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  • Are Dividend Investors Concentrating Too Much On Consumer Staples? [View article]
    Hi Bruce,

    Before I answer you points I want to make a clarification that many readers might overlook - I write at my personal website, and have chosen to have my content republished at SA and a few other sites. Actually, I have written over 1000 articles since 2008. Check my archive here if you do not believe me:

    By the way, the archives include the answers to many if not all of your questions. To your other comment below, I do not need to publish my performance every month, quarter, year, because i am not managing OPM. When I do however, I would make sure to submit my complete audited financial and investment record in the brochure.

    I have spoken about benchmarks before, and it is S&P 500. I benchmark returns and dividend income growth as well.

    My goal is to at least match S&P 500 return over long periods of time. Since 2008 I have done much better than S&P 500. I was lucky, as I had a lot of cash in 2007- 2008, and many of my CD's matured in around 2009. I did not have the money to invest prior to 2007. Then I was lucky to buy the great dividend stocks at depressed valuations, and was lucky that this was a situation where everyone has been hungry for yield. I was also lucky that I had good health, decent employment to provide me money to put in the market and good family. I was also lucky because I ignore people that forecasted depression, hyperinflation, and other gloom. I like to do my own thinking/analysis, which is seldom understood/appreciated by others. This is my alpha.

    I do care about total return. DGI stocks are the most misunderstood investment vehicle out there - now that is alpha. A company that trades at 100, earns $6-7/share and pays $3 in dividends, which can grow EPS at say 10%/year, will double earnings in 7 years. This company would likely double DPS and maybe even stock prices. That way in 7 years, this stock will probably still yield 3%, and have a similar P/E as before, but the stock price will likely be around 200 (all of this is within a range of course). Reality is that nothing is linear. However, I would much rather own a stock that pays 3% dividend and returns the other 7% through capital gains, than have a stock that will return 10% in capital gains only. If you live off your investments, it is much easier to rely on that 3% dividend in a bear market, than the 10% in cap gains ( which is average and could vary from plus to minus greatly)

    I did not care about taxes for the first five years. I did this until my dividend income reached a certain threshold of covering half my expenses. Now that my income has risen, I am trying to minimize current tax liabilities. I am trying to max out 401K and IRA's today, because I am saving 30%+ on every dollar I put in those vehicles. I don't care that I will pay ordinary tax rates when I turn 70.5 yrs. I would have received my tax deduction TODAY, and then I would have several decades of tax-free compounding.

    However it is wrong to believe that in situations where you compare investing in dividend stocks vs non dividend stocks at equal total returns, dividend stocks are inferior because of taxes. A non-dividend investor is not simply going to buy a stock, and hold on to it for 30 years, while the stock appreciates at 10%/annum like clockwork. Chances are that this investor will buy a stock, and then sell it or a portion of it later. However, I would much rather have a lot of taxable income that gets taxed at 30%, than have no taxable income at all. I would much rather be a highly paid lawyer making $200K and paying a ton in taxes, than be a cashier at a grocery store and pay almost no taxes.

    I talk about my investment philosophy in each of the 1000 articles I have written. Investing is not just a few rules you can program into a computer. There are nuances, and as you get more experience, your strategy evolves. I have written 1000 articles, and I have about 100 - 150 articles in various stages of completion that I will publish sometime over the next 2 years. Some are finished, while others are just ideas and outlines of what I will talk about. The more I learn abt investing, the more ideas I get.

    The one thing that shows me whether an investor is successful or not, is the willingness to do a lot of digging, reading, researching on their own. If they want to get all of their answers fed to them, without much effort, they would likely not be successful in the investing game. This is important, because you have to select a method that works for you - I have a friend who buys tech stocks, and he has done really well. He would never listen about dividend stocks, and I would never be comfortable owning his tech stocks. But yet, we both made very good money investing in what works for each one of us.
    Jun 3 09:16 PM | 2 Likes Like |Link to Comment
  • My Dividend Portfolio Looks Much Better Than Expected [View article]

    Did you read the whole article, or did you simply read the headline and then comment? I am just checking, because based on your comment it seems that way.
    Jun 3 07:47 PM | 2 Likes Like |Link to Comment
  • The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]
    Of course DLR responded to the HighfieldsCapital BS:

    I honestly hesitated before responding to MV. His comments were driven not by facts of this specific company and allegations against it. The facts that are available to you and me today ( SEC filings, company presentations) clearly show that the arguments from Jacobson are not worth their salt. If the hedge funder has insider information however, that you and I are not privy to, then my analysis would not be worth even the digital bites it is written in. These days however, accounting firms take financial reporting a little bit more seriously than in the old wild wild west Enron times..

    I clearly showed the rebuttal, point by point in this article. Anything else of who is more successful, went to shinier school, drives a shinier car, is BS.

    - I guess, an intelligent person would ask themselves, what are Jacobson's motives for "going public" with his short? An intelligent person would also ask themselves, what percentage of Jacobson's ideas are profitable? And, a third question an intelligent investor would ask is at what point in time did the hedge fund cover their short ( will cover their short)

    My motives for writing this article are to get traffic to my site, I also own DLR, and wanted to check if Jacobson's comments had merit.
    May 17 01:31 PM | 2 Likes Like |Link to Comment
  • The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]

    I explain in the article why the dividend is sustainable, and not paid out of the stock and debt being sold. Go read again what I am saying, and why the hedge fund person is feeding BS to the public. Please also do some research about the REIT legal structure.

    I understand that reading financial statements is boring and tedious, but the numbers presented in the article clearly show why Mr Jacobson's arguments are complete BS.

    In regards to Harvard, didn't Jeff Skilling, the Enron "Smart Guy" go there? Also, isn't Harvard the place that REJECTED Warren Buffett?

    So Mr Jacobson is a billionaire - big deal. Last time a famous billionaire hedge fund manager was short a REIT in 2009, he was very wrong - check comments:

    As far as loans are concerned, when companies sell bonds, they only pay interest on them, not principal. If you have factual evidence to show that DLR is paying off principal, along with interest on the majority of the debt it has sold, I would be happy to learn about it.

    Because if you are correct, that means that DLR is an even better investment.

    As far as market efficiency, markets are always inefficient - you have investors who don't know what they are doing ( ignoring basic fundamental info), you have others who trade on insider information, and you also have investors who openly manipulate markets with their statements.

    Btw, how do you know I am not successful? As far as me being successful or not - I am much younger than Mr Jacobson, so I would say I still have time to prove myself.

    Of course, in the grand scheme of things, is someone who manipulates people and earns billions doing that, truly successful?
    May 17 01:27 PM | 6 Likes Like |Link to Comment
  • Why Would I Not Sell Dividend Stocks Even After A 1000% Gain? [View article]

    SA accounts for 5% of my traffic. I receive a lot of comments and emails. A lot of comments on SA did sound unhappy.

    I never try to be insulting on purpose.

    One of my weaknesses is that any time i write something, I assume people know what is going on inside my head. Instead, I should be spelling things out, because I should never assume people know what is going on in my head.

    I actually like when people challenge my thinking, because it makes me a better investor. I don't like it at the time when my ideas are challenged, but it is what makes me better. Now, not all ideas that are challenging me are worth learning from, but on aggregate they are ;-)

    While I can tell you which stocks I think are cheap today, I struggle with selling stocks that are overvalued. It is a gray area as I am wiling to pay up to 20 times earnings for a stock. So when a stock trades at 24 times earnings, is it a sell? If I sell, what happens if I buy a stock that only looked cheap on the surface but dissapoints me down the road ( and therefore I would have been better off holding the original stock)?

    I try to assign probabilities to different scenarios, but they are all totally unscientific. That's what makes investing more of an art than science - expectations and the fact that beauty that lies in the eyes of the beholder.

    BF-B might look like a decent hold for me until it hits $75 - $80/share given current fundamentals through 2014 keep up as expected. Someone else might decide to sell BF-B, and buy something cheaper, like WFC. But what if BF-B earns $6/share in 10 years, trades at $120 and pays me $20 - $25 during that holding timeframe; while WFC fails to grow EPS and trades at $40 in 10 years, and distributes $15 in dividends during that period?

    Is the P/E of 10 for WFC an illusion of margin of safety? Or is the P/E of 26 for BF-B unsustainably high because BF-B EPS are going down from here?

    These kinds of decisions make me sleep like a baby - I wake up every hour and I cry over these decisions. (It's a joke, I sleep well at night actually)
    May 16 07:05 PM | 1 Like Like |Link to Comment
  • Optimizing Triple Net Lease REIT Investment: Time To Sell Realty Income [View article]
    I find it interesting that the author fails to mention that Realty Income raised dividends by 19.20% over the past year. The author does mention

    "Back in September, LXP raised its dividend by 20% in one fell swoop. Such a raise is bigger than all of O's dividend raises in the last 5 years COMBINED."

    For your reference:

    I do agree Realty is overvalued today, but could be fairly valued below $42.

    In addition, replacing Realty Income with GOOD might be pretty BAD, as you are running the risk of getting into an asset with lower quality.

    Furthermore, real estate is all about location, location, location. The competitive advantage for Realty Income is that a profitable retailer at a certain location would likely renew the lease, or otherwise they would have to go to another place, and might lose customers in the process. A high traffic location is worth paying a decent rent for over time. Plus, given the long-term nature of Realty Income’s leases, even if rents are decreased down the road, that would happen in 10+ years on aggregate. How will the situation look like in over a decade?

    May 15 08:16 PM | Likes Like |Link to Comment
  • Procter & Gamble - A Dividend Stock To Hold Forever [View article]
    After reading some comments I find it very interesting that so many had an issue with the word "forever", but had few comments on the actual article or any objections that PG will be able to grow as it has been for the past 56 years.

    PG will likely earn $8/share by 2023.. The price could probably reach $120 - $160 in 10 years, and investors would likely receive close to $35 in dividends over that period. If you disagree with me, please short P&G - I would gladly earn 3% per year by lending you my PG shares ( in addition to any dividends and capital gains I would earn over that period).

    The main reason why I don't comment here is because you always get a hoard of people focusing on insignificant details that don't matter, and end up missing the forest for the trees.
    May 15 08:42 AM | 3 Likes Like |Link to Comment
  • Procter & Gamble - A Dividend Stock To Hold Forever [View article]
    Thank you for your comment. I like Buffett, and like to learn as much as possible about him and strategy. I like learning about stock market investing in general.

    I would not blindly buy because he has done the analysis and purchased a security himself. If I feel comfortable with a stock after I review it, only then I would buy it.

    I didn't know that he sold MCD because he bought DQ. I do recall his 1998 letter to shareholders mentioning that BRK shareholders would have been better off if he had not shown to work, as he sold MCD too early.

    For DIS, I was referring to his selling of the stock in the 1960s ( 1965 I think). Adjusted for dividend reinvestment, it would have been up 600 times over the past 48 - 50 years. Of course, BRK is up 10,000 times since then...

    I would hold PG "forever", although if a car runs me over tomorrow, it would have been for a shorter period of time ;-) If they cut dividends in 5 years, I would be out too ;-)

    I found the following very interesting from the 2012 PG annual report - shows shareholder friendly management:

    "Operating cash flow provides the primary source of funds to
    finance operating needs and capital expenditures. Excess
    operating cash is used first to fund shareholder dividends."
    May 14 07:04 PM | 1 Like Like |Link to Comment
  • Procter & Gamble - A Dividend Stock To Hold Forever [View article]
    Haha, I did set myself up by picking Warren Buffett as one of the largest shareholders for PG ( through BRK). Buffett is awesome, and he is my hero - I like to read everything about him and from him ( investment wise).

    However, he does have the ability to do deals that you and I cannot do - buying railroads in 2010, Heinz in 2013, preferred shares of GE, BAC, GS that have high yield and warrants to buy shares at rock bottom prices.

    Also, Buffett is not always right. He sold DIS at less than 50 cents/share in 1960s, and MCD at less than $40/share in 1998. It is much better to purchase something you understand, than blindly follow something that someone bought/sold. Always do your homework before buying stocks.

    I already addressed the forever thing in the first comment.

    For anyone that has read my other articles, they would not have commented on the forever thing. I am always amazed at how quickly people make up their minds, without doing the necessary digging - you cannot address everything there is to dividend investing in one high level analysis of a company.

    I just hope (for them) that they do better digging before putting their money to work, and not jump to conclusions. I also hope people are buying things not because Buffett, or Tim or someone else likes it. But based on my interactions with investors, many do not do their own research before buying anything. Which is why I am still going to end with:

    "So what"
    May 14 07:39 AM | 2 Likes Like |Link to Comment
  • The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]
    I am not comfortable owning INTC. But I do agree that one needs to have a diversified portfolio, and not be overly reliant on a single stock. I also try to have no more than 4- 5% of portfolio value in one stock. Helps me sleep well at night
    May 13 08:10 PM | Likes Like |Link to Comment
  • The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]

    I guess markets are not very efficient after all - a hedge fund manager goes short a company, then talks negatively about that same company at a conference, without making much sense. Weak hands panic, and the stock price falls, thus helping the short cover their position at a profit.

    Rinse and repeat, and earn your 2 & 20. I am glad investors have been able to capitalize on this opportunity, after doing their analysis and identifying the weakness in the logic of the shorts.
    May 13 08:09 PM | 5 Likes Like |Link to Comment
  • The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]
    I do agree that companies are better off using services of companies like DLR. If that happens, it is better for DLR

    Hope we see this trend expand over time. However, you always have risks with a lot of items. If you find mitigating factors, then risk is reduced
    May 13 08:07 PM | Likes Like |Link to Comment
  • The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]
    The so called "straw man" argument is listed as a risk on the 10-k:

    "Our tenants may choose to develop new data centers or expand their own existing data centers, which could result in the loss of one or more key tenants or reduce demand for our newly developed data centers, which could have a material adverse effect on our revenues and results of operations."

    As mentioned in the article, there are mitigating factors behind this risk.
    May 13 07:57 PM | Likes Like |Link to Comment
  • Procter & Gamble - A Dividend Stock To Hold Forever [View article]
    Great comment Water Buffalo. The diverse portfolio of global brands that consumers are buying for their quality will pay dividends for a long time.

    Ex I have been using Gillette products for a long time.
    May 13 07:50 PM | 1 Like Like |Link to Comment
  • Procter & Gamble - A Dividend Stock To Hold Forever [View article]
    So what?
    May 13 07:47 PM | 4 Likes Like |Link to Comment