Seeking Alpha

Dividend Dynasty

 
View as an RSS Feed
View Dividend Dynasty's Comments BY TICKER:
Latest  |  Highest rated
  • Is Dow 17,000 Dangerously High? This Comprehensive Review May Surprise You! [View article]
    Chuck stated: "Stock price as you suggested is in almost continuous motion bouncing from one price to the next. The value of a business is something that can be analyzed by viewing the company’s financial statements, and other important fundamentals."

    I recently read an analogy that will help to illustrate Chuck's point. Watching the stock market is like watching a man walk up a flight of stairs with a yo-yo; investors tend to focus on the up and down motion of the yo-yo (the stock price), when they should be focusing on the steady upward climb of the man on the stairs (the stock value).

    Value changes infrequently, usually quarterly with earnings releases or annually with dividend increases and forward earnings guidance. Value is the orange line on a FAST Graph or the stairs. Price changes constantly and is represented by the black line on the graph which is the yo-yo. Price, although constantly moving, only occasionally represents value as demonstrated on Chuck's graphs.
    Jul 12, 2014. 08:41 AM | 8 Likes Like |Link to Comment
  • What's Your (Dividend Growth) Number?: Part 4 - Creating And Surpassing Goals [View article]
    I've dealt with the uneven monthly dividend issue already. You just keep a cash level of three months of dividends in your account. Then set up an automatic monthly withdrawal of 1/12 of your annual dividend income. The cash balance goes up and down each month, but is always enough to cover your monthly withdrawl. Each year, you give yourself a raise to the new 1/12 dividend level. "Magic Pants" indeed!
    Jul 9, 2014. 05:46 PM | 8 Likes Like |Link to Comment
  • What's Your (Dividend Growth) Number?: Part 4 - Creating And Surpassing Goals [View article]
    Mike, our similarities continue to amaze me. Married 31 years here too. My wife is also a professional (accountant). She too tires of hearing me discuss the goals and strategies of our portfolio. She delegates portfolio management to me since I professionally managed corporate pension funds and was downsized at 52 like you.

    I have one more question for you, to put you on the spot. Have you set a retirement date for your wife yet? Our plan is for my wife to retire in the event of being "downsized" or mid-2016, whichever comes first. How about you?
    Jul 9, 2014. 05:37 PM | 1 Like Like |Link to Comment
  • Just How Risky Is Dividend Growth Investing? [View article]
    "So I would opine that Chevron - at 40% payout - is in a better position to weather a business downturn than Procter or Coke - which both hover around 60% of payout."

    Adam, I strongly disagree that a cyclical company, CVX, is in a better position to weather a business downturn than PG or KO. CVX's earnings can fall 50% in the blink of an eye. CVX's operating earnings dropped 57% in 2008 and 34% in 2002. Suddenly that 40% payout ratio could become 80%. The largest operating earnings drop for KO was a single 3% drop over the last 15 years in 2009. For PG, its only operating income reductions over the past 15 years were 15% in 2010 and 3% in 2012.

    I'm not anti-CVX, as it is my largest holding, being only slightly larger than my PG and KO holdings. But I have more concern that CVX could freeze or cut its dividend than KO or PG.
    Jul 9, 2014. 04:20 PM | 4 Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    Again you keep wishing me luck. I don't use luck, I use facts. The fact is that if you bought CL at its low in 2011 at $37.43 you bought it at 14.85 times its 2011 operating earnings or 15.46 times its 2010 operating earnings. The facts point to investing in the market or SPY at current levels will produce high single digit returns in the future.

    I'm using facts and you're using emotional terms like manic and guru. I give up on trying to reason with you. Hopefully others who have read our exchange learned something from the effort.
    Jul 8, 2014. 11:07 AM | 7 Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    Advisor4, you keep trying to discredit my calculations and make it seem like i'm making up numbers. My average p/e number comes from right from S&P!

    Here's an easier source for the data http://bit.ly/RW5dWW with 20 years of P/E listed from that source.

    Date S&P 500 PE Ratio
    Jul 8, 2014 19.48 estimate
    Jan 1, 2014 18.15
    Jan 1, 2013 17.03
    Jan 1, 2012 14.87
    Jan 1, 2011 16.30
    Jan 1, 2010 20.70
    Jan 1, 2009 70.89
    Jan 1, 2008 21.46
    Jan 1, 2007 17.36
    Jan 1, 2006 18.05
    Jan 1, 2005 19.98
    Jan 1, 2004 22.73
    Jan 1, 2003 31.43
    Jan 1, 2002 46.18
    Jan 1, 2001 27.55
    Jan 1, 2000 29.04
    Jan 1, 1999 32.92
    Jan 1, 1998 24.29
    Jan 1, 1997 19.53
    Jan 1, 1996 18.08
    Jan 1, 1995 14.89
    Jan 1, 1994 21.34

    It doesn't seem like using a future P/E of 19 is unreasonable to me. I would think that an "Advisor" would have a better grip on market history.
    Jul 8, 2014. 10:47 AM | 7 Likes Like |Link to Comment
  • Getting The Returns Without The Risk [View article]
    Dale,

    Please read the entire complement before replying or forming an opinion!

    When I first read the title of this article, I thought, what idiot thinks that you can get returns without risk. Then I opened the article and saw your picture and didn't expect too much. BUT, then I read the article and was impressed with it overall. I enjoy reading articles that describe how one is actually investing to offset the current market conditions with a positive presentation.

    Congratulations on your best article yet!
    Jul 8, 2014. 10:27 AM | 3 Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    'Thanks to folks like you I can sell CL at a 30 p/e and maybe buy it later at a reasonable valuations."

    "Maybe" just like the folks who sold CL at a p/e of 20, 21, 22, 23, 24, 25, 26, 27, 28, 29 did? Yes, I was one who bought CL when it was fairly valued in 2011 at near its low around $40 and sold it when it got "overvalued" around $52. Boy wasn't I smart that I pocketed a 30% gain only to watch it gain another 30%. Now I sit and wait for it to come back to value to buy it like all the others who sold. Do you think I'll be able to buy it again below $52? I doubt it. This is why I said market timing is not possible.

    I don't mean that you can't watch for value and buy it when you see value, like I do, but you must be very careful when selling a core position thinking you'll just buy it back in the future. It may be a long time before CL hits a P/E of 15 again to let me get back in below my exit price.
    Jul 8, 2014. 09:09 AM | 7 Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    "Let's say mornngstar s+P or those fast graphs showed ths stock was at very high(record valuations) would you still hold and in fact buy more through reinvestment ?"

    Depends on my future expectations and the alternatives available. If my dividend stocks keep going up in value to the point where I could jump off of them into SPY without a serious drop in dividend income, I just may do that. If bonds (TLT) would tank and provide a 8% yield while my stock holdings stayed at elevated levels, I'd probably sell up to half of my stocks and buy TLT. But as my tables showed above, I expect my dividend stocks to provide me with more income than the S&P at a similar total return. I don't see bonds as a good diversifier at the moment as I believe my growing dividend portfolio will provide equal income with a higher total return from their current relative values.

    I've learned that timing the market is nearly impossible and I am lucky to have gotten 100% invested in stocks, from 60/40, as the market tanked in 2008. Happily, I have stayed 100% invested ever since and moved to dividend stocks in the 2011 dip. But I reserve the right to monitor the market and take advantage of opportunities be they in relative value of other dividend stocks, broad market indexes or bond funds. Although my expectation is that I will stay 100% invested in the stocks listed in the table and live on the dividends. That is what I have instructed my wife and family to do with my funds in the even that I no longer can manage the portfolio. I believe my portfolio would do just fine as a buy and hold forever portfolio since it kicks out enough dividend income for me to live on at the current dividend levels.
    Jul 8, 2014. 08:35 AM | 1 Like Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    Advisor4, I can't understand why you think that the current stock price is beneficial in my calculation. The current stock price is used to calculate the number of shares used to calculate the dividends paid and end of period sale. The current high price gives you a low beginning number of shares. So it hurts this analysis by giving lower dividends and lower sale proceeds. Then to calculate the future sale price, the 20 year average P/E is used, not the current high P/E. This means that for any stock that is trading above its 20 year P/E will have a lower return than its expected growth rate plus dividend yield.

    Let's go through the S&P 500's calculation to demonstrate.

    The S&P current value is 1977.65. Therefore, I take $10,000 and divide by the current value and get 5.006 shares. Let's use 5 shares for simplicity (or that I paid a 0.006 share commission to buy the shares).

    Next I get the 20 year historic operating earnings growth rate at 6.7% for the S&P 500.

    Then I calculate the 20 year historic average P/E at 19 times earnings.

    Since I am using a current P/E of the market of 17.6, the beginning earnings rate would be $112.36. So now grow earnings by 6.7% for 10 years. Earnings in 10 years equals $214.90. Now take 214.90 and multiply by the 19 future P/E and get $4083.1. Now multiply this by 5 shares and get $20,415.

    Then I get the current dividend at $37.33 and grow that by 6.7% for 10 years and multiply each by 5 shares to get a total dividends of $2895.

    Now add $20415 from the sale plus the $2895 dividend for a total cash received of $23310. And now do a CAGR calculation for $10k to $23,310 for 10 years. I get 8.83% expected total return from the S&P 500 over the next 10 years.

    I hope this helps you see that my calculations are correct and that low single digit returns are a realistic expectation for both dividend stocks and the market for the next 10 years.
    Jul 8, 2014. 07:04 AM | 1 Like Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    The growth rate is on earnings, not stock price. Historical stock price was only used to determine historical average P/Es for the future sale. I used the current "overvalued" stock prices to invest the $10,000 to get a number of shares. Then I calculated the forecast dividends paid on that number of shares by year, growing at the forecast or historic (depending on which table you use) earnings growth projection. Then I multiplied the future earnings by the historic P/E ratio to get a sale price. I added the future sale proceeds and cash dividends to calculate a 10 year CAGR on that based on a $10k investment for the next 10 years.

    This is the historical research that values these stocks to their historical average and then uses either historical growth or analyst growth projections to calculate a future return based on which table you use above.

    The bottom line is that based on historical growth, these stocks are slightly better values than the market. Based on analyst forecast growth rates, the market is a slightly better value. Based on either forecast growth or historical growth, one's expectation from these levels should be high single digit total returns for both the market and dividend stocks.
    Jul 7, 2014. 05:49 PM | 2 Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    I just realized that the above table was not using 20 year historical growth rate, but was using an analyst based growth rate with 10 year average P/E. My comments above were based on the first table presented.

    Here is the table with the 20 year growth rate and P/E. Notice in this scenario, SPY has a below average CAGR and would also have the lowest total dividends. In this scenario, there is no need to question whether one should invest in SPY over the dividend stocks.

    Ticker * Total Cash * CAGR
    SPY * $21,822 * 8.11%
    CVX * $25,282 * 9.72%
    GE * $19,927 * 7.14%
    JNJ * $24,790 * 9.50%
    KO * $27,879 * 10.80%
    PEP * $28,036 * 10.86%
    PG * $25,986 * 10.02%
    XOM * $36,961 * 13.97
    Jul 7, 2014. 04:37 PM | Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    My takeaways from the above is that on a "total return" basis, SPY should outperform all but one of my seven stocks. But on a "dividends received" basis, the seven stocks should provide more "income".

    Would I be better off in 10 years investing in SPY and selling the shares needed to meet my spending needs? Maybe. But then I add the risk of selling into a declining market to match the dividends received from the seven stocks.

    And finally, I don't need the DGI stocks to repeat their bull market performance to be successful. By using DGI stocks and spending the dividends received, I take the market value out of the equation.
    Jul 7, 2014. 04:09 PM | 5 Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    Advisor4,

    I calculated an expected 10-year total return on 7 dividend stocks in my portfolio and the S&P 500 index based on Thursday's close. I assumed each stock would sell at its historic 20-year average P/E in 10 years and that earnings and dividend would grow at the 20 year historical average earnings growth over the next 10 years. I assumed no reinvestment of dividends but added the dividends paid to the sale proceeds in the CAGR calculation. Here are my expectations based on an initial $10K investment.

    Ticker * total dividends paid * total cash received* CAGR
    CVX * $4,840 *$25,282 * 9.72%
    GE * $5,189 * $29,917 * 11.58%
    JNJ * $3,627 * $22,075 * 8.24%
    KO * $4,084 * $23,694 * 9.01%
    PEP * $4,248 * $24,938 * 9.57%
    PG * $4,391 * $25,500 * 9.81%
    XOM * $3,646 * $23,488 * 8.91%
    SPY * $3,390 * $27,574 * 10.68%
    Jul 7, 2014. 03:55 PM | Likes Like |Link to Comment
  • Protecting Your Income Portfolios In Today's Market: Consider Defensive Utility Stocks [View article]
    I agree with Chowder's picks and would add GE, PEP and XOM. That 11 stock portfolio would have an average yield of 3.3% with a growth rate of 6.4%. Its average P/E is 15.2, which equates to fair value on a Fast Graph.
    Jun 28, 2014. 09:24 AM | 8 Likes Like |Link to Comment
COMMENTS STATS
1,057 Comments
1,798 Likes