John Connors

John Connors
Contributor since: 2012
The dividend is tempting along with the low beta in the stock... and as one of the major holdings by mutual funds and retirement accounts, the AT&T management will be conservatively managing the payouts. A word of caution though, all the telecoms, AT&T especially, have been fueling their cash flow by increasing debt. Unless they start using some of the operating cash flow to reduce the debt, it will eventually bring the dividend to a greater risk of reduction. I dont think it is going to happen anytime soon, just a trend to keep under a watchful eye. For more details, check out my review from earlier this year.
Smitty - thanks for your comments. I will look out for that in the future.
Thanks fellow seeking alpha contributor Abba's Aces for his comments and suggestions to add an earnings growth element to the screen. So starting from 17 Aug 2013, an additional filter of looking at quarter over quarter EPS growth is being added to the screen. This will further help refine to just those stocks of stong companies that are just momentarily out of favor and eliminate those with downward earnings momentum.
Thanks for your question. First, the usual disclaimer that I am not recommending a specific trade, just offering one idea of many possible ways to play AAPL into earnings.
AAPL is set to announce earnings on 23 July so one trade would look to the July 26th calls. If you think AAPL is going up, you could either sell a put, for example the $420 put or buy a call. For the call, buying a reasonably close out of the money call ($440) will both define the risk and give the upside. The July 26 $440 call was selling for about $6 so that defines the risk.
Premiums are high on the July 26th options so if you are bullish, selling the put may be a better move.
In either case, the next question is to hold through the announcement of exit a day or two before. Either works, but the price action into the announcement may be as good as or better than the move right after.
DIY DG Investor - thanks for your comments. Yes, cash flow should be included and I will make sure add it into future reviews.

So, lets look at this a bit closer. In looking at depreciation it should be compared against capital expenditures. For T, their most recent full year depreciation was $18,143 million and cap ex was $19,465 million, indicating they are spending more on cap ex than is being removed through depreciation. On top of that, in the last fiscal year they net added $4,754 million to their cash position through net new borrowings (new loans). For VZ, their depreciation last year was $16,460 million and cap ex was $16,175 million, showing they are just depreciating at rate slightly higher than their reinvestment rate. VZ paid down their debt by a new $3,351 million.

Of the two, VZ looks to be on a course to strengthen their balance sheet and cash flow while T is on a course to leverage their balance sheet at the expense of shareholder equity.

S, FTR, CTL & WIN are all depreciating at rates about 30% higher than their capital investments.

I am not suggesting VZ or T are going to cut dividends anytime soon. However, if T continues on this path of leveraging up, at some point, a shift in total cash management will be needed. That change may or may not impact dividends. I would think there would be significant institutional pressure to maintain the dividend given the position T holds in many funds. So T will need to make other changes in their cash strategy which could impact the P/E valuation. In other words, for T, the dividend may be safer at the expense of higher stock price risk.

With this review, my purpose is simply to share some color behind the headline yield rate.
Cpa28761 - does the lack of clarity of what sort of company PEP purely is, could it be worth more as a break-up the combined entity ?
Blix - thanks for your comment. Of the five stakeholders, you are right, this is the hardest to read. I will take a look at the IV idea and see if that provides any better fidelity.
Thanks for your comments, that is very good insight. The comments about a possible sale are very interesting because of some moves being made at DOLE to clean up their balance sheet and the 86 year old chairman returning to run the operations. I cannot help but wonder what DOLE will do with a balance sheet free of debt -- could they be a possible buyer for Chiquita ? Below is the link to my review of recent activity at DOLE.
The Nov 15th data is the best I had when writing the article and I understand it is a bit dated. It comes from
Since then, I have found another website has data as of 27 November, it shows MCP had a 44% short interest as of that date, so while declining from 15 Nov, this is still a substantial open short position.
Thank you for the feedback. I hope this brings you some holiday profits !
Hey, the world is full of bulls and bears. Everyone is entitled to their forecast and opinion.
If you agree with the bears on this, one way to play is 'buy the rumor, sell the news' and go long through 3rd week of Jan and then reverse course. If you are a bull, then just go long and stay long. Obviously I am a bear on this one but do not want to take the risk of a short squeeze if I am wrong so I am playing it through puts waiting for the fall to define the risk. So far it has been a profitable play.
Kurt - your comments makes my point exactly - there is very little that actually differentiates smart phones in today's market - they are all just flavors of the same thing. There is no new break-through, no amazingly new software, no new form factor, no new integration with other tech gadgets, it will be just one more phone on the market with perhaps some slightly better security.
Kurt - the 101% saturation is for all types of cell phones
Thanks for the comment. I don't think there is anything which says regular and special dividends must be announced at the same time. If they wanted to use a special to goose the stock price, a better way to do that would be to have a separate announcement to get an additional news cycle focused on the stock.
Nice article. Possible shifts in strategy and the balance sheet construction like this are often harbingers of bigger changes. I am also long BGS so this is very helpful. It would be great if you could give us an update after the conference next week.
Yes, I missed that. Thanks for pointing it out. In a small way, it does help validate the scan used to identify these stocks.
thank you for catching that.