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Craig Lehman  

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  • The Bear Claws My Dividend Growth Portfolio - Will I Cut And Run? [View article]

    I applaud your cash position. I am somewhere between you and DVK, but currently moving your way. While I don't disagree at all with the central advice of this article, I do think there is room for a variety of views about how much cash should be held. I noted during the commentary on the recent Berkshire Hathaway meeting that BRK has historically held about 10% of its assets in cash or near-cash equivalents and that Buffett credited that approach with his ability to take positions in companies such as GE and GS at fire-sale prices in 2008-9. Holding substantial cash before a bear market begins only amplifies the ability to buy stock at depressed prices which this article emphasizes.

    Of course, there are other good reasons to hold substantial cash, such as a reserve for emergencies (or indulgences) and even better SWANing. One thing I would like to see here on SA is a robust discussion among DG investors about the appropriate level of cash to hold. There are many possible reasonable views and DGI does not dictate any particular view.
    Mar 24, 2015. 02:21 PM | 2 Likes Like |Link to Comment
  • Why Dividend Investors Could Withdraw More Than 4% Of Their Portfolio [View article]
    I don't know of anyone who practices this religion. Of course, I know of good empiricists who observe that many companies continued to pay and raise dividends during the Great Recession. Some companies even continued to pay their dividend through the Depression, a much worse period. No faith is required to verify these propositions; you simply have to consult the historical stock tables.

    Again, I don't know any sane person, religious or otherwise, who denies that there won't sometimes be some pain. E.g., I see dividend growth investors confessing the mistakes they have made all the time on this site.

    Straw man.
    Mar 24, 2015. 10:34 AM | 8 Likes Like |Link to Comment
  • Why Dividend Investors Could Withdraw More Than 4% Of Their Portfolio [View article]
    B & H,

    You say "Never spend the principal", but I distinguish between two kinds of principal -- "core" principal, the principal necessary to sustain my current level of income (adjusted for inflation), and "appreciated" principal, which is all the rest. So if the market goes up say 7% in a year, and inflation is 2%, I feel free to spend some of the *appreciated* principal, probably no more than another 2% (setting aside the rest as a buffer.) If the market goes down, then, like most other people, I tighten my belt a bit -- I don't touch the principal, I eat more chicken, and I vacation close to home. But historically, most years in the market are good years, so this seems like a very low-risk strategy.
    Mar 24, 2015. 10:06 AM | 1 Like Like |Link to Comment
  • 4% Dividend Yield Portfolio: An Evaluation After One Quarter [View article]
    1) As you probably know, YOC is a controversial measure. I don't want to relitigate that controversy here, and in fact I maintain a YOC column in my own spreadsheets (useful as a long-term measure of dividend growth), but I would never be without a column for current yield. So many other types of assets come with a figure for current yield; I want to be able to make direct comparisons.

    2) Another column I would not do without is S & P credit rating. I don't know whether all of your holdings have investment-grade financial strength, but I personally always discount my estimates somewhat for those that are *not* BBB+ or above.

    3) I also think it gives a false sense of precision to be calculating these figures ten years out. Certainly I would not base any portfolio management decisions on ten-year estimates. History teaches me that I'm considerably off in my dividend growth estimates (or should I say hopes) for a couple stocks I own every year. Probably by the time I get ten years out, I will have been wrong about all of them, even if there isn't an intervening cataclysmic event like the Great Recession in the meanwhile.
    Mar 24, 2015. 09:29 AM | 2 Likes Like |Link to Comment
  • Dominion Resources Inc.: Dividend Fact Sheet [View article]
    Amen to that, Mike. He says "To determine the safety of the dividend, I check the historical levels, the current level and the evolution of the payout ratio with respect to the earnings and, when relevant, with respect to the free cash flow" and then proceeds to say nothing further about FCF. Since earnings are subject to significant accounting adjustments, FCF is much more relevant to a discussion of dividend sustainability. Yet FCF is completely ignored as the author states his conclusion. I'm mystified.
    Mar 20, 2015. 11:42 AM | 4 Likes Like |Link to Comment
  • Today's Oil Crash Presages The Next One [View article]
    Oh, I see the point. I just don't think "at some point" comes as fast as you project, and I think in the meanwhile the Saudis have plenty of leeway to raise the price of oil by cutting back supply.
    Mar 18, 2015. 02:48 PM | 1 Like Like |Link to Comment
  • Today's Oil Crash Presages The Next One [View article]
    My understanding has always been that the Saudis wanted to be the swing producer because they had the most oil, so that their long-run interest was served by keeping prices high as they parceled out their supply over time. So why are they currently allowing an oversupply and lower prices? Best theory I've heard is that it is to hurt the (Shiite) Iranians, who need high-priced oil to finance their expansionist ambitions. Also to punish Russia for siding with Iranian ally Assad.

    *If* this is correct (and I'm not sure), then the natural inference is that if and when the Saudis can regain the upper hand over Iran, then they will turn the spigot way down, and the price of oil will go back up, where they want it to be over the long run. As the author points out, the collapse in the price of oil is only due to an oversupply of a few million BPD, which the Saudis can easily sop up. If so, then if we ever see a collapse of the mullahs in Iran, we can expect the price of oil to start heading back up the next day. When the balance of supply and demand is as close as it is, I believe it will be a long time (like, say, a quarter of a century) until renewables can really swing the balance, particularly in the absence of a solution to the problem of storing renewably-generated energy.
    Mar 18, 2015. 08:44 AM | 2 Likes Like |Link to Comment
  • The Hidden Risk Of High Dividend Growth Stocks [View article]
    Um, I just said that I *wasn't* demanding that articles meet the standards of academic journals, and explained the much more real-world concept I had in mind. I have no interest in looking into this stuff about p-values etc, since it's not a standard I'm applying, advocating for, or even know of. I'm mystified how you read this into what I said in my last comment.

    I don't see any value in responding further to an off-the-wall mischaracterization of my view. This thread is tangential enough as it is.
    Mar 15, 2015. 03:25 PM | 3 Likes Like |Link to Comment
  • The Hidden Risk Of High Dividend Growth Stocks [View article]
    I don't see that making your data and methodology explicit is necessarily limited to scholarly journals, or involves "impossible" standards. E.g., if a financial advisor tells me that stock X is the best of a certain group, then I'd like to know the method he used to reach his conclusion. If his reasons include financial data, I'd expect to be able to confirm it for myself on, say, Yahoo Finance. Transparency is what you expect of *anyone* trying to (rationally) persuade you. If the pitchman on TV doesn't clear that hurdle, well then, that's why you don't buy his product; *he* is the trickster. If this is some kind of impossibly high standard suitable only for scientific journals, then trust between ordinary human beings is in deep trouble.

    But you're right, Nathan; this is a standard that SA articles sometimes don't meet.
    Mar 14, 2015. 02:02 PM | 2 Likes Like |Link to Comment
  • Just How Risky Is Dividend Growth Investing? [View article]
    I haven't specifically looked at CIB, but I do note that in the World Economic Forum's 2014-15 Global Competitiveness Report (, the safety of the US banking system is ranked 49, vs 30 for Colombia. Canada is #1, followed by New Zealand, Australia, Singapore, and Finland (table on p. 517.)

    So I agree, I can't even invest in US banks, but it doesn't follow that CIB would necessarily be worse.

    Long RY, BNS.
    Mar 8, 2015. 02:22 PM | 3 Likes Like |Link to Comment
  • The Perfect Stock To Build A Retirement Portfolio Upon At Any Age [View article]
    I am reminded of the (supposed) remark of Zhou Enlai when asked about the influence of the French Revolution on western civilization: "It's too early to say." Similarly with Apple. Let's check back when we have a five- or ten-year history of Apple dividend growth.

    As to the author's repeated "show me anything better" challenge, I would say, look at Robert Allan Schwartz's web site, There, you will be able to find many, many stocks which have a compound annual dividend growth rate of 10% or more for a *decade*. When Apple gets even halfway there, I will think about increasing my current small position in the stock. No denying it's a great company, but whether the biggest company in the world can continue to produce the same kind of earnings (and dividend) growth as smaller ones is a very debatable proposition.
    Mar 7, 2015. 05:10 PM | 2 Likes Like |Link to Comment
  • CVS: Will Strong Dividend Growth Provide Solid Returns? [View article]
    The dividend history is a really interesting story. One thing people often like to say about low-yield high-dividend-growth stocks is that rapid dividend growth has to eventually slow down -- which is true in the very long run -- but CVS exhibits almost two decades of *accelerating* dividend growth, beginning to taper off only recently and still at a very high level. Nor is CVS an isolated example of this kind of pattern (as I illustrated in an article a couple years ago.) I will not be surprised by another decade of double-digit total return.
    Mar 6, 2015. 05:33 PM | Likes Like |Link to Comment
  • American Capital Agency Corporation And One Other Stock Can Fund My Retirement [View article]
    I suggest Graham on the difference between investing and speculation: “An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

    Safety is relative, of course, but I think we can agree that, say, AAA-rated companies (JNJ, XOM, MSFT) give you greater long-run safety of principal than AGNC or any mREIT. The value of a blue-chip stock may decline in bear markets, but in the long run the principal is probably safer than in an mREIT.

    If you were hired as a guardian for a child's trust, I doubt anyone would try to sue you for breach of fiduciary duty if you lost some money buying the stock of double- or triple-A companies. A portfolio of mREITS, I'm not so sure.
    Mar 5, 2015. 01:00 PM | 1 Like Like |Link to Comment
  • Ward's Dividend Heat Map Vol. 1: Dividend Champion Consumer Staples, March 2015 [View article]
    "I'm just thankful that the market is such a big place that allows everyone to be successful where ever they stand morally or philosophically."

    Thank you for that. I disagree with you about how bad a (occasional) Big Mac and fries are, and for that matter, the conditions under which the food is produced. But it is much easier to disagree with someone who is not taking the stance of the Food Police.

    I was comforted to read about Warren Buffett's dietary preferences the other day: Have to love the line about the actuarial tables.
    Mar 3, 2015. 04:11 PM | 1 Like Like |Link to Comment
  • Ward's Dividend Heat Map Vol. 1: Dividend Champion Consumer Staples, March 2015 [View article]
    Echoing DC, it's always interesting to run a new screen and see something unfamiliar come through it. I'd never paid any attention to SCL, either, but it's now definitely on my DD list. Cleaning products -- I love it.

    I need to chew on your weighting scheme more, but I find it interesting that a couple of stocks that look wildly overvalued on FASTGraphs -- HRL and BF.B -- come through your filter highly ranked. Now, maybe something is wrong with the filter -- or, maybe there is a reason why the traditional valuation is misleading, a question that needs to be asked. We can't just assume that historical PE is always a dependable yardstick.

    Anyway, thank you for the article. Always nice to see some fresh thinking.
    Mar 3, 2015. 12:28 PM | 1 Like Like |Link to Comment