SEB, DVY (New), IIBK (New), ASHG, NBG, et. al.

Man, today was just freaking huge. The markets opened up quiet and waited on the comments from the Federal Reserve about the state of the economy. It is incredible how the words of one person, federal chairman Bernanke, can impact the market so sharply. The biggest discussion was Bernanke saying the economy is 'ok' and interest rates are not going anywhere anytime soon. What this means is that interest rates will not increase, as many feared or even expected.
The impacts of this are the treasury yields staying about the same mean that for the time being, we live in a world where yields of dividend paying stocks are very close to what you would get if you invested in a U.S. treasury bond. When I stock about dividend paying stocks, I am not talking about the egregiously high yielding stocks, like oil royalty trusts - I am talking about blue chips. PFE sports a 4.4% yield, Altria (NYSE: MO) is at 4%, and Washington Mutual (NYSE: WM) is at 4.9%. My point is, if you get 4.8% from a U.S. Bond, why wouldn't you just buy WM, collect the 4.9% return on your investment via dividend and then own the stock? Exactly - you wouldn't - the 'guaranteed' return is about the same and you have a chance for stock ownership.
So, today, with rates staying the same, and that gap between dividend yields of blue chips and treasury yields remaining relatively small, money flowed into stocks today - especially blue chips as the Dow Jones closed at an all time high. It seems that this trend will continue as long as the environment is the same. Eventually, the yields of these stocks will go from say 4% for MO to maybe 3.2%-3.5% yield. Then, people see that difference between a treasury and a dividend yield and are less inclined to buy stock. But, that slowdown won't take place for a bit and stocks will continue to rise, especially blue chip stocks, creating a larger gap between the yields.

In light of that, I'd like to introduce you to NYSE: DVY. The symbol is fitting as this is an 'exchange traded fund' (ETF) and is the Dow Jones iShares Dividend Index. This 'fund' trades like a stock and invests in blue chip companies that have histories of strong dividends and consistent dividend growth over 25+ years. I like this one a great deal for my IRA and I took a position in this one in my IRA account. I think the ETF will perform well from a capital appreciation standpoint and yield about 3% in dividends. This fund supports my discussion above regarding the interest rate environment and I think is perfect for an IRA account.
I am a little more aggressive in my main portfolio, but oddly enough, I am very conservative in my IRA. Why? I mean, can't you get tax deferred growth in your IRA? Well, sure. But, I remain conservative. The key to the IRA, especially at a young age like me, is the time value of money. It is more important for me to have years generating 10%-12% returns, year after year, without exception. When stocks struggle, the dividends will help support. Over time, and with maxxing out my annual contributions, this is what will make the thing big. Taking big risks in the IRA? Well, what if a big risk doesn't grow or suffers serious depreciation? You are literally wiping out what could take you years to recover. I will stick to aggressive in my portfolio, where I can move the money, stomach a loss if it happens, and take gains out to use for my own lifestyle if need be. As long as I can get a nice, steady return in my IRA year after year, I will be fine when I can actually use the thing. Short and simple, implicit in the strategy and purpose of the IRA is to get that residual time value of money - very slow and steady. In my day to day stuff, I'll take bigger whacks at things looking for 50%+ gains in a 12 month period.

Speaking of monster gains, Seaboard Corp (AMEX: SEB) was my best performer today, up 6.2% to $2,107 per share. I started buying at $1,289. I expected it to crack $2,000 today, after yesterday's strong close, but today, in the last 30 mins. of trading, it just blew up and traded as high as $2,135. SEB is still worth $3,000+ per share - it continues to produce lots of cash and shareholders equity. Plus, their business model, especially their marine chartering business, will benefit from the opening up of Cuba. SEB has a great conglomerate going, but SEB risks never reaching full valuation because lack of coverage by the big institutions. In the mean time, remember, there seem to be no shares out there available for sale and there are buyers - supply and demand - demand is high, supply is low, and price goes up. SEB is not done yet, but it might take a breather over the next couple of days, but short term, heading to $2,300 is not out of the question. SEB will shortly be releasing its earnings report, so we will see what comes to pass in terms of EBITDA, Cash Flow, Shareholders Equity, etc. I think we will see another uptick in all of those categories for SEB and the market may be anticipating that.

National Bank of Greece (NYSE: NBG) performed strongly today, too. 2 days ago, it fell down to $10.01 (from $10.40) on the news they lost the bid for a Ukrainian bank and were looking at a bank in Russia. I almost pulled the trigger and bought more, but my adding threshold was $9.90. I wish I got more, as it is now back up to $10.51 and less than a nickel off of its 52-week high of $10.55. From a chart standpoint, this appears to be good news, especially if it can break through its old high. It broke through $10.40, the past recent high it hit before falling to $10.01 and it is higher than it was at this time last year. NBG pays its dividend annually, so there tends to be some selling come dividend time, since I guess people do not like to wait all year, so once they get it, they sell out and get back in later I guess. I do not think we will see a 20% decline post-dividend like we did last year.

Ash Grove Cement (Pink Sheet: ASHG) hit an all-time high today of $215 and is currently offered at $220. I added more in my IRA the other day and ASHG will shortly announce its dividend, payable around the first or 2nd week of March. We will see if they raise the dividend from $0.40 per quarter to something higher, as they have done the past few years. I like ASHG long-term, mostly because of market dynamics and their unique position as largest American owned cement company in the country. Their capital expenditures in 2006-2007 should start to yield some serious results starting in 2008, so the future looks bright for this cement producer. At the very least, this is a very solid long-term holding.

Finally, let me also introduce you to Idaho Independent Bank (OTCBB: IIBK) - it is trading at $34.55. I found this bank because they are my finalist for the new direct stock purchase plan for my girls and I as the program has no fees to participate. IIBK pays an annual 7% stock dividend - no cash dividend. Interestingly enough, although you can count on this 7% dilution every year come November, the additional shares has not hindered their EPS growth or hurt the supply/demand dynamics of IIBK's market. IIBK is a relatively small bank with only 10 branches and their focus is businesses, rather than consumer. Their ratios are stellar, boasting a 2%+ return on assets and very well positioned from a cash/debt standpoint. My only fear is that they may be richly valued already, trading at 3+ times book value, which is high for a bank. However, the x-factor here is the situation and the stock dynamics.

IIBK reminds me a little bit of Ft. Pierce privately held bank, Riverside National Bank, which has provided tremendous returns to shareholders and pays an annual stock dividend. Riverside's internal stock price has climbed year after year as it is governed by the financial results of the bank and the fact that there are not many 'sellers' of the stock. Sure, there is an active market, but there are more buyers than sellers. IIBK appears to have the same situation - closely held, strong growth in EPS and financial health, limited institutional holdings, and not a whole lot of people dumping shares. Only trades about 2,000 shares each day, so not a ton of liquidity or volume. The November 2006 2-1 stock split might loosen up the marketplace some, but IIBK is going up. I say $40-$42 by the end of 2007 and $50+ by end of 2008. Not a huge mover, by any means, but a great play from the direct stock purchase standpoint, especially with the 7% stock dividend and history of the additional shares not impacting the company's per share performance.