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  • Will Apple Exist 3 Years From Now? How Much Will It Be Worth? [View article]
    "Will Apple Exist Three Years From Now?...

    How can this title get through the editors? The individual investor is probably completely confused on Apple, given all of these types of headlines. The probability of Apple not being around in three years is as close to 0 as possible. I hope the individual investor knows this. The company has roughly enough cash to buy Boeing, Ford, and DuPont in full combined.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc
    Feb 22 01:11 PM | 5 Likes Like |Link to Comment
  • Silly Rabbit, Dividends Do Matter In Retirement [View article]
    I thought I might respond. There is truth to both -- that dividends do matter and that dividends don't matter.

    For valuation experts, and in the context of a free cash flow to the firm model, the only thing that matters is what a firm generates in enterprise free cash flow, not how that enterprise free cash flow exits the business. When calculating intrinsic value, dividends/distributions DO NOT matter to valuation.

    Price is different than value, however, and investors can drive the price of a stock as a result of its dividend far greater than its intrinsic value. Some may argue that the dividend does matter in that it can push a firm's stock price far beyond the fundamentals that tie it down. Value is based on the future enterprise cash flows that are generated (not cash flows that are paid), but the payment of these cash flows in the form of dividends could cause income investors to bid the firm's stock price higher. Two places for additional information:

    1) Valuentum's academically-sound and professional-tested FCFF model:

    http://bit.ly/tHr7kg

    2) Valuentum's e-book on the '13 Most Important Steps to Understand the Stock Market'

    http://bit.ly/1nuzehe

    Absent the income stream that serves a vital purposes in retirement, the answer to if dividends matter or if they don't depends on your perspective. If you are a value investor, then dividends paid don't matter to the valuation (remember they matter to the price). But if you are a dividend growth investor, dividends certainly matter--this is your strategy. And if investors are overpaying for yield, the prices of these equities will go higher, and in this light, for investors focused on capturing this upside, dividends matter.

    Importantly, however, Brad's comment that paying out all excess cash flow as dividends/distributions enforces capital market discipline may be true, but it also significantly increases capital market risk. Dividend cuts from Boardwalk Pipeline to Exelon to First Energy were all tied to the fact that these entities did not have a large net cash position on their balance sheet. MLPs and REITs are unable to build large cash balances to handle exogenous shocks. Their dividend safety, as a result of their dependence on the capital markets, is lower than those entities with gobs of cash flow -- think Microsoft, Apple, etc. For income investors, they want both growth and safety -- certain business structures such as MLPs and REITs are less safe than general corporates because they require the entity to be significantly dependent on access to the capital markets, which is never guaranteed.

    Though there was a reference to Morningstar in this article, it should be known that more than a handful of the firms included in the dividend portfolios slashed their dividends -- not only in the banking sector but also within energy. The Valuentum Dividend Growth portfolio has yet to have a dividend cut, and we credit this to the framework behind the Dividend Cushion. Please read more about that at the following link:

    http://bit.ly/uFXpFr

    Kind regards,

    Brian
    Jul 21 01:24 PM | 4 Likes Like |Link to Comment
  • The Serious Risks Of Dividend Growth Investing [View article]
    Thank you all for the fantastic feedback! As some of you have mentioned, I hope investors of all types can find something to take away from this article, especially those that are new to the markets and are just starting to learn about dividend growth investing.

    It's great to hear from all of you, and I hope you may come visit us sometime!

    Kind regards,

    Brian
    Jun 24 01:26 PM | 4 Likes Like |Link to Comment
  • Why Apple's Intrinsic Value Will Be $1000+ In 3 Years [View article]
    Hi all,

    Thank you for reading our team's article. We certainly appreciate it. If you like our process, please feel free to give our website a look:

    http://www.valuentum.com

    All the best,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Nov 2 09:56 AM | 3 Likes Like |Link to Comment
  • We Don't Think SeaDrill's Dividend Is Sustainable [View article]
    Pasted below is the simple construct of the Valuentum Dividend Cushion for SeaDrill:

    Net Debt Position: {[Total Cash ($739) - Total Debt ($8,574)] + 5yr sum of FCF ($7,870)]}/{5yr sum of dividend payments ($9,302) = 0.0037 -- rounded to 0.

    We use the year-end balance sheet numbers from last year as we phase in future free cash flow generated from this year (to avoid double counting). We do not forecast the dividend payment to increase in coming years in our calculation, and we assume modest share count growth to keep the firm's cash position from going in the red.

    We make this valuable ratio available for all companies in our coverage universe. The higher the ratio the better.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Aug 30 04:02 PM | 3 Likes Like |Link to Comment
  • Arena Pharmaceuticals' Belviq Approval May Not Match The Hype [View article]
    Hi all,

    Thank you for voicing your concerns. We don't want our article to be taken out of context in any way. We have removed it from our site and have requested that Seeking Alpha remove it from theirs.

    Please let me know if you have any additional questions or concerns.

    Thank you,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Jun 30 02:29 AM | 3 Likes Like |Link to Comment
  • Arena Pharmaceuticals' Belviq Approval May Not Match The Hype [View article]
    Thanks for reading and posting your comments.

    I've requested our team to take a look at your responses and address them, where appropriate.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Jun 29 06:47 PM | 3 Likes Like |Link to Comment
  • The Most Successful Dividend Investors Of All Time [View article]
    Hi surfgeezer,

    I think you're correct. Price and earnings are positively correlated. This is a very basic but extremely important concept for all investors to understand. Price is discounted future earnings, so if future earnings increase, price will follow. Makes sense to me. Very insightful, forward-looking statement.

    I'm not sure total return equals trading. We think it makes sense to hold a basket of undervalued dividend-growth stocks and only trade when valuation becomes extreme on the high end. This way one can capture all of the benefits of dividend-growth investing and open up the opportunity for capital appreciation, too!

    The very best of both worlds.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Jun 6 09:07 PM | 3 Likes Like |Link to Comment
  • 5 Dividend Growth Giants For Your Radar [View article]
    Hi petpirhana,

    We don't like AT&T as a dividend growth idea. Here's an except from our recent take on the company:

    "AT&T (T) – Dividend Cushion: 0.5 – Dividend Yield: 5.1%

    We don’t like the debt loads of telecom firms. All things considered, firms that generate significant cash flow, have little incremental capital requirements, and boast little to no debt on their balance sheets are the ones with strong dividend-growth potential. This particular profile is as about as far away as possible for AT&T. The company had its best revenue growth in more than two years and its best first-quarter postpaid net adds in five years during the first quarter, but we can’t overlook the impediments to AT&T’s future dividend expansion. Capital expenditures absorbed nearly two thirds of cash from operations in the period, and while the company expects to haul in $11 billion in free cash flow for 2014, it is staring down a mountain of long-term debt ($71.6 billion at quarter end). Its cash balance doesn’t even cover debt maturing within one year, which itself is not included in the long-term debt count. AT&T may have been a great dividend growth idea 10 or 15 years ago, but it is not today. The company’s Dividend Cushion score is below 1."

    Thanks for reading!

    Brian
    May 8 04:07 PM | 2 Likes Like |Link to Comment
  • The Real Reason Why Moats Matter - It May Surprise You [View article]
    Very well said tallguyz. Stocks with moats or with no moats can be undervalued, fairly valued, or overvalued. It all depends their discounted future free cash flow stream relative to the prices. The markets are not efficient, but the moat is not what drives a price-value misalignment. It will always be expectations of future free cash flows.

    Thanks for reading!

    Brian
    Apr 29 12:39 PM | 2 Likes Like |Link to Comment
  • The Real Reason Why Moats Matter - It May Surprise You [View article]
    Hi Buyandhold 2012,

    Thank you for your comment and contribution. Here is an excerpt from my e-book regarding the 13 most important steps to understand the market:

    "2) There is No Long Term. The financial industry loves long-term investors. And rightfully so for them: there is lower flight risk of your assets if you are a long-term investor. It just sounds so good, too: "investing for the long term." And so innocent! Yet, it is one of the stock market's biggest fallacies. Long-term investing is not leaving your assets in one place for a long time, but instead, it is considering the long-term earnings and cash flow of a company in your investment analysis. At any point in time, for example, the stock price of a company will always be based on the expectations of future earnings and cash flow. In 10 years, the stock price of the company will still be based on expectations of future earnings and cash flow at that time. We, as investors, will never reach the long term -- there is no long term, even as we say that all of the value of any asset today is based on expectations of its future earnings and cash flow over the long term. Please understand that this concept is much different than the saying that "in the long-term, we are all dead" -- coined by John Maynard Keynes, which means that the long term isn't as important as the short run for decision-making. The long term does matter, and in almost all cases, it is more important than the short term. But what I'm saying in Step 2 is that stock prices will always be based on current expectations of future earnings and cash flow over the long term (at any point in time in the future). There is no magic switch 10 years from now that will change the market from a discount mechanism of future earnings and cash flow to a precise mechanism that translates earnings one-to-one from the company to the shareholder. Trust me, it will not happen. If it does, the stock market will no longer be a market (it will be some pass-through entity). Long-term investing is based on analyzing the long-term dynamics of a business and making a stand that at some point other investors will drive the stock toward your intrinsic value estimate (over the long haul). It does not mean that all of a sudden the company will be valued differently because we're now 10 years into the future. Or that the stock price will be higher 10 years from now because earnings have expanded. If you're willing to hold a stock for 10 years, it is very simple: you could have a winner or loser (or something in between). The difference is expectations of future earnings of these companies 10 years in the future. Let's try this example. Many investors may consider 2050 to be the long term. But the value of a stock in 2050 will be based on the market's expectations of the company's future earnings and cash flow in 2050 and over a "new" long term, not from today through 2050. In this and every example, the long term will remain elusive -- always in the future and never attainable. Key takeaway: The core of stock investing will always be based on expectations of future earnings and cash flow at any point in time in the future. There is no long term."

    Thanks for reading.

    Brian
    Apr 29 12:37 PM | 2 Likes Like |Link to Comment
  • Linn Energy: SEC Sees Smoke... But Is There Fire? [View article]
    On behalf of the Valuentum Team, thank you for reading.

    Brian
    Jul 9 07:46 PM | 2 Likes Like |Link to Comment
  • We Don't Think SeaDrill's Dividend Is Sustainable [View article]
    Yes, debt is the major concern, as reflected in our Dividend Cushion score (which considers the company's net debt position). The firm is heavily dependent on the capital markets to maintain its dividend payout over the long haul.

    Thank you for reiterating this point.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Aug 30 04:12 PM | 2 Likes Like |Link to Comment
  • We Don't Think SeaDrill's Dividend Is Sustainable [View article]
    Thank you for reading our article.

    Our analysts create a three stage free cash flow to the firm model to arrive at an intrinsic value estimate for the 1,000+ companies in our coverage universe.

    As it relates to SDRL, the construct of our Valuentum Dividend Cushion is the following: we take the firm's net debt position and add our forecasts for future free cash during the next five years and divide that sum by expected future dividend payments during the next five years. The resulting number is 0 -- meaning future free cash flows generated during the next five years are expected to approximately equal its debt load. SeaDrill's excessive financial leverage (read debt) is the primary reason for the poor score.

    Though such analysis doesn't mean a dividend cut is imminent, it does raise a number of red flags. Either the firm will have to see a tremendous increase in profitability relative to expectations or it will have to access the equity or debt markets to support such a high payout (over the long haul). The key time horizon is over the long haul. Both cash-raising outcomes are plausible, but nonetheless, the risk of a dividend cut over the long haul is certainly elevated relative to other firms. Our Valuentum Dividend Cushion has recently predicted the cuts at SuperValu and JC Penney, and we make such a score available for all companies in our coverage universe.

    We consider firms that have a Valuentum Dividend Cushion above 1.25 as comfortably being able to cover their dividends with future free cash flow generated (after considering the company's net balance sheet impact). If interested, you can read more about our Dividend Cushion at the following link:

    http://bit.ly/wThfGP

    Thanks again for reading.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc
    http://www.valuentum.com
    Aug 30 03:54 PM | 2 Likes Like |Link to Comment
  • Buybacks And Shareholder Value [View article]
    Thanks for the article. And thanks especially for including the relationship between what a company is worth and the price at which a firm is trading. If a company buys back stock that is trading at a discount to fair value, it is creating economic value for shareholders. Think of the company as getting the same deal for shares as you would.

    Mechanically, accounting for sharebacks is simple. Cash on the balance sheet goes down by the amount of the share repurchase. The denominator in the fair value calc (shares outstanding) is also reduced. The resulting impact either results in a higher fair value for the company or a lower one. If it's higher, share buybacks are value-creating. If it's lower, share buybacks are value-destroying.

    We firmly believe that the intrinsic value of a company can be estimated:

    http://bit.ly/nO9Tkv

    Thanks again for bringing up this topic.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Aug 9 03:54 PM | 2 Likes Like |Link to Comment
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