Office Depot Rebates

I have usually had good success with rebate offers for products that I buy. I estimate that I participate in maybe two dozen rebates a year, and have not had any problem 80-90% of the time. However, over the past year, I have sent in three rebates for products that I bought at Office Depot and had a problem receiving each one. If a problem happens with receiving a rebate, I usually consider it a fluke or coincidence. But since a problem happened three times in a row with the same retailer, I think that there a definite problem.

In each case, the rebate got "stuck" in their system. I am still waiting for a rebate on blank DVD media that I bought the day after Thanksgiving. I have talked to their customer service (at Web-Rebates.com), and they said that they would try to expedite the rebate, but it is still in the "Required Validation Period," after almost five months. In any case, Office Depot is now officially off my list of places of where I will shop for rebate items. Curiously, I have not had problems with other retailers who also use "Web-Rebates.com" for rebate submissions. Does anybody else have a similar experience with Office Depot?

On a different note, I will give credit where credit is due. One retailer that I have not had any problem with is the drugstore Rite-Aid. They have a system where you can submit your receipts online instead of by mail. You do have to sign up for an account, and they keep a running total of your combined rebates for the month. Once I've requested a check, I have always gotten my rebate within three weeks of submitting it.

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NetBank Revisited

On the morning of September 20, 2006, I posted here that I was about to begin the process of withdrawing my money from NetBank and close my account with them. In that post, Sayonara NetBank, I referred to this process as "evacuating my money." There and in subsequent posts on PFStock, I cited deteriorating financial conditions at NetBank as one of my prime reasons for closing out my account. Even then, I conceded that NetBank was not likely to be forced into bankruptcy, but in the event that they did declare bankruptcy, it would be a hassle for depositors to get their funds back from the FDIC.

Let's take a look back six months (almost seven months now) at NetBank (Nasdaq: NTBK). On September 20th, the stock closed at $6.10. Today, NTBK trades at a mere $1.74 (a 71% decline). And, NTBK reached an all-time low of $1.48 this past week. This decline is not surprising considering NetBank's deteriorating financials. From NetBank's previous press releases and other information available at their website, we can clearly see a series of quarterly losses over the past year. And early last year, NetBank stopped paying its shareholder dividend saying that they needed "to protect the company's capital base and tangible book value from further erosion."

Then on October 3rd, NetBank announced that it would be replacing its CEO. Even before this event, I had speculated that something fishy was going on at NetBank. A worst-case scenario could be that NetBank customers would need to recover their funds from the FDIC if NetBank becomes insolvent. However, I noted that while this is certainly possible, it is not the most likely case. Nevertheless, I asserted that NetBank could no longer remain competitive with other banks in its market space.

According to a more recent NTBK press release dated February 21, 2007, NetBank recorded a net loss of $202 million or $4.36 per share for 2006. This loss of $4.36 per share over the 12-month period is absolutely staggering when you consider that the entire company is only valued at $1.74 a share. Unfortunately, what is really lacking from NetBank's report is any type of good news. To further exacerbate the already existing problems, NTBK has received a notice from the Nasdaq Stock Market that the company's common stock is subject to delisting. NetBank has been delinquent in its regulatory filings because its former independent auditor resigned as of November 9, 2006. Since then, NTBK has been having difficulty bringing a new auditor on board. Again, this cannot be construed as good news.

For NTBK shareholders, I think that there are better investments out there. Taking a loss may be a difficult thing, but so is watching your remaining investment dwindle to practically nothing.

For NetBank customers, you haven't yet suffered a loss, and you won't due to FDIC insurance. But just the same, there are better banks out there that offer the same FDIC insurance, and significantly higher interest rates.

Further reading:
The Decline and Fall of Internet-only Banks
Unprofitable and Unstable, NetBank Ousts its CEO
More on NetBank

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Ameritrade SPAM Again!

I have written about getting SPAM at my Ameritrade Email address before. (See Ameritrade's Unimpressive Site Upgrade.) Toward the end of that post, I described a method where I use a unique Email address for my different bank and investment accounts. This is accomplished through Yahoo's "AddressGuard" feature. If I get spammed at one of these unique addresses, I can delete that Email address and create a new one.

Well, it has happened again! Two days ago, I started receiving spam at both my Ameritrade and Waterhouse Email addresses. The Waterhouse address has never before been compromised. This is now the fourth time that it has happened with Ameritrade! In addition, I have been getting correspondence from other bloggers who are experiencing the same issue. Their Email addresses were compromised as well. And, some are frustrated enough that they will begin moving their money out of Ameritrade as a result. This is a quote from one of the comments that I received:

Today, I have received four "pump 'n' dump" spams at two separate addresses -- one associated with Waterhouse which has been around for several years and another associated with Ameritrade which is only a few weeks old. These are the only two addresses out of the hundreds of vendor email addresses which I've created to be spammed in the last couple of days. If a trojan horse had stolen email addresses from my emailbox, I would have been receiving similar spams at many other addresses as well. The probability that ONLY these two Ameritrade addresses would have been selected for spamming is minute. One two real possibilities exist, in my opinion. 1) The addresses were sold. 2) The addresses were stolen. I believe that #2 is far more likely and worrisome since who knows what other personal data might have been stolen as well. Even more worrisome is the refusal of their "Tech Department" to consider the possibility that they have a problem.

I have received a similar response from TD Ameritrade's customer service people. So, is anybody else in the same boat as us?

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Money Market Fund Options for TD Ameritrade

The series of posts that I made about my experiences with TD Ameritrade have been very popular at PFStock. Perhaps the most popular of my posts was the one where I exposed Ameritrade's "Hidden" cash sweep account. I have recently come across another cash (money market) option for TD Ameritrade account holders. This is another fund offered through "The Reserve" (website: ther.com).

The fund is called the Reserve Yield Plus Fund Class R (symbol: RYPQX), and is classified by The Reserve as an "enhanced cash fund". Currently, this fund pays in the neighborhood of 5.4% APY. This rate is much better than the default TD Ameritrade cash option which puts you in a sweep account that pays less than 1% interest.

However, unlike the other Reserve funds (offered through Ameritrade's Total Asset Plan) that I've talked about before, this fund is not available as a sweep option which automatically places your uninvested cash into a money market account. Instead it is traded like a No-Transaction Fee (NTF) mutual fund. You would need to put in a mutual fund order each time that you want to buy or sell the fund.

Now I have a few questions for my readers. Has anybody invested in this type of enhanced cash fund before? Do you need to report each mutual fund sale (each time you take money out of the fund) as a broker transaction on Schedule D of your tax return? Presumably, the fund tries to maintain a $1/share valuation, and each transaction would represent $0 in capital gains. And, does anybody know if TD Ameritrade would count each NTF transaction toward qualification for their premier (or APEX) trading status?

I suppose that I would be remiss if I didn't add that The Reserve Yield Plus Fund contains the following disclaimer:
This Fund is not a money market fund. Achievement of the Fund’s objectives cannot be assured. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Yields may vary.

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Dividend Yields

One of my investment strategies is to buy dividend-paying stocks. When making investment decisions on dividend-paying stocks, it is important to know what the dividend yield of the stock is. Basically, a dividend yield is the sum of the regular dividends that a company pays over the course of a year, divided by the current stock price. In the United States, most dividend-paying stocks pay out every three months (quarterly). In a previous post, I stated that Pfizer (NYSE: PFE) had a dividend yield of 3.43%. Currently, Pfizer pays 24 cents per share in quarterly dividends, for a total of 96 cents in dividends per year. At the time of my post, Pfizer was trading at 27.96. If you take the annual dividend divided by the price, you get 0.96/27.96 = 0.0343 or 3.43%.

[Note that PFE has fallen in price to 25.84 and Pfizer recently raised its dividend. The yield is now 1.16/25.84 = 4.49%. It is important to know that when the stock price goes down, the yield goes up. On the other hand, if the stock price went up, the yield would go down.]

When researching a stock at a financial website such as Yahoo Finance, the dividend and yield is listed with the company quote. I estimate that 95% of the time this number is correct. However, sometimes this number is inaccurate or outdated. This can be the case if a dividend has been reduced or eliminated. For example in another post I mentioned that NetBank has sustained a series of quarterly losses, and its management has decided to suspend their dividend. So the yield for NetBank (Nasdaq: NTBK) is actually 0%, but the Yahoo stock information still indicates that it pays a dividend.

Another case is when a one-time special dividend is paid by a company. This will make you believe that the dividend (and thus the yield) is greater than it really is. Unfortunately, it is not always obvious whether a dividend payment is a regular dividend or a special dividend. So be careful when looking only at the dividend yield statistic on financial sites.

While dividend yield is an important criteria used for selecting stocks worth buying, it is not the only criteria. Dividend yield is not the most important criteria either. In future posts, I will cover some of the other criteria that I use for selecting stocks to buy.

This article was originally posted on September 27, 2006. It is being republished today to complement my post about dividends and ex-dividends.

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About Dividends and ex-Dividends

One of my investment strategies is to buy companies that pay dividends (i.e. dividend paying stocks). I want to talk about the mechanics of dividends. Basically, stocks could be classified into two categories: those that pay dividends, and those that don't. A lot of smaller, growth companies do not pay a dividend. Companies are not required to pay dividends, and each dividend must be declared by the company (usually at a board of directors meeting) before it is paid.

In the United States, most companies that pay a regular dividend do so every quarter. There are exceptions, however. For example, Eastman Kodak (NYSE: EK) pays its dividend twice a year. When looking at a finance site such as Yahoo Finance, the dividend is listed with the company stock quote. I estimate that 95% of the time this data is correct. However, sometimes it is inaccurate or outdated. For example, a current quote of NetBank (Nasdaq: NTBK) still indicates that it pays a dividend. However, NetBank has sustained a series of quarterly losses, and its management has decided to suspend that dividend early last year. So, its dividend is actually 0.

Typically, when dividends are announced, the company will usually issue a press release that says something like this:

The board of directors of Pfizer Inc today declared a 24-cent fourth-quarter, 2006, dividend on the company's common stock, payable December 5, 2006, to shareholders of record on November 10, 2006.

Let's dissect this statement. For 2006, Pfizer (NYSE: PFE) paid dividends of 24 cents per quarter or 96 cents for the year. The dividend was paid on December 5 to "shareholders of record" on November 10. In order to be a "shareholder of record" one has to own the stock 3 business days before the record date. In this case, that date is November 7. On November 8, the stock goes ex-dividend. What that means is that if you buy the stock on November 8 or later, you are not entitled to this particular 24-cent dividend. The term "ex-" in this case means "without". So as of November 8, the stock trades without the current dividend.

A common question about dividends is "What happens if you sell the stock on November 8 or later, but before the December 5 date when dividends are paid?" In this case, you would be entitled to the dividend, even though you don't own the stock on the pay date. This has happened to me several times where I've received dividends on stock that I no longer own.

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Calculating Rate of Return

What rate of return are you earning? For a bank account (savings, money market, or CD), figuring this out is usually pretty straightforward as the bank tells you what the APY and nominal percentage rates are. But what about the annual rate of return on your investments? If you know how much you put in an investment account and when, you can calculate this return using a computer spreadsheet (i.e. Microsoft Excel).

MS Excel has a function called XIRR that calculates the Internal Rate of Return (IRR) of an investment. You must supply the date and amount of each deposit to or withdrawal from the account. Each of these deposits and withdrawals is called a cash flow. Each deposit is considered a negative cash flow, and each withdrawal is considered a positive cash flow.

I was thinking of writing a detailed post about how to calculate your return using the XIRR function in MS Excel. However, I found a very good post that already describes this method in some detail. The blog is Fat Pitch Financials, and the post is here. Look for the link to the file: "Annualized rate of return.xls".

The original blog writer, George, is an actually an economist, so his description is quite involved. By contrast, I'm just a rank amateur on these matters. Nevertheless, I did take six economics/business classes in college, so I will offer you my additional commentary.

First of all, if you are having trouble using the XIRR formula in your spreadsheet, you might need to install what is called the Analysis ToolPak. A symptom of this is if you see "#NAME?" where you use the XIRR formula on your spreadsheet. To add in the Analysis ToolPak (in my version of Excel, at least), go to Tools, Add-ins, and select the Analysis ToolPak. You might need the original Excel (or MS Office) installation disks for this one-time operation.

The other thing that I want to mention is that in addition to the initial value, deposits, and withdrawals, you need to know what the current (or final) value of the account is. Don't forget to include "accrued interest". This is interest that is accrued, but not yet paid to your account. Money market savings accounts usually pay you monthly or quarterly. In the interim between the last time you were paid interest and now, interest accrues, but is not reflected in the balance. You have to estimate the amount of accrued interest, or your results won't be accurate past the last date that interest was paid.

Lastly in the example XL spreadsheet, George includes a line for taxes. Your account value may not include taxes, and you might pay your taxes out of another account. However, in the example, taxes are deemed to be paid out of the investment account. Taxes are, of course, a negative cash flow.

Now you have a general tool that can help you figure your rate of return on investments. In addition to brokerage accounts, this same formula can be applied to CDs, money markets, Prosper.com loans, and just about any other investment that can be valued.

PF Stock