Wall Street Daily

Five Nagging Questions (and Answers) For Dividend Investors

“Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.” – Calvin Coolidge

President Coolidge might call it persistence. I call it pestering. And before I ever landed my first job on Wall Street, I was a professional.

I pestered the hell out of everybody for information on what interested me most. And it’s served me well in my career by accelerating my learning curve concerning all things related to investing, finance and the market.

Why bring any of this up? Because readers constantly pester the hell out of me with questions. But I love it. I know that underlying it all is a desire to become a more informed (and better) investor.

That’s why we take the time to answer your questions once a month. And I don’t plan to stop until the pestering ends. So if you want a chance at instant internet fame in next month’s Mailbag, pester away!

Drop us a line at feedback@DividendsAndIncomeDaily.com with your questions, comments and biting criticisms. We’re on the ready and eager to respond to each one.

Remember, though, I can’t provide individual investment advice. But I can answer your general questions, which means you just need to be clever with your wording. (Wink. Wink.)

Without further ado, here are this month’s top questions…

Question: I see there is possible legal action pending against Outdoor Channel Holdings (OUTD) for selling the company for less than what the “legal eagles” think the company is worth. They are instigating for a shareholder class action lawsuit. Any comments on this possibility? Thanks very much and I enjoy your writing! – J.P.

Goldman Sachs (GS) was famously characterized as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” I often wonder, though, if such a cheery depiction wasn’t misplaced.

When it comes to greed, financial wizards aren’t any more bloodthirsty than lawyers. And there’s no better proof of this than mergers and acquisitions. When deals are announced, the lawyers come running. Pull up the news feed for any of the merger arbitrage opportunities I shared, and you’ll see countless press releases about legal action.

It’s nothing to worry about, though. If the lawyers succeed, which they seldom do, it results in a higher price being paid for the merger. Translation: More money for us. Now who looks greedy?

Comment: How about the factor that insiders have bought into Windstream Corp. (WIN) within the past months? – M.Q.

In mid-September, I labeled Windstream one of the most dangerous stocks in the S&P 500. Was it an unfair assessment? You might be inclined to think so, considering that insiders have snatched up almost 300,000 shares over the last six months.

But the tape never lies. Shares are off 20.7% since I shared my research. Why? Because stock performance always comes down to the fundamentals. And the fundamentals for Windstream, particularly for income investors focused on safe, reliable returns aren’t compelling. Insiders can’t change that reality, no matter how much stock they buy.

Let this be a lesson that insiders aren’t always right. So before you rush out to follow them, confirm that the fundamentals warrant it.

Comment: I have yet to read your view on why we shouldn’t invest in the Iraqi dinar. Iraq is set to have the biggest oil fields in the world and become the wealthiest country in the world. What is your problem with purchasing dinars? – C.M.

The easy way to answer this question is with another question. As subscriber Terrie B. asks, “Is the Iraqi dinar revaluation a hoax or not?”

Folks, if you have to ask whether or not something is a hoax – or too good to be true – it usually is. And this is no exception.

As I shared with WSD Insider subscribers over a year ago, everything I’ve read and heard about the Iraqi dinar “investment opportunity” smacks of a scam. And I’m convinced that the only people destined to make gobs of money on the Iraqi dinar are the ones behind the seemingly shady operation.

If you want more information about this “opportunity,” I encourage you to read the warnings from Forbes and from John Jagerson, Co-Founder of PFXGlobal.com.

Question: How can we rely on your research above all others? Where is the trust factor in your details that needs to persuade? Why would we throw our trusted investment brokers over for you? Would love to have those INDICATORS…. – T.M.

Easy there, Tonto. We’re not looking to replace anyone’s broker. Remember, we don’t manage money. We’re just trying to be an unbiased voice of reason in a sea of misinformation. And the easiest way to “persuade” you to listen to us is simple: Take us for a test drive.

See what we have to say, “paper trade” our recommendations, and let the track record do all the talking for us. As we revealed a few weeks ago, our track record might not be perfect, but it’s still pretty stellar. And we aim to keep up the good work.

Question: Louis, you are a voice of reason on the Fiscal Cliff issue while Washington and Wall Street run around like idiots. I’m hanging tough with you – certainly not pulling out of the market in anticipation of a “disaster” via Washington’s failure to act, and I LOVE dividend stocks. Buying the solid dividend-paying companies inside my 401(k) whenever the price makes sense… Maybe you should advocate dividend stocks inside a retirement plan if that plan allows self-directed option (SDO)? – G.M.

I love dividend stocks, too. And thanks for stealing my thunder! You shared one of the investing tips I planned to talk about this week. Specifically, investing in dividend-paying stocks in an individual retirement account (IRA), instead of a taxable trading account.

The reason couldn’t be more straightforward. By owning dividend-paying stocks in retirement accounts, we can avoid next year’s potentially higher dividend tax rates. The only tax we have to pay is deferred until we retire and start making withdrawals. And at that point, the income will be taxed at ordinary income tax rates.

So if it’s possible, you should hold dividend stocks – and reinvest the dividends – in an IRA to reduce your tax burden.

That’s it for today. Be sure to submit your questions to feedback@DividendsAndIncomeDaily.com before our next installment of the D&I Daily Mailbag.

Safe investing,

Louis Basenese