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Eli Inkrot  

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  • Breaking Down The Returns Of The Dow Components [View article]
    Hi kpbarbee, thanks for your comment. Incidentally, I recently published an article relating to your question:

    http://seekingalpha.co...

    In essence, compounding math is such that you have to think about things in exponential rather than linear terms. In the above linked article, I detail this specifically with Verizon as an example. Instead of adding or subtracting compound returns (which are over years) you have to think about the return components individually if you want to figure out what percentage might be attributable to each.

    In this example share price appreciation (fueled by underlying profit growth) still makes up the majority of the return, but not as much as you might suppose from the above information. Moreover, dividends play an ever important role as your time frame lengthens or you begin reinvesting. I hope that helps. All the best.
    Jul 29, 2015. 04:19 PM | Likes Like |Link to Comment
  • The Case For Preferred Shares - Income [View article]
    Hi Jack, thanks for your additional comment. Growth was with respect to total income. Your total income in year two would be higher than in year one. This would continue as you reinvest. All the best.
    Jul 7, 2015. 03:01 PM | 2 Likes Like |Link to Comment
  • The Case For Preferred Shares - Income [View article]
    Hi Jack, thanks for your comment. It is true that the per share payments of preferreds are fixed. However, that does not also indicate that your total income has to be fixed. As described in this example, reinvestment can allow for more shares, which in turn provide a growing total income stream. Just because the dividend per share doesn't increase, doesn't mean that your total cash flow will remain stagnant - a central concept to comparing the alternatives.
    Jul 7, 2015. 01:03 PM | 1 Like Like |Link to Comment
  • The Case For Preferred Shares - Income [View article]
    Hi maybenot, thanks for your comment and kind words. Incidentally, I wrote an article detailing preferred issues that I have held in the past:

    http://seekingalpha.co...

    Hopefully this gives a bit of insight. All the best.
    Jul 7, 2015. 12:59 PM | 1 Like Like |Link to Comment
  • Realty Income: The Benefit Of Reinvesting [View article]
    Thanks Robyn, I appreciate it. I agree: its up to the individual, but if you elect to reinvest its easy to see the benefits compounding through time. All the best!
    Jun 25, 2015. 09:26 AM | 1 Like Like |Link to Comment
  • AT&T As A Better Investment Than Visa [View article]
    Hi Adam, thanks for your comment. Incidentally, as a long-term owner / net buyer (either through "fresh capital," reinvested dividends or on my behalf via share repurchases) I'm actually "rooting" for lower prices. With the intention to partner with the company for the long-term, I find no great benefit in a moderately higher share price over the intermediate-term. Indeed, this can actually inhibit one's underlying investment goals. All the best.
    Jun 24, 2015. 01:56 PM | 1 Like Like |Link to Comment
  • AT&T As A Better Investment Than Visa [View article]
    Hi peapaw, thanks for your comment. You're correct in noting that I don't have control over when the article is published. Something in the 1 - 72 hour range is usually a reasonable estimation. This doesn't bother me. Further, although the majority of my articles name an actual security or three, the specific company mentioned is rarely the takeaway. Instead, it's the underlying concept (which can then be applied to a variety of situations) that is important. I hope that helps, all the best.
    Jun 24, 2015. 01:51 PM | 2 Likes Like |Link to Comment
  • Realty Income: Buying A Share A Month [View article]
    Thanks ksteiner, I appreciate both your comment and kind words. I'm glad that I could inspire a "nudge" towards your first comment. If I can get you to think I've done my job. Moreover, I agree with your underlying message: financial education is critical and the earlier you can start the better. Once started, as you have described, the tangible benefits begin to compound. All the best!
    Jun 23, 2015. 04:52 PM | 4 Likes Like |Link to Comment
  • AT&T As A Better Investment Than Visa [View article]
    Hi Dividend Math Guy, thanks for your comment. I agree: Visa could very well offer better returns than AT&T in the coming years. However, it might not be as great of a runaway as it originally appears. The underlying idea, as outlined in the article, was simple: "Business performance and investment performance can be two drastically different items, with one greatly trailing or leading the other." All the best.
    Jun 23, 2015. 04:44 PM | 3 Likes Like |Link to Comment
  • The 4 Stages Of Portfolio Growth [View article]
    Thanks Robyn, I appreciate it. It's not necessarily about advocating for one strategy over another as much as it is about thinking about the process. If I can get you to think, I've done my job. All the best!
    Jun 17, 2015. 09:01 PM | 7 Likes Like |Link to Comment
  • Berkshire Hathaway - Sell-Off Stress Test [View article]
    Howdy Robert, incidentally I personally agree and would likely advocate an investing strategy similar to yours. However, I simultaneously find it useful to look at the process from a variety of angles. In this particular case you could never partner with a wonderful company - Berkshire - simply because it does not pay a dividend. Not only that, but the rationale for doing so - fewer shares - isn't particularly compelling in light of the underlying math. It doesn't have to be an exhaustive process.
    Jun 5, 2015. 04:00 PM | 2 Likes Like |Link to Comment
  • Berkshire Hathaway - Sell-Off Stress Test [View article]
    Robert, thanks for the additional comment. In the same way that fewer shares can still leave you richer (with a larger underlying earnings claim), you could also have more income. With growing per share dividends you could both sell a portion and end up with more income. Perhaps it's not intuitive, but moderately selling is not a spiral to zero.
    Jun 5, 2015. 03:40 PM | 1 Like Like |Link to Comment
  • Berkshire Hathaway - Sell-Off Stress Test [View article]
    Robert, thanks for the follow up.

    "No… I can't" Luckily your personal limitation need not inhibit the resulting math. You're getting caught up in the number of shares. It's an easy misstep to make, but it isn't truly the "right' scorecard to be looking at. Underlying earnings claim is much more important. You can have fewer shares but a greater underlying earnings claim (see Buffett example above). In realizing this, you can get richer even while selling shares - in the same manner that you can get richer by only taking the dividend.
    Jun 5, 2015. 01:13 PM | 3 Likes Like |Link to Comment
  • Berkshire Hathaway - Sell-Off Stress Test [View article]
    Robert, the conclusion is quite simple. Instead of thinking about selling shares you can think about receiving dividends. You take a part of the company's earnings in the form of cash (which can be accomplished via the company doing it or you doing it on your own). You get richer over time for a very simple reason: businesses earn positive returns and you aren't taking out the entire portion of earnings. As a result a portion of earnings are reinvested and the company earns more in the coming years.

    The idea of a forever lower share price, while possible for a single company, isn't reality for the vast majority of companies. You don't get to call yourself a company for very long if you aren't generating profits. The vast majority of companies earn more over the years, eventually resulting in higher share prices. Surely you have observed this.

    If business X earns say 7% more next year and you "sell off" 4% of this, your underlying earnings claim increases. Do this consistently over the years and you can both sell shares and get richer over time.
    Jun 5, 2015. 11:53 AM | Likes Like |Link to Comment
  • Berkshire Hathaway - Sell-Off Stress Test [View article]
    Hi Robert, thanks for your follow up. However, supposing that there is "no way" and actually doing the math are two vastly different things.

    In my previous article on the subject (http://seekingalpha.co...) I plainly demonstrated how this is indeed possible. But you don't need to take my word for it (and by the way, it's not even my word it's just math), once again here's Buffett's actual situation as described in 2012:

    "Let me end this math exercise - and I can hear you cheering as I put away the dentist drill - by using my own case to illustrate how a shareholder's regular disposals of shares can be accompanied by an increased investment in his or her business. For the last seven years, I have annually given away about 4 ¼% of my Berkshire shares. Through this process, my original position of 712,497,000 B-equivalent shares (split-adjusted) has decreased to 528,525,623 shares. Clearly my ownership percentage of the company has significantly decreased.

    Yet my investment in the business has actually increased: The book value of my current interest in Berkshire considerably exceeds the book value attributable to my holdings of seven years ago. (The actual figures are $28.2 billion for 2005 and $40.2 billion for 2012.) In other words, I now have far more money working for me at Berkshire even though my ownership of the company has materially decreased. It's also true that my share of both Berkshire's intrinsic business value and the company's normal earning power is far greater than it was in 2005. Over time, I expect this accretion of value to continue - albeit in a decidedly irregular fashion - even as I now annually give away more than 4 ½% of my shares (the increase having occurred because I've recently doubled my lifetime pledges to certain foundations)."

    I hope that helps.
    Jun 5, 2015. 11:00 AM | 3 Likes Like |Link to Comment
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