Dividends are my friend - update

Note: This is an update to my first note on this subject back in January.

If you were so trusting as to misinterpret my advice to buy dividend stocks and instead followed this amateur and actually purchased NovaStar Financial (NFI) back on January 13, you'd be a happy camper as the stock is up 14% since then. The stock should also throw off at least $5.60 in dividends this year (an 18% yield based upon the closing price on 1/13/06).

Of course you would have had to resist the temptation to dump the stock when it took its roller coaster ride from $30.36 down to $25.70 on February 15.

In my last note, I alluded to an issue of stock price manipulation and shorting (a practice where someone sells the stock without actually owning it). Shorting is legal as long as the entity selling the stock is able to find someone else's stock they can temporarily borrow. In the case of NovaStar and several other stocks, including Overstock.com and Krispy Kreme, however, there is proof that not everyone shorting the stock is actually able to find stock to borrow. When this happens it's called naked shorting, and it's against the law. Kudos to Forbes for giving some press to this subject. Perhaps this article will generate some interest from regulators who are not doing their job (companies should not be on the SHO list for months or years at a time).