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Craig Lehman

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  • The ABCs Of Dividend Investing: Divi-Do Or Divi-Don't? [View article]
    "The most important element of dividend investing is the significant long-term relationship between dividend growth and price growth."

    The other day I saw a commenter remarking "No self-respecting dividend-growth investor would consider a stock paying only 0.5%" Oh really? If the dividend is growing 20% a year, then even if dividend growth starts to slack off at some point, you'll be near a 3% yield on cost within a decade. And more importantly, as you point out, the dividend growth will *drive* price appreciation.

    This point is also made by Lowell Miller in The Single Best Investment, but it's often overlooked. Some self-described DG investors seem to think that the concept includes some minimal level of dividend yield, but to me, dividend growth simply means dividend growth (and all the good things that come with it, like a growing company.) There is no reason why a DG investor shouldn't *also* think in terms of price apprecation. No, you can't count on price appreciation for basic-necessity income, and retired investors have to focus on getting to an acceptable income level first, but for anyone with a horizon longer than a few years (which includes most retirees!), there is no reason not to make potential price appreciation a significant part of the picture.

    Your chart of dividend growth vs. price appreciation is really rich food for thought. That 0.8 r-squared of sectors cannot be ignored. As mentioned in your preceding comment, I would be very interested to see you expand your commentary to more specific industry groups and some representative companies.
    Jan 18 01:32 PM | 4 Likes Like |Link to Comment
  • Shed Some Tiers Over Your Income Portfolio [View article]

    Thanks for a thought-provoking article. I too think in terms of tiers, in a spectrum running from zero-dividend stocks on the one extreme and zero-capital-appreciation bonds at par on the other, with various combinations of low-to-high income and high-to-low capital appreciation in the middle. However, I don't think that risk correlates very well if at all with these tiers -- you can have high- or low-risk investments at any tier. For instance, your example of PBI before the dividend cut is an excellent illustration of a high-yield high-risk investment. But with a little effort, I think it's possible to provide examples of high or low risk on *any* tier. (E.g., perhaps BRK.B is an example of a low-risk zero-dividend stock.) And if you can have low risk on any tier, then risk and tier selection are two completely different issues in portfolio construction.

    That's probably too brief, but at some point I hope to write an article that fills in some of the blanks. Meanwhile, to repeat, I agree with your fundamental point that tiers provide no blanket definition of risk.

    Just one quibble -- I don't believe that "blanketly" is a word :).
    Jan 18 12:54 PM | 1 Like Like |Link to Comment
  • My Mad Method: What Next To Buy, Taking Profits, And Why? - Part 3 [View article]
    "CCC Rank = It's not a Dividend Champion, Contender or Challenger... Yet."

    TGH is, in fact, a Challenger.
    Jan 17 05:49 PM | 2 Likes Like |Link to Comment
  • My Mad Method: What Next To Buy, Taking Profits, And Why? - Part 3 [View article]
    Granted that MO diversifies you by adding another position, do you ever look at sector, industry or cap size diversification? I mean, shaving down LO to raise some of the funds to buy MO protects you from company-specific problems at LO, but not from problems in the tobacco industry. TGH, by contrast, gives you a relatively small-cap company in a completely different industry.
    Jan 16 11:33 AM | Likes Like |Link to Comment
  • Is It [Low D]? [View article]
    Oh damn. I looked closely at your profile picture and for a moment I thought, Doctor, Doctor!... but no. Unfortunately there is already a long line of people volunteering to take care of the dividend checks.
    Jan 16 01:52 AM | 2 Likes Like |Link to Comment
  • Finding Alpha In Discarded 'Dividend Growth' Stocks [View article]
    A lot of the factors you discuss have been tested and ranked in O'Shaugnessy's What Works on Wall Street.

    That said, I do strongly agree with your methodology of looking at "discarded" dividend stocks. Incidentally, a list of such stocks can be found in the "Notes" tab of the CCC list, where they are called "frozen angels."
    Jan 15 12:47 PM | Likes Like |Link to Comment
  • Should You Sell After Yield Drops Below Minimum Yield Requirement? [View article]

    I completely agree -- as long as people don't read "balance" as meaning "50-50." I believe I recall you having said that you own "two handfuls" of utilities, but I bet you don't have two handfuls of 2% yielders.

    My own view is that every investor (except perhaps those who know they are going to die very shortly) needs some stocks from every part of the yield spectrum. Of course the proportion varies depending on age, backup savings, risk tolerance, etc. But it's a kind of diversification: DE and ED are very different kinds of companies and prosper in different kinds of circumstances. So as with any kind of diversification, you reduce risk.
    Jan 10 02:25 PM | Likes Like |Link to Comment
  • Dave Van Knapp Positions For 2014: The Best Dividend Growth Stocks Will Pay Out More This Year [View article]
    "How does DVK know that 2014 will be similar to 2008/2009 but not to 2008/2009? 8-)."

    Because, more often than not, the market goes up over the course of a year, not down, especially in the absence of catastrophic news. How do I know that my car will start when I go out to run errands shortly? Because it usually does. Could I be wrong? Of course, but the fact that I'm not certain doesn't mean that I don't "know", in the ordinary sense of the word. I am not fretting one bit.

    Note that the kind of knowledge being employed here is knowledge of probabilities. People sometimes argue that the only "real" knowledge is supplied by deductive proof (see the history of philosophy), but that is wildly at odds with ordinary language. DVK is surely not claiming certainty with regard to his market forecast, but SDS, you seem to be holding him to a higher standard.
    Jan 10 01:50 PM | 5 Likes Like |Link to Comment
  • Micron: Are The Analysts Getting Cold Feet? [View article]
    I hope you are planning a followup once the earnings report comes out. If you are right, you will certainly deserve the opportunity to spike the ball.
    Jan 6 12:25 PM | 5 Likes Like |Link to Comment
  • My Income Portfolio Quarterly Update (Q4 2013) [View article]
    I guess it's a matter of taste. You look at the YOC, you see the net result of the compounded growth rate. Yeah, I can use a compounding calculator to see what the growth rate will give me, but the YOC gives me the net result directly, and does it equally well in cases where there aren't easily divisible numbers as in your example. Trying to do rough estimation at a glance, I would personally rather project the growth of YOC forward than try to do compound interest calculations.

    I could equally well argue that growth rate tells you nothing until you work out the YOC. Granted, it is two ways of looking at the very same thing. It's just a matter of which number you find more intuitive to look at. Po-TAY-to or Po-TAH-to. I don't think we really have any argument.
    Jan 4 11:42 PM | 2 Likes Like |Link to Comment
  • My Income Portfolio Quarterly Update (Q4 2013) [View article]
    "IV, I'm curious why you (and others) pay so much attention to YOC. YOC seems like a neat "how did I do" metric, but I don't see why it should color any decision making going forward. Current yield is all that really matters, no?"

    No, dividend growth *rate* also really matters. E.g. if you bought a stock yielding 1.5% but growing the dividend 20% a year five years ago, your YOC is now 3.73%, more than many of the traditional dividend-paying favorites. You would not want to be kicking this stock out of your portfolio if its current yield was still 1.5-2% (due to accompanying price appreciation.) YOC gives you an easy way to appreciate what the net result of that high growth rate has been since you bought the stock.

    Some will argue that a stock with a higher current yield is *still* a better choice than a rapid dividend grower. And if you are willing to be changing positions frequently to capture the highest current yield (with all the transaction and tax costs that involves), perhaps that's correct. If you're more inclined to buy and hold, however, the long-term trajectory is an important factor to consider, and a high YOC after only a few years of ownership shows that your company is attaining superior results. Past performance may not guarantee future results, but it's certainly an indicator worth looking at, even if the percentage growth rate gradually declines.
    Jan 4 02:33 PM | 1 Like Like |Link to Comment
  • Value Can Still Be Found In This Market: 5 Examples [View article]
    For those who are impressed by the "repeating business" argument for utilities, telecoms, and consumer staples companies, QCOM's licensing fees for virtually every cell phone made have some of the same appeal.

    "Only" 16.5% growth at a PE of 19? I'll take it.
    Jan 4 11:04 AM | Likes Like |Link to Comment
  • High-Yield ETFs For Dividend Growth Portfolios [View article]
    Yeah, I know. But this article-writing stuff is *hard*, particularly if you don't crank out articles from a template to collect pageviews.

    It's on the New Year's resolution list...
    Dec 30 08:08 PM | Likes Like |Link to Comment
  • High-Yield ETFs For Dividend Growth Portfolios [View article]
    "here for your perusal and due diligence..."

    And a very useful list it is; thanks. Some of the commenters seem to expect a neatly packaged conclusion about the "best" option, but I'm happy to start by perusing.

    It's far beyond the scope of this article, of course, but it would be very interesting to see a study of the relative merits of ETFs vs. CEFs for garnering high yield. I agree with your fundamental strategy of partitioning the portfolio for different tradeoffs of yield vs. capital appreciation and dividend growth; each segment has a role to play.
    Dec 30 05:28 PM | 1 Like Like |Link to Comment
  • Is The U.S. Bankrupt? [View article]
    The graphic with which the essay begins, Figure 3-1, has been repeatedly challenged and criticized. See, e.g., By pretending that it is uncontroversial, the (anonymous) authors immediately undermine their credibility.

    A balanced appraisal of *any* subject requires that the most serious dissenting opinions be addressed. We find none of that here -- just a merry regurgitation of the views of the White House, Krugman, et. al. If the views of authors like Mauldin and Hussman (among many) were taken seriously, I'd find the analysis a lot more persuasive. Good scholarship does not ignore opposing viewpoints.
    Dec 22 01:40 PM | 2 Likes Like |Link to Comment