CNBC by Giovanny Moreano, Market Data Analyst

Dividend yields in the Dow index are down about a quarter of a point since early June and 165 basis points since early March, as equity markets continue to trend higher, pushing yields lower.

The current average yield among the 30 Dow components stands at 2.85%, compared to an average yield of 3.11% in early June, and 4.5% in early March.

Despite of a decline in dividend yields, various Dow components continue to reward investors with lofty payouts. A review of the Dow index reveals that about half of its components have a dividend yield above the current average.

Since early spring, AT&T [T] continues to be the highest yielding stock on the Dow, while Verizon [VZ] has moved ahead of DuPont [DD] for second and third place.

Here is a look at the dividend yields of all 30 Dow components:

John Reese of Validea.com wrote a recent post on what Warren Buffett would be purchasing now at current market prices. Here are some highlights of the article.

Falling In And Out Of Favor With Warren
If you're looking for some current "Buffett-type" individual stocks, scanning through Berkshire's holdings can of course offer some ideas, but it can also be problematic. One reason is that, while Buffett may have bought some of the firm's current holdings at good prices, they may now have risen to the point that they're still worth holding onto, but not worth buying new shares of.

Since last fall, my Warren Buffett-based guru strategy (a computer model I developed that mimics the approach Buffett used to build his fortune) has been high on Becton Dickinson (BDX). Now, it appears my model isn't alone. In Berkshire Hathaway's (BRK) recently filed second-quarter holdings statement, Buffett's firm revealed that it had taken an $85.6 million stake in the New Jersey-based medical technology firm.

My Buffett-based strategy doesn't always anticipate moves that Buffett himself will make. It's designed to emulate the quantitative aspects of the approach Buffett used to find winning stocks in the past.

Here are the five that my models think are the best Berkshire-owned bets:

Becton Dickinson (BDX): Becton makes a variety of medical equipment, ranging from drug injection systems to products used in Pap testing to technologies used in diagnosing infection. It has a market cap of almost $16 billion, and in the last year it has taken in more than $7 billion in sales.

Johnson & Johnson (JNJ): This pharmaceutical and health care giant makes a broad array of drugs and other health care products, including those sold under big brand names like Tylenol, Band-Aid and Neutrogena. Based in New Jersey, it has a $166 billion market cap and has taken in more than $61 billion in sales over the past 12
months.

Coca-Cola Company (KO): This Atlanta-based giant is one of the most recognizable companies in the world, and its 2,800-plus products include such big names as Sprite, Minute Maid, PowerAde, Nestea, Dasani, Fanta, and, of course, the cola that bears its name.

Sanofi-Aventis (SNY): Headquartered in Paris with operations in more than 100 countries, Sanofi makes a wide array of drugs, including Allegra (allergies), Ambien CR (a prescription sleeping aid), and Plavix (used to prevent blood clots). The $89 billion market cap firm has taken in more than $41 billion in sales in the past year.

Procter & Gamble Company (PG): Based in Cincinnati, P&G owns a number of well-known consumer product brands, including Pampers, Tide, Crest, Pantene, Bounty, Pringles, Charmin and Downy. The firm, which has operations in about 80 countries, has a market cap of more than $152 billion, and has taken in more than $79 billion in sales in the past year.

As always, do your own research before making any investments.

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

I am in the market for a new set of tires for my car as I have gone 60,000 miles on my original Bridgestone tires. This got me to thinking more about my stock investment in Cooper Tire & Rubber (CTB). I bought CTB as a value play with a good dividend to boot. When I originally made the purchase, I was looking at a one to two year holding period.

As I look around at tires, there seems to be much more foreign competition offering very good tires. I feel the tire markets will get more competitive and see even more low cost producers getting into the market in the coming years. I still feel good about CTB in the next year or so but long term I am not sure how they will handle the increased competition of cheap foreign producers. They have increased their foreign production the past couple of years but with the increase of competitors this will mean tighter profit margins for all companies. I think the larger companies that have more money to spend on R&D and keep their costs low will perform well in the long run and I an not sure if that will be Goodyear or some of the foreign companies such Michelin or Bridgestone.

Bottom line, I have an average cost on my CTB shares of $7.50 with gain of about 40% in the past year. I look to hold this stock until early next year and then take another review of the stock to see if I still want to be in the tire business.

I found an interesting article from Moringstar about CTB, Goodyear and the tire industry. Here are some highlights.

Are Tiremakers Gaining Traction? by Joung Park
Few industries have felt the bite of the recession as acutely as tire manufacturing. However, we believe the short-term outlook for tire manufacturers is brightening given the potential release of pent-up replacement tire demand as drivers notch up more miles, drastic capacity cuts across the industry, and easing raw-material costs. Also to be considered is the proposed tariff on imported Chinese tires, which is a wild card. If approved, this tariff could have mixed effects on the U.S. tiremakers, such as Goodyear (GT) and Cooper (CTB), which we will cover in more detail shortly.

Adverse Conditions
In response to the presently dismal demand environment, tiremakers across the industry have pared capacity, with Goodyear and Cooper proving no exception.

We view this disparity as evidence that beleaguered U.S. consumers are deferring tire replacements, and we believe that this pent-up replacement-tire demand will be released in the near future, likely in 2010 and 2011. We believe this confluence of contracting supply and rebounding demand for replacement tires will provide a temporary spike in profitability for Cooper and Goodyear by raising plant-utilization rates, tightening tire availability and thereby supporting pricing. In addition, falling raw-material costs could provide an additional boost to industry bottom lines.

The Better Tire for the Road Ahead
Although we are now more bullish on the short-term outlook for both Cooper and Goodyear, we are much more inclined to bet on Goodyear over the long haul than Cooper. Goodyear boasts stronger and more diverse distribution channels than Cooper, which has traditionally relied on small independent retailers, which are slowly losing market share to larger national chains.

In addition to its distribution advantage, Goodyear is already strongly entrenched within the premium-branded tire market, which commands more attractive margins and is better protected from the onslaught of cheap imports. Cooper, on the other hand, still generates about half of its sales from private-label tires, which has steadily lost market share to cheap imports. Moreover, its branded tires are not as well-recognized as Goodyear's, which boast a strong lineup of innovative offerings. As competition intensifies within the important North American market, we believe Goodyear's advantage over Cooper in distribution channels and premium tires will shine through.

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

I just came across a good artilce By Dave Kansas from WSJ. The article has some good reasons to invest in dividend stocks and why investors now getting back in the market may want to take a look at dividend paying stocks. Here are some highlights.

As the stock market continues to recover, more investors are easing back into the market. While stocks have had a good run, they remain well off their record levels reached in 2007.

Given the carnage of the past two years, it's unsurprising that some people are hesitant to invest in the stock market. One strategy to consider when wading back in is to look at dividend-paying stocks. Such stocks, or mutual funds that focus on dividend-paying stocks, often called "equity income" funds, provide you with an income (the dividend) while giving you a chance to benefit from capital appreciation of the stock.

Beyond the dividend income, there are several reasons for investing in dividend-paying stocks. One, companies that can maintain or even increase their dividend payouts in the current environment are proving their strength. Also, in the wake of
various accounting scandals, a steady dividend is proof that a company is actually making the money it says it is making. While accountants can fudge lots of numbers in a quarterly financial statement, they can't conjure up the cash required to make dividend payments.

Blue Chips Keep Paying
Despite the brutal economic downturn, a number of blue-chip companies, such as General Mills, Colgate-Palmolive and Lockheed Martin, have managed to maintain or even increase their dividends.

Also, bond yields remain at very low levels, making dividend yields competitive on a historical basis. Given the frailty of the U.S. economy, most economists expect bond yields to remain low for quite some time.

Brian Belski, market strategist at Oppenheimer, also thinks that with bond yields likely staying low for some time, retiring baby boomers may decide to focus on dividend-paying stocks to sustain their income.

Under current tax law, most dividend income is taxed at a maximum rate of 15%, while interest income from bonds is taxed as regular income. Another advantage for dividends: They tend to rise over time, while interest payments from bonds remain fixed for the duration of the bond.

Investing in dividend-paying stocks means looking for a stock that pays a good yield. The yield is calculated by dividing the annual dividend by the share price. Thus, manufacturer 3M pays an annual dividend of $2.04 and its share price is about $72, giving it a yield of around 2.8%.

In looking for good dividend picks, using the dividend yield of a major average is a good starting point. The Dow Jones Industrial Average has a dividend yield just above 3%; the Dow Jones Utility Average's yield is nearly 4.5%. That would make 3M a slightly below-average dividend-paying stock. Pharmaceutical company Merck, another DJIA component, has a 5% dividend yield.

Some critics argue that investing in dividend-paying stocks comes at the cost of growth. That, however, is not always the case. Since 1990, the top 20% of companies that have increased their dividends over time have had an annualized price return of 11.9%, compared with a 2.4% annualized price return for the bottom 20% of dividend growers, according to Oppenheimer research.

Mr. Belski recently screened dividend-paying stocks in search of strong dividend payers. Among the stocks that fit his screen: H&R Block, railway operator CSX, United Technologies and Johnson & Johnson.

While dividend-paying stocks are usually sturdy and stable, that isn't always the case. For instance, during the recent financial crisis many companies, such as General Electric, slashed their dividends to preserve cash. Often, just ahead of a dividend cut, a company's dividend yield will balloon to huge, usually unsustainable levels.

No Guarantees
Also, paying a good dividend doesn't guarantee safety. Financial companies have historically been healthy dividend payers. But the fact that Lehman Brothers, Bear Stearns and Merrill Lynch all paid decent dividends ultimately had little bearing on the safety of those stocks.

Indeed, some money managers think dividends are an overrated and inefficient way to invest. "Dividends are fine, but they can go down or even go away," says Ethan Anderson of Rehmann Financial in Grand Rapids, Mich. "I'm not saying great stocks don't pay dividends. I'm saying a great dividend does not mean a stock is great. In my opinion, dividends are like stock splits -- good for marketing."

Disclosure: The Div Guy owns shares of JNJ and GE at the time of this post.

I enjoy creating stock screens as a way to find stocks not already on my watch list. I ran a quick S&P stock screen for dividend stocks that are Strong Buys (5 star) and have a yield of 4% or higher. I am taking a look to see if there are some high quality stocks with high yields that I may want to purchase. This is a good place to start and I will do some additional research to see if I will add any to my portfolio. I need to take a look at some of the communication stocks to add to my portfolio. Currently I have too many banks and no communication companies and just one tech stock, Seagate.

Company Dividend Yield
Altria (MO) 7.23%
AT&T (T) 6.40%
Bristol Myers Squibb (BMY)5.66%
ConocoPhillips (COP) 4.27%
Dominion Resources (D) 5.21%
DPL (DPL) 4.65%
Genuine Parts Company (GPC) 4.45%
Kinder Morgan Energy Partners (KMP) 7.96%
Microchip Technology (MCHP) 5.13%
ONEOK (OKE)4.91%
TOTAL (TOT) ADR 5.95%
Windstream (WIN) 11.35%

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

Aircastle (NYSE: AYR - News) soared after beating estimates to cap off airplane leasing earnings season.

Stamford, Connecticut-based Aircastle reported its earnings this morning, topping expectations for earnings per share and revenue. Adjusted net income for the second quarter was $26.9 million or 34 cents a share on $136.9 million in revenue. All of the company's aircraft were on lease at the end of the quarter, but CEO Ron Wainshal said the company expects the lease market to "remain challenging through the winter." Shares are up by 20%, leading the airplane leasing sector on a strong rally to end the week.

As a whole, the Airplane Leasing Stocks Index is up by 7.2% today. It has now outperformed the S&P 500 by 16.7% over the last month.

AerCap Holdings (NYSE: AER - News) reported a -12% decline in second-quarter revenue before the bell yesterday. The company earned $56.6 million or 67 cents a share during the period, down from $68.6 million or 81 cents a year ago. However, after adjusting for certain items, EPS came to 46 cents for the quarter. Investors were happy with the report, and the stock is adding another 6% to its 19% weekly rally.

Babcock & Brown Air (NYSE: FLY - News) also pleased the Street yesterday, reporting $14 million of net income in the second quarter. Earnings per share were 46 cents, up from 33 cents in Q2 2008. Chief executive Colm Barrington noted that "all but one aircraft was on lease during the quarter," but remained cautious for the remainder of the year. He continued, "we continue to monitor our lessees very carefully as many airlines are facing liquidity problems as a result of the current declines in global air traffic and yields." The stock is on pace to end the week up 18%.

Genesis Lease Limited (NYSE: GLS - News) reported its second-quarter performance figures on July 30. The company lags its peers over the last week despite a 9% gain for the period. Earnings per share came in at 19 cents in Q2, a nickel below estimates. Genesis CEO John McMahon praised the company's balance sheet in a press release, "Genesis had a healthy financial position at the quarter-end with more than $66 million of unrestricted cash, significant credit capacity and no immediate refinancing requirements."

I enjoy helping younger investors get started with investing. One of the first things they ask is how do you get started investing. Most young investors I talk to are looking for an easy plan to follow. Mutual funds offer a great way to start a pretty simple investment plan. As investors get more experienced may want to add stock to their portfolios but mutual funds provide a good base to build on.

Here are a couple of mutual fund options I recommended for someone getting started. These funds are for investors seeking maximum long-term growth of capital and with a long-term investment horizon of at least five years.

1. Young investors who are willing to take more risk should take a look at the Vanguard LifeStrategy Growth Fund. The fund invests in other Vanguard mutual funds with an allocation of approximately 80% in stocks and 20% in bonds. The minimum to start an account is $3,000 with additional investments of $100. Expense ratio is .27%

2. Don't have $3,000, Take a look at the Vanguard Star Fund which has a minimum of $1,000. The STAR Fund invests in a diversified group of other Vanguard mutual funds and follows a balanced investment approach by placing 60% to 70% of its assets in common stocks through eight stock funds; 20% to 30% of its assets in bonds through two bond funds; and 10% to 20% of its assets in short-term investments through a short-term bond fund. Expense ratio is .35%

3. Can't come up with $1,000, can you find $25? The AARP Mutual Funds allow you to open an account with an investment of $25 if you sign up for a monthly contribution of $25 or you can set up an account with a single investment of $100. Additional investments to the account can be made at any time with a minimum of $25. The AARP Aggressive Fund as it has a nice balanced portfolio including some international exposure. The funds are managed by State Street Global Advisors and has an allocation of approximately 75% in stocks and 25% in bonds. Expense ratio is .91% but is currently capped at .50%.

I am not saying these investments are right for everyone but for someone just starting out and looking to invest, these funds are a good place to start. Check the mutual fund objective and make sure if matches yours before investing. These funds can be used for a taxable account or for a Roth IRA.

Disclosure: The Div Guy owns some Vanguard Mutual funds and the AARP Aggressive Fund for my children.

Since I have not posted in a while, I thought it would be good to give a current update of my stock portfolio. Here is my top 20 stocks in my Dividend Portfolio as of the end of 7/31/09 ranked by size of holdings.
1. Kinder Morgan Energy (KMP) USA
2. Barclays PLC ADR (BCS) UK
3. DCP Midstream Partners (DPM) USA
4. Johnson & Johnson (JNJ) USA
5. Procter & Gamble (PG) USA
6. HRPT Properties Trust (HRP) USA
7. American Capital (ACAS) USA
8. General Electric Company (GE) USA
9. Penn West Energy Trust (PWE) Canada
10. Diana Shipping Inc. (DSX) Greece
11. Exxon Mobil Corporation (XOM) USA
12. Banco Santander (STD) Spain
13. Deutsche Bank (DB) Germany
14. Cooper Tire & Rubber (CTB) USA
15. GlaxoSmithKline (GSK) UK
16. Aircastle Limited (AYR) USA
17. ONEOK, Inc. (OKE) USA
18. Duke Energy Corporation (DUK) USA
19. Newell Rubbermaid Inc. (NWL) USA
20. Pfizer Inc. (PFE) USA

Since I am a fan of the Tweedy Browne Funds, here is an update of the Tweedy, Browne Worldwide High Dividend Yield Value Fund as of the end of 6/30/09.
1. CNP Assurances France
2. Glaxosmithkline PLC UK
3. Philip Morris Int’l USA
4. Heineken NV Netherlands
5. Muenchener Rueckver Germany
6. Diageo PLC UK
7. Novartis AG Switzerland
8. 3M Co USA
9. Eni Spa Italy
10. Johnson & Johnson USA
11. Total SA France
12. Pearson PLC UK
13. Unilever NV Netherlands
14. Embotelladoras Arca Mexico
15. Coca Cola Co USA
16. Emerson Electric Co USA
17. AT&T Inc USA
18. Genuine Parts Co USA
19. Conocophillips USA
20. Telefonica SA Spain

My Annualized Dividend Income as of the end of July decreased to $5,302 from $5,887 in January. This means my dividend stocks will pay $5,302 in dividends over the next 12 months.

I made a few dividend stock purchases over the past few months but my stocks have had a number of additional dividend cuts. Hopefully the dividend cuts will slow down for the rest 2009 as the economy is showing some signs of stabilizing.

My Dividend Income Goal for 2009 was $7,000 in yearly dividend income but due to the poor economy and additional dividend cuts, I will have to review that goal. I think $5,500 would be a much more realistic and challenging goal over the next few months.

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 July 2009 our Net Worth increased to $697,342 from $606,241 from the last update in January. I need to start keeping track each month again. We had a nice increase from stock gains over the past couple of months.



The breakout is as follows:
ASSETS
Retirement Accounts $329,262
Taxable Accounts $108,541
Cash $13,297
Home $205,000
Cars $12,000
Personal Property $3,000
Kids 529 Accounts $27,123

DEBT
Credit Card $881

Here is the summary for the past few months:

Our Net Worth increased the past few months again due to the stock increases over the past couple of months. I have been using the cash from dividends to make additional stock purchases of our dividend stocks but I have not been adding much extra money.

We spent about $16K on two new air conditioners and two new furnaces in April which came out of our cash. We will be building up our cash over the next few months to increase our cash reserves. 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 each month.


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.

I realize some investors out there may be interested in investing in dividend stocks but may not be ready to purchase their own stocks and manage their own portfolio. Additionally some investors may not have the time or want to select their own stocks but want the benefits of investing in dividend stocks. Exchange Traded Funds (ETF's) are a great way way for investors to participate in stocks but not have the burden of selecting individual stocks.

First a definition of ETF's. An ETF is a group of stocks similar to a mutual fund except ETF's are traded on the stock exchange like other company stock. Most ETF's are based on a stock index such as the S&P 500.

ETF’s provide more flexibility since you can trade them on the stock market any time during the day. Low costs are another advantage of ETFs because their expenses are typically lower than mutual funds including index funds.

To get the maximum cost saving with ETF, look at using a low cost or no cost broker such as Zecco Trading. Even with low fees, brokerage commissions can seriously erode ETF costs when investing small sums of money.

A couple of good websites for finding out more about ETF's are ETFConnect.com and the ETF section found in SeekingAlpha.com. They both will keep updated on ETF trends and you can subscribe the their newsletters.

Since I like dividend stocks, I will cover a few Dividend ETF's. The number of Dividend ETF's has been exploding with more coming to market each month. One of the oldest is iShares Dow Jones Select Dividend Index (DVY) from Barclays. DVY was started in 2003 and most Dividend ETF's can thank the Jobs and Growth Tax Relief Reconciliation Act of 2003 for their popularity. This tax act was signed into law in May of 2003 and lowered the tax rate on dividends to 15%. REIT's and foreign company dividends were excluded from the lower tax rate of this law.

Here are links to some popular Dividend ETF's
DTN WisdomTree Dividend Top 100
FDL First Trust Morningstar Dividend Leaders
VIG Vanguard Dividend Appreciation
VYM Vanguard High Dividend Yield
PEY Powershares High Yield Dividend Achievers
AGD Alpine Total Dynamic Dividend Fund

Here are links to some of the major providers of ETF's.
Barclays iShares
Vanguard
Powershares
WisdomTree

Disclosure: The Div Guy does not own any ETFs at the time of this post but I do own Shares of Barclays (BCS) which is the creator of iShares ETFs.

I'm back! I have been busy with work, kids, volunteering and sports. I plan to start posting a few articles a week and see how it goes from there. My stocks have been recovering for the most part, my biggest loser so far has been shares of American Capital (ACAS) which I continue to hold and think they will recover nicely over the next two years.

My biggest gain so far this year has been on shares of Seagate (STX) which have increased over 200% since I started purchasing shares in January 2009. Even though the company stopped paying a dividend, I believe STX will be a great long term holding. Here is link to my write up in January Seagate Stock Review.

Another stock I think has a great future is Banco Santander (STD) which I started purchasing in May of 2007 and now have an average cost of $14 a share. The current share price as of 7/31 for STD is $14.46. So yes, I am still bullish on bank stocks but I am reducing the number of bank holding I have and concentrating them in the top banks in their respective markets.

Here is a highlight of a recent article on Banco Santander (STD) which was written by Vito Racanelli for Barron's. The Best Bank You've Never Heard Of

The financial crisis has culled the world's herd of big banks, leaving survivors dazed and damaged. But there is a rare exception in the long line of walking wounded: Spain's Banco Santander (STD), arguably the least-well-known behemoth to American investors.

That's likely to change in coming years. Santander's acquisition strategy — fix and grow broken banks — makes it likely the Spanish giant will boost its branch presence and profits in the U.S. Last January, it purchased troubled U.S. lender Sovereign Bancorp. The Pennsylvania-based bank, which lost $2.3 billion in 2008, is just a small part of Santander's far-flung empire, with 14,000 branches in 40 countries on three continents.

Santander has its problems — nonperforming loans chief among them — but don't expect to find the subprime "toxic asset" exposure or esoteric and risky derivatives that have brought other banks to their knees or worse. Among the big boys, the Madrid-based bank is probably the best-positioned and least-risky investment.

By focusing on a simple and conservative retail business strategy, mainly by cutting costs to get margin expansion, Santander has quietly gone about its business, taking its cost-conscious model to other regions, Crown adds. "It's not a pure Spanish bank [anymore]. It's not well known, but that will change."

Rare is a global bank little known to most American investors. Rarer still is the occasion to buy shares of such a bank at what looks to be a reasonable price.

The Bottom Line
Based on their 7% dividend yield, Santander shares should offer a total annual return of 10% to 15% in the next few years — possibly more, depending on the global economy.

Standard & Poor currently has a 4-star Buy Rating on the stock with a 12 month share target of $16. Check out the S&P review as well and make your own decision before investing in any stocks.

Disclosure: The Div Guy owns shares of ACAS, STX and STD at the time of this post.