Hi Blue, thanks for your comment. I understand what you're suggesting, but I would advocate that the metric still has value. In fact I detail my precise reasoning here:
3 Blue-Chip DRIP Programs You Should Not Touch [View article]
Hi Tim,
Thanks for the DRIP update. Also, I believe the KO reinvestment is even worse than you indicated. 360*$0.28*.05 = $5.04. I think you used 2% instead of 5%. $2/.05/$0.28 = roughly 143 shares to hit the $2 reinvestment cap.
Good Times Ahead For Dividend Investors [View article]
Hi Ted, thanks for your reply. I understand your point, but I would again argue that this isn't necessarily a new phenomena at TGT. If you look at dividends on a yearly basis (i.e. using the fastgrahphs.com tool for example) we see increases of 20%, 31%, 27%, 10%, 15%, 18%, 22%, 20% and 15% over the last 9 years. So yes, the dividend history has changed but this has been going on for a decade now.
Also, TGT has out-right stated they expect 20% dividend growth over the next 4-5 years:
Good Times Ahead For Dividend Investors [View article]
"Companies with a shorter dividend history, which also show a strong commitment to dividends and their growth, such as ... Target (TGT)."
Sure I suppose in comparison to companies like PG, KO and JNJ; TGT's dividend history isn't quite as storied. But I wouldn't exactly call 45+ years of consecutive dividend payments (not to mention increases) as a "shorter dividend history". In fact, glancing at David Fish's list, TGT holds the 26th longest dividend increase streak.
Incidentally, with WAG's earnings out today I'm now up 50%+ in 8 months.. I suppose that takes the burden of "angst" away from you and temporarily on me ;)
Time In, Not Timing Dividend Growth Stocks [View article]
Hi Chump, thanks for your follow-up. I understand what you're getting at, but I don't believe we're going to reach common ground. First, it's impossible to logically disagree with the idea that "sometimes waiting for a good entry point does not pay off". Obviously there are mathematical examples that would easily fulfill that criteria. In addition, if you extend "waiting" to thinking about the present, then it follows that waiting for a lower entry point that never comes would in turn yield lesser results. (think CL or AAPL in my example)
Also, and I'm sure you're going to disagree with me, but I think your article enhances my thesis. Your first case, bought at 33% "overvaluation" as compared to the fair value metric is quite close to your fifth case which was bought at a 25% "discount". (Obviously I understand that the relative IRR due to the shorter time period is higher with the 5th case) But it stands that if you were sitting in 1999 with $15,000 and decided to wait until the security reached 25% "undervaluation" then the result for today is effectively the same. It isn't unimaginable that buying at say 20% "overvaluation" would turn out to provide a higher total return (not annualized) then buying at say 15% "undervalution" 4 years from now. My lasting emphasis was simply that buying at a lower valuation is inherently important, but the amount of time that one spends partnering with a wonderful company should also be considered.
Walgreen: Should I Stay Or Should I Go Now? [View article]
Hi Ry, thanks for your comment.
I agree with you in suggesting that WMT has the ability to effectively wallop competitors in anything retail. However, I would like to offer some reassurance within the 75/65 context. Without looking it up, it wouldn't be that difficult to imagine that 75% of the population or more also lives within 5 miles of a WMT. But it is at least noteworthy that WAG looks to make the locations "shopper friendly". To your point about the products being overpriced, I would again agree. But if we remember that 65% of WAG's business is derived from prescriptions, I think the business model makes a lot more sense. People come into the stores to get their prescriptions and then they realize: "oh hey, I do need some Pepsi, toothpaste, deodorant and I dunno a hair brush". If you can get people to buy "overpriced stuff" just because they happen to be in the store, that seems like a smart move to me. It's effectively an "added bonus" of being a wellness store. As long as WAG remains strongly committed to health, I think they'll do just fine as many people will continuously look for the "wellness boutique" feel, rather than the "big-box everything in my life under one roof" mega store.
Walgreen: Should I Stay Or Should I Go Now? [View article]
Hi tech, thanks for your comment.
I was simply looking for a range of yields and growth rates within the dividend growth framework. So while it says "WAG" I instead created a "WAG equivalent" whereby one would sell their WAG holdings, pay the applicable expenses and have a new security (call it Stock XYZ) that would be invested in a "random" (i.e. similar yield and payout growth characteristics) DG company. In other words, if I sold WAG (of which I have no intention) I wanted to see what types of yield and growth one might need to provide comparable income going forward. In reality, one would also want a company as wonderful as WAG, but this would have been even harder to synthesize. I agree CVS would have worked as well (10 years of growing payouts at a robust pace), but believe that TGT shows similar income results. (Actually, I might have understated Target's payout growth slightly, but the numbers didn't need to be exact for the thought experiment) Basically I was simply suggesting, for those that are chiefly concerned with a growing stream of income over time, that WAG's characteristics - even after a short-term run up - were still adequate if not favorable.
Walgreen: Should I Stay Or Should I Go Now? [View article]
Hi Dave,
Thanks for your comment. "First world problems", am I right? We're either making more money or have the ability to buy more of a great company. It can be humbling to realize that such scenarios aren't so much "problems" as they are rational considerations. I'm thankful that I have the opportunity to invest.
Also, with regard to your question: "" Keep in mind that the stock needs to drop 40% for you to "lose" money. Think that's a possibility? "" - I don't think that's going to happen, but in reality (given that the business remains fundamental) the best thing to happen for me would be for a 50% price drop tomorrow.
Time In, Not Timing Dividend Growth Stocks [View article]
Hi Chump,
Thanks for your comment. Obviously I would agree that including a variety of comparative illustrations would add to the robustness of the evaluation. In fact I explicitly stated there were likely "dozens of simplifying assumptions". However I would like to indicate that, despite the aforementioned restrictions, the ideology still carries a great deal of weight.
First, your point effectively makes my point: that only viewing a security in the context of a 52-week or all-time high (i.e. price only) as we see in the media, is silly at best. As I demonstrated, reaching new highs is a common and necessary process and thus you should not take your "buy action" from the price directive.
More importantly, while I did not explicitly mention earnings, the lasting realization can be implicitly found. I'll make this clear with an example from the article. Instead of picking an individual DG stock, I choose to use a DG "aggregation vehicle" that looked to mimic a wide variety of available DG alternatives. The characteristic of this investable DG proxy was a share price of $100, a $3 dividend and an assumed payout growth rate of 8%. What is not stated - but instead is assumed - is a reasonable payout ratio and sustained earnings growth. After all, it would be nearly impossible (especially in the long-term) to continuously grow dividend payouts without also growing earnings. If we look at David Fish's CCC list, we find an average yield for the "Dividend Champions" of 2.77% and an average payout ratio of nearly 42%. Let's make the numbers easy, sticking with our 3% yield and bumping the payout ratio for our example to 50%. $3 dividend at a 50% payout ratio means $6 EPS, or a P/E ratio of 16.67. Further, without assuming earnings growth, a price of $85 would indicate a P/E of 14.167. More realistically grow EPS by 8% and we find a P/E of 13.11 in one year. The point is that instead of using prices alone, I could have just as easily used P/E ratios. However, the math works out in precisely the same way as in my stated example if you are chiefly concerned with a growing stream of income. That is, if you thought a P/E of 16.67 was a touch too high and you would just wait until it hit 15 or 14, then it still might work out such that the greater income stream would result from buying today rather than waiting for a lower P/E. This becomes even more apparent with the higher prices / PE levels. The realization was not that this is always the case, but more aptly that it is possible to buy at a lower value (both in price and relative earnings) without necessarily providing the best outcome. Personally this is something that I would like to keep in the back of my mind when holding capital to deploy.
Walgreen: Should I Stay Or Should I Go Now? [View article]
Hi Hawmps, thanks for your comment. I've been somewhat busy: full time job, studying for the CFA level II exam and working on getting my book out in the next couple of months.. But inevitably SA always draws me back.
Triple Threat Investing: Wells Fargo [View article]
http://seekingalpha.co...
3 Blue-Chip DRIP Programs You Should Not Touch [View article]
Thanks for the DRIP update. Also, I believe the KO reinvestment is even worse than you indicated. 360*$0.28*.05 = $5.04. I think you used 2% instead of 5%. $2/.05/$0.28 = roughly 143 shares to hit the $2 reinvestment cap.
Good Times Ahead For Dividend Investors [View article]
http://seekingalpha.co...
I'll let you know when the book is out! (Should be in the next few weeks)
Good Times Ahead For Dividend Investors [View article]
Also, TGT has out-right stated they expect 20% dividend growth over the next 4-5 years:
http://seekingalpha.co...
After that, dividend growth in-line with earnings seems reasonable.
Good Times Ahead For Dividend Investors [View article]
Sure I suppose in comparison to companies like PG, KO and JNJ; TGT's dividend history isn't quite as storied. But I wouldn't exactly call 45+ years of consecutive dividend payments (not to mention increases) as a "shorter dividend history". In fact, glancing at David Fish's list, TGT holds the 26th longest dividend increase streak.
http://tgt.biz/10bltCo;highlight=
The Market Is Advancing: Is It Time To Sell? [View article]
The Market Is Advancing: Is It Time To Sell? [View article]
Thanks for the shout-out! (http://seekingalpha.co...)
Incidentally, with WAG's earnings out today I'm now up 50%+ in 8 months.. I suppose that takes the burden of "angst" away from you and temporarily on me ;)
Time In, Not Timing Dividend Growth Stocks [View article]
Time In, Not Timing Dividend Growth Stocks [View article]
Also, and I'm sure you're going to disagree with me, but I think your article enhances my thesis. Your first case, bought at 33% "overvaluation" as compared to the fair value metric is quite close to your fifth case which was bought at a 25% "discount". (Obviously I understand that the relative IRR due to the shorter time period is higher with the 5th case) But it stands that if you were sitting in 1999 with $15,000 and decided to wait until the security reached 25% "undervaluation" then the result for today is effectively the same. It isn't unimaginable that buying at say 20% "overvaluation" would turn out to provide a higher total return (not annualized) then buying at say 15% "undervalution" 4 years from now. My lasting emphasis was simply that buying at a lower valuation is inherently important, but the amount of time that one spends partnering with a wonderful company should also be considered.
Walgreen: Should I Stay Or Should I Go Now? [View article]
I agree with you in suggesting that WMT has the ability to effectively wallop competitors in anything retail. However, I would like to offer some reassurance within the 75/65 context. Without looking it up, it wouldn't be that difficult to imagine that 75% of the population or more also lives within 5 miles of a WMT. But it is at least noteworthy that WAG looks to make the locations "shopper friendly". To your point about the products being overpriced, I would again agree. But if we remember that 65% of WAG's business is derived from prescriptions, I think the business model makes a lot more sense. People come into the stores to get their prescriptions and then they realize: "oh hey, I do need some Pepsi, toothpaste, deodorant and I dunno a hair brush". If you can get people to buy "overpriced stuff" just because they happen to be in the store, that seems like a smart move to me. It's effectively an "added bonus" of being a wellness store. As long as WAG remains strongly committed to health, I think they'll do just fine as many people will continuously look for the "wellness boutique" feel, rather than the "big-box everything in my life under one roof" mega store.
Walgreen: Should I Stay Or Should I Go Now? [View article]
I was simply looking for a range of yields and growth rates within the dividend growth framework. So while it says "WAG" I instead created a "WAG equivalent" whereby one would sell their WAG holdings, pay the applicable expenses and have a new security (call it Stock XYZ) that would be invested in a "random" (i.e. similar yield and payout growth characteristics) DG company. In other words, if I sold WAG (of which I have no intention) I wanted to see what types of yield and growth one might need to provide comparable income going forward. In reality, one would also want a company as wonderful as WAG, but this would have been even harder to synthesize. I agree CVS would have worked as well (10 years of growing payouts at a robust pace), but believe that TGT shows similar income results. (Actually, I might have understated Target's payout growth slightly, but the numbers didn't need to be exact for the thought experiment) Basically I was simply suggesting, for those that are chiefly concerned with a growing stream of income over time, that WAG's characteristics - even after a short-term run up - were still adequate if not favorable.
Walgreen: Should I Stay Or Should I Go Now? [View article]
Thanks for your comment. "First world problems", am I right? We're either making more money or have the ability to buy more of a great company. It can be humbling to realize that such scenarios aren't so much "problems" as they are rational considerations. I'm thankful that I have the opportunity to invest.
Also, with regard to your question: "" Keep in mind that the stock needs to drop 40% for you to "lose" money. Think that's a possibility? "" - I don't think that's going to happen, but in reality (given that the business remains fundamental) the best thing to happen for me would be for a 50% price drop tomorrow.
Time In, Not Timing Dividend Growth Stocks [View article]
From Buffett: "Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway".
Incidentally - and this point is neither here nor there - but that picture was taken about 6 years ago. I just happened to like it. (Still do)
Also, by "pass on" I assumed you meant "share with others", so thanks! ;)
Time In, Not Timing Dividend Growth Stocks [View article]
Thanks for your comment. Obviously I would agree that including a variety of comparative illustrations would add to the robustness of the evaluation. In fact I explicitly stated there were likely "dozens of simplifying assumptions". However I would like to indicate that, despite the aforementioned restrictions, the ideology still carries a great deal of weight.
First, your point effectively makes my point: that only viewing a security in the context of a 52-week or all-time high (i.e. price only) as we see in the media, is silly at best. As I demonstrated, reaching new highs is a common and necessary process and thus you should not take your "buy action" from the price directive.
More importantly, while I did not explicitly mention earnings, the lasting realization can be implicitly found. I'll make this clear with an example from the article. Instead of picking an individual DG stock, I choose to use a DG "aggregation vehicle" that looked to mimic a wide variety of available DG alternatives. The characteristic of this investable DG proxy was a share price of $100, a $3 dividend and an assumed payout growth rate of 8%. What is not stated - but instead is assumed - is a reasonable payout ratio and sustained earnings growth. After all, it would be nearly impossible (especially in the long-term) to continuously grow dividend payouts without also growing earnings. If we look at David Fish's CCC list, we find an average yield for the "Dividend Champions" of 2.77% and an average payout ratio of nearly 42%. Let's make the numbers easy, sticking with our 3% yield and bumping the payout ratio for our example to 50%. $3 dividend at a 50% payout ratio means $6 EPS, or a P/E ratio of 16.67. Further, without assuming earnings growth, a price of $85 would indicate a P/E of 14.167. More realistically grow EPS by 8% and we find a P/E of 13.11 in one year. The point is that instead of using prices alone, I could have just as easily used P/E ratios. However, the math works out in precisely the same way as in my stated example if you are chiefly concerned with a growing stream of income. That is, if you thought a P/E of 16.67 was a touch too high and you would just wait until it hit 15 or 14, then it still might work out such that the greater income stream would result from buying today rather than waiting for a lower P/E. This becomes even more apparent with the higher prices / PE levels. The realization was not that this is always the case, but more aptly that it is possible to buy at a lower value (both in price and relative earnings) without necessarily providing the best outcome. Personally this is something that I would like to keep in the back of my mind when holding capital to deploy.
Walgreen: Should I Stay Or Should I Go Now? [View article]