Podcast Episode - A Super Financial Game Plan, Part 2
February 12, 2023
Listen to Podcast Episode:
Today’s Suze School episode picks up with the lesson Suze taught last Sunday about dividend paying stocks.
Podcast Transcript:
00:00:31
Suze: February 12, 2023, Suze O here. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. Super Bowl Sunday, Super Bowl Sunday. KT and I are both in Florida. We were supposed to go back to the island. But to tell you the truth, we were having such a great time in Florida. Going into stores. You know when you live on an island. I know it sounds strange. There's nothing to do
00:01:00
Suze: except the things that we do not like. You have stores that you go into and you see many people, it's really very isolated. So here we are back in Florida and we're going all over the place and I'm just loving it. So we thought,
00:01:16
Suze: okay, let's just stay here. So we're going to stay here. And yesterday was Tom, Lynn's husband, which is KT's twin sister. It was his 72nd birthday. So he stayed to celebrate with him. We love him so much. And now today, we're gonna go over to
00:01:36
Suze: to their house and watch Super Bowl together. You know who I'm rooting for: the cat's meow, you know it, I just want Mahomes to win. I don't know why I do. I just do. So we'll see what happens. But I was thinking a lot about the Super Bowl and I was thinking a lot about Suze School and how really
00:02:03
Suze: planning
00:02:05
Suze: the moves for a football team, your football team. And you have all these people on your football team and you have to make the moves that get you over the goal line so that you win eventually.
00:02:18
Suze: And the same is true, believe it or not with your money, your players, however is that you are the coach, you are the quarterback and all of your team members are your bills, bucks and pennies. All of the money that you have
00:02:38
Suze: and each one kind of has a different function.
00:02:42
Suze: So it's not like everybody on your team is just a quarterback. No, you have all different positions and all different goals for each section of your money. And I know that may sound silly a little bit, but truthfully it's not
00:02:59
Suze: because a lot of you tend to be all or nothing investors and what I mean by that is you tend to do absolutely nothing with all of the members of your financial team. You just let it sit in maybe a savings account, you do nothing with it. You just let them sit there and if you do that, especially with inflation,
00:03:23
Suze: you're never going to go over the goal line, which hopefully your goal line is your retirement one day. Or you just feeling secure one day. So you have to do something and then there are those of you who are just always taking risks with your money. You're always throwing it all the way down like you're a quarterback and you're going for a deep throw the entire time.
00:03:49
Suze: You just, you don't want to go little by little, 10 yards by 10 yards, you just want to go the whole length of the field. And chances are
00:03:58
Suze: the ball isn't caught and you don't get anywhere.
00:04:02
Suze: So you have to have a combination of everything, you have to have your own game plan 00:04:10
Suze: And hopefully that's what we're going to do over this year on the women and money podcast
00:04:17
Suze: because there are so many things that you can be doing with your money, but you have to know, what is it that you want from your money?
00:04:29
Suze: You just got an inheritance or you got a tax refund back maybe that you weren't expecting and now you have $10,000 in your hands. What is it that you want that money to do for you?
00:04:45
Suze: Because typically what happens is you just put it in your savings account or checking account and you just let it sit there and before you know it's all gone because you've spent it on all things that you don't need and in the end don't even want. So that's what Suze School is about today. Because what I realized is last Sunday I started to give you a fabulous Suze School seriously as how to move your money around
00:05:16
Suze: how to go from one stock that was doing very well for you, paying you a nice dividend. But how to change that and go into another stock that was paying you more of a dividend because what you wanted from that money was income.
00:05:32
Suze: So how did that strategy work out? Take out your little Suze notebooks everybody
00:05:41
Suze: because not only am I going to briefly go over what that strategy was. So those that didn't listen last Sunday can get a brief overview and you can see how did we do in one week.
00:05:54
Suze: And I'm also going to talk about the second part to that strategy. What happens if you don't have a stock that's winning and you're up on it and you have a stock that you're actually down and you're losing the game here then what do you do? So just briefly what's interesting is that last week we talked about a couple
00:06:20
Suze: who had purchased 1000 shares of Chevron at $69.50. And a week ago, Friday when the markets closed, Chevron closed at $169.50.
00:06:36
Suze: And Chevron was paying them $6,040 a year in dividends but that was only a 3.56% yield on their money which really wasn't that good. Now even though they had made
00:06:52
Suze: a nice profit $100,000 they still were only making 3.56% on all of it. So one of the suggestions was, why not sell because this money was in a retirement account, why not sell all of it
00:07:11
Suze: and purchase an energy stock by the name of PXD, Pioneer.
00:07:17
Suze: The symbol is PXD, and it was trading at $220 a share a week ago, Friday. So they were able to if they did this by 768 shares. However,
00:07:34
Suze: PXD pays an extraordinary dividend. We were very conservative and said it will only pay you $20 a year. The truth is it's paying almost $25 a year in dividends. But that's besides the point. And even at just $20 a year in dividends
00:07:55
Suze: they would have made $9,320 more in dividends than if they had left their money simply in Chevron. Are you all following me? So that's what we did.
00:08:09
Suze: So this couple went from $6,040 a year in dividends to $15,360 a year in dividends. Which is how I got the $9,320 more.
00:08:23
Suze: Now that was a week ago
00:08:26
Suze: a lot of you heard that example and you wrote me and you all said we bought PXD. We bought PXD. Even though I said to all of you I'm not telling you to buy it. Although what can I tell you? I think it's a good buy here but you have to decide on your own
00:08:42
Suze: as many of you know I'm still a tremendous bull on energy I think energy has a ways to go and if all of you were to follow me on my women and money community app you can download it by going to Google Play or Apple Apps you would have seen
00:09:02
Suze: that I post what I think is going to happen in the market, what I think is going to happen in energy and I tell you little things like that to give you hints as to what I'm doing and what I'm thinking in between when Suze Schools drop which is a week and a lot can happen in a week.
00:09:21
Suze: So here we are one week later
00:09:26
Suze: And PXD that was at $220 a share a week ago Friday, a few days ago on Friday closed at $231.39 a share. It is up $11.39 a share
00:09:49
Suze: or 5.16% it is increased 5.16% in just one week.
00:10:01
Suze: So I would say that this was a really good thing that they had done
00:10:08
Suze: Now, you also may be wondering but Suze, what happens if they had just left their money in Chevron? Would Chevron had gone up as much?
00:10:21
Suze: Please remember I told you that you have to know the goal of your money. So did you want to invest money for the dividends so you could live on it? Or do you want to invest money for the growth of what you're doing and you don't care about the dividend?
00:10:41
Suze: Just so you know if they had kept Chevron, Chevron was a week ago Friday at $169.50
00:10:52
Suze: a few days ago on Friday, it closed at 171.97. So it was up only $2.47 a share. However, they did own 1000 shares of Chevron versus 768 shares that they bought of Pioneer.
00:11:15
Suze: So they only would have been up $2,470 with Chevron versus $8,748 with Pioneer. Also remember they're making $9,000 more a year in Pioneer as well. Again, I am not saying you should be buying pioneer except especially since it just had a nice little run here.
00:11:42
Suze: However, do you see how, when you take action with your money
00:11:48
Suze: and you take action and go, you know what, I don't care if the stock's gonna go up or down or whatever. I'm doing it for the dividend
00:11:57
Suze: and then the stock happens to go up as well.
00:12:02
Suze: Now you really made a wise move,
00:12:06
Suze: it's possible that the stock could absolutely go back down again. Absolutely, it could,
00:12:14
Suze: but for one week it was a nice move
00:12:19
Suze: But I want to talk about that.
00:12:22
Suze: Too many of you are writing me now and saying, oh my God. Suze, Suze I bought PXD and it was at $218 a share because it went down a little from when I did this example. I bought it and now it's at $231 a share. Oh my God, Suze I made so much money, I can't even stand it in just a few days
00:12:47
Suze: If you're feeling like that now what are you gonna do?
00:12:51
Suze: Are you going to keep it, are you going to sell it? Are you going to freak out when all of a sudden it goes back down again to 220 or 215 or lower which it absolutely could.
00:13:03
Suze: So when you get that excited and you watch your stocks every single day and you watch the moves that they make every single day. You now are going to be benched.
00:13:18
Suze: Am I taking this Super bowl thing too far? Because you're going to make the wrong moves.
00:13:26
Suze: You're not going to get where you wanna go cause you're gonna get so happy when it goes up then it's gonna go down and you're gonna get so depressed and your emotions are gonna take over and you're going to get confused. If you bought like these people did in my example PXD, simply for the dividend,
00:13:50
Suze: the dividends good, everything's pretty good. You don't need to watch it every day. You can if you want to but but not to get so excited about it and go oh my God look at how much money I made, you do not make money in the stock market until you sell the stocks that you own.
00:14:07
Suze: And then if you don't reinvest them, okay then you've made money
00:14:13
Suze: but just because the stock went up
00:14:17
Suze: over 5% in a week doesn't mean that you made money
00:14:23
Suze: because you haven't sold. But one thing for sure is you are going to make the dividend.
00:14:32
Suze: So
00:14:33
Suze: if your game plan is
00:14:36
Suze: to simply invest to live off of the dividends, the income of your stocks then just focus on the dividends which is what that strategy last week was all about.
00:14:50
Suze: If however you want to make money by investing in the stock market then okay you can do that but you have to be very careful. So
00:15:02
Suze: that was a little recap of last week.
00:15:06
Suze: This week however we need another game plan and we need another game plan because many of you wrote and said Suze I bought PXD at $288 a share
00:15:21
Suze: and now it's at $231 a share.
00:15:26
Suze: What do I do in my situation? You gave an example of somebody buying a stock that was down at $69 a share and then it went to 169.50 and they made all this money. So that was easy because they are up, but I am down. So what would my strategy be?
00:15:49
Suze: Now, there may be many of you that are investing for income and dividends and that's what this Suze School is about
00:15:57
Suze: And you did buy a stock like PXD (Pioneer) at 288 and here it is down at 231. So you have a $57 per share loss, $57 is a considerable loss, that's 20% on your money
00:16:20
Suze: And you have to think about that. So what do you do? The first question, are you all writing this down? Is this money invested in a retirement account or outside of a retirement account?
00:16:36
Suze: Because what you do with money inside a retirement account is very different than what you do with money that is outside of a retirement account.
00:16:46
Suze: And the reason is inside a retirement account,
00:16:51
Suze: you don't have any taxes. You can buy and sell and buy and sell and it doesn't matter, you don't have to pay tax on the gain, while it's in the retirement account and you don't get to take the losses off your taxes. Outside of a retirement account.
00:17:08
Suze: when you sell, you have to pay taxes on your gain,
00:17:13
Suze: Write down what I'm about to say if you haven't held the stock or the investment that you own for at least one year and one day you will pay ordinary income tax on that money. If you're in a high income tax bracket,
00:17:33
Suze: let's say you're in the 37% tax bracket, you could lose 37% more when you sell because if you had a gain
00:17:43
Suze: that's going to go to Uncle Sam.
00:17:46
Suze: Also, you need to know that if you do hold a stock longer than one year, then you still have to pay tax on it. But that tax is known as the capital gains tax and capital gains tax runs from about 0% to about 20%. And sometimes if you make under $44,000 a year, you won't owe anything in capital gains tax.
00:18:15
Suze: So capital gains tax is always less than ordinary income tax.
00:18:22
Suze: Likewise, if you have a loss, you have a $57 per share loss now that you would either get to offset the gains that you've taken in a year or if you don't have any gains
00:18:40
Suze: or if you have too much of a loss versus a gain,
00:18:46
Suze: then you could write off $3,000 a year every year until all of it has been written off.
00:18:54
Suze: Now, if that was confusing to you, that is a sign that you have to rewind and listen to it again. If it's still confusing to you, you have to rewind and listen to it again
00:19:08
Suze: Because if you have money outside of a retirement account, you have got to take taxes into consideration as much as what the stock itself or the investment you're in happens to be trading at. Do you understand that?
00:19:27
Suze: Let's go back for a second now and assume
00:19:31
Suze: that these people that I talked about last week, they had purchased 1000 shares of PXD at $288 a share. Now I get that's a whole lot of money in one stock. But let's just say they did it.
00:19:50
Suze: And now they're seeing it all the way down at 231 or even down to 220 where it was a week ago.
00:20:00
Suze: What when my advice had been to them,
00:20:04
Suze: What I would have said to them, because it is in a retirement account
00:20:11
Suze: and you are not going to be able to take that loss off your taxes. And the reason that you bought the stock was for the dividend even at $288 a share which you bought it at, it was paying an 8.8% dividend
00:20:32
Suze: which is still a fabulous dividend. So even though it went down in value you are still getting the dividend.
00:20:42
Suze: And you're getting the dividend in a good quality stock.
00:20:47
Suze: So if you looked at it and you knew that the dividend was pretty solid because the company had a lot of cash flow. They were making money they were doing really well with their profits. Which Pioneer, again symbol PXD is absolutely doing
00:21:05
Suze: my advice to you would be do nothing,
00:21:11
Suze: Do absolutely nothing. Maybe if you didn't own so many shares and you had cash in your account.
00:21:22
Suze: I might say why not buy some more here?
00:21:25
Suze: Because if you aren't willing to sell something, you should be willing to buy more
00:21:33
Suze: Because otherwise
00:21:35
Suze: you don't have any faith in that stock really.
00:21:38
Suze: So if you owned it at 288, if you were able to buy more at 220
00:21:47
Suze: and let's just say you were able to buy an equal amount, maybe you only had 100 shares of it. So now you're going to buy another 100 shares or you had 50 shares of it and now you're gonna buy another 50 shares.
00:22:00
Suze: Just let's say you did do that.
00:22:04
Suze: Then your cost basis would become $254 on this stock
00:22:12
Suze: and your yield would be approximately 10%.
00:22:18
Suze: So you would have lowered your cost basis from 288 down to 254.
00:22:25
Suze: Your yield because of the dividend it's paying which is about $25 a share in reality is almost 10%.
00:22:33
Suze: And here you are today with the stock at $231 a share.
00:22:41
Suze: So now you're only down $23 a share versus 57.
00:22:49
Suze: Did that just make sense to you? Which is why
00:22:54
Suze: when stocks are high, I don't want you to put a lump sum of money in it. I want you to dollar cost average. Maybe what you do is you buy a specific amount
00:23:09
Suze: and you keep enough money in cash within your retirement account, earning money either in a short term Treasury or whatever it may be. And if that stock happens to go down
00:23:24
Suze: now you can buy an equal number of shares
00:23:27
Suze: again and dollar cost average down
00:23:31
Suze: And maybe that's how you do it over a year period of time when things are uncertain
00:23:38
Suze: When a stock is really low however and paying an incredible dividend at that price
00:23:47
Suze: then I don't have a problem with you putting in a lump sum and buying a large amount if that's what you want to do.
00:23:56
Suze: So that would be my advice to you. If you were in a retirement account and you happen to own PXD or any stock that you bought, high
00:24:08
Suze: paying you a dividend and now it's low.
00:24:13
Suze: You're outside of a retirement account. You bought 1000 shares of PXD at $288 a share.
00:24:23
Suze: Last Friday it was at $231 a share. That is a $57 per share loss or you are down $57,000 on this investment.
00:24:42
Suze: What should you do?
00:24:44
Suze: Now, the truth is if you did nothing - okay you're still making, like I said about 8.8% on your money in terms of the yield the dividend. However, there is another strategy that you can do to increase your money to make more money out of less. What I would do in this situation, is it doesn't matter how long you've held it.
00:25:14
Suze: All that matters is that it is outside of a retirement account.
00:25:18
Suze: And I would sell it and take a $57,000 loss.
00:25:26
Suze: Now if you took a $57,000 loss,
00:25:30
Suze: again you can use that on many things like I said earlier to offset gains that maybe you've taken.
00:25:38
Suze: Or at least $3,000 a year off of your income tax until it's all used up.
00:25:47
Suze: Then you have to wait at least 30 days till you can buy PXD back.
00:25:55
Suze: Now there is a rule that says when you have sold for a loss
00:26:01
Suze: you cannot buy that stock back for at least 30 days. That's called the 30 day wash rule. If you buy it back within those 30 days you do not get to take the money off of your taxes.
00:26:19
Suze: Alright so here you are, you now have a $57,000 loss in your pocket
00:26:26
Suze: that you can use in many different ways.
00:26:30
Suze: And let's just assume over those next 30 days, two things are gonna happen. Actually three things; the stock will stay at about $231 a share, or the stock can go up dramatically or the stock could go back down.
00:26:48
Suze: Now the chances within 30 days of this stock going up more than 10% is pretty nil. But let's just say it did that, let's just say it went up in the next 30 days to $254 a share 00:27:07
Suze: And now you buy it back.
00:27:11
Suze: At $254 a share,
00:27:15
Suze: That's still a better price than $288 a share.
00:27:20
Suze: And now what you've done, is you've now also increased your dividend. Because remember at $254 a share,
00:27:30
Suze: with a $25 a year dividend, which is what they're currently paying this year, that's a 10% annualized yield for dividends, which is what you want. So you've increased your dividend yield by 1.2%. You gave yourself a $57,000 tax loss
00:27:53
Suze: and you're back in the stock.
00:27:56
Suze: So, really by just a little bit of thinking and doing that strategy, it would be very difficult for you to lose. Even if the stock went all the way back up to $288 in 30 days, which is really not going to happen.
00:28:17
Suze: So you'd be at the same place, but you gave yourself a $57,000 tax loss.
00:28:24
Suze: So do you understand,
00:28:27
Suze: Am I making sense to you? How if you just start to play the game,
00:28:33
Suze: you start to plan the moves that you want to make when things have gone in your direction? They've gone up dramatically, the question has to be asked, should I keep the stock, especially if I bought it for a dividend?
00:28:48
Suze: Because what is it pain for you with that increase?
00:28:53
Suze: Or if a stock goes way down, what should you do? I've just given you a strategy for inside a retirement account, outside of a retirement account.
00:29:05
Suze: In all kinds of situations between last week Suze School and this week's Suze School. You are to mark these two Suze Schools to come back when you find that you may be in this situation one day and trust me you will be in this situation one day, then you will know exactly what you should do. Alright everybody, so what team are you rooting for?
00:29:32
Suze: I hope whichever team you're rooting for, they win.
00:29:37
Suze: Because there's got to be a winner and there's got to be a loser, but I don't know... if you make it to the Super Bowl. I'm not sure that you could ever even think of yourself as a loser. So until Thursday, when Miss Travis joins me again for Ask KT and Suze Anything,
00:29:55
Suze: there's really one thing that we want you to say every single day before you get out of bed
00:30:03
Suze: and that is as follows: today, wherever I go, I will create a more joyful, peaceful and loving world. Don't ever let anybody stop you from being who you are meant to be and don't you ever stop yourself from doing something that you want to do and why is that? Because I want all of you to be unstoppable.
Take advantage of the Ultimate Opportunity Savings Account with Alliant Credit Union at: https://bit.ly/3vEUTZW
Get Suze’s special offers for podcast listeners at suzeorman.com/offer
Join Suze’s Women & Money Community for FREE and ASK SUZE your questions which may just end up on her podcast!
To ask Suze a question, download by following one of these links:
Suze Recommends
