Last week, I asked you what you would do with an extra $10,000. Most of you answered that you would invest in the stock market, precisely into dividend stocks. I wasn’t too surprised by this answer. While I discussed several options, I didn’t really tell you what I would do with an extra 10K. So here we go…
Pay Off an “Expensive Debt”
I recently bought a pool based on an expected tax return. This was a really dumb move! Last year, we were able to use my wife’s tax credit to decrease my taxes. This year, I doubled my RRSP contribution (I was allowed to put in 10K) so I was expecting an additional return of $3K on top of what I received in 2011. Well, my wife made more money and the accountant used the tax credit to help her save taxes. In the end, it comes down to the same pockets, but I was truly expecting a bigger tax return! So, this is how I’m now stuck with a 5K loan at 6.75%. It’s not that expensive but I would definitely use the first 5K to pay off this loan and “make” a 6.75% return on my money. Considering that it’s after tax money, it’s more like a 10% yield .
Pick Another Stock… MCD?
After my MCD stock analysis, I’m convinced that MCD would be a great fit in my portfolio. This stock will most likely provide more stability to my portfolio (as compared to VNP!) and I can count on a solid dividend as well. The company is on a short slump right now after showing mild results. MCD is currently paying a little bit more than 3%.
Another stock on my watch list is Seagate Technology (STX). It was part of my Best Dividend Stocks for 2012 eBook. It shows strong long term fundamentals and pays a great dividend. The only problem I can see with this stock is that the “party might be over” as the stock surged by more than 80% since the beginning of the year. Would you really think that STX can pay more to its shareholders? Well, you can always count on a solid dividend yield (over 3%) along with a low P/E ratio (7!).
I would also be tempted to increase my position in INTC or Telus (T). I think that INTC still has steam under its hood and will eventually crack the $30 mark. Since that’s another 10% more or less, I would be willing to increase my position in this stock. As for Telus, the high dividend yield attracts me while I’m convinced it’s going to do better than BCE in the upcoming year.
By using 5K to pay off my debt, I would probably use 3K to buy a new stock and 2K to increase my position in one stock (or twice 1K to buy 2 stocks 😉 ).
Another internet money making machine is about to go public in May; Facebook! I’m not a big fan of their site to be honest (I find Facebook highly time consuming so I don’t really use it) but I’m a big fan of its growth and cash generation! The company is going public soon but I doubt they will pay a dividend up front. This doesn’t really make sense anyways.
Is there any money to be made from the Facebook IPO? I can’t really tell. If I had my 10K ready to invest at the moment, I would be tempted to give it a try though… but it’s more gambling than investing. You can’t really tell if the market will value Facebook correctly or if it will go nuts and make the stock surge on the very first day. It reminds me of Google when we thought that $100/share was too expensive… silly me!
Are you interested in the Facebook IPO? Will you give it a try?