Wednesday, May 12, 2010

Decided on my Scottrade Account

Yesterday I was pondering what to do with my taxable brokerage account. Well, today I made my decision and pickup up a stock as well. So that means I decided to keep the money in the account. My next choice was to go for a growth stock or some income. I decided on the latter.

I did some research last night on high dividend paying stocks and settled on Fifth Street Financial Corporation. They are kind of a private small business administration, providing loans to companies looking for some capital injection. This type of business was set up through government legislation back in the 1980s. FCS has excelled at these loans in the past decade. This is because they have a strong capital base as opposed to other companies who rely on loans from the big banks to fund their own capital. FCS also uses loans from the banks, but because they have their own capital, they are less risky.

The good thing about these corporations is that they have to payout 90% of their net earning back to their shareholders. In the case of FCS, they pay rather well. The stock is currently trading at about $13 per share and the quarterly dividend is $.32. This means their yield is 10%. As long as the economy continues to pickup, I see the company and it's group doing well. We should see more startups now and existing small businesses will be looking to expand. With that in mind, I decided to pickup 38 shares at $13.07. This should pay me around $48 a year, if the free cash flow is maintained.

After going back and forth, I decided to split the $1000 in the account into 2 dividend stocks. I have not decided on the other one yet, but am leaning towards a big guy, like McDonalds or JnJ. This will be me one dividend grower to match with FCS.

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