Podcast Episode - Are You Getting The Most For Your Money?
Debt, Investing, Stocks, Student Loans, Students
February 05, 2023
Listen to Podcast Episode:
On this episode, Suze starts out with a quick update about the Student Loan Repayment Program and then we dive right into Suze School for a lesson on the importance of dividend paying stocks - and why you need to pay attention to those stocks. There may be a stock with a better dividend.
Podcast Transcript:
00:00:23
Suze: February 5th, 2023 Suze here and welcome everybody to the Women and Money podcast and everybody smart enough to listen. So today is Suze School, but before we get into Suze School, I just wanna tell you, I'm so excited and I'm so excited because tonight is the Grammys, the Awards for music
00:00:49
Suze: And Brandi Carlile, who I love more than life itself, well, not more than KT though. Right? I love her. She's up for eight awards and I just am so rooting for her. I can't even tell you. I love her song "You and Me on The Rock." It reminds me so much of me and KT. I can't even tell you.
00:01:14
Suze: Alright. A few things that I want you to know before I really, really get in to Suze School and it's about student loans and that's because for three years now, as many of you probably know you haven't had to pay your student loan payments. Hopefully you were saving the money you should have been paying towards student loans and you haven't been paying towards student loans. But chances are you probably didn't. But here's what you need to know.
00:01:42
Suze: Obviously this August we're still a long ways away from that. That is when it is scheduled for student loan repayments to start being made again. However,
00:01:56
Suze: at the end of this month,
00:02:00
Suze: we have the Supreme Court taking up
00:02:04
Suze: Biden's loan forgiveness program and they will rule on it. Here's what you have to know, that 60 days after they have ruled on it, the litigation is over.
00:02:20
Suze: You will have to start making student loan repayments again. So it's not gonna be till August, it's gonna be 60 days after the litigation is over. So the litigation starts right now around the end of February. So March, April maybe it'll take them three months. May and then you have 60 days, June, July
00:02:46
Suze: to start payments again. Alright, that's only one month before August. But what if it only takes them a month or three weeks or a week to decide that means 60 days from possibly the end of March?
00:03:04
Suze: So April and May you will have to start making student loan repayments again.
00:03:10
Suze: So therefore if you haven't been saving that money up, you might want to start saving it up now. So you have something to pay when that time comes.
00:03:23
Suze: Alright, what Suze School is about today
00:03:29
Suze: is about, are you getting
00:03:32
Suze: the absolute most for your money? Especially if you have invested in dividend paying stocks. So I just want you to imagine that you are in retirement and by the way, whether you're in retirement or not. If you are invested in dividend paying stocks, you need to be listening to me now. So let's just say you are in retirement
00:04:00
Suze: and you were in retirement in 2020 and interest rates were still really, really low. You couldn't get a good interest rate really anywhere and you needed the income from the money that was in your retirement account, the interest on it or the dividends on it for you to live on. That's what you had planned on doing.
00:04:25
Suze: You didn't want to have to take money from your principal. You wanted to live off of the interest it could earn or the dividends that it could earn.
00:04:35
Suze: So around 2020, maybe you were listening to the women and money podcast and you heard me talk about energy and energy stocks and ETFs and how I really wanted you to invest in it. And many of you chose at that time to buy Chevron.
00:04:56
Suze: So you bought Chevron and Chevron at that time was $69.50 right around there.
00:05:06
Suze: And Chevron, you chose because it was paying a 7.5% dividend.
00:05:14
Suze: So you thought, oh, I can invest my money in this stock. I can get 7.5% in dividends.
00:05:23
Suze: And therefore, oh my God, I can start to live on that money versus a quarter of a percent or whatever it was in a savings account.
00:05:35
Suze: And the same was true, really, with Treasuries and everything back then you couldn't invest your money really anywhere and get even close to 1%.
00:05:45
Suze: So you decided
00:05:47
Suze: You were going to buy 1000 shares of Chevron. You had a few $100,000 in your retirement account. You thought you could put almost $70,000 towards that because you're going to earn 7.4, on that money.
00:06:06
Suze: So, here's what you need to understand. So this is where I want you to start taking out your Suze notebooks because I want to break this down for you.
00:06:19
Suze: This person bought Chevron simply for the dividend. They did not necessarily buy it for it to go up in value. They bought it for the dividend. At the time, Chevron was $69.50 a share
00:06:38
Suze: and it paid then $1.29 a quarter or $5.16 a year in dividends. So, what that meant to this person
00:06:53
Suze: is that they were going to be getting $5,160 a year
00:07:01
Suze: in dividends for that year. Because Chevron also had a reputation of raising their dividends every year, which they have, not by a lot, but by enough.
00:07:15
Suze: Now, for those of you who want to figure out what is the yield
00:07:21
Suze: on that? Like, how do you figure out, Suze, what that dividend percentage really is? One way that you can do it on your own is that you take the amount of money that they pay out per share,
00:07:39
Suze: That would be $5.16 a year. And you divide that by $69.50
00:07:48
Suze: The amount of money that you paid for Chevron and you would come up with 7.42% interest, which is what you would be making.
00:08:02
Suze: So people are really, really happy
00:08:05
Suze: and they just kept this going and going and going for about three years.
00:08:13
Suze: But they never stopped to think,
00:08:16
Suze: are they still getting 7.42% on their money?
00:08:25
Suze: This is where I want you to listen to me closely.
00:08:29
Suze: As of Friday, Chevron was at $169.50.
00:08:38
Suze: So whoa, they made $100 a share.
00:08:44
Suze: They owned 1000 shares. So they are up $100,000 on their investment. So they have now approximately $170,000 invested in this stock
00:09:01
Suze: and Chevron is still paying a really nice dividend. They raised that dividend to $1.51 a quarter, which is $6.04 a year.
00:09:16
Suze: So now they still own 1000 shares. So now their income is $6,040 a year.
00:09:28
Suze: However, if you were to look at the yield of what they're really, really getting.
00:09:36
Suze: Rather than getting the 7.42% a year,
00:09:42
Suze: Now, they really are only getting 3.56% a year in yield. How did I get there?
00:09:54
Suze: You would take $1.51 a quarter. So you, at times that by four, you get $6.04 a year in dividends, you would divide it by $169.50 and you would come up with 3.56% yield.
00:10:14
Suze: So even though their income has gone up, you have to look at the money as to what is $169,000 really yielding them at this point in time. And it's really like I just said, only yielding them
00:10:36
Suze: 3.56%. Now, these people needed money to live on.
00:10:44
Suze: That's what they needed. So, is it smart that they just leave their money right where it is and only get 3.56% a year or approximately $6000 a year in dividends or would they be better off? It's in a retirement account, now listen to me...
00:11:08
Suze: Would they be better off
00:11:11
Suze: selling it here
00:11:14
Suze: and taking that $169,500 and either buying a Treasury note or possibly another stock in energy that pays a higher dividend. Stick with me here for one second.
00:11:34
Suze: Let's just say they took that $169,500 and they invested it all in a one year Treasury bill or whatever it is a certificate of deposit and they were getting 4.7% on it.
00:11:52
Suze: That would give them $7,966.50 a year in interest.
00:12:02
Suze: Now, you may not think that's a big deal, but that's $1,926 more per year in income than what they were getting just leaving it where? In Chevron stock, that's 31% more.
00:12:21
Suze: Are you all following me on this now? It's not enough for you to just invest your money and get your dividends and the stock that you happen to buy goes up and up and up and you think you're doing fabulous when the truth is you're not getting as much from your money as you could be if you then were able to take that money, especially if it was in a retirement account and invested in something that actually was giving you a higher yield.
00:12:51
Suze: Because here we are, look at reality.
00:12:55
Suze: Inflation went up, their costs went up for everything. They're in retirement. This is all the money they have to live on another $150 a month is possibly enough to combat inflation for food.
00:13:13
Suze: Do you see what I'm saying? So you have to get involved with your money and get the most out of it. Let me just give you another example.
00:13:24
Suze: I don't care that energy is down, as I'm doing this podcast right now, I still don't have a problem with energy at all.
00:13:33
Suze: Now, remember, did I not tell all of you if you're going to invest in Devon or XLE or Pioneer or whatever the stock was that I was talking about? I wanted you to do it for the dividend and the dividend alone. I did not want you to buy it so that it would go up in value. I wanted you to buy it for the dividend if it happened to go up in its price great.
00:14:00
Suze: But if it didn't, you were still getting the income that you needed. So let's just take these people again, for example, they like energy. That's why they were keeping their Chevron stock. They have other money in here. They're diversified. So this isn't all of their money. So they decide they're going to take all $169,500 and they buy Pioneer
00:14:28
Suze: Now, just because I'm giving you this example does not mean that I want you to buy Pioneer. I just want you to hear this example. Okay.
00:14:38
Suze: Although, Pioneer has been a great stock and what can I tell you? But anyway, that's not the point of what I'm talking about right now.
00:14:47
Suze: Again, they take all of their money and they buy pioneer and currently pioneer is at $220 a share.
00:14:59
Suze: So they have enough money now to buy 768 shares.
00:15:07
Suze: So now they own 768 shares of Pioneer worth $169,500 when they buy it. Pioneer has been known for paying out the highest dividend yield of all stocks on the stock exchange. Now, I'm just going to even ratchet it down from what they're projecting, it's really going to pay.
00:15:33
Suze: But let's just say they pay between their base dividend, meaning what they normally declare and what's called a variable dividend because they are making so much money, they are actually giving money back to their shareholders in terms of a dividend. And let's just say that they're paying out right now, $5 a quarter
00:15:59
Suze: or $20 a year 00:16:04
Suze: On 768 shares, if they were to get $20 a year in dividends,
00:16:15
Suze: that's $15,360 a year in dividends,
00:16:25
Suze: That's a yield to them of 9% - big difference between 3.52% that they were getting and 9% now. If they get $15,360 let's say they did this and P X D, Pioneer paid $5 every quarter,
00:16:48
Suze: they would be getting $9,320 more a year. What they would have been getting if they stayed in Chevron, which was $6,040 a year.
00:17:01
Suze: Again, that 65% more or $776 a month. All right, I just want us to get realistic here.
00:17:12
Suze: What would $776 in this particular case? What would that mean? Do you think to these people that are totally reliant on the income from their retirement accounts?
00:17:26
Suze: It would really make a world of difference. So, what I want all of you to do is I want you to look at your money, whether it's in retirement accounts, not in retirement accounts. And did you purchase a dividend paying stock a long time ago?
00:17:46
Suze: And it was paying you a nice yield when you originally purchased it? But has it gone up considerably since them?
00:17:56
Suze: And you've just been holding onto it? I want you to figure out what your actual yield is right now. What are they paying you in dividends? Divide that by the price of the stock right now. And you'll get your dividend yield. And you will see, especially if it's an energy stock.
00:18:22
Suze: The dividend yields have really gone down considerably since we did this back in March of 2020 when energy stocks had totally plummeted. So the question is, are you getting the most out of your money? It's really important for you to think about that.
00:18:47
Suze: Now, you might not want to risk it. Maybe these people don't want to risk it in an energy stock, fine. So buy a certificate of deposit by a treasury note. You can do those things within your retirement accounts.
00:19:01
Suze: Lock in all of that money. You didn't have to pay any taxes on it because it was in a retirement account.
00:19:08
Suze: But look at how your income could absolutely increase simply by you paying attention to: has your money grown. Is it in dividend? Paying stocks? What is the current yield on that money? And are you better off selling something now, since you bought it for the dividend, you bought it for the income. Are you better off selling it right now and investing it
00:19:38
Suze: in something that pays a nice dividend yield now. 5%, 6%, 7% or even more.
00:19:46
Suze: Now, obviously, this strategy works best for those of you who have money in dividend paying stocks or E T F s or whatever it is within a retirement account
00:19:59
Suze: Outside of a retirement account, you have to really take into consideration the tax ramifications before you do something like this strategy. So just don't go doing it without consulting your C P A and what it would mean to you tax wise if you did it. This strategy is mainly to be used really in retirement accounts.
00:20:26
Suze: That was your Suze School. So before I bring this to an end, I just want to say a few things which are as follows. Obviously, last week, this was quite the week of the stock market and it went up, it went down, it went all over the place and I'm sure many of you are worried. Oh, is it going to go straight up from here is it, should I have bought, should I be putting my money into VT I, what should I be doing?
00:20:54
Suze: I'm just going to reiterate. It's always wise if you have at least five years or longer until you need money,
00:21:02
Suze: that if you want to be involved in the stock market, dollar cost average and you can dollar cost average every month or every three months up to you, however you can do it. But that way when the markets go up and the markets go down, you're participating one way or the other, there is absolutely no way that I can know for sure. Are these markets going to go up from here now? What are they gonna do?
00:21:28
Suze: I personally believe and this doesn't mean that it's going to happen. I personally believe that the Standard and Poor's 500 index that closed at 4,136 on Friday, was a good closing for it. I think we absolutely possibly... don't you love all the words I'm using a hedge what I'm saying here... we could see it go up to its new resistance level, which is 4,225.
00:21:58
Suze: And that's where I think we could once again see a turnaround and it's very possible that it could go back down to about 3,888, which is its support level.
00:22:10
Suze: Now, a lot of you don't know what I'm talking about when I say resistance and when I say support, go on to the community app, the Women and Money community app. If you don't have it, you can download it at Apple Apps or Google Play and search there for support, resistance. I did a whole podcast on it. So that's how you would start to learn about things. Okay.
00:22:39
Suze: That was the lesson, And I have to tell you for those of you who are retired and you're really looking for income, especially if your money is in retirement accounts. The lesson that I just gave you today
00:22:56
Suze: was one of the more important lessons I've ever given on a Suze School on the Women and Money podcast. Play it over and over again till you understand exactly what I was trying to teach you today. So until Thursday, when Miss Travis joins us again for Ask KT and Suze Anything,
00:23:21
Suze: there's only one thing that I want you to do every single day as soon as you wake up, I want you to repeat the following: Today, wherever I go, I will create a more peaceful,
00:23:39
Suze: joyful and loving world. That is the goal. Everybody, if you can do that and you have joy and you have peace and love in your life, you will make far more intelligent decisions with your money. I promise you that, I promise you that. I promise you that. So until Thursday, I want all of you to stay safe and don't you ever stop yourself from being
00:24:07
Suze: who you are meant to be and what you want to do? Remember everybody. We are unstoppable.
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