Columnist a Luddite when it comes to social networking - but not tech stocks

Dear Mr. Berko:

I've tried to find you on Facebook but to no avail. I'm asking you to join because I would like to include you among my list of friends. I hope to soon have more than 2,000 friends on Facebook. Would you please be my friend?

My other question concerns a $16,000 CD coming due. I'm 57 and preparing to collect social security at 67. My broker wants me to invest my CD money in a preferred stock fund paying about 5.6 percent. I've emailed you the specifics. My son-in-law, an accountant, says I should buy AT&T. My broker says my son-in-law should stick to accounting. What do you think?

I also own 125 shares of Microsoft that I bought at $16 in 2009. Microsoft is now at $27, but it never goes above $30. My broker wants me to sell it and put that money in the preferred stock fund too.

What do you think of Microsoft? Should I put it in the preferred stock fund, which would guarantee me a good dividend return?

ED: Elkhart, Ind.

Dear ED:

I have three friends who would give me their kidneys at midnight with no questions asked and four very close acquaintances who would interrupt their European vacations to post bail if I called.

Not one is on Facebook because none of them needs instant approval from hundreds of so-called friends.

My friends are not insecure, lonely and depressed, and they don't get their jollies by undressing themselves for a public audience. And while you'd like it if I were your Facebook buddy, I assure you that it will never happen. I earn friends the old-fashioned way -- based on trust, honor, respect and commitment. That takes years.

Most of your "friends" on Facebook are poured from used plastic molds and worth no more than a cheap watch. They may be interested in your skimble-skamble of inane activities, but frankly, my dear, I don't give a hoot. I have no interest in being apprised of your silly everyday foraging ... but I'm always interested in what you think.

And here's what I think about AT&T (T-$28.28) and Microsoft (MSFT-$24.04): First thing tomorrow morning call your broker and tell him to stick that preferred stock fund in his left ear and pull it all the way out through his right ear. His fund pays 5.45 percent and is a better yield than most 10-year CD rates, except for those in Bosnia and Madagascar. But in 10 years, when you're 67 and interest rates are higher and inflation has purged the value of that fixed-income fund by 30 percent, you'll still be earning $872 a year in interest. Not a good way to maintain your income, that!

So use that $16,000 CD money to own 566 shares of AT&T, which pays a dividend of $1.72 a share (6 percent) and should raise its dividend frequently in the next decade. AT&T has increased its dividend in each of the past 20 consecutive years, and I'm willing to wage my autographed hoof print of Seabiscuit to a Lincoln penny that AT&T's dividend will grow to $2.50 in 2021. And at $2.50, that's a 9.2 percent current yield--and easily 50 percent higher if you reinvest the dividends.

A 566-share purchase of AT&T will give you $973 in income in the coming 12 months, but it could easily pay more than $1,400 a year when you start collecting what's left of Social Security. AT&T's dividend is safe as a saint in heaven, and there's even a possibility those shares might increase in value.

This is a quality company and an excellent choice for a conservative, defensive, income-oriented investor. I think that your broker is dumber than a screwdriver with no moving parts and that your son-in law is a gem.

MSFT, like the Energizer Bunny, just keeps going and going, but unlike the bunny, MSFT just goes round and round in place. When management figures the company needs a revenue rush, it designs a new Windows operating system. Windows 223 is on the horizon, and Microsoft Office will continue to be updated, possibly 'til the end of time.

In the last decade, MSFT traded between $22 and $30. Meanwhile, revenues tripled, earnings tripled and the dividend that was initiated in 2003 has increased ten-fold but could grow 15 percent annually for the next four to five years. Earnings of $2.69 for 2011 will be up 25 percent from 2010 and are projected to reach $3.85 by 2016. Meanwhile, the 80-cent dividend may be raised to 92 cents in 2012.

Keep the 125 shares you own at $16; the 3.2 percent current dividend is grand and will probably be raised frequently and will be ever more so when you attempt to collect your first Social Security check.

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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2011 Creators Syndicate Inc.

Published: Wed, Nov 30, 2011