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Dividend Power Week In Review – Things I Won’t Do After The Lockdown Ends

Week 9 of Lockdown – Things I Won’t Do After the Lockdown Ends

Things I Won’t Do After The Lockdown Ends and Grace Groner. We finished Week 9 of the lockdown here. It seems like most people’s outlook is improving as the lockdowns ease around the country. Most states are taking a slow methodical approach, which makes sense to me. I personally don’t want to see a resurgence of new infections. In my opinion most people should still be wary. I am wearing my mask when I am out grocery shopping, or going to Home Depot (HD), or running other errands. Notably, I was able to find flour and hand sanitizer this past week. So, the hardest to find items are now available. This is likely due to a combination of consumers no longer hoarding and companies have ramped up production of consumer staples and basic necessities. Since the coronavirus lockdowns are easing, I was thinking about “things I won’t do after the lockdown ends.”

I think first on my list not to do after the lockdown ends is go on a cruise. Don’t get me wrong, I like cruises. One of my favorite vacations was our cruise to Alaska. The highlight was seeing the Hubbard Glacier, which is really best seen by ship. It’s about 400 feet high and about eight miles wide. We were about ¼-mile or so away. That alone was worth going on a cruise. But now, I’m not so sure. I need some more convincing and my wife needs even more convincing than me.

Another of the things I won’t do after the lockdown ends, I am not getting on an airplane, at least for the next couple of months. I think most airlines will figure out the ‘social distancing’ aspect. Maybe they will leave the middle seat empty. Or maybe they will change how the seats are arranged. But still, the concept of being in cramped quarters for an extended period of time while wearing masks and wondering if anyone is sick is not appealing to me.

We have been ordering food from restaurants once per week. Our go to order is pizza. This gives us a break from cooking and also gives some business to our favorite local restaurants. We have been going to some of these restaurants for years and I don’t want to see them close. I would like to go eat at a restaurant. With that said, I am also not going to a restaurant unless they change how they seat people to maintain ‘social distancing’. So, that is number three of the things I won’t do when the lockdown ends.

Restaurants Get Creative As Lockdown Ends

Restaurants are getting creative to bring back wary customers like me. I was reading about a restaurant in Amsterdam that will essentially put their customers in a greenhouse to uphold ‘socials distancing’. Check out the picture below. Another restaurant in Ohio is using shower curtains that hang around each table. A restaurant in Sweden is serving one customer at one table in the middle of a field. There are no servers. The food arrives in basket via a rope and pulley system. Another restaurant in Germany is fitting customers with headgear constructed of floatation noodles for swimming pools to provide ‘social distancing’. Check out the second picture below. I’m not sure that I would wear the noodles, but I don’t mind the greenhouses or the shower curtain approach.

Source: Mashable India
Source: MarketWatch

Coronavirus Dividend Cuts and Suspension List in 2020

I updated my coronavirus dividend cuts and suspensions list this past Wednesday. The number of companies on the list has risen to 250. We are now over 8% of companies that pay dividends in the U.S. having cut or suspended them. The list is still growing, but the growth rate has slowed quite a bit. We are in the middle of earnings season right now. Most of the companies that are going to cut or suspend their dividends have done so during their first quarter earnings release. 

However, I do not think that we are completely out of the woods yet from the perspective of dividend cuts and suspensions. For some companies Q2 2020 will be harder than Q1 2020 from the context of revenue and earnings. One has to remember that the first quarter was mostly complete before the lockdowns and travel restrictions started in mid-March. Many companies already issued dividends or planned to in the early part of Q2. My expectation is that we will see an uptick in dividend cuts and suspensions albeit not a large one during second quarter earnings releases.

The big dividend suspension this past week was from a Dividend Champion, Tanger Factory Outlet Centers (SKT). Tanger is real estate investment trust or ‘REIT’ that focuses on outlet malls. The main problem is that Tanger is not receiving all of its rent payments and is deferring collection. Thing will likely get better for Tanger as each state ends their lockdown, and customers return to malls. The company has raised the dividend for 27 straight years before this suspension. Since the stock is a Dividend Champion, this suspension will probably hurt many small investors. The stock is down nearly 70% in the past one year, and approximately 85% from its all-time high. I will have an article out on Tanger soon.

The CBOE VIX has been between 30 and 40 since late April and is still trending down. It was above 40 around April 21st to 23rd and below 30 May 8th to 11th. We will eventually get to the long-term average of 19. I think that the new stimulus bill and reopening of several states are positives in this regard.

Source: Google

I have also been tracking the Fear & Greed Index. It has been roughly between about 40 to 50 for the past several weeks in Fear. The index was trending down slightly this past week and the most recent reading was 39. My expectation is that we will be in the above range for some time even as the lockdown ends in different states. It will take time for the index to get higher.

Source: CNN Business

Mortgage Rates Are Near Record Lows

I wanted to talk about mortgage rates in this blog post. They are near record lows. They may even go lower if the economy does not bounce back quickly. Why are rates so low? Right now, there is likely little demand for new homes. Further, with over 36 million in job losses in the U.S. demand for refinancing may be low. 

In the past two weeks, the 30-year mortgage has been roughly at 3.30%. As of May 14th, the 30-year mortgage rate is at 3.28%. Take a look at the chart of the 30-year fixed rate mortgage average in the United States from the Federal Reserve Bank of St. Louis. Clearly, the 30-year is near historic lows.

Source: Federal Reserve Bank of St. Louis

Other mortgage rates are also approaching record lows. The chart below shows that the 15-year mortgage rate is at 2.72% and the 5/1-year adjustable rate mortgage or ‘ARM’ is at 3.18%. The rates for these two types of mortgages are not yet at record lows. They were lower in April 2013. 

Source: Freddie Mac

Low rates usually tends to lead to an increase in home purchases and refinancing. But this may now be difficult for some homeowners due to stricter lending standards. Reportedly, mortgage delinquencies due to the coronavirus are rising. At the moment nearly 4 million homeowners or 7.54% of all mortgages are in the midst of forbearance plans. For some categories the percentage rises to nearly 11%. This is reportedly leading to stricter or tighter lending standards. So, in the end, probably not everyone will be able to get these low rates.

Secret Dividend Millionaires – Grace Groner

In this installment of my series on Secret Dividend Millionaires I am highlighting the story of Grace Groner. She worked as a secretary at Abbot Laboratories (ABT) for 43 years. She died in 2010 at the age of 100 with a fortune of $7.2 million. She bequeathed that fortune to her alma mater, Lake Forest College in Illinois.

How did Grace Groner become wealthy and a Dividend Millionaire? Well, after graduating college, she took a job in 1935 during the Great Depression as a secretary at Abbot. Reportedly, in her first year there, Grace bought three shares of Abbot at $60 per share for a total of $180. Yes, only three shares. She held those three shares for 75 years. Her three shares split many times and the dividends were reinvested. Those three shares became well over 100,000 shares by the time she died.

Grace Groner’s success was due to time, compounding, and dividend growth. Interestingly, her stock portfolio was not diversified at all. I don’t suggest that for most people.

Grace had the advantage of investing early and letting that investment compound over many years. She lived a very long life so that the initial $180 grew. Note that the intial investment grew through about 13 recessions, World War II, and other negative world events. If she had invested the initial $180 in savings account with a 3% interest rate, it would have only turned into $1,652.

Next, Grace Groner reinvested the dividends allowing compounding to occur over a very long period of time. Her success also shows the power of dividend growth. Abbot has paid a growing dividend for 48 consecutive years. The stock is a Dividend Aristocrat. In addition, the company has declared a dividend for 385 straight quarters since 1924. Few companies can match that success and that was to the benefit of Grace Groner who became a Dividend Millionaire.

You can read about the other Secret Dividend Millionaires.

Here are my recommendations:

Lastly, if you are interested in an excellent resource for dividend growth investors. Please take a look at my Review of The Sure Dividend Newsletter from another dividend growth investor, Ben Reynolds. Note that I am an affiliate of Sure Dividend.

If you would like notifications as to when my new articles are published, please sign up for my free weekly e-mail. You will receive a free spreadsheet of the Dividend Kings! You will also join thousands of other readers each month!

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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2 thoughts on “Dividend Power Week In Review – Things I Won’t Do After The Lockdown Ends

  1. In the face of adversity there are many creative inventions, like those sweet hats! Grace Groner sounds like a fascinating lady! An investor but a minimalism investor at that! A good history lesson and example of the magic of compounding interest.

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