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Heisenberg Principle

 
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  • American Realty Capital Properties Is No Mirage: It's Time To Back Up The Truck [View article]
    "The author is half correct that paying divvies out of raised cash is dilutive BUT the author is missing the point that if I were to borrow 10 mil at 6% and deploy it and get 9%, I would do that all day long. an over simplified example I know but that is what they are doing."

    I completely agree. I'm not missing that point nor did I even imply otherwise.
    Mar 5, 2013. 09:52 PM | Likes Like |Link to Comment
  • American Realty Capital Properties Is No Mirage: It's Time To Back Up The Truck [View article]
    Imagine the storm coming when ARCP hits $8/share?

    Any suggestions for my article then?

    ARCP's Truck Blows A Gasket And Backs Into A Sink Hole?
    Mar 5, 2013. 08:29 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    FOR THE UMPETEENTH TIME:

    The economic effect is IDENTICAL to dilution when they are raising equity and paying out a dividend at the same time. It's like when my spouse spends all of our paycheck then uses the credit card to go shopping. "Oh, but I only went shopping with the money we got from the paycheck, really." The economic effect is identical. If you have to borrow money (or raise equity) then the dividend is a mirage.

    You don't even explain for a second why the dividend yields are huge. It has nothing to do with them making money -- a higher yield means the market isn't confident in the dividend or the market would bid up the price.

    Offering shares above book value is still dilutive to earnings when that financing is then paid out in dividends. That's just Finance 101. I'm sorry. They had the option of reducing the equity raise by the earnings made and paid out as a dividend -- but they chose not to and instead DILUTED.

    Don't take my word for it -- REIT management even calls them on their income statement DILUTED shares. Go look.
    Mar 5, 2013. 07:36 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    No, it most certainly is net income. But the IRS demands in order to remain a REIT with its tax benefits that entails, a REIT must pay a dividend equal to at least 90% of the income.

    One way around this is to issue a dividend then turnaround and raise equity at the same time. The REIT getst that capital back but keeps the IRS happy.

    (and, yes, I know the REIT tax structure requires a 90% dividend and yes, I know, the REIT made that dividend in earnings.)
    Mar 5, 2013. 07:23 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Raising money via equity then paying a dividend to shareholders after diluting them = mirage dividend.

    That's why the yield is so high. It's garbage.

    (and, yes, I know the REIT tax structure requires a 90% dividend and yes, I know, the REIT made that dividend in earnings.)
    Mar 5, 2013. 07:22 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    "The author completely ignores that dividends must be paid out to 90% of what the company earns or they can't exist in the REIT tax status."

    Absolute nonsense. Here's from my paragraph 2:

    REITs, by their structure to save on taxes, have to pay out their net incomes in the form of dividends to shareholders.

    -----other than the tax savings, the dividends are a mirage. They raise money then pay a dividend. The dividend is garbage. That's why the yields are so huge.
    Mar 5, 2013. 07:19 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    I completely agree, but capital raised then paid back as a dividend almost immediately has no realistic chance of being accretive and is a mirage.

    This cannot be denied. It's simple math.
    Mar 5, 2013. 07:18 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    That is correct which I address both in the article and many times in the comments section. The reason to pay the dividend is to save on taxes. It's smart of REIT management. But not a thin dime more than is required by the IRS since it adds zero value to shareholders other than tax savings.

    There's no reason to retract my article when you are repeating the same stuff I said. Paragraph 2 from my article:

    "REITs, by their structure to save on taxes, have to pay out their net incomes in the form of dividends to shareholders."
    Mar 5, 2013. 07:16 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Actually I believe I've made it crystal clear both in my article and my comment section that capital raised to purchase new properties has been accretive in the examples used in my article. But paying out dividends while raising capital means the dividend-paying-portion of the capital raise is most certainly not accretive. Some have argued that the dividend comes from earnings. That's a great story to make the IRS happy, but the economic effect is identical. When a company is raising money via equity and diluting then paying a dividend that's a fraction of that equity raise, the dividend yield is a mirage, laughed at by most serious dividend investors. It's not reliable or sustainable unless the environment continues to improve for REITs (which so far for now looks great). If the yield wasn't a mirage, the stock prices would be much higher. Efficient market theory? To a degree, yes.
    Mar 5, 2013. 07:14 PM | Likes Like |Link to Comment
  • American Realty Capital Properties Is No Mirage: It's Time To Back Up The Truck [View article]
    Watch for what spin when the "truck" hits a pot hole and gets a flat tire.

    It will be epic.
    Mar 5, 2013. 07:08 PM | Likes Like |Link to Comment
  • American Realty Capital Properties Is No Mirage: It's Time To Back Up The Truck [View article]
    What's funny is anybody believing these giant dividend yields are real when most serious dividend investors won't even touch them.
    Mar 5, 2013. 10:08 AM | 1 Like Like |Link to Comment
  • American Realty Capital Properties Is No Mirage: It's Time To Back Up The Truck [View article]
    Same cluelessness yet violent defensiveness we saw circa 2006. Diluting while paying a giant dividend yield is for suckers.
    Mar 5, 2013. 10:06 AM | 2 Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    I never called mREITs fake value.

    A stock going up doesn't mean every aspect of it is kosher.
    Mar 5, 2013. 08:19 AM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Raising money via equity to make accretive investments is smart, yes.
    Mar 5, 2013. 08:19 AM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Makes no difference if it's a toy dog doo maker. A REIT that pays a yield that is a fraction of its equity raises is a mirage.
    Mar 4, 2013. 10:31 PM | 1 Like Like |Link to Comment
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