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Craig Lehman

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  • Why Teekay Is Overvalued And Its Dividend Is Not Safe [View article]
    I said "explanation." I don't take "we feel comfortable" as much of an explanation.

    If you have genuine reasons, it would be really, really interesting to hear them, because a lot has been written recently about the growth prospects of the LNG shipping industry. I do NOT see consensus estimates being taken down; e.g. see the "EPS Trends" section of the Yahoo Finance Analyst Estimates page for TGP (sorry, the link does not seem to paste correctly, but it reports the half dozen analysts that follow the company RAISING their 2013 estimates by 13% in just the last 90 days, as well as boosting this year's estimates during the course of the year.) If you know something that SA's readership doesn't -- then please, please share it.
    Sep 11 07:12 PM | 4 Likes Like |Link to Comment
  • Retirement Strategy: My 'Buy The Dips Portfolio': When To Add, When To Sell, And My Ultimate Format [View article]
    "When a stock rises by 50%, consider selling 25% of your stake in that position.
    When a stock rises by 100%, consider selling 50% of your stake in that position."

    In what time frame? Hold most stocks long enough, and you will probably see these kinds of rises.
    Jun 3 12:18 PM | 3 Likes Like |Link to Comment
  • Retirees Please Don't Index, You Deserve Better Than Average [View article]

    I agree with your critique, but it wouldn't be a reasonable approach just to take the 1996 Aristocrats and go forward, either. Many if not most DG investors would set a minimum yield floor, and have a rule for selling a stock and replacing it with something else if it cut or froze its dividend, or was acquired. Ultimately, to be useful, lists of this sort have to be dynamic.

    Also, by concentrating on the Aristocrats rather than the CCC list, the survivorship-bias situation seems worse than it is. Many if not most DG investors will start looking at stocks as soon as they crack the CCC list's five-year minimum. So likely they would have bought some Challengers and Contenders that went on to become Champions.

    Damn these complications...
    May 30 03:47 PM | 3 Likes Like |Link to Comment
  • Managing Low Conviction Positions - Feedback And Strategy [View article]

    I like Kyle Bass and so took the time to listen to the link you provided. Just so other readers are clear, yes, he says that the Canadian consumer is overleveraged and that Canadian homes are overvalued, but he *does NOT* say anything about the Canadian banks and their underwriting standards. As I understand it, the minimum down payment on a home in Canada is 20%, UNLESS CMHC insures the loan against default. In which case, the banks should be insulated against mortgage defaults either because there was a substantial down payment to begin with, or the default insurance kicks in.

    Again in my understanding, Canadian banks engage strictly in commercial banking, and are not allowed to get involved in things like trading mortgage-backed securities for their own account, which was the undoing of the US banks in 2008.
    May 13 01:48 PM | 3 Likes Like |Link to Comment
  • 8 Dividend Stocks With A 15% Yield In 15 Years [View article]
    Do the math. A 2% yielder need only grow the dividend 20% a year for FOUR years to get up to a yield over 4%. That is NOT beyond my time horizon, and there are many stocks that have managed to sustain that kind of dividend growth for four (or more) years. Meanwhile, with that kind of dividend growth, you will almost certainly see significant price appreciation.

    I'm all for some 3.5% yielders growing the dividend 9.7% a year. And some higher yielders growing the dividend less. AND some lower yielders growing the dividend more. Dividend growth rate is another good way of diversifying one's portfolio.
    May 7 01:47 PM | 3 Likes Like |Link to Comment
  • How Do You Manage Your 'Low Conviction' Positions? [View article]
    Just to briefly add to my comment above, I'd note that while BMO and BNS cut their dividends in 2008, it was only by about 20%, and they restored them within two years, much faster than the US banks. (I am inclined to give prudent/temporary/cons... dividend reductions the benefit of the doubt.) And while they suffered greater-than-market losses, they also recovered from them much more quickly than US banks. People realized that Canadian banks operate under a very different set of rules.

    2008 was really a once-in-a-lifetime event (or so I hope!) So I'm very skeptical of putting too much weight on metrics that highlight 2008 conditions. No doubt we'll have another bear market, probably sooner rather than later, but I doubt it will result from the same set of conditions.
    May 7 12:12 PM | 3 Likes Like |Link to Comment
  • How Do You Manage Your 'Low Conviction' Positions? [View article]

    I'd say your low-conviction stocks are a mixed bag. Some are not high-quality, but MSFT is one of only three AAA companies in the US. BMO and BNS are "merely" A+, and because of Canadian banking laws separating commercial from investment banking carry considerably less risk than US banks. So if it were me (and I happen to own MSFT, RY, and TD), I would regard these three as horses of a definitely different color than the mREIT, BDC, or MLPs.

    You say that you bought these three low-conviction stocks for sector diversification, but you have to keep the intrinsic value of diversification in mind. No, diversification doesn't pay a dividend, but properly done, it does reduce the overall riskiness of a portfolio, just as your constitutional requirement of lower beta does. In other words, some of the stocks I own for diversification are not the ones I am most enthusiastic about, but I still have conviction that owning them is the right thing to do.

    I'm not sure how much weight I'd put on the "drop in 2008" metric, at least until I saw the comparable numbers for a whole portfolio. You are periodically going to see some fairly sickening declines in ALL your stocks in a bear market, regardless of the exact percentage. Comes with the territory of being a DG investor. Perhaps the solution is not to try to eliminate lower-conviction positions (some are ALWAYS going to be lower-conviction), but just to set a fairly tight sell-stop, at least for any company which is not at least a Champion or Contender. Yes, that would mean a temporary marginal decline in income (for which I think anyone should have a reserve), but it would also create some dry powder for use in the next buying opportunity. This would be a variation on your suggestion of "low conviction holdings as a form of cash with a twist...That being the benefit of providing income until higher conviction positions come available at a good price."
    May 7 11:56 AM | 3 Likes Like |Link to Comment
  • Actually It Is All About Total Return...Totally! [View article]

    Thanks. I may be a little slow, but as I reread all this, I now see the emphasis you put on "managing income" as an inferior approach to achieving maximum total return. In other words, as I understand it, you are saying that if someone evaluates their portfolio through the prism of whether they have met a marker of achieving a certain level of income, or yield on cost, then they are unlikely to be simultaneously maximizing total return.

    I'm not sure. In general, it seems almost self-evident that the best way to maximize X is to FOCUS on maximizing X. But then again, we constantly hear success stories (e.g. in sports) where people say that they achieved their greatest success when they put X out of their mind, and just focused on the little things, or something unrelated, or nothing at all. So I think it's just possible that someone who focuses on managing income might also wind up maximizing total return. After all, if you read all that David Van Knapp, Chowder, Bob Wells, etc. have had to say, it's clear that they are NOT just single-mindedly focused on an income goal; they are pursuing that as a goal while keeping many other factors in mind. As useful as it is to have a mission statement, the danger of promulgating one is that one may appear to oversimplify what they're doing.

    Per my previous reply to Pat, I now conclude that the only way to truly resolve this controversy is to get out of the armchair, lay out different sets of rules for portfolio construction (e.g. maximum beta and payout ratio, minimum yield and dividend growth rate, etc), and crunch the numbers to see which actually produces the best risk-adjusted return. Of course, part of the problem for this research programme is to decide exactly how RAR should be measured in the first place.
    Apr 14 12:02 PM | 3 Likes Like |Link to Comment
  • Actually It Is All About Total Return...Totally! [View article]

    You're right, of course, except that Chowder's portfolio is published on his Project $3M blog, and he has stated that he doesn't look at any company that isn't rated BBB+ or above by S & P.

    So while it's admittedly a guess, I'm going to guess that the Aristocrats list, with 65 members, has an average S & P rating a little lower than Chowder's, with a little higher beta. And other Roberts favorites VYM and CVY, because they hold so many more stocks, almost certainly have lower average S & P risk ratings and higher beta. And, all Roberts' suggested ETFs have management fees, which Chowder's portfolio doesn't.

    So while I'm too lazy to do all the number crunching, I think it's easy to see where the burden of proof lies. It lies with the party making the quickie assertion (which Chowder hasn't done.) I just want a true, risk- and cost-adjusted apples-to-apples comparison, that's all.
    Apr 11 01:37 PM | 3 Likes Like |Link to Comment
  • What If My Stocks Crash And Burn? Part 2 [View article]
    Sorry not to have studied the comment thread in more detail, so someone may have already said this, but what jumps out at me is the almost complete absence of *metrics* in your discussion. You are "happy" with this group of stocks, you are "not as excited" about others -- but this is not how securities analysis is done. If I was worried about one of my companies going bankrupt, I would be looking at S & P financial strength ratings and setting a cutoff point (say, BBB.) If I was worried about dependable income in a bear market, I would be checking dividend histories and limiting myself to companies that survived 2008-9 without a dividend cut. I would be trying to get some reasonable diversification in terms of market sectors and dividend properties (i.e. some with higher yield and lower dividend growth rate, some vice versa.)

    In short, I would put evaluation in terms of measurable criteria first, and try to minimize the use of subjective criteria that somehow involved my feelings. I would be spending a lot of time with the CCC list.
    Apr 11 11:06 AM | 3 Likes Like |Link to Comment
  • How One Retiree Is Muddling Through Dividend Investing: Part IX - My Dividend Investment Business Plan [View article]

    Congratulations on developing a well-thought-out plan. It's interesting the amount of convergence you see when people such as you, David Van Knapp, Chowder, and Bob Wells take the trouble to spell out their intentions.

    I applaud the sector diversification and would suggest considering going even further in that direction. E.g., I own some industrials (LMT and UTX), tech (MSFT and INTC), and financials (RY and TD, with the qualification that I prefer large Canadian banks to most large American banks.) Recent moves have put some of these under your yield threshold, but I'd also suggest considering the idea that yield thresholds should vary by sector. E.g., with utilities and telecom, I expect a higher yield, while with tech I am willing to accept lower yield and harvest some income as capital gains. I am not an absolutist about deriving 100% of my return from dividends.

    Continued good luck to you, although I tend to agree with the saying that luck is the intersection of preparation and opportunity.
    Apr 9 12:02 PM | 3 Likes Like |Link to Comment
  • Dividend Growth Portfolio: Spring Checkup And Semi-Annual Review [View article]
    FWIW, I too have dumped DRI. If you look at the Analyst Estimates page on Yahoo,, there are some truly sick-looking numbers, such as two consecutive quarters with a -25% negative earnings surprise, and a past-five-years annualized earnings growth of -6.28%. The CCC list says the EPS payout is 87.65, the FCF payout n/a. So I smell a dividend cut and am happy to have gotten out essentially even. I plead guilty to chasing yield with my original purchase.

    I don't automatically sell on a dividend freeze, and would draw a distinction between DRI and INTC, since several have mentioned it. There, thanks to SA contributors Ashraf Eassa and Russ Fischer, I see a story I can believe in, and the price performance has been good enough since I purchased that I would be able to switch into something else at a gain, if I ever decided to do so. No such confidence with DRI.

    I just visited my first Yard House a few months ago and it seems like a promising concept. Unfortunately, it's only a tiny sliver of DRI.
    Apr 8 02:12 PM | 3 Likes Like |Link to Comment
  • Actually It Is All About Total Return...Totally! [View article]

    I have NEVER heard anyone here on SA describe themselves as a "total income" investor. In fact, I'm not even sure what that would MEAN, and you provide no definition. Owning only the highest-yielding stocks? Investing in stocks that provide no capital gains (e.g. high-yield CEFs), so that their return is only from dividends? Who of the well-known DG writers advocates any such thing?

    Well, you say, "Total income investors would not purchase many of the great companies currently on that list of Dividend Aristocrats, as the yield is simply too low. Many investors on SA use a combination of yield and dividend growth history to select their companies, and they have a minimum current yield requirement that may be in the area of 2 or 3%... Of the Dividend Aristocrats, over half, some 29 of those companies have a current yield below 2.5%. Many of them are very low yield wouldn't touch it with a ten foot pole kind of companies for total income investors." [Dashes deleted to avoid mangling by the SA comment editor.]

    Ah, I see. A "total income" investor is a dividend-growth investor who adds a requirement of high current yield. But that's not what the words "dividend growth investing" SAY: they say that you invest in stocks that consistently grow their dividend, period. A minimum current yield requirement simply is not part of the concept. I consider myself a DG investor, and I am in print here on SA with an article explaining how lower-yield stocks can produce superior total return AND income over a time frame that is well within the reach of many retired investors.

    Let me introduce a new term to the debate. Writers here on SA often refer to the "accumulation phase" and the "distribution phase." Let's add the "death phase": your doctor has told you that you only have a couple years to live. Now in the death phase, setting a requirement of maximum current yield (and even invading principal) makes perfect sense. You can't take your income of ten years from now with you. But I submit that most of the retired investors here on SA are not in the death phase, unless they are a whole lot less healthy than they sound. Of course they want income, but it is not as if that is inherently in conflict with wanting total return, too -- nor has it ever been. A balanced portfolio consisting of both higher- and lower-yielding Dividend Aristocrats makes good sense in BOTH the accumulation and distribution phases. The balance may reasonably tilt with age, but it remains a balance. (See DG investor Chowder's comment on my article, in which he discusses the possibility of buying BDX, and other comments where he has talked about the suitability of utility stocks for younger investors.)

    In short, you seem to want to gin up a controversy where none exists. Done right, dividend growth investing IS total return investing (with, of course, your all-important caveat that ALL investors need to consider the level of risk with which they are comfortable.)
    Apr 8 01:18 PM | 3 Likes Like |Link to Comment
  • I Love My 'Magic Pants' And My Partners Wear Them Proudly [View article]
    The way this comment thread has degenerated into a cult of personalities, both positive and negative, is so disappointing. No, I don't particularly like Swedroe's somewhat smart-assed academic writing style either -- I think authors are always at their most persuasive when trying to give every benefit of the doubt to those who they are critiquing -- but you've got to learn to separate the content from the tone. Even smartasses capture an element of truth sometimes! By the same token, one pass through the Manual of Style would leave a large percentage of Carneavale's verbose and self-referential essays on the cutting-room floor, but that doesn't mean that FASTgraphs and the conclusions he derives from them aren't extremely valuable.

    Mar 20 02:49 PM | 3 Likes Like |Link to Comment
  • I Love My 'Magic Pants' And My Partners Wear Them Proudly [View article]
    "Would you sell the goose that lays the golden eggs? If you did, no more golden eggs. :-("

    "The" goose? I own about 50 gooses. If I decide to have a nice roast goose one night, that doesn't mean NO more golden eggs, it just means one less golden egg until a new gosling comes along. Now for the King Midases that can't bear to part with even a single golden egg, maybe hoarding is the right strategy. But I submit this is not the situation of most investors.
    Mar 20 02:36 PM | 3 Likes Like |Link to Comment