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Bruce Miller

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  • Medical Properties Trust: Acute Care For Your Portfolio [View article]
    I agree that OHI has enjoyed a rapid steak of growth that I'm no sure they can sustain. Rather, I like the unexciting plodders whose business activites are rarely in the news or on any 'analysts' buy recommendations. Divided growth is long and slow and ratios tend to keep in balance, including FFO payout ratio, debt/equity, the percentage of their annual distributions that are reurn of capital and annul dividend growth rates. Now, I don't like to give away what takes me quite a bit of time to collect....but here are the HC REITs I' suggest you take a look at from the above predictive metrics...or any others you might like to use:

    Oct 26, 2012. 10:54 PM | Likes Like |Link to Comment
  • Dividends Versus Homemade Dividends [View article]
    "Many companies have been "Dividend Champions" until the day they are not (GE, BAC, Wells Fargo, etc., etc.) "..

    ahhhhh, there's the rub!

    In the case of GE, BAC, PFE....did all look well right up until the date the company's BOD press release announcing the dividend cut? Was this a complete surprise? Or were there discoverable indicators that the company's dividend was at high risk of being reduced?

    A long history of sustained dividend growth does NOT mean the dividend will continue as it has.....but it is one of the BEST predictors that it will. Were this not the case, the list of Dividend Champions would be a fraction of the 105 companies it now lists. But like all other predictable events, its the combination of several related metrics that, combined, provide the best predictive models.

    Oct 26, 2012. 10:24 PM | Likes Like |Link to Comment
  • Retirees And The Dividend Cliff [View article]
    I think this is a small part justifiable concern but mostly hyperbole.

    If you are married fiing jointly and have an AGI in excess of $250,000 and hold dividend paying stocks in taxable accounts, then yes, you should take note and prepare to make some adjustments to where you hold your dividend paying stocks/funds, should Congress elect to treat today's qualifying dividends as ordinary income. However, my tea leaves tell me that it is the retired community looking to dividends as one of their sources of household income....and not many of these will have that kind of an AGI and if they do, it is likely most of their retirement savings will be in tax deferred accounts whose distributions will not count as investment income next year.

    The significant (?) tax change for many retirees was not mentioned: the potential loss of the favorable qualifying dividends that have been taxed at the 0% tax rate for the past several years for those retired tax payers in the 15% marginal tax bracket...which I would imagine makes up most retired households, whose AGIs are in the $80K to $100K range, that with deductions/exemptions, drop below about $70K into the 15% least for Fed income tax.

    And as Chowder points out, remember, the primary recipient of qualifying dividends are institutions, the majority shareholders of most dividend paying companies...and most of these....pensions, foundations, trusts and endowents, pay no tax.

    But will large dividend paying companies change or alter dividend policies with a change for the worse in the tax code....say, making qualifying dividends ordinary income? Possibly, but my guess is little, Most of that is because most dividend recipients will not be affected, but also because dividend policy has as a factor the cost of capital for the company's capital structure...and historically, particularly during high interest rate eras, retained earnings was the least cost of capital. But interest rates and today's lower cost of common/preferred stock issuance/accounting have, I've been told, made earnings retention less important than decades past.

    Oct 26, 2012. 04:46 PM | 3 Likes Like |Link to Comment
  • Dividends Versus Homemade Dividends [View article]
    Asset preservation can never be unimportant for any investor"

    Those who give their retirement savings to an insurer for a single premium life annuity have fully surrendered their capital. If they die the next month, they (or their estate) will have forever lost their 'investment'. Same for those who take the life pension over a lump sum. For those who buy 25 year maturity bonds, they will lose the purchasing power of their initial investment. Asset preservation is not a universal goal...altough it is likely a common goal.

    "Pitney Bowes.....I don't know of any investor who would be happy to collect modestly higher dividends each year in exchange for a capital loss like that."

    Its not that PBI's market price has not grown that makes it a poor fit to those of us who invest for reliable income....its the risk that PBI will not be able to sustain its dividend over the years and decades ahead. Put another way, if PBI (or any other stock) could show that its dividend growth is well supported by free cash flow, and wll be able to continue to do so, the stock price would not matter, as the market will recognize this strength and the price will show it.

    "To be sure, most stocks go through down periods where some capital is lost". No, it isn' isn't "lost" until the stock is sold.

    For an income investor (remember, this is the 'dividends and income board), "down periods" shouldn't matter. If the income investor has done their research, they will have found dividend stocks that will sustain their free cash flow during up and down markets. Most of the Dividend Champions have demonstrated this. However, the real challange is to be able to recognize those few stocks who will not be able to sustain their distributions...whatever the broad market is doing.

    Thank you for your comments.

    Oct 25, 2012. 11:30 PM | Likes Like |Link to Comment
  • Dividends Versus Homemade Dividends [View article]

    Many DGI investors say that capital gains are secondary but you certainly cannot ignore capital losses. Don't you want your stock price to at least remain stable while your dividend grows? I certainly do."

    I think you might be confusing 'needs' and 'wants'. If you are investing for reliable income (i.e. income that doesn't decline over time) and asset preservation is secondary or even unimportant, then yes, I can ignore unrealized capital losses (capital losses are only realized when I sell or the security (like a preferred) is redeemed or involuntarily converted). So, at least for me, a decline in a stock's price is not a loss....its a decline in the stock's price.

    As to the stock's long term change in value (price), I take a bit more of a presumptuous view. If the income stock I'm holding is generating increasing revenue and their expenses are not growing faster than this (or are not at high risk of rising faster), their dividend will grow and the market, over time, will take care of the stock's trading price. Further, I understand that the market, like all good schizophrenics, will go through periods of joy, followed by indifference which will devolve into meloncholia to again be punctuated by bursts of unexpected elation. Trying to make predictive sense out of this to me makes no sense...unless one has a very long time horizon....and my time horizon goes to the next quarter when I predict that dividend will show up in my brokerage account, on time.

    Oct 25, 2012. 01:39 PM | 1 Like Like |Link to Comment
  • Is Tax Deferral For Dividend Growth Stocks Really Worth It? (Part 2) [View article]
    Dr. Dividend
    I've done these kinds of calculations for clients many times. My conclusion is that this kind of analysis is extremely individualized. The following are examples of the important variables I can think of in the quantification of taxable vs. tax deferred savings:

    1. Fed + State tax rates, ordinary income and capital gains
    2. Expected annual realized gain (taxable) rate (yield) and the tax character of the realized gain (cap gain, qualified dividend, ROC, ordinary income)
    3. Expected average annual unrealized (mostly capital appreciation) growth rate
    4. Household cashflow projections
    5. Expected individual inflation rate
    6. Estate size and probability of estate tax
    7. The importance of a stepped-up basis to heirs
    8. Increased income tax projection (negative household cash flow) for the years of RMDs.
    9. Anticipated or likely 'liquidity events' in future years
    10. Probability of catestrophic event necessitating creditor protection.
    11. Expected age(s) of retirement

    And then combining this for H & W when both have IRAs can add another dimension of complexity.

    The general wisdom in the trade is to hold assets in tax deferred accounts as early and as long as possible to maximize tax deferral and the compounded growth that comes from it. But as you can see from the above list, other factors can combine to trump this general assumption.

    Oct 25, 2012. 12:54 PM | 1 Like Like |Link to Comment
  • Medical Properties Trust: Acute Care For Your Portfolio [View article]
    Now that's optimism!
    One of the things I've found with REITs is they change slowly. This is likely due to their inability to retain much of their cash flow and the relatively fixed long term nature of their revenue sources. All HC REITs I hold have slowly improved their positions and increased, slowly, their distributions. MPW has not.

    What you've outlined may indeed come to pass, and I hope for you (and others) that it does, as some indicators do point in that direction. But I've seen this play before, and have long ago learned that REIT past performance, more so than any other industry group, is one of the best predictors of what the REIT will do in the future.

    Oct 25, 2012. 12:10 PM | Likes Like |Link to Comment
  • Medical Properties Trust: Acute Care For Your Portfolio [View article]
    Hi Kurt
    As a long time holder 7 of the 12 HC REITs, I would not recommend MPW at this time.

    During the economic downturn of 2008/9, MPW and HR were the only two of the HC REITs to cut their dividends. Since then MPW and HR continue to be the only 2 who have not raised their dividends. Cash flow is weak, although there has been a slight uptick in Op CF in the last quarter. For 2011, 58.5% of their dividend was return of capital while only 37% of distributions are attributable to depreciation. So unless MPW can permanently increase FFO/share, the dividend may have to be cut. Because so much of the price premiums today are for dividend reliability/growth, those companies showing dividend vulnerability will be price sensitive to any news of economic slowdown. And although I really haven't explored this, it would seem that MPW is exposed primarily (only?) to health delivery facilities without diversification into non-treatment facilities such as medical office, assisted living or skilled nursing. I wonder how sensitive MPW rents will be to a reduction in Medicare reimbursements. Again, just a speculative question.

    Yes, the demand for health services will be strong for the next 20-30 years. This has been stated and restated over the past many years as a reason to be invested in HC REITs. But keep in mind, demand for seats on US Airways flights was also very strong on the date it declared bankruptcy. Demand does not necessarily translate to profitability.

    I will continue to monitor MPWs quarterly and annual reports. But for now, I would categorize MPW and their dividend as too risky.

    Oct 23, 2012. 12:37 PM | Likes Like |Link to Comment
  • Philip Morris Pulls Back Again [View article]
    "he is saying that the price compared to his metrics was high, and now it has gone down and would be a better time to buy. He's saying "sell high, and re-buy low"

    That is the definition of market timing.

    It took me many years to finally figure out and admit to myself that market timing, in every respect, CANNOT work. The smarter you are, the sooner you'll figure that out.

    Oct 22, 2012. 07:10 PM | 2 Likes Like |Link to Comment
  • Philip Morris Pulls Back Again [View article]
    "Two weeks ago, I published an article telling investors to sell shares of Philip Morris (PM), and reacquire them on a pullback"

    Thats called market timing.

    No thank you.

    Oct 22, 2012. 11:20 AM | 8 Likes Like |Link to Comment
  • REITs Are Bubblicious, Especially The Dividends That Are Repetitious [View article]
    Hopefully this reply catches you in time.
    I posted my findings and request for any further info on STAG at TMF REIT site, and got a reply back from Ralph Block (Reitnut), as follows:

    " I haven't looked at STAG since I wrote that post, but have noticed that they are VERY acquisitive. The most recent deal was an acquisition of a $129MM industrial portfolio (October 9). That can often be an orange - if not red - flag. Most equity REITs aren't out there buying a lot of properties, perhaps for the reason that there's a lot of capital chasing real estate these days, and good bargains are scarce.

    Real value is created when a REIT can buy properties from distressed sellers, or that are in foreclosure, or that are undermanaged or suffering from unwarranted poor occupancy rates. This is a principal reason for my enthusiasm for ROIC; it is doing these kinds of deals. Those who are thinking about investing in STAG might dig a bit and try to find out how there deals are being sourced; are they coming from personal relationships in off-market deals, or are they just winning deals at competitive bidding?

    I am not trying to cast doubt on STAG as a REIT; however, I do think that some attention should be paid to the kinds of deals STAG is doing, and whether they are likely to create any value for shareholders. Just buying a lot of properties at market prices to drive FFO growth doesn't excite me very much, unless it can use its stock as currency when it trades at prices above NAV. Perhaps it is doing exactly this, as consensus NAV is about $15, while the stock trades at $17.

    Ralph "

    So perhaps you could ask him about recent and future aquisitions, and how he expects to derive value from them.


    Oct 22, 2012. 11:12 AM | Likes Like |Link to Comment
  • Demystifying The 'Dividend Illusion' [View article]
    There was a long discussion on this article at the Vanguard Diehards forum last month....

    Investment intelligencia who assail income investing usually do so, in my experience, to protect their MPT turf. It seems logical that is what is happening with Mr. Updegrave....although one might also conclude that he is trying to gin up some attention in the hope of improving ad revenue.

    But whatever the case, this is simply one more example of disputing dividend income investing using the tenets of MPT. Now, to be sure, there are valid arguments for avoiding investing exclusively for income that have nothing to do with MPT....but these are lost on those like Mr. Updegrave who I'm sure would understand the paradigm of dividend income investing following a detailed explanation in King's English just about as well as he would understand the explanation were it given to him in Swahili.

    Oct 21, 2012. 03:07 PM | 1 Like Like |Link to Comment
  • REITs Are Bubblicious, Especially The Dividends That Are Repetitious [View article]
    "BruceCM - Thanks for reading. Have you considered LSE, STAG, HTA, ROIC, or MNR? They appear to be over 5% with growth... Thanks for your comments. Brad "

    Thanks for the REIT names. Lets take a look...

    LSE is a leveraged bond fund. I don't do leveraged bond funds :-)

    STAG looks interesting, as it has raised its 6 dividends twice, and although data is sketchy, it looks like it has an FFO POR of 43% and based on 2011 1099 data, about 14% of its distribution was ROC. From what I can see, its primary drawback is that it is tiny at a market cap of $420MM and its only been around for 6 quarters. But its yield of 6.25% makes this an interesting bit of high risk income.

    HTA is a HC REIT. As I'd said, I'm overbudget on HC REITs.

    ROIC looks very high risk with a CY of 3.9%. It looks highly speculative...almost like a REIT property flipper. From their profile description:
    "The company locates potential acquisition candidates through investment bankers, venture capital funds, private equity funds, and other financial institutions. NRDC Acquisition uses mergers, capital stock exchange, stock purchase, asset acquisitions, and other contractual agreements to acquire firms"

    It has had good dividend growth since its first dividend in May 2010. But this REIT is a bit too speculative for me.

    MNR has had a flat $.15 quarterly dividend since 2007 with a microcap of $443MM, and does not seem to belong to NAREIT as there is no 1099 data for it there. The FFO POR looks decent in the upper 70% range. But this is a bit too much incme risk, IMHO, for a CY of 5.3%. There are better HC REITs providing the same CY with long dividend histories and lots of data.

    I'll continue to track STAG. Thanks

    Oct 20, 2012. 12:52 PM | 1 Like Like |Link to Comment
  • REITs Are Bubblicious, Especially The Dividends That Are Repetitious [View article]
    With some redeemed preferred stock $$ I need to get redeployed, I have been looking closely at the equity REITs available today, and my inescapable conclusion is that REITs are overbought...some, way overbought. That the yield spread with the 10 year me correct that...with the ARTIFICALLY PRICED T-Notes, is wider than 'average' or AFFO PORs are lower than past years averages, is all very interesting, but it doesn't change the fact that the larger equity REITs are trading at historically low yields. Consider these current yields:

    AVB: 2.9%
    ESS: 3.0%
    KIM: 3.7%
    SKT: 2.6%
    SPG: 2.7%
    TCO: 2.3%
    BXP: 2.0%
    PSA: 3.2%

    And these are still a good buy, based on valuation, for the income investor?

    Like investment grade bonds and utilities, when interest rates start to climb, the prices giving us these yields are going to drop. I mean, to get to the roughly 4% yield it has historically provided, BXP's price would have to go from its current $110 to about $55.

    About the only REITs providing >5% yields today are either the slow growing health REITs, or the really trashy stuff, like CDR, GOV and HPT...and I am way over budget on health REITs.

    Oct 19, 2012. 02:09 PM | 3 Likes Like |Link to Comment
  • Merck Offers Promising Results; A Must Have Dividend Stock [View article]
    If you wish to diversify with a pharma ETF, beside PPH you might also want to consider IHE, XPH, PJP or even Vanguard's VHT, although this includes other HC than pharma.

    But for those seeking income, these ETFs are likely not good choices, as the highest of them is XPH with a CY of 1.66%, and I can't even find that PPH pays a dividend.

    Oct 16, 2012. 03:30 PM | Likes Like |Link to Comment