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Bruce Miller  

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  • Structured Products: These Are Not Bond Substitutes [View article]
    Rather than try to delve into the inner workings of these and other such products, just remind yourself of the 3 laws of the marketplace:

    1. No one knows what the markets will do in the future
    2. We all invest in the same market place.
    3. Only the Treasury may print money

    What financial products of any type really do is rearrange risk.

    But all the middlemen must be paid, from those who market and sell the product to the portfolio managers to the underwriters. This necessarily means lower returns, but it doesn't mean the product does not have application. Certainly, there are benefits to such products, such as disciplined asset allocation and managed liquidity. These are not small benefits to most individual investors.

    In the end, its all about risk and liquidity. Unfortunately, if they are not variable products and are offered by insurance underwriters, they do not have to comply with SEC disclosure rules, although they do have to meet FINRA 'suitability' standards if sold by licensed securities dealers....althoughh I've become convinced over the years that 'suitability' really means the product is not grossly 'unsuitable'. And even if it does fall under SEC disclosure rules, if sold by a broker-dealer, there is no fiduciary responsibility and if/when the product 'implodes', the salesperson and their organization can simply say that this risk was fully disclosed in the 120 page prospectus.

    For most, the final answer is relatviely simple: if you don't fully understand the product and its risks, don't go there.

    Feb 28, 2013. 11:51 AM | 2 Likes Like |Link to Comment
  • 3 Charts, 3 Busted Dividend Myths [View article]
    What is your investment goal? The answer to this drives your investments...not the other way around.

    If my goal is reliable retirement income, month after month, quarter after quarter, year after year, a basket of preferred stock is one way to do this. If my goal does not include captial growth, but just reliable income (the condition that "should" exist during one's retirement years) I'm not going to care what the total return is...I'm going to care that my income is reliable.

    A portfolio of preferred stock, a portfolio full of long maturity bonds, a single premium immediate annuity....these are all fixed and reliable income. No growth, but that is acceptable to my goal (my income growth may be coming from an inflation adjusted life pension and Social Security).

    As Giorgiolb say, there are other risks in holding a big basket of preferreds, such as redemption/reinvestment risk, inflation risk, risk of perpetuity and default....another topic.

    But back to the response comes from his statement that one cannot live on yield alone. My argument is that, depending on one's goals and through careful management, one can indeed live on yield alone.

    Feb 27, 2013. 12:00 PM | 2 Likes Like |Link to Comment
  • 3 Charts, 3 Busted Dividend Myths [View article]
    No Free typing finger missed the 'quarters' and hit 'years' key instead!! Hate it when I do that!

    Although a bit less dramatic, my point remains. But thanks for catching my silly boo-boo.

    Feb 26, 2013. 01:28 PM | Likes Like |Link to Comment
  • 3 Charts, 3 Busted Dividend Myths [View article]
    "It's been said that man cannot live on bread alone. Well, investors cannot live on yield alone. They need growth, too"

    Not necessarily.

    A pool of 30 preferred stocks provide a weighted yield of 7% with 0% dividend growth. A pool of 30 fortune 100 dividend paying stocks with an average yield of 3.5% grows its distributions by an average of 8% per year. It will take over 78 years for the nominal cummulative distributions to be equal.

    High yield does not necessarily equal high income risk and fixed distributions can be lived on. It really depends on the retirees life situation and the retirees income requirement to determine the income securities that will best meet the income need.

    Feb 26, 2013. 11:46 AM | 3 Likes Like |Link to Comment
  • Sleep Well At Night With This Dividend Aristocrat You Can Buy Right Now [View article]
    This is REIT happy-talk I completely agree with, particularly because you discussed Medicare and Medicaid exposure, thus the risk to revenues to operators and what this would likely mean to operator's earnings. HCP and HCN management have had a long history of watching and limiting this revenue I think this will gradually become the 600 lb gorilla in the space of reliable income from HC REITs.

    The other HC REIT that doesn't get much attention is NHI. Much smaller, but some interesting internal growth and property aquisitions, and probably the fastest growing of the HC REITs.

    I suppose I should disclose that I hold gobs of HCP and NHI, as well as 4 other HC REITs....held them a long time, and will continue to do so if their fundamentals continue as they have :-)

    Feb 25, 2013. 12:36 PM | 1 Like Like |Link to Comment
  • I'm Picking Omega Healthcare Because I Want My Daughter To Be A Winner [View article]
    And just for the sake of timing, here's an article that popped up in my e-mail today on the topic of Sequestration and Medicare payments. It doesn't specify the likely impact to HC REITs, but it does talk broadly on % payment reductions to hospitals and outpatient medical services covered under Parts A and B, and to Part D and MA premium subsidies.

    Exactly what impact this will have on HC REITs whose operators rely heavily on Medicare reimbursements, I do not know. But I'm pretty certain, it will not help their bottom line.

    It would be interesting to interview Pickett about this topic.

    Feb 21, 2013. 05:58 PM | Likes Like |Link to Comment
  • I'm Picking Omega Healthcare Because I Want My Daughter To Be A Winner [View article]
    Thanks again for your usual round of REIT happy-talk :-)

    As I've said so often in the past, HC REITs represent my largest income group holding. All 6 I hold demonstrated their recession-resistance by not cutting their dividends during the 07-09 downturn and indeed, all but LTC actually raised their dividend during this period.

    OHI is well run and there is no disputing this. What the market is telling us is their operators revenue stream from Uncle Sugar (US) is the question, and it is my understanding from previous readings, that most of OHI's operators source of revenue is US. Now, to be sure, all HC REIT operators, to the best of my understanding, get some income from US. With today's sequester uncertainty and tomorrows spending cuts that most agree will be forthcoming, how will HC REIT operator's earnings statements fare? That is the question.

    And lest we forget, the last time US unilaterally decided to cut operator reimbursements (late 2000 as I recall), OHI nearly went BK. Something tells me this tidbit of info is not lost on the marketplace currently pricing OHI shares.

    Feb 21, 2013. 12:42 PM | 2 Likes Like |Link to Comment
  • CenturyLink: How A 7% Yielder Hit Into A Triple Play [View article]
    Good analysis.
    I don't own any of the telecom/ISP/wireless companies for income....too much competition and too much techno risk. Kinda like consumer cyclicals.....good cash flows when things are going good, horrible cash flows when they are not. My income must be more reliable than that.

    But to the point of corporate dividend policy, which you indirectly address, but should be taken head-on....

    If you look at David Fish's listing of dividend champions and contenders, most of that membership are foturne 100 companies with large market caps. To these companies who 'get it', dividend policy is critical. It is an unofficial agreement between the institutional majority shareholders and company management/BOD that the company will sustain the dividend and its growth, regardless of how much more the company could make use of the dividend as retained earnings to fund this or that capital project or other cash flow need. In return, the institutions hold the stock giving the price stability and a low beta that allow the company to more effectively use the stock as a form of reward and compensation through all manner of stock grants/options/retirement plan contribution etc, etc. Its pure symbiosis.

    So why a company like CTL would whack its dividend for some hair-brained future cash flow need, and tell the institutionals to take a beyond my understanding.

    I suspect CTL is going to pay dearly for this, with a single digit P/E for many quarters to come....and some new and exciting price volatilitiy that otta tickle-the-innerds of key employee stock award plans!

    Go figure

    Feb 16, 2013. 04:09 PM | 1 Like Like |Link to Comment
  • Building A 6% Income Portfolio For 2013 (Part 7): Technology [View article]
    Good comment on preferreds.

    When you say 'virtually no risk', you really need to define that risk.

    If the risk you refer to is default risk (dividend suspension) then I'd agree, most preferreds are very low risk. Try this: go to quanutmonline, click on 'special lists' and then 'preferreds with dividends suspended' and look at the 100+ preferreds that suspended their dividends over the past several years. They are almost all banks or mortgage backed preferreds. A couple of equity REITs and no regulated utilities or insurers. And this through the economic decline we went through...that's low risk to the non-financial preferreds!

    And a couple of more observations on preferreds.
    REIT prefereds are the most common, per LordXot's listing of all preferred stock. Preferred dividends are always senior to common stock dividends...but preferred dividend suspensions and outright bankruptcy almost always translate into the preferred shareholders getting zip. Yes, some suspended preferreds are renewed, but most are not, as the company is either broken up and sold, reorganized out of bankruptcy or bought by some kind of private all cases the preferred shareholder gets little or nothing.

    The real risk with today's ultra-low yielding preferreds is perpetuity and being subject to purchasing power erosion. Becuase of this, I won't hold a preferred yielding under 7.25%, which today means very high defualt risk. So as the preferreds I hold (currenlty 17) are redeemed, I'm not replacing them with other preferreds, as today's yields are dangerously low on all but the pure junk.

    Feb 16, 2013. 03:41 PM | Likes Like |Link to Comment
  • Building A 6% Income Portfolio For 2013 (Part 7): Technology [View article]
    "Whether you are new to dividend investing or you are a seasoned pro, it's likely that your main goal is to build a long-term portfolio that generates consistent income over time "

    Good opening! But then....

    "The Technology sector as a whole has performed relatively well over the past 5 years, with a total return of 40.9% (which is the 4th highest among the nine S&P 500 sectors)." now have contradicted yourself and are loudly pronouncing that you really don't understand income investing...which is then further reinforced when most of the metrics you give for each of the securities you mention are metrics of total don't offer any analysis of sustainable free cash flow, which is the central metric of any income security analysis.

    Feb 16, 2013. 03:16 PM | 2 Likes Like |Link to Comment
  • CenturyLink Shocks The Market With Its Dividend Cut [View article]
    Like PFE, CTL's out-of-the-blue dividend cut is going to prove costly. The message sent to its institutional shareholders is that its yield cannot be depended on to help the institutional money manger make his target return. So out goes CTL, down goes its forward P/E and suddenly, CTL's going to have a hard time using its 'underwater' stock to fund key employee stock options, SARS and stock bonus plans, not to mention the hit their employees will take to the company stock in their retirement plans. And any explanation to employees that this 'capital restructuring' will be good for the stock's price over the years ahead is going to smack of Kenneth Lay. In short, a dividend cut has far reaching consequences. At best, the company can expect to see its forward P/E lanuish in the low double digits if not single digits for the foreseeable future until management can overcome their faux-pas with solid performance.

    Feb 15, 2013. 02:53 PM | 1 Like Like |Link to Comment
  • A Closer Look At Suburban Propane Partners' Distributable Cash Flow As Of 1QFY 2013 [View article]
    thanks for the review. And good to see your analysis on a down-stream retailer. I'd really like to see a comparison with the likes of APU.

    Your observation that like retailers and Christmas, propane retailers have their 'high' season they rely on to get them through the 'slow' season. Historically their busy time is the coldest months....but I wonder how much 'alternative' fuels will play into their future off-season demand.

    Propane and NG are fuel sources, and as much wailing as there is about 'carbon footprinting', we as a nation require energy. So unless somebody figures out how to integrate lots of hamsters in spinning cages into our energy needs or cold fusion becomes a reality, we'll have to rely on the energy sources we already have.

    Look forward to more cash flow analysis on the 'propanes'.

    Feb 12, 2013. 01:09 PM | Likes Like |Link to Comment
  • 12 Things To Dislike About Dividend Investing [View article]
    As a now retired RIA, my experience tells me that any experienced registered investment advisor of credentials is fully capable of understanding a true income approach to investing. It is simply a realignment of what they should already know and practice. The real question is will they? The answer, again in my experience, is they will not, as it will require a set of analytical skills and metrics tracking that are well out of the main stream, thus it will be harder to do the required research and defending their approach in the event of a client challange, will be harder to do.

    Feb 11, 2013. 04:50 PM | 3 Likes Like |Link to Comment
  • 12 Things To Dislike About Dividend Investing [View article]
    Let me clarify. MLPs, like S-corps, proprietorships and most LLCs, are pass through entities, meaning all earnings (and certain other taxable events) must pass through to unitholders. What is not required is for an MLP to make distributions of cash. A seemingly fine point, but one with real implications for the traded partnership, as a publicly traded partnership that distributed taxable earnings without cash (or cash equivalent) distributions would not be a publicly traded company for very long. Interestingly, this is exactly what has happened in the case of formerly publicly traded RELPs that after the 86 TRA, went private, cut distributions to zero yet continued to distribute earnings each year. I can't imagine much of a worse place to be than one of their unitholders.

    And as another kind of interesting take on the statutory rules for distributions, REITs are required to distribute not less than 90% of RTI to maintain REIT status, but are not reqired to distribute capital gains.

    Feb 11, 2013. 04:44 PM | 1 Like Like |Link to Comment
  • Lockheed Martin Corp: Dividend Stock Analysis [View article]
    As the sequester comes towards us, I think most realize that the US Gov provided revenue stream is definitely at risk. This shouldn't be the question for LMT....the question should be how will LMT respond to such a revenue cut. There are fortune 500 companies who are used to this and will handle a revenue cut without much of a ripple in company performance ratios. Layoffs and discontinued operations are the most common. My concern with LMT is they are not used to this and not very experienced at it. They are used to the government spigot with only temporary or minor changes to revenue streams.

    I see too much inexperience and too much revenue risk with LMT. So despite its great looking history and favorable yield, I'm staying on the sidelines for now.

    Feb 7, 2013. 12:29 PM | 1 Like Like |Link to Comment