Building a Financial Future Understanding Our Free Enterprise System

Blue Chip Stocks – Why invest? Blue chip stocks are giant companies with solid reputations. Think of General Electric, Intel, Visa, Wal-Mart and Walt Disney — financially fit corporations with dependable earnings, usually paying additional income to investors in the form of dividends (cash payments back to you).

Dividends – The Details! Note: Dividend Yield is a ratio that shows how much a company pays out in dividends each year relative to its share price. Details: If a stock share price is $100, and the dividend yield is 5%, you will get $5.00 for every share of stock you own whenever dividends are paid, i.e. quarterly, annually, etc.

Paid to wait? What does that mean? Dividends are cash payments to investors! Blue Chip stocks pay dividends! You have two choices: 1. Automatic reinvestment – set up your 401K (where you work) or IRA account (your own private a account) with one click to automatically purchase more stock (equity in the company) with the dividends. DO WHILE YOU ARE YOUNG TO BUILD WEALTH! If you work where there is a “employer match,” you will be purchasing the stock below market value! 2. Automatic deposit into your checking account – for people no longer working these checking account deposits function as a “paycheck!” Source: Stock Market Investing for Beginners, 2013 –Chapter 1

Is the dividend safe? What just happened to Conoco Phillips this year? Why? What did income oriented investors (all people building wealth OR older people who want income) do when this happens?

Choices Companies Have to Make 1. Put profits into reinvesting in the company for future growth! Examples: Wal-mart builds more stores! Google invests in internal technology to maintain their market leadership Name some other examples of reinvesting in the company? How would the profits be spent for reinvesting in the sectors below? Name a company and a proposed reinvestment idea. Industrial sector? Financial sector? Construction sector? Telecom sector? Source: Stock Market Investing for Beginners, 2013 –Chapter 2

Dividend Examples What is the dividend for Wells Fargo? What is the dividend for AT&T? What is the dividend for Annaly Capital Mortgage? Why is one higher than the other? Are the differences good or bad? Source: Stock Market Investing for Beginners, 2013 –Chapter 3

Dividends as a percentage of investment Wells Fargo – (3.01%) *Moderate growth company with some risk of the economic cycles *Considered safest of the big national banks. When interest rates are l low, WFC makes less money. When interest rates are high, they make more money by lending it to consumers! *More profit centers than consumer loans, but for simplicity no more information will be provided in this module. Note: Dividend rates fluctuate daily depending on how you pay for the stock (your original equity investment). Go to Yahoo Finance & get the rate for today! Source: Stock Market Investing for Beginners, 2013 –Chapter 4

Dividends as a percentage of investment AT&T – 5.01% *It is a slow growth investment with low risk *Your original investment is a slow grower, but adding the quarterly dividends to the annual rate of return makes this telecom one of the safest equity & most lucrative holdings in the U.S.A. (5.01%) It is the most widely held stock in the U.S. Congress. Note: Dividend rates fluctuate daily depending on how you pay for the stock (your original equity investment). Go to Yahoo Finance & get the rate for today! Source: Stock Market Investing for Beginners, 2013 –Chapter 5

Dividends as a percentage of investment Annaly Capital Mortgage – (11.73%) *More risk and more reward * It is a broker-deal for mortgages, acquiring, financing, and managing commercial mortgage loans and commercial real estate debt. It is classified as a Real Estate Investment Trust (REIT). More information to follow on REITs. Value fluctuates significantly. High debt. Note: Dividend rates fluctuate daily depending on how you pay for the stock (your original equity investment). Go to Yahoo Finance & get the rate for today! Source: Stock Market Investing for Beginners, 2013 –Chapter 6

Dividends as a percentage of total stock market return The Long Term *The chart on the next slide shows how an investment in each portfolio as of January 1928 would have grown through December 2013, with dividends reinvested. *Over the full period, all portfolios of dividend payers outperformed the portfolio of non-dividend payers. Source: Stock Market Investing for Beginners, 2013 –Chapter 7

Dividends as a percentage of total stock market return Source: Stock Market Investing for Beginners, 2013 –Chapter 8

Dividend – Some facts!

Dividend Questions? Should you have all dividend payers in your portfolio? What is the right combination? Does age matter? How do you choose the right stocks? Source: Stock Market Investing for Beginners, 2013 –Chapter 9