Ignoring Buybacks Can Be A Costly Mistake For Yield Starved Investors [View article]
Minyi, your arguments are clear and compelling. You may find that participants in this section of SA have a visceral negative reaction to buybacks. Whatever one's philosophy though, the evidence is quite clear that, on an aggregate basis, companies that undertake buybacks have outperformed their peers on a total return basis (of course to some here total return is not their measure of success, rather it is the amount of dividend income produced by a stock portfolio...any stock price increases are viewed by some here as being on a scale ranging between fragile and illusory).
I think the TrimTabs approach (reduced float) addresses one of the major concerns often expressed here...namely that repurchased shares are just being recycled for executive compensation (not that I believe this is a legitimate argument for the vast majority of buybacks). Thank you for contributing your expertise here.
Study is a bit dated and I just skimmed it but it seems to say that executive ownership does not increase because they often sell shares when options vest. http://bit.ly/VsQYHo
Dave, taking your question literally, the answer is very likely no. Presuming your view on buybacks and executive compensation is correct, it means is that executives should be controlling ever larger percentages of companies engaging in large scale buyback programs. I am open-minded to believing that assertion based on somebody presenting data to support it but, for large cap companies, I truly doubt you will find many if any cases where management controls anywhere near a majority of the stock through stock compensation accretion alone.
Even if management controls a majority of the shares though, access to the public markets is still a critical avenue for these executives to maintain liquidity for their holdings. So, under most circumstances I don't see an advantage to them taking a company private.
Beyond that, highly compensated executives have fewer personal current cash flow concerns are going to be looking to their shares to build wealth and not current cash flow. This pushes them toward buybacks and not dividends. The new tax laws only made this equation more skewed than before. Still, they are smart enough to know that dividends need to maintained and grown just enough to placate the masses.
Tangential to this, I saw this interview live last week on CNBC...note Blankfein's blurb on compensation. This came after some strong jabs from Sorkin. http://bit.ly/WHoDju
On the topic of low payout ratios, you may find the following article interesting http://bit.ly/YmcMH3. Of course as the lone commenter pointed out, albeit indirectly, dividends "compete" with buy backs more so than in the past for the dollars returned to shareholders. Therein lies part of the explanation for today's low ratio and also why payout ratios may not increase much notwithstanding that higher payout ratios are better for most companies from a cost of capital standpoint, presuming the analysis in the article is correct.
Dividend Investors To Face Significant Challenges Going Forward [View article]
Rich, great assessment as always. As some may recall, I addressed the subject of this article from a bit of a different angle last year. http://seekingalpha.co...
Allow Interest Rates To Rise While Keeping Monetary Policy Accommodative [View article]
Lawrence, how about a just zero (not negative) real return from the coupon on Treasuries? Is that an unfair expectation? Perhaps we do have excess easy credit. Wouldn't you say our government has easy credit right now...so easy that it makes it, politically, more difficult to institute deficit reduction?
I think Bob is on to something and hopefully his former colleagues will take note. Of course, the banks will hate it as it would take away their mindless carry trade and force them to lend to small businesses...that will probably be enough to kill it prima facie. In that context, would be curious how Bob would propose addressing the issue of interest on reserves if you let Fed Funds slide up.
Larry Swedroe Positions For 2013: Resist The Temptation To Stretch For Yield [View article]
Larry, let me start by saying I am a total return investor and certainly considered no more of a "friend" of your so called religious people than you are. Nonetheless, I disagree with the notion that those who spend or reinvest dividends always end up in the same place as those who mimic a dividend through small stock sales. It is easy to show that if you have a string of down market years early in an investment that you would have been better off with a dividend paying stock and the opposite, of course, if you have a string of up markets. See my article http://seekingalpha.co... and note the section on variable market conditions (which is the way real markets behave last I checked).
Why I Am Not Worried About The Fiscal Cliff And Dividend Tax Increases [View article]
See attached link. Majority of stocks are held in taxable accounts and a majority of the money in taxable accounts is held by individuals in the top tax bracket. Nonetheless, I generally agree with the conclusion of this and the Fidelity article....but let's get there based on facts. More likely insidious affect is an overall reduction in future dividend growth as new tax laws may push more money towards stock buybacks. See Richard Shaw's recent article on this topic for an in-depth discussion also.
The Trillion Dollar Coin Idea: Beyond Stupid [View article]
This reminds me of when Fred Trump bought $3 million in chips at Donald's casino in the early 1990's so Donald could make his debt payments. As much as I love out-of-the-box thinking, as the author points out, the coin idea is impractical at best and incredibly dangerous at worst.
U.S. Taxes: Who Makes And Who Pays - More Than The Rich Will Have To Pay More [View article]
Actually, 214624, we can't afford waist either. If all overweight and obese Americans lost 10% of their body weight, you could probably eliminate the Medicare deficiency which is the largest long term deficit issue (I'm in the overweight camp but am down 15 lbs in the past 5 months). I say we put it to a vote...the Bush tax cuts versus banning bread, pasta, French fries, mashed potatoes and all products with refined sugar.
The Rich Will Not Abandon Dividend Stocks [View article]
Richard good article...I'm glad you enjoyed the Fidelity article. Like yours it presented all the facts and came to reasonable conclusions.
Anecdotally, dividends have been steadily and markedly increasing as a percentage of my AGI...and I am underweight equities and investing for total return not just dividends! I expect that dividends will be about 7% of my AGI this year versus about 3% in 2009. I think when the IRS data is released for 2012, you will see that there will have been a similar increase for most "wealthy" people due to increased dividend payments by corporations, lower average earned income due to economic conditions and ZIRP reducing interest earned. I don't think this fundamentally changes the conclusions of your or the Fidelity articles, but I think the "wave" will be a bit larger than you think. I have made some modest adjustments in my portfolio anticipation of this and I may make more as it shakes out.
I'm sure you both understand this but technically speaking, the 3.8% Obamacare tax sort of works on its own rules. It will apply over $200K/250K single/married. It will apply to any so-called "unearned" income including interest, dividends, yes capital gains and more. Separately if the Bush tax cuts expire for those with NTI over $200K/$250K but less than about $400k (married), as Obama wants, you would be in the 36% tax bracket and then for any unearned income you will be the 36% plus the 3.8%. I think the 39.6% bracket would start just short of $400K NTI with again the additional 3.8% for unearned income. This is the simple explanation. There are additional nuances.
I think all of you above a largely correct in your assessments.
1) I think the lagging price action this year in Dividend Aristocrats and their cousins was at least in part due to the tax issue. There may be more lagging next year but it won't be major IMO.
2) I like NFC's and Richard math on the actual percentage of dividends that flow to top bracket individual tax payers. Nonetheless, the flow of dividends is still materially skewed toward this group and that needs to be remembered and considered when pondering this topic.
3) I strongly agree with hjtheuns that the real effects will be more insidious as BOD's rethink dividend policies going forward. They may try to mask it behind the expected slower earning growth anticipated for next year but I am quite certain aggregate dividend growth will slow quite a bit over the next few years, notwithstanding demographic demands pulling in the opposite direction.
Ignoring Buybacks Can Be A Costly Mistake For Yield Starved Investors [View article]
I think the TrimTabs approach (reduced float) addresses one of the major concerns often expressed here...namely that repurchased shares are just being recycled for executive compensation (not that I believe this is a legitimate argument for the vast majority of buybacks). Thank you for contributing your expertise here.
19 Things I Like About Dividends [View article]
19 Things I Like About Dividends [View article]
Even if management controls a majority of the shares though, access to the public markets is still a critical avenue for these executives to maintain liquidity for their holdings. So, under most circumstances I don't see an advantage to them taking a company private.
Beyond that, highly compensated executives have fewer personal current cash flow concerns are going to be looking to their shares to build wealth and not current cash flow. This pushes them toward buybacks and not dividends. The new tax laws only made this equation more skewed than before. Still, they are smart enough to know that dividends need to maintained and grown just enough to placate the masses.
Tangential to this, I saw this interview live last week on CNBC...note Blankfein's blurb on compensation. This came after some strong jabs from Sorkin. http://bit.ly/WHoDju
19 Things I Like About Dividends [View article]
Dividend Investors To Face Significant Challenges Going Forward [View article]
Allow Interest Rates To Rise While Keeping Monetary Policy Accommodative [View article]
I think Bob is on to something and hopefully his former colleagues will take note. Of course, the banks will hate it as it would take away their mindless carry trade and force them to lend to small businesses...that will probably be enough to kill it prima facie. In that context, would be curious how Bob would propose addressing the issue of interest on reserves if you let Fed Funds slide up.
Larry Swedroe Positions For 2013: Resist The Temptation To Stretch For Yield [View article]
Larry Swedroe Positions For 2013: Resist The Temptation To Stretch For Yield [View article]
Why I Am Not Worried About The Fiscal Cliff And Dividend Tax Increases [View article]
http://bit.ly/SZ2jvQ
The Trillion Dollar Coin Idea: Beyond Stupid [View article]
U.S. Taxes: Who Makes And Who Pays - More Than The Rich Will Have To Pay More [View article]
U.S. Taxes: Who Makes And Who Pays - More Than The Rich Will Have To Pay More [View article]
The Rich Will Not Abandon Dividend Stocks [View article]
Anecdotally, dividends have been steadily and markedly increasing as a percentage of my AGI...and I am underweight equities and investing for total return not just dividends! I expect that dividends will be about 7% of my AGI this year versus about 3% in 2009. I think when the IRS data is released for 2012, you will see that there will have been a similar increase for most "wealthy" people due to increased dividend payments by corporations, lower average earned income due to economic conditions and ZIRP reducing interest earned. I don't think this fundamentally changes the conclusions of your or the Fidelity articles, but I think the "wave" will be a bit larger than you think. I have made some modest adjustments in my portfolio anticipation of this and I may make more as it shakes out.
2013 Dividend Tax Impacts [View article]
2013 Dividend Tax Impacts [View article]
1) I think the lagging price action this year in Dividend Aristocrats and their cousins was at least in part due to the tax issue. There may be more lagging next year but it won't be major IMO.
2) I like NFC's and Richard math on the actual percentage of dividends that flow to top bracket individual tax payers. Nonetheless, the flow of dividends is still materially skewed toward this group and that needs to be remembered and considered when pondering this topic.
3) I strongly agree with hjtheuns that the real effects will be more insidious as BOD's rethink dividend policies going forward. They may try to mask it behind the expected slower earning growth anticipated for next year but I am quite certain aggregate dividend growth will slow quite a bit over the next few years, notwithstanding demographic demands pulling in the opposite direction.