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Craig Lehman  

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  • Stress Test For Dividend Growth Investors [View article]
    "That's exactly what I thought. How are you supposed to buy great companies in a fire sale if you are 100% long?"

    "I could never sit on 50% cash. ... Ha!"

    As they used to say in the old breath/candy mint commercial, "Stop -- you're both right!"

    How about 10% cash, at least in a bull market that's six years old and generally richly valued? After all, holding enough cash to cover a year's expenses and cushion against disasters is a widely accepted principle anyway. For someone who can afford to forego some dividend income, seems to me like hedging makes sense.
    May 11, 2015. 10:48 AM | 3 Likes Like |Link to Comment
  • Stress Test For Dividend Growth Investors [View article]
    Well, maybe it was stupid. But what would have been *really* stupid would be to have put 10% of his portfolio into an industrial/financial stock, as in the author's stress test. Most DG stocks tend to be defensive and low-beta in nature -- consumer staples, healthcare, etc. -- and many (admittedly not all) DG investors believe in committing no more than two or three percent of their portfolio to any one position, as with MD's model 50-stock portfolio.

    Start with a smart portfolio design, and the consequences of a stupid mistake (like we all make) are likely to be minimal. Now, if people stop eating and getting sick during the next bear market, and the top 25 food and healthcare companies all suspend their dividend, DG investors may be in real trouble.
    May 11, 2015. 10:19 AM | 4 Likes Like |Link to Comment
  • Generating $100 A Month From Kinder Morgan [View article]
    "Who cares?" More than once, I've seen literate writing advance someone's career prospects, and a "spelling and grammar is for bozos" attitude hurt them.
    May 8, 2015. 01:07 PM | 19 Likes Like |Link to Comment
  • A Dividend Growth Leaders Portfolio With A 17.5% Dividend Growth Rate [View article]
    But I do think Cougar's recommendation is a good one. By limiting yourself to the Aristocrats, you are going to miss the Young Turks coming up through the ranks. (And, as Dale Roberts notes, by not filtering by low payout ratio, you are going to include companies which are bumping their head against a dividend growth ceiling.) If you want to give this theory its best chance, you probably don't just look in the easiest place.
    May 4, 2015. 10:18 AM | 1 Like Like |Link to Comment
  • My Take On CVS [View article]
    So "there would be no issue" if not for the name change? You would be OK with them selling junk food if they just went back to calling themselves CVS Pharmacy? Because the name CVS Pharmacy would *not* be fooling people about selling junk food?

    Myself, I think everyone knows where to find junk food, no matter the name of the (many types of) stores selling it. Nobody is being fooled. Names are not the problem.
    May 3, 2015. 01:23 PM | Likes Like |Link to Comment
  • Recent Trade: Sold 2 Oil Majors And Bought W.P. Carey [View article]
    "This is more of a moral decision than anything else. I am not going to attempt to back it up with data. I know that many say that investors should keep their emotions out of their portfolio management and try to remain rational at all times."

    You seem to think that moral decisions are not something you back up with facts, but that they *are* apparently based on emotions, and needn't involve any attempt at rationality. Or so your statement seems to suggest; I'm trying to make sense of it. Handy, it kind of gives you a get-out-of-jail-free card for *any* conclusion you reach about moral issues, since you can always plead that you were not in your right mind.

    But I'm curious what great moral thinkers may have influenced you in this outlook. Offhand, I can't think of any who endorse making moral decisions based on emotions, throwing rationality to the wind, and ignoring facts.
    May 2, 2015. 05:42 PM | 2 Likes Like |Link to Comment
  • Straight Talk On The 4% Rule [View article]
    Be Here Now,

    I second your and DVK's thoughts. The way I'd put it is, we really need a study of safe withdrawal rates that *starts* with various percentages of average required income provided upfront by SS, pensions, health insurance, dividends, etc. In other words, if such sources provide X% of your average required income, what is *then* the safe rate of withdrawal? Most retirees have some such source(s), making discussions of withdrawal rates that assume that withdrawal is the sole source of income somewhat academic.

    While it seems to be an unpopular idea, I'd add that the ability to live beneath an average "required" level of income for a year or two, otherwise known as belt tightening, is another important way of maintaining a safe level of principal. It depends on what kind of safety nets you already have set up in advance, of course (e.g. health insurance), but I think that many people are capable of sharply cutting back their withdrawals during bear markets by reducing travel and entertainment, postponing big-ticket purchases, eating more chicken, etc. Since bear market withdrawals are generally the biggest threat to fixed withdrawal schemes, ability to hunker down and reduce income needs in lean times is another factor that needs to be acknowledged in making these calculations. It may be the old-fashioned way, but many people do it.

    Thanks to DVK for the crisp expositions of Bengen and Israelsen, works which I've never read the originals of.
    May 2, 2015. 12:07 PM | 10 Likes Like |Link to Comment
  • My First Quarter 2015 Portfolio Review [View article]
    Hi Bob,

    Thank you for another report. Even though we have 20 overlapping holdings, I always pick up some tidbit from your thought process, and those of the other authors that do systematic reviews.

    Have you ever thought about some sector diversification objective (not necessarily a hard and fast rule)? E.g. I see 4 health care REITs including the non-investment grade OHI. Then, you have 4 others in the REIT sector. But (without getting into specifics) there are arguably companies in other sectors where you are underweight and could probably get equivalent after-tax income.

    Hey, it wouldn't be portfolio theory without there always being some additional tweak to consider.

    CKL
    May 2, 2015. 11:05 AM | 2 Likes Like |Link to Comment
  • Real Estate Vs. Dividend Growth Investing [View article]
    Agree about the work and time of owning real estate, Alex. I think the author is correct that being a landlord requires a certain kind of person (which I am not -- I've tried it), and about commercial real estate involving less hassle.

    But take that thought to the limit with triple-net REITS. There your company pays only for the land, bricks, and mortar. They specialize in valuing commercial property. The tenant is responsible for taxes, maintenance and insurance. And if you are getting a 13% compound rate of return as historically with O, you are more than doubling your money every six years.

    Makes me wonder why I own any real property at all.
    Apr 30, 2015. 03:49 PM | 3 Likes Like |Link to Comment
  • The Madness Of Mr. Market [View article]
    Agree, Robert, especially about buybacks at the highs. I own a little PM and worry about it. Hopefully the dollar is done rising and the situation gets no worse. My consolation is that management has a pretty good track record.
    Apr 27, 2015. 10:50 AM | Likes Like |Link to Comment
  • The Madness Of Mr. Market [View article]
    Well, buybacks are not necessarily "borrowing on margin," even though borrowing on margin may make sense when you can virtually borrow for free. But it is perfectly possible to use free cash flow for buybacks, just as it is used for dividends. For companies with a low FCF payout ratio, it's an obvious alternative.
    Apr 26, 2015. 10:03 AM | Likes Like |Link to Comment
  • Chasing High Dividend Growth Rates For Lower Total Returns [View article]
    In my view, the biggest flaw of the original article was the "chasing" -- churning the portfolio every year to hold the current-year biggest dividend increasers. Nice to have a methodologically refined refutation, but the real issue, in my judgment, is whether there is an advantage to holding the biggest *serial* dividend growers for the long run and disposing of them only when growth begins to fade. I believe there is research to indicate that such a strategy works, but discussion of it deserves a full article.
    Apr 20, 2015. 04:13 PM | 2 Likes Like |Link to Comment
  • How To Create A Portfolio Today With Dividend Yield Of 4.5% And Dividend Growth Of 4.75% [View article]
    Fair enough. I had just been under the impression that your focus was on dependable income, as long transitory share price gains and losses didn't affect it.
    Apr 8, 2015. 05:23 PM | Likes Like |Link to Comment
  • How To Create A Portfolio Today With Dividend Yield Of 4.5% And Dividend Growth Of 4.75% [View article]
    I'm no expert on CEFs either (for that see SA contributor Douglas Albo), but it's my belief that not all CEFs use leverage. Certainly the amount of leverage varies, from mild to high (DNP would be pretty mild.) Some CEFs employ a covered-option strategy, some a dividend-harvest strategy, some are tuned to tax advantages, etc.

    I understand that your view is a matter of personal preference, and far be it from me to declare anyone's preferences "incorrect." But I still think the *reasons* behind preferences -- yours, mine, anyone's -- are of interest. To me, what makes the views of the leading authors here on SA is their discussion of *why* they prefer what they prefer. Call it "philosophy."
    Apr 8, 2015. 01:08 PM | Likes Like |Link to Comment
  • How To Create A Portfolio Today With Dividend Yield Of 4.5% And Dividend Growth Of 4.75% [View article]
    Robert,

    You acknowledged that you do not get involved with CEFs, but for investors searching for yield I think they deserve a look, particularly when compared with some of the lower quality/higher FCF payout/lower DG names here.

    E.g., DNP, the Duff and Phelps Select Income Fund currently yields 7.3%+, and has maintained at least the same payout for over 25 years. Of course it is not designed to produce increasing dividends (though its yield more than offsets the effects of inflation), and as a CEF it does not have an S & P rating, but it could be reasonably described as a "CEF champion." In my own portfolio "symphony", what DNP and a couple other solid CEFs like it enable me to do is purchase higher quality/lower FCF payout/higher DG names while still obtaining an overall portfolio yield comparable to what you have sketched.

    Again, I understand that you deliberately avoided CEFs, MLPs, and BDCs. I am with you on the BDCs, as well as MLPs with an after-tax yield higher than the average yield of the portfolio you sketch. But it would be interesting to know your reasoning for disdaining the entire class of CEFs, given your obvious interest in income.

    CKL
    Apr 8, 2015. 12:28 PM | 2 Likes Like |Link to Comment
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