The DINKS Watch List

by Dual Income No Kids on March 25, 2007 · 0 comments

My wife and I have set the goal this year of maxing out our IRAs, so we’ve been talking a bit about what stock we might want to consider buying in our retirement accounts. Accordingly, we wanted to comment on two stocks were considering. We’re not endorsing either of these yet, but we did want share our thoughts with our readers.

Best Buy Inc. (BBY) – Best buy is a consumer retail chain. They operate a number of “big box” stores and sell goods like electronic gadgets, televisions, appliances, etc. There are a couple of Best Buys in the DC area, so we’ve had a chance to test their “retail experience” for ourselves. Generally speaking, the stores are full, but have awful customer service. The on-line interface and prices are a bit better.

Best Buy’s financials are mixed. For example, the company’s stock has split a number of times, but most of these were in the 80s and 90s. Also, cash flow has increased as have the corporation’s net assets, but a lot of this is due to “fluffy accounting” like increases in goodwill. Finally, the dividend has increased somewhat, but its still pretty small at .40 cents per share. That said, we’ll be keeping an eye on the stock for potential lower price.

The Coca-Cola corporation (KO). Coke is the second stock we’re looking at. Coke is a classic American icon. We initially got turned on to the company because Warren Buffet was touting the stock a while back. Also, we drink a pretty good amount of coke (a 2 liter bottle is about right if you need to stay up all night studying). So it seems like the stock has both the “smart money” and the “main street” appeal.

Coke does have some downsides. For example, the company’s price is off its 1998 high of $100.00. Its income is slightly up over the past few years, but cash flow has been negative, due to stock buybacks, borrowing and dividend payments. As a result, Coke’s corporate value hasn’t increased much. An additional downside is Coke’s relatively low dividend payment. It yields $1.36 or 2.8% at its current price of $48.

Right now, Coke has the edge over Best Buy, but we’ll keep you updated on which stocks we finally decide to purchase.



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