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Why I Changed My Mind on Amazon

Three quick questions?

1) Are you one of the millions that shop on Amazon and just love getting that package delivered exactly on time?
2) Do You want to have more money in the future?
3) Do you own share of Amazon (AMZN)?

amazon books on stock investing

When it comes to companies as large and life-altering as Amazon.com, you have to make an exception to the Safe Investing Rules. The reason I always avoided buying Amazon stock for years is that they do not pay cash dividends (even though I’ve been watching and hoping it would have a huge correction almost every business day). I even sell amazon books on stock investing!

My strict rules when I buy a stock are as follows:

1) The companies must be profitable and since my background is accounting, I am an expert at reading, understanding, and knowing financial statements. A lot of people just look at the bottom line or listen to a financial news blip. However, a company may show a net loss on its income statements, but a closer look at their cash flow statements will show that they have very good cash flow from operating activities and are very profitable. And they know how to legally NOT pay any taxes by growing the company (by the way, Amazon is an expert at doing this).

2) The companies must produce goods or services that millions of people use in their daily lives. For example, hundreds of millions of people in America have a Visa (V) or a MasterCard (MA) in their purse or wallet and they use them to purchase goods and services. WShoes

3) The companies I endorse must pay, at the very least, annual dividends that you can reinvest in the form of additional shares of the same company stock at zero cost (that means no commission). Quarterly dividends are even better, but very few companies do this. My very favorite is a company that pays monthly cash dividends, such as Reality Income (O) .

4) They must be companies that have understandable “how and what” in what they do in

their business—the more basic, the better. For example: a shipping company, Navios Maritime Partners L.P. (NMM), brings huge bulk goods to and from countries around the world. Another company that has an important but simple mission is a freight train line, like Norfolk Southern Corporation (NSC),  and CSX Corporation (CSX)  which moves huge quantities of goods from the Midwest to Florida.

5) And most importantly, I have to believe that the companies will be around, at a minimum, for another twenty-five-plus years—Wal-Mart or Coca-Cola, for example.

Amazon surely fits all the above-mentioned safer investing rules, except they do not pay dividends as of yet. However, they have a unique CEO/leader in Jeff Bezos, who is a true visionary and has a very long-term view. Bottom line/net income is not his main concern; he is mainly concerned about having happy repeat customers and capitalizing on niche markets, such as now striking a deal with the U.S. Postal Service (USPS) to deliver goods on Sundays when most people are at home. This is the kind of creative, out-of-the-box thinking that keeps a company ahead of the competition and moving forward. They have dominated in book sales online including my amazon books on stock investing.

Here are some financial numbers on Amazon you simply cannot ignore:

Top line Revenue:      Year 2009: $24.5 billion

Year 2010: $34.2 billion

Year 2011: $48 billion

Year 2012: $61 billion

Year 2013: $74.4 billion

Year 2014: $88.9 billion

That kind of growth rate is simply hard to be maintained, but if they can grow that well in a recessionary period, they have a very good chance to improve as the U.S. and world economies get better. It’s just a matter of time before the board of directors starts paying cash dividends.

In summary, Amazon is one of those stocks you have to hold in the very long-term part of your investment portfolio. The grandkids or your much younger relatives will be very happy you did.

More Dividend Investing 101:

Here is a very good video on dividend dates:

Ex-Dividend Date – Video | Investopedia http://www.investopedia.com/video/play/ex-dividend-date/

 

Stop Paying Your Electric Bill

How to get your current gas and electric company to eventually pay you more than you’re paying them each month.

 

nexteraenergya23Did you know if you live in Florida and you pay your utility company, such as FLP {real name is Nexta Energy—(NEE)}, at the average monthly cost of $183 for 32 years, it will cost you a total of $70,272 ?

 

But, if you had just invested only two years of the same payment $4,392 ($183 x 12 x 2 = $,4,392), it would now be worth $251,376 as today. At a dividend yield of 3% per year, you would now be earning  $ 7,541 per year–that is $628 per month. You would now be getting $445 per month more than the $183 you are paying them.

Here is a second example: If you live in Chicago, and you pay COM Ed (ED). Culling data from Yahoo Finance for the past 45 years, and using the current average $135-per-month x 45 years, your total bills paid would amount to $72,900.

mYXT0ThmBut, if you had just invested only two years of the current annual cost $3,240 ($135 x 12 x 2 =$3,240), your investment with growth and enrolled in a Dividend Reinvestment Program (DRIP), it would now be worth $579, 292 and  with a current dividend yield a 4.2 percent.

Your current yearly investment income from them would be $24,330 or $2,027 per month. That is; you are now getting $1,892 more than you are paying them.

How much do you pay your utility company and how long have you been paying them?

What other company do you buy something from each day?

Are you a Starbucks junkie? Do you pay about $2.50 per cup twice per day? Plus tip?

starbucks_1798272c That is at least $1,825 per year, or in 23 years you will have spent $41,975. But, that is okay if you just had put one year of your coffee cost of $1,825 twenty-three years ago and let it compound via growth and dividend

The value of that $1,825 as of today would be worth be $282,521 with a cash dividend yield of 1.3%, and  it would be paying you $3,672 per year or $10.06 per day. You could still enjoy your two cups per day and have $5.06 more than you are paying them.

Money Lesson #140: As it says in my book “Simpler, Safer Investing”, invest where millions of people such as yourself buy and use the companies’ products and services each day, such as your electric and gas company, or your favorite coffee chain.

To lean more on this subject, please check  my book on my web site www.sherwinpbrown.com  or an Apple ITunes,  Amazon .com,  Google play, Barnes and Noble, Kobo Book are anywhere books are sold.