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  • McDonald's Is Appealing Below $100 [View article]
    The article makes the case that under $107 is fair based on the growth estimates it makes. It doesn't say that exactly under $100 is fair; it says that the current price of under $100 is appealing.

    I don't do technical analysis; I do fundamental analysis.
    Jun 13 05:08 PM | 5 Likes Like |Link to Comment
  • McDonald's Is Appealing Below $100 [View article]
    The majority of blue-chips regularly grow EPS and dividends at a higher rate than revenue because they use cash to buy back shares. If revenue grows at rate X, and profit margins don't change, then operating income and net income will also grow at rate X. If the company then continually reduces its number of outstanding shares each year, then earnings per share will grow faster than the net income of the company at rate Y, because the increasing net income of the company is divided over a continually shrinking number of outstanding shares.

    As an example, if share count is reduced by 3% per year, and revenue and net income grow by 4% per year, then you're looking at about 7% growth in EPS.

    The dividend can then grow at 7% per year without increasing the payout ratio, because it matches EPS growth. This is how the majority of the companies with 25+ years of dividend growth have maintained high single digit or even low double digit dividend growth over those periods without revenue growth anywhere near those levels.
    Jun 13 05:04 PM | 5 Likes Like |Link to Comment
  • Oneok Inc. Valuation Estimate [View article]
    Looks like operating income from the partnership was down 30% due to weakness in the current economics of the NGL industry. Lower margins, ethane rejection.

    They reaffirmed their net income guidance for the year and announced a dividend increase subject to board approval.
    May 1 04:49 PM | Likes Like |Link to Comment
  • Emerson Electric: Fair Price For 2013 [View article]
    Well Bob, I certainly appreciate that.

    Thanks for the comment.
    Feb 21 05:03 PM | Likes Like |Link to Comment
  • Brookfield Infrastructure Partners: A Global Infrastructure Play [View article]
    Over the long term, the sum of dividends/distribution yield and the dividend/distribution growth rate result in approximately that amount of long-term total returns, assuming that the valuation of the units is roughly the same at the beginning and end of the period and assuming that the payout ratio remains fairly constant (and BIP targets a constant 60-70% payout ratio). So if we're talking about a stock rather than partnership units, and the P/E ratio and payout ratio are constant, then the sum of dividend yield and growth are the expected total return rate. If it is expected that one can later sell the stock for a higher (or lower) earnings multiple, then we'd have to add or subtract that from the assumption. For BIP we'd used another metric like multiple of FFO or AFFO rather than P/E.

    BIP so far has provided a rate of return above its sum of yield and growth over the last three years because the valuation also expanded, resulting in a lower distribution yield. But at this valuation I wouldn't particularly count on that happening again.

    So basically the expected rate of return of a dividend investment is yield + EPS growth rate (or cash flow) + change in valuation. I don't try to predict changes in valuation so unless a stock appears significantly undervalued or significantly overvalued, I don't assume a change in valuation over the long term.
    Feb 13 06:49 PM | 3 Likes Like |Link to Comment
  • Kinder Morgan Energy Partners: Still Poised For Good Returns [View article]
    Dividend Discount Model is a valuation technique that works on stocks that offer a dividend/distribution, but the conclusion drawn from it takes into account overall capital appreciation and the dividend, because it takes into account dividend growth (and any estimates about long-term dividend growth are reliant on underlying growth of the money available to pay dividends).

    For any investment with a 6+% yield, the distribution/dividend plays a very large role in total returns of the investment.
    Jan 2 07:06 PM | Likes Like |Link to Comment
  • 5 Blue-Chip Stocks Discounted For Black Friday [View article]
    The company currently projects 5.3-5.8 billion in FCF for 2013. For 2014, they have projected 5.5-6.5 billion, but with exchange rates it's more like 5.2-6.2. This doesn't include VW dividends.

    With the current share repurchase plan winding down and reducing the share count, you're right that it's about 5 billion to pay their regular dividend.

    An eventual dividend cut is certainly possible. That's a risk for all high yielding companies. The primary medium term variables that would put it at risk are larger than expected capex for 2014 and 2015 or large deterioration in their continental European operations. There's not a big margin of safety between their regular dividend and their projected FCF figures, although the 2.4 billion VW dividend eases this because they're going to use it to buy back 1.5 billion worth of shares and reduce their dividend burden a bit.

    For now, the numbers look acceptable to me as part of a diversified portfolio. For investors that have different risk profiles, or different estimates for VOD's operations over the next 1-3 years, then I wouldn't recommend holding a stock they're not comfortable with.
    Nov 25 12:25 PM | 3 Likes Like |Link to Comment
  • The Fiscal Cliff And Its Effect On Your Portfolio [View article]
    The full original article on my site includes a little bit more on the end that was edited and reduced on Seeking Alpha, likely because that part was about personal finance rather than investing. The full article answers that question.

    In the context of the article, "invest often" means to build strong personal finance habits and to save and invest large sums of money to accelerate one's personal financial freedom rather than just minimal retirement savings with the aim of retiring late in life. It points out that optimizing one's portfolio isn't all that helpful if one simply isn't saving and investing nearly enough of their income.

    So "invest conservatively and invest often" meant in the context of the article to be prudent with a margin of safety in valuation principles, and also to have a margin of safety in one's personal financial habits by aggressively putting away a diversified base of assets.
    Nov 16 12:26 AM | Likes Like |Link to Comment
  • Darden Restaurants: Moderate Valuation, Above Average Yield [View article]
    Fair point, and comparing the executive compensation to pre tax income is a useful comparison.

    An advantage of owning individual stocks is that the investor can choose to vote in favor of or against executive compensation packages.
    Nov 11 09:21 PM | 2 Likes Like |Link to Comment
  • Yum Brands: Strong Chinese Growth [View article]
    I certainly appreciate that comment.
    Nov 3 07:46 PM | Likes Like |Link to Comment
  • Procter & Gamble: Still A Champion Blue Chip? [View article]
    You can check the cash flow statement, and look for things like "stock based compensation" and "shares issued".

    Stock-based compensation is a more direct measure of it.

    Shares issued shows whether the share repurchases are actually reducing the share count or just running on a treadmill to keep up with issued shares. (And you can check share count to be sure.)

    Proxy materials, available publicly, show the executive compensation.

    The reasonableness of it is somewhat subjective. You could compare executive compensation or total stock-based compensation to market cap or net income and use it as a general reference for different companies.
    Sep 11 05:32 PM | 1 Like Like |Link to Comment
  • Procter & Gamble: Still A Champion Blue Chip? [View article]
    I generally use discount rates of 9-12%. In short, it's just the target rate of return that I'd be satisfied with for this type of investment. It's a large and stable company, so I can go on the low end, but still want double digit returns.

    More formally, one can use the WACC. But personally, I find it's more important to me that the stock reaches my target rate of return than that figure.

    The toolkit spreadsheets can allow investors to calculate it via whichever discount rate (target rate of return) that they feel is appropriate and realistic.
    Sep 10 06:16 PM | Likes Like |Link to Comment
  • Procter & Gamble: Still A Champion Blue Chip? [View article]
    That's the course I'm taking. Neither selling my position nor adding more.

    Another option would be to write some long term covered calls on the investment to reduce the cost basis or generate some extra income, but only if an investor is interested in using options that way.
    Sep 10 06:14 PM | 1 Like Like |Link to Comment
  • Aflac Inc. Offers Both Risk And Value [View article]
    Thanks for the comment. That adds quite a bit of value to the discussion.
    Aug 13 08:19 PM | Likes Like |Link to Comment
  • Aflac Inc. Offers Both Risk And Value [View article]
    Almost all of my reports use a 7 year period.

    Which period do you think most appropriately shows Aflac's performance?
    Aug 13 05:45 PM | 1 Like Like |Link to Comment
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