Diary of a Dividend Diva: D-Day Approaching

 | Jan 27, 2014 | 11:00 AM EST  | Comments
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Stock quotes in this article:

kmi

,

cag

,

f

,

txn

Alert! Alert! A slow month of dividend collections in January will soon yield to a hefty flow that should fill your pockets. I managed to hit my target income this month (0.67%, or 8% annually), but just barely. The first month of any quarter is invariably slow, because companies are just closing the books, reporting earnings and getting board approval for dividends, which will then be declared and go ex-dividend in the second month. In the first month you need to take what you can get, which is why I have had little to say on this front of late. This too shall pass.

Our first Dividend D-day is approaching, with a caveat. "D-Days" are my description of days when a number of stocks with attractive payouts will go ex-dividend, enabling you to collect a lot of income in a short burst of activity. This Wednesday will see no less than 17 reasonably interesting dividends go ex-, seven of which offer payouts of 1% or higher.

Dividend D-Day Payouts
Source: FactSet

Now, before you get too excited, there is a catch. There is always a catch, isn't there? The top six payers on Wednesday are not normal C corporations, but are mostly master limited partnerships. These tax-advantaged structures are great income vehicles, sporting fat payouts and stable businesses. Despite these great attributes, though, I rarely play them because the tax accounting becomes a nightmare for an individual investor. It's just not fun to own a sliver of an LP for a short period and then, consequently, to deal with dozens of K-1 forms and so on.

However, if your situation allows you to freely trade LPs with little concern about tax structure or consequences, you can have a field day Wednesday. The five energy/pipeline LPs going ex-dividend are paying between 1.09% and 1.95%!

For those of us who are avoiding LPs, the day is still OK. Kinder Morgan Class P (KMI) is a great C-corp payout at 1.15%, as is Ford (F) at 0.76% and perennial favorite ConAgra (CAG) at 0.75%. These names alone are a nice mix across sectors, paying in a range that's attractive yet not risky. You could even stretch down to Texas Instruments (TXN), which I rate as "OK" at 0.69% payout.

But stay tuned. February will shower us with dividend income, so start to raise cash now in order to deploy against a deluge of payouts next month.

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