After analyzing communication stocks from Monday's screen, I decided to purchase shares of AT&T (T).

Company Description

AT&T is the dominant local phone company in 22 states, serving about 55 million local phone lines and 15 million high-speed Internet users. The firm also provides phone and data services, such as Web hosting and data transport, to businesses nationwide, notably large corporations. AT&T owns 100% of AT&T Mobility, the second-largest U.S. wireless carrier with 77 million customers. The firm also owns a directory publishing business and a handful of international investments.

AT&T has been growing it's wireless revenue with help from iPhone and continues to roll out of U-verse fiber-based network which offers video and faster-speed broadband services. U-verse has higher profit margins and is increasing the companies profitability.

Strong Brand and Dividend Income

AT&T still has strong brand loyalty and an improved balance sheet. The 6% dividend yield is a big bonus as well. The dividend payout was 52% of the $13.9 billion of free cash flow which should provide ample cushion for continued dividend payments.

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

I just read an article on NPR.org that talked rain day funds. About half of Americans don't have $2,000 for a rain day fund. I find it amazing and sad that so few people can save money. Here are the highlights of "Americans' Savings Offer Little Shelter For Rainy Day" by Marilyn Geewax.

For nearly two years, the U.S. economy has been struggling with a recession brought on by excessive borrowing, both for home mortgages and consumer purchases. Economists say many people have learned a lesson; the personal savings rate is inching back up as more Americans embrace the "new frugality."

Still, half of U.S. households don't have even modest savings, according to a new study conducted by TNS Group, a market researcher, with help from professors at the Harvard Business School and Dartmouth College.

The researchers conducted a survey to see how many households could round up $2,000 within 30 days to cope with an emergency, such as having a car breakdown or needing a major home repair. About half said that even if they turned to relatives for help, they could not come up with $2,000 for a "rainy day," the study found.

The tougher credit environment makes it even more important for households to have their own savings to handle emergencies, according to one of the researchers, Dartmouth economics professor Annamaria Lusardi. The personal savings rate has crept back up from zero to about 3 to 4 percent, but is still about half the norm of a generation ago.

Lusardi says most Americans continue to live with what she calls "financial fragility." That is, families may be living a middle-class lifestyle, but are one job loss, or even one car breakdown, away from tumbling into real financial trouble.

She said many consumers don't study the interest rate and fee terms of their credit cards, and suffer from "financial illiteracy." That is, they don't realize just how expensive it is to borrow money — and how important it is to have cash available for unexpected expenses.

She recommends that families save in a "slow and steady" manner, always setting aside some cash each week to create a "rainy day" fund of at least $2,000.

I just read an interesting CNNMoney story about 401(k) plans. Millions of US workers cash out their 401(k) plans when they lose their job or change jobs. How sad is it that almost half of all people who lose their job or change companies take their retirement plan in cash. Many of these same people will be struggling during their retirement years.

Here are some highlights of the article by Ben Rooney. Unemployed tap their 401(k)s

Hewitt Associates, a global human resources consulting firm, said 46% of employees who left their job last year took a cash distribution from their 401(k) plan.

The "alarmingly high" number, which was based on a study of 170,000 401(k) participants, has remained virtually unchanged since 2005, the group said.

Pamela Hess, Hewitt's director of retirement research, said employers and policymakers need to work together to change employee behaviors and reduce 401(k) cash-out rates.

"Otherwise, millions of Americans who rely on defined contribution plans will find themselves unable to achieve a financially secure retirement," Hess said in a statement.

Among the workers who did not cash out their plans, 29% left their savings in their prior employer's 401(k) plan, while 25% rolled over their money into an IRA account or other retirement plan.

The study also showed that younger workers were more likely to take the money and run. Six out of ten workers in their 20s took a cash distribution from their 401(k) last year, compared with just one-third of employees in their 50s.

Hess said the high cash-out rate among young workers is troublesome because those employees are missing out on "decades-worth of tax-deferred growth on their investments."

Not surprisingly, the study found a correlation between 401(k) plan balances and cash-out rates.

Only 8% of workers with 401(k) balances of $100,000 or more cashed out their plans last year. That compares with 85% of workers with a balance of $1,000 or less who did take a cash distribution.

I just finished reading 'The Top 10 Distinctions Between Millionaires and The Middle Class" by Keith Cameron Smith. Nothing earth shattering in this book and most distinctions are common sense but they are good to review. Here is a summary of the book.

10. Millionaires think long term. The middle class thinks short term. The goal of the poor is survival, middle class is comfort and rich is freedom. What would you like your life to be like ten years from now? Think about it and start planning for it. Think long term in every area of life.

9. Millionaires talk about ideas. The middle class talks about things and other people. There are three types of people, those who make things happen, those who watch things happen and those who say what happened. Ideas are the most valuable asset in the world. Money is powerful but ideas are even more powerful.

8. Millionaires embrace change. The middle class is threatened by change. Millionaires embrace change because they know it always brings an opportunity for growth.

7. Millionaires take calculated risks. The middle class is afraid to take risks. If you take risk out of life, you take opportunity out of life. Risk management: What is the best thing that could happen?; What is the worst thing that could happen?; What is the most likely thing to happen? Three primary fears that stop the middle class from taking actions that create success are the fear of failure, the fear of rejection and the fear of loss.

6. Millionaires continually learn and grow. The middle class thinks learning ended with school. Success is a process, millionaires are students for life. The secret to being a lifelong learner is to study what you love.

5. Millionaires work for profits. The middle class works for wages. Wages will always limit your income, if you earn profits the sky is the limit.

4. Millionaires believe they must be generous. The middle class believes it can't afford to give.

3. Millionaires have multiple sources of income. The middle class has only one or two. The power of intentional congruence is getting each source of passive income to support the others.

2. Millionaires focus on increasing their net worth. The middle class focuses on increasing its paycheck. Millionaires make their money work hard for them. The middle class works hard for its money. Increasing your net worth with assets that produce passive income is a skill and skills require time to develop. Wisdom is the application of knowledge. Millionaires apply knowledge they gain and continually increase their knowledge.

1. Millionaires ask themselves empowering questions. Middle class people ask themselves disempowering questions. Learn to ask yourself questions that stretch you beyond your current levels of experience. Questions you ask yourself determine the results you get in your life.

I am looking to add a communication company to my portfolio. I have created a stock screen using S&P data. I am looking for 4 and 5 star rated stocks that are paying a dividend of 2% or more. The screen comes up 8 stocks which are listed below. I will need review these stocks and select one to purchase this week.

I also need to review and trim some of my current stocks in the new year. I am going to take a close look at the stocks that are not paying dividends and stocks that are not leaders in their industries.

As always do your own research before making any investments.

Symbol Company Dividend Yield
T AT&T Inc. 6.25%
CTL CenturyTel 8.08%
FTR Frontier Communications 13.76%
NTLS NTELOS Holdings 7.35%
ERIC Telefon Ericsson 2.17%
TEF Telefonica S.A. (ADR)5.11%
VZ Verizon Communications 6.31%
WIN Windstream Corporation 10.05%

Disclosure: The Div Guy does not own any of these stocks at the time of this post.

Here are the top 20 stocks in my Dividend Portfolio as of 10/31/09 ranked by size of holdings.

1. Kinder Morgan Energy (KMP) USA
2. Barclays PLC (BCS) UK
3. DCP Midstream Partners (DPM) USA
4. HRPT Properties Trust (HRP) USA
5. Penn West Energy Trust (PWE) Canada
6. Procter & Gamble (PG) USA
7. Johnson & Johnson (JNJ) USA
8. General Electric Company (GE) USA
9. American Capital (ACAS) USA
10. Exxon Mobil Corporation (XOM) USA
11. Banco Santander (STD) Spain
12. GlaxoSmithKline (GSK) UK
13. Deutsche Bank (DB) Germany
14. Diana Shipping Inc. (DSX) Greece
15. Aircastle Limited (AYR) USA
16. Cooper Tire & Rubber (CTB) USA
17. ONEOK, Inc. (OKE) USA
18. Newell Rubbermaid Inc. (NWL) USA
19. Seagate Technology (STX) USA
20. Duke Energy Corporation (DUK) 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 10/31/09.

1. Total SA France
2. Muenchener Rueckver Germany
3. Glaxosmithkline PLC UK
4. Unilever NV Netherlands
5. CNP Assurances France
6. Novartis AG Switzerland
7. Pearson PLC UK
8. 3M Co USA
9. Philip Morris Int’l USA
10. Diageo PLC UK
11. Emerson Electric Co USA
12. Vodafone PLC UK
13. Conocophillips USA
14. Genuine Parts Co USA
15. Eni Spa Italy
16. Coca Cola Co USA
17. Johnson & Johnson USA
18. Embotelladoras Arca Mexico
19. AT&T Inc USA
20. Akzo Nobel NV Netherlands

My Annualized Dividend Income as of the end of October increased to $5,381 from $5,378 for the month. This means my dividend stocks will pay $5,381 in dividends over the next 12 months.

I made a few small dividend stock purchases over the past month from dividend distributions. It looks like the economy is showing some signs of stabilizing and we will have fewer dividend cuts for the rest of the year.

My Dividend Income Goal for 2009 was $7,000 in yearly dividend income but due to the poor economy and 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.

I will post my Top 20 Stock Holdings on Wednesday.

As of the end of October our Net Worth decreased to $747,078 from $755,013 for the month which is a 1.05% decrease. For now the markets look like the have settled but we will have to wait and see if the economy slowly starts to recover.

The breakout is as follows:
ASSETS
Retirement Accounts $366,513
Taxable Accounts $116,147
Cash $18,358
Home $205,000
Cars $9,000
Personal Property $3,000
Kids 529 Accounts $29,060

Here is the summary for this month:

Our Net Worth decreased the past month due mostly to the drop in the stock market. We are now debt free since we paid off our credit card debt. We will continue to use our credit cards for rewards but payoff the balances each month. I received around $100 in dividends for the month and have used the cash from these dividends to make additional stock purchases of our dividend stocks but I have not been adding much extra money.

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.

I will post my Dividend Income Update on Tuesday.