMP previously announced that it expects to declare cash distributions of $4.20 per unit for 2009, a 4.5 percent increase over 2008. “We continue to be well positioned for future growth and anticipate that our business segments will generate over $3 billion of earnings before DD&A in 2009,” Kinder said. “Growth will be driven by the continuation of our substantial capital investment program, which includes both expansions of existing assets along with new projects. As examples, we have three major natural gas projects scheduled to begin service in 2009.”

Well 2008 didn't quite turn out as I had planned. The market was down about 40% for the year and some of my dividend stocks stopped or decreased their dividend payments. I will recap what I had forested for 2008 and look ahead to my goals for the end of 2009.

I started tracking our yearly progress towards reaching our retirement goals of having $2 million in retirement assets as well as reaching $40,000 in dividend stock income. I originally wanted to complete both these goals by the time I am 60 which is 14 years from now. But the market decline in 2008 will add a couple of years to my goal and my new plan is to retire at age 62 which is in 16 years.

Retirement Assets
In order to reach our retirement goal, we need to average an 8% investment return along with a 21% contribution to our retirement plans for the next 16 years. To calculate the amount needed for the end of 2009, I start with our 2008 year end retirement balance of $355,030 which is the balance of our retirement accounts as well as our taxable stock account. We then add the 8% investment return which is $28,402 for a total of $383,432. Next I add our retirement contributions of $21,000 for the 21% contribution and a grand total of $404,432 needed at the end of 2009.

As part of our retirement contributions, we will fully fund our Roth IRA's for a total of $10,000. My wife will make a 6% contribution to her 401(k) and I will contribute 12% to my 403(b) plan.

Retirement Assets Summary 2008
$508,000 2007 year end retirement asset balance
$40,640 8% investment return
$20,000 contributions to our retirement accounts
$568,640 2008 year end retirement balance (2008 year end actual $355,030)

Retirement Assets Summary 2009
$355,030 2008 year end retirement asset balance
$28,402 8% investment return
$21,000 contributions to our retirement accounts
$404,432 2009 year end retirement balance

Net Worth 2008
Our goal for Net Worth for the end of 2008 will be $880,954 which is the increase in retirement assets. (2008 year end actual $629,685)

Net Worth 2009
Our goal for Net Worth for the end of 2009 will be $683,637 which is the increase in retirement assets that includes and 8% investment return and $21,000 in contributions for 2009.

Net Worth Summary for 2009
$404,432 2009 Year End Retirement Balance
$205,000 House
$35,271 Cash
$14,000 Cars
$3,000 Personal Property
$21,934 529 Accounts
$683,637 Total

Dividend Income 2008
We also plan on growing the yearly dividend income to $9,000 for the end of 2008 from our end of year 2007 balance of $7,495 by reinvesting dividends and investing additional money every month into our stock portfolio held at Zecco. (2008 year end actual $5,907)

Dividend Income 2009
We also plan on growing the yearly dividend income to $7,000 for the end of 2009 from our end of year 2008 balance of $5,907 by reinvesting dividends and investing additional money every month into our stock portfolio held at Zecco. I plan to be a little more conservative with my stock purchases for 2009.

And lastly we will split $550 a month between our children's 529 plans for the year.

Let's hope the plan goes better in 2009 than 2008.

Here is an interesting dividend stock story for Barrons. Dividend Stocks That Shouldn't Disappoint

The companies on our list have a long and steady history of increasing their cash payouts to shareholders.

LAST YEAR, MANY LARGE U.S. companies had to cut or eliminate their dividends. And in 2009, the dividend news is likely to grow worse.

But income-hungry investors who prize dividend payments can still generate reliable returns from the elite among the Standard & Poor's 500 index's dividend-paying stocks.

To come up with a handful of dividend-paying stocks that we think won't let investors down, Barron's Online started with Standard & Poor's S&P 500 Dividend Aristocrats.

The 52 companies on the latest list, which came out in December, have all boosted their dividend payouts to investors for at least 25 consecutive years regardless of market conditions.

The next step was winnowing down the number of stock candidates. First we eliminated companies that aren't expected to generate profit growth in 2009. We also nixed companies with debt-to-capital ratios above 50% as well as companies that were paying out more than half of their annual earnings in dividends.

(A company with too high a dividend-payout ratio has less of an ability to protect its dividend in the event of an earnings downturn.)

We then looked for stocks with growing dividends, and yields above the 1.6% paid by 10-year inflation-protected Treasuries.

Among the stocks left standing were McDonald's (ticker: MCD), Procter & Gamble (PG), Wal-Mart Stores (WMT), Becton Dickinson (BDX) and Aflac (AFL).

These companies have some of the fastest-growing profits and dividends among large-cap stocks.

"In this environment, anyone raising their dividend stands out," says Richard Helm, a manager of the Cohen & Steers Dividend Value Fund. "What better way to show confidence in your business."

Confidence, however, has been waning, and for good reasons.

In 2008, dividend payments by companies in the S&P 500 rose by a mere 2.4%, the worse performance since 2001, when the dividends payout fell 3.3%.

And in 2009, dividends could fall even more than that as the economic recession deepens.

Investment pros suggest avoiding some classic high-yield stocks (see Weekday Trader, "In Dividends We Trust," Sept. 16, 2008).

Falling stock prices will create handsome yields that offer little comfort if the stock
price keeps falling or if financial problems force the company to cut its dividend.

Last year, 48 members of the S&P 500 -- including American International Group (AIG), Whole Foods Market (WFMI), Citigroup (C) and the now bankrupt Lehman Bros. -- cut or suspended their dividends, sucking $40.6 billion from investors' pockets, according to Howard Silverblatt, senior index analyst with S&P.

Most of those announcements came from financial firms.

But the pain is spreading beyond financial firms.

To avoid getting blindsided, investors have to "check under the hood," says Judith Saryan, a portfolio manager with Eaton Vance Managed Investments.

Focus on companies with rising profits and enough free cash flow to fund the dividend payment.

Among our recommended five companies, the biggest one was Wal-Mart. While it has a modest yield of 1.8%, it has raised its dividend an average of 18% annually over the last five years.

In a down year for stocks, Wal-Mart shares gained almost 18% in 2008 as Americans flocked to discount stores. Meanwhile, fewer new-store openings and capital-spending cuts have strengthened free cash flow.

The dividend could climb 8% during the next fiscal year, which begins on Feb. 2.

Other company picks are increasing their dividends even faster.

With a yield of 3.4%, fast-food giant McDonald's could increase its payout to investors by almost 27% in 2009 to $2.12 a share.

Six years into a rebound spawned by new foods and less aggressive expansion, the company's popular "Dollar Menu" has lured cash-strapped diners.

Meanwhile, the timing of their last quarterly dividend hike -- a 33% increase on Sept. 25 -- denotes considerable confidence, says Chris Hagedorn, a portfolio manager with the Fifth Third Dividend Growth Fund.

The same can be said for medical-supply company Becton Dickinson, and life insurer Aflac. Both companies raised dividends last quarter.

"If raising the dividend is normally a strong sign of management's faith in the future, then in this environment it's even more so," Hagedorn adds.

Becton's profits are expected to climb an average of 12% annually over the next five years (see Weekday Trader, "Becton Dickinson Is a Safe Bet," July 18, 2008). And during the fiscal year scheduled to end on Sept. 30, 2009, the annual payout could climb 14% to $1.31 a share.

Aflac, meanwhile, has raised its dividend an average of 27% annually over the last five years (see Barron's, "Ducky Doings at Aflac," Feb. 4, 2008).

With a yield of 2.8%, the company's payout still consumes only one-quarter of profits, which are expected to climb 15% annually over the next five years, according to Thomson Reuters.

Other names, however, have had a harder time, recently.

At consumer-products titan Procter & Gamble, earnings estimates have come into doubt. Last month, the company -- which has raised its dividend for 52 consecutive years (see Barron's, "Procter & Gamble Pampers Investors," April 14, 2008) -- warned that organic sales growth fell short during the quarter that ended on Dec. 31.

P&G still expects to earn between $4.28 a share and $4.38 a share during the fiscal year scheduled to end on June 30, a 17.6% to 20% gain.

Wall Street expects the dividend to climb 12%.

Of course, just because a company has a long history of increasing dividends does not mean that payments will keep rising, or survive.

If the recession deepens, then all bets may be off. For now, corporate boards may delay dividend hikes until they have a clearer picture of policies coming out of Washington.

Yet after 25 years or more, old habits die hard.

So investors should still be able to bank on dividends from the few companies that haven't let us down a year into a recession.

Dividends for the Long Run
Companies Ticker Mkt Cap (bil) Yield 2009 Est EPS Grth
McDonald's MCD $64.60 3.4% 6.0%
Becton Dickinson BDX $17.30 1.8% 9.6%
Aflac AFL $18 2.8% 15.0%
Procter & Gamble PG $171.60 2.7% 17.8%
Wal-Mart Stores WMT $201.40 1.8% 6.5%

Disclosure: The Div Guy owns shares of BDX and PG at the time of this post.

Here is a recent update on Kinder Morgan Energy Partners (KMP) from Investor's Business Daily by Paul Whitfield. Kinder 'Toll Road' Keeps Dividend On Upward Path

Kinder Morgan Energy Partners (KMP) is "essentially a huge toll road," as CEO Richard Kinder put it at the earnings call in October.

It operates about 25,000 miles of pipeline in North America and 170 storage terminals. The pipelines transport crude oil, natural gas, gasoline and carbon dioxide.

While the price of crude oil is down about 75% since July, the stock of Kinder Morgan Energy lost only 14% in the same period.

Changes in oil prices don't immediately affect Kinder because contracts are for longer terms.

Even changes in actual quantities transported can be initially irrelevant. Many contracts are on a take-or-pay basis — meaning Kinder receives most of its fee whether the customer uses capacity or not.

Earnings increased 94%, 51% and 26% in recent quarters, according to Thomson Reuters. Sales jumped 25%, 48% and 45%.

Those returns mark a departure from 2005-07, when earnings were patchy.

The dividend, however, has been increased for 12 consecutive years. The current yield is 8.3%.

Kinder Morgan Energy Partners is a master limited partnership. Like real estate investment trusts, MLPs pay out most of their cash flow to shareholders.

For energy MLPs, the current challenge is access to capital.

While Kinder hasn't had problems raising capital, some companies in this group are pulling back from commitments because of the credit squeeze.

In December, for example, Quicksilver Gas Services (KGS) and Enterprise Products Partners (EPD) killed plans for a stake in a TransCanada (TRP) project to build a natural gas pipeline in Colorado.

TransCanada, however, hasn't given up on the project.

Disclosure: The Div Guy owns shares of KMP at the time of this post.

Someone left a comment last month that I sounded like the Motley Fools when I talked about Zecco. I am just writing about a service I use and am happy to share with who are like minded. I started using Zecco over a year ago and I have been very pleasaed the free trades and their services. So why not write about it and share what works for me and give out money.

Zecco has been operating for over two years and I have been very pleased with my Zecco account and would recommend Zecco to anyone who wants to save money on stock trades. If you are skeptical, open an account and purchase as little as one share to see how it works.

I figure that makes me quite a bit different from those Fools because I an not asking you to buy any thing from me. Just enjoy free trades like I do.

Finally some good new to report in 2009 for one of my stocks American Capital (ACAS). Early last year ACAS was my second largest holding after Kinder Morgan Energy Partners (KMP). ACAS was down around 90% for 2008 and finished the year around $3 a share and to matters worse, they announced the suspension of their dividend.

After today, ACAS has been up five days in row and is now my best performing stock for 2009 with 125% return year to date. I know it is a little early to name my best performing stock of the year but it is nice to see the stock come back some.

On Monday, ACAS shares skyrocketed 41.3 percent and today they rose $2.11, or 41 percent, to end at $7.31. Two days of over 40% gains and you think it would be close to its 52 week high but it still has a long way to go reach last years high of around $37 a share.

Next, I just hope they can start paying a dividend in 2010.

Disclosure: The Div Guy owns shares of ACAS at the time of this post.

My Annualized Dividend Income as of the end of December increased to $5,907 from $5,780 . This means my dividend stocks will pay $5,907 in dividends over the next 12 months.

I made a few dividend stock purchases for the month which made up the increase. I have not had any move dividend cuts at this time and hopefully there will be fewer dividend cuts in 2009.

I did not make my updated 2008 Dividend Income Goal of $10,200 in yearly dividend income due to the dividend cuts over the past few months. I will have to work on a new dividend stock goal for 2009, keeping in mind there may be more dividend cuts this year and smaller dividend increases for the firms that do increase dividends.

Most of my stocks are held in my Zecco Trading account and the rest are DRIPs. The dividends from my stocks are reinvested but I am keeping track of the amount of income I could receive once I retire or choose to receive the dividends in cash.

As of the end of December our Net Worth increased to $629,685 from $604,118 for the month which is a 4.23% increase. Finally it seems we have come to a bottom, though there could be few more bumps along the way. I will have to review my goals for the year later this week and set new goals for 2009. It is safe to say I did not make my Net Worth or Dividend Income goals for 2008.

The breakout is as follows:
ASSETS
Retirement Accounts $271,979
Taxable Accounts $83,051
Cash $35,271
Home $205,000
Cars $14,000
Personal Property $3,000
Kids 529 Accounts $21,934

DEBT
Credit Card $4,550

Here is the summary for the month:

Our Net Worth increased by over 4% for the month, which is a nice change from the drop of the past few months. I did make a couple of additional purchases to our dividend stocks this month using some additional cash.

You can click on my Net Worth graph on the right to see the changes in each category from the previous month. I continued funding our Roth IRA's this month. I am keeping a high level of cash that I will use to fully fund our Roth IRAs for 2008 and 2009. I also have a savings account to fund the replacement of my wife's car in a couple of years.

This is the first time in a while that I have a credit card debt but I will pay the card off in the next 9 months with no interest.

I will post my Dividend Income Update on Tuesday.