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Heisenberg Principle

 
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  • REITs: Why The Dividends Are A Mirage [View article]
    You are most certainly correct. Any REIT that is not raising equity is paying legitimate dividends and paying out real value shareholders. This article is about the REITs that raise equity while paying though
    Mar 4 04:21 PM | Likes Like |Link to Comment
  • Time To Sell Universal Display And Buy Apple [View article]
    Fair response. It's mostly a trade idea with the intention of potentially selling AAPL and going back into PANL at another date. Of course I cherry picked that which made my case strongest as the dip in AAPL vs. the spike in PANL in such a short timeframe the switch that much more tempting.
    Mar 4 03:57 PM | 1 Like Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    No, these companies HAVE earned their dividend. However, that becomes irrelevant if they choose to raise money to pay out the dividend rather than pay it out from retained earnings.

    And, yes, I know they pay it out from earnings on paper to keep the IRS happy. But not really.
    Mar 4 03:52 PM | 1 Like Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Yes, absolutely it's possible to be profitable but cash flow negative.

    I completely agree that raising equity is a smart move for REITs in this environment as they are able to get more leverage than the average investor which in turn tends to return more dollars per share in earnings than dilution.

    Just, please, be smart and ignore the dividend yield especially when comparing different REITs. Bigger yield doesn't necessarily mean better REIT since the yield itself is just a mirage.
    Mar 4 03:39 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Ignoring the tax-savings, the total return would be identical dividend or not.

    Put another way, if these same REITs were given tax-free status without having to pay a dividend, they wouldn't pay a dividend. And your return would be identical or better.
    Mar 4 03:30 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Cash in the pocket feels great. I confess that I always enjoy seeing those REIT dividends pop up in my account too when they are delivered.

    They only come at the sacrifice of capital gain. But boy they feel great!

    Not the same as rental income though with real estate in real life. Your tenants don't dilute you to pay the rent. :)
    Mar 4 03:29 PM | 1 Like Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Yes, I understand that the dividend matches 90% of the income or more. It has to in order to get the tax-free REIT status from the IRS.

    Yes, I understand that the new money used for investment doesn't dilute shareholder.

    And, yes, I'm exclusively speaking about public stocks. It doesn't matter what papers are shuffled to make the IRS happey -- they are diluting shareholders to pay the dividend. Period. The end result is no value gained. It's laughable when people call this an error on my part. Good God.
    Mar 4 03:13 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    No, I'm not missing any of those points as I laid out each and every one of them already.

    1. The full $89 million isn't going to invest in new assets. Some of it is being used to pay a dividend.

    2. I already called it "a necessary evil" that they pay dividends to save on income taxes. That's the ONLY benefit of the dividend. And it's a great benefit for investors who truly understand REITs properly and also understand that the dividend yield is a mirage but a ncessary mirage.

    3. You can call it distributing income to make the IRS happy but the net economic effect is the same -- the cash comes out of the equity raise. As a CPA, you should know that. You gotta do what you gotta do to keep the IRS happy, and the IRS is okay with companies distributing the "income" out then turning around and bringing it straight back in. It's a great game REITs play, and legal, to skirt the IRS rules and remain a REIT. You should know more than anybody that's the purpose of it otherwise the REITs have zero interest whatsoever in paying out a dividend. They only do it to keep the IRS happy and avoid a huge income tax expense all the while what they give the shareholders with one hand they take away with the other. Nothing wrong with it -- investors should just learn to recognized what it is and not be fooled by these huge dividend yields. They are RISKY and trade with a mirage yield.

    Many REIT investors see for example on PMT a 12% yield and go "ooohhh, look at that, get paid 12% to wait AND be in a growing REIT." I like PMT very much long term, but the yield is a joke. Investors will make money on PMT because its mortgage business itself will grow and earn more and more per share as it has been.

    There's a reason the REITs pay in dividend the very bare minimum needed to keep the IRS happy. They, too, know it's a mirage. Call any one of them and ask.
    Mar 4 02:54 PM | 2 Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Rooksmith is on the right track. Kudos.
    Mar 4 02:06 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Your "cashed out dividend" is only in direct portportion to the larger price per share appreciation sacrificed. If not for the divdends, the share prices would be much higher.

    REITs are still great investments.
    Mar 4 02:05 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    I've already stated numerous times that I like REITs and invest in them. However, the dividend is a mirage. They still make great investments near and long term Imo.
    Mar 4 01:58 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Those people would be wrong. Dividend yield mirages only exist with companies raising money to pay them.
    Mar 4 01:55 PM | 1 Like Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    Book value won't be depleted because the keep rasing more equity.


    Ill repeat: the portion of those equity raises kept and not paid out is acceretive. The dividend portion is not. It's a mirage. And a mirage, by definition, keep the clueless perma-newbies believing.
    Mar 4 01:46 PM | Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    The money used to pay dividends isn't buying mortgages.
    Mar 4 01:31 PM | 3 Likes Like |Link to Comment
  • REITs: Why The Dividends Are A Mirage [View article]
    I agree with your article. The "False God of Dividends" article is wrong. He ignores that in the long run we're all dead so there is a big difference between a company hoarding its cash (like Apple) and one actually paying out a consistent dividend.

    This topic, however, has nothing to do with REITs that are raising equity while paying out a dividend. Your article was based on PG -- PG isn't raising equity while paying dividends. PG's dividends are real; not a mirage. It's a real return of corporate EARNED money BACK to shareholders. REITs, on the other hand, are literally returning shareholder money back to shareholders that they just raised sometimes mere weeks or even days prior. Not the same. Diluting shareholders by 10% (for example) then paying them a 10% dividend isn't creating value. PG paying a dividend 100% from their earnings per share, and not from equity raise, IS paying value to shareholders. REITs are not. Their dividends are a mirage. People foolishly think they are getting a free lunch.

    It looks free because the stock prices are up nicely and the dividends are paid. But the return is identical whether the dividends got paid or not. That's why the market refuses to raise the stock prices to a level that the dividend yields aren't so high. The market is completely disregarding the dividend yields of these REITs, and rightfully so, because they are a mirage.
    Mar 4 11:02 AM | 1 Like Like |Link to Comment
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