1. BONDS OR DIVIDENDS?

2. Why Have Investor’s Historically Preferred Bonds?
Traditionally known as a “safe investment”
Typically less volatile than stocks
Offer regular interest payments
Have first priority in any liquidation
The Safer Alternative to Bonds. Jim Royal (September, 2011)

3. Is There Risk With Bonds?
Types of risks associated with bonds:
Interest rate risk, reinvestment risk, inflation risk, credit/default risk, rating downgrades and liquidity risk.
The Safer Alternative to Bonds. Jim Royal (September, 2011)

4. Trends in Bonds Current trends within the bond environment:
Low interest rates: Interest rates below the level of inflation, making investors lose purchasing power as bonds decline in value when rates rise again.
100-year bonds: Although these bonds offer higher interest rates, there is principal and business risk.
Weak bond covenants: Bond investors may accept weaker lending terms.
The Safer Alternative to Bonds. Jim Royal (September, 2011)

5. YIELD OF S&P500 STOCKS vs. 10-YEAR TREASURY YIELD
Source: AAII, July 2018

6. An Investor in Dividend Stocks or Bonds Will Have To Deal With Principle Fluctuations In Either Investment… So, In This Interest Rate Environment, Which Would You Rather Own, Dividend Stocks or Bonds? **In Both Cases, The Investor Has To Hold The Investment To Get The Yield.

7. Average Dividend Yield from Indices, as of September 27th 2018
Index
Aggregate Value of Index Components
Aggregate Dividends
Dividend Yield (%)
[S&P and Nasdaq in millions.
[Next four quarters]
[Aggregate Dividends divided by Aggregate Value]
Dow Jones in units.]
 S&P
24,472,
481,
1.97
[Floating Capitalization Weighted: stock price and per-share dividend are multiplied by the number of floating shares and then scaled to millions.]
 Nasdaq 100
11,448,
124,
1.09
[Modified Cap. Weighted: stock price and per-share dividend are multiplied by the Nasdaq weight factors and then scaled to millions.]
 Dow Jones 3,
89.067
2.29
[Price Weighted: Sum of prices and dividends of stocks in the DJIA index.
(N.B. Divide stock price sum by the DJIA divisor to get the index value.) ]
Indexarb.com, September 2018

8. Trading View September 28th, 2018
10-Year Treasury Yield
3.06
Trading View September 28th, 2018

9. Historical Comparison: Top 25 Dividend Stocks Q3/2018 vs
Historical Comparison: Top 25 Dividend Stocks Q3/2018 vs. 10-Year Treasury Yield
3.83
2.83
Source: Yahoo.com

10. TOP 25 DIVIDEND PORTFOLIO PERFORMANCE - % RETURN
Source: Yahoo Finance

11. What about Corporate Bonds?
Nominal yields on Treasuries and corporate bonds have dropped since recession
Maturity timeline required
In inflationary environment, bonds tend to do poorly.
Bond interest is taxed as high as 35% rate
DIVIDEND STOCKS
Dividend yields of high quality equities have risen
Companies with strong balance sheet and stable earnings will sustain in an economic downturn
Equities will hold up much better in an inflationary environment
Current tax rate for qualified dividends is 15% or 0%
Potential for capital growth
Advantage of possibly raising current yields over time
Seeking Alpha, June 2011

12. Average dividend yield of the same corporate borrowers is 4.03%
Average yield-to-maturity for bonds= 3.52%, despite having an average coupon of 6.42%
Average dividend yield of the same corporate borrowers is 4.03%
Seeking Alpha, June 2011

13. Key in a Dividend Strategy
Search for companies with strong fundamentals
Select stocks with stable dividend yield and growth
Unlike the bonds that are difficult to price, stocks are much easier to price
Underlying stock offers growth potential
Reinvest the dividends
Quarterly screening process for quality dividend stocks
Combination of high/low dividend yield, high/low dividend growth, and payout ratio

14. Expected Return on Dividend Portfolio
10/1/2018
TICKER
COMPANY
Growth Score
Yield Score
Dividend Yield
TOTAL SCORE
Beta
Rf* Rm
CAPM
BGCP
BGC Partners, Inc.
93.00
6.00
81.04
1.02
2.09
0.7113
0.6837 T
AT&T Inc.
77.46
0.40
1.5385
AVGO
Broadcom Inc
83.00
3.00
76.49
0.94
0.7940 BX
Blackstone Group LP
75.94
1.37
0.2012
ABBV
AbbVie Inc
88.00
4.00
75.75
1.54 VZ
Verizon Communications Inc.
89.00
4.40
74.60
0.69
1.1387
VLO
Valero Energy Corporation
82.00
2.70
73.60
0.98
0.7389
LAZ
Lazard Ltd
87.00
3.70
73.32
1.79
PRU
Prudential Financial Inc
3.60
73.21
1.49
0.0357
AYR
Aircastle Limited
92.00
5.40
72.63
1.80
RDS.B
Royal Dutch Shell plc (ADR)
5.80
70.93
1.06
0.6286
IBM
International Business Machine
4.20
70.56
0.87
0.8905
ETN
Eaton Corporation PLC
84.00
70.39
1.38
0.1874
PFE
Pfizer Inc.
3.20
70.18
0.96
0.7665
BUD
Anheuser Busch Inbev NV (ADR)
91.00
4.80
69.75
0.93
0.8078
ORI
Old Republic International Cor
86.00
3.40
69.67
1.22
0.4080
PEP
PepsiCo, Inc.
85.00
69.22
0.66
1.1801 IP
International Paper Co
66.94
1.50
0.0220
MSFT
Microsoft Corporation
71.00
66.53
1.25
0.3666
JPM
JPMorgan Chase & Co.
2.80
66.31
1.16
0.4907
KKR
KKR & Co Inc
80.00
2.50
64.97
1.63
WMT
Walmart Inc
77.00
2.20
64.36
0.51
1.3869 KO
The Coca-Cola Co
62.56
0.74
1.0698
CSCO
Cisco Systems, Inc.
60.83 GM
General Motors Company
60.81
1.55 Rf
Current Portfolio Yield:
3.824
1.14
0.5183%
Per Month
Treasury Bill Rate - 4 weeks
9/25/2018
CAPM of Portfolio
6.40%
Annualized
Current Portfolio Yield
3.82%
* Growth and Yield Score based on 4Q/2018 Screening
Expected return of the Portfolio
10.22%

15. Capital Asset Pricing Model (CAPM)
A model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.
General idea behind CAPM: investors need to be compensated in two ways: time value of money and risk.
The time value of money is represented by the risk-free (rf) rate in the formula and compensates the investors for placing money in any investment over a period of time.
The risk is represented by beta and calculates the amount of compensation the investor needs for taking on additional risk (risk premium)
The CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free security plus a risk premium.
Investopedia, October 2013

16. No strategy can guarantee profit or protect against a loss.
Past performance is not indicative
of future results.

17. BigFoot Investments (a DBA of Lee Johnson Capital Management) does not promise, guarantee or imply that you will improve your operation, or increase your revenues. As with any business, earnings potential and successful or unsuccessful use of BigFoot Investments’ products and materials will widely vary among our customers depending on many factors, including but not limited to, the customer’s finances, knowledge and skill set, creativity, motivation, level of effort, individual expertise and as such we do not guarantee your success or income level. The information conveyed by BigFoot Investments, as well as the information otherwise conveyed in these materials is intended to provide you with basic instruction regarding your business or operation. BigFoot Investments does not guarantee any results or returns based on the information you receive. Past performance or examples of other’s performance is no indication or guarantee of your anticipated future results, and individual results may vary. We are not responsible for any success or failure of your business if you implement the information you receive from us. We provide a tool that you can use to try to improve the operations of your business. All information contained or received through the use of our materials is provided “as is” without warranty of any kind. We hereby disclaim all warranties with regard to the information contained in our materials including without limitation all expenses, statutory and implied warranties of merchantability and fitness for a particular purpose.