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John D. Thomason

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  • Yield, Value, Safety - Available With (Some) Integrated Oils [View article]
    Hi, Vorgriff,

    I am not familiar with SSL. I took a quick looksee using the data sources I used in my article, and I agree it looks interesting. Per MSN Money, all of the metrics look favorable, but the analysts' estimates of 5 year earnings and ratings only have 1 or 2 analysts weighing in, so not much there as far as opinions. Morningstar does rate SSL as a 3*, and while S&P does not rate it with a star rating, they have a report on it with a fair value rank of 3, which is in the middle. My list of withholding percentages by country shows South Africa with no withholding tax on dividends, so that is a plus. Schwab's Intl Equity Rating shows a B, which is pretty good. A "latest headline" from the E*Trade snapshot view is "S&P Affirms 'BBB+/A-2' Foreign Currency Long- And Short-Term Corporate Credit Ratings On Sasol", which doesn't sound half-bad.

    I would say it certainly looks worthy of further analysis, no immediate "deal-killers" that I can detect. Like many if not most foreign firms, confirmation is hard to find, with few analysts tracking the firm.

    I see that the semi-annual dividend upcoming has an ex-dividend date of 4/11/2012, so buy before then to get the dividend. If after checking further you can't find any reasons not to buy, but are hesitant to go "all in", maybe just start with a small position, get the dividend, confirm no withholding, and keep up with the company. If all goes well, then add to the position later on.

    John D. Thomason
    Apr 4 07:43 PM | 2 Likes Like |Link to Comment
  • Yield, Value, Safety: Still Available With Selected Utilities [View article]
    You are correct in that I did not treat the Exelon-Constellation merger the same as the Duke-Progress Energy merger. I had considered the Exelon-Constellation a done deal, but since it only closed a few days ago, there is really no reason for this inconsistency. Most of the Exelon-Constellation merger/integration challenges are likely still to be faced. To be consistent, I should have either rejected EXC as well, or accepted/rejected DUK on other grounds. This is a definite flaw in the analysis. Moving past that, and reconsidering, I will admit to a bias towards EXC because of my sense that it is more of a value play because of the nuclear issue. DUK, post-merger, could turn out very well, but it is not down today to where it is as much of a value play as EXC. The Exelon-Constellation merger was reported as a $7.9B deal, while the Duke-Progress Energy deal has been reported as a $26B deal. While that doesn't mean the Duke-Progress merger will be necessarily 3 times more difficult, it would seem that it is a larger undertaking - but that is no excuse for treating the two mergers inconsistently. After reflecting on it, I believe that the bias against mergers should rule, and I would suggest that in both cases the fact of the mergers being in the mix increases the unknowns in both cases, and maybe it would be better to drop EXC for this reason, and resurrect DTE, or wait for better prices on SO, ED, NEE, or LNT. Another option would be to reconsider foreign utilities, and at least consider British firm National Grid NGG, which another respondant (Gorgo) has had good results from.

    To recap, I'll repeat what I've said before - readers should definitely read all the comments associated with an article, to benefit from the knowledgeable SA readership's take on the views expressed in an article, to get a more rounded and fully informed view of the total picture.

    Thanks for making me think a little harder and realize I had an inconsistency there.

    John D. Thomason
    Mar 17 10:45 PM | 2 Likes Like |Link to Comment
  • Yield, Value, Safety: Still Available With Selected Utilities [View article]
    I took the approach that I can't own everything, so based on where things are at today, what would the best choices be? Frankly, you could probably select any 10 from the original list and do OK. Utilities are a pretty good bet for an income investor, for 15% to 20% of a total portfolio.

    John D. Thomason
    Mar 16 04:05 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks: Which Way To Go - Blue Chips Or High Yield? [View article]
    I agree that just because a stock is a large-cap, perceived "blue chip" doesn't mean you don't have to keep an eye on it. Enron and WorldCom were very large companies at one time. As for the banks, I certainly did not recognize the risk of some of the large banks that at one time were great dividend stocks, i.e. Citigroup and Bank of America, until I was down significantly. Risk is definitely not confined to just the smaller companies.

    John D. Thomason
    Jan 28 10:12 PM | 2 Likes Like |Link to Comment
  • BDCs Then and Now: One Investor's Real-World Experiences And Recommendations [View article]
    As I have noted in all my articles, I'm not an accredited financial expert. That said, I believe the consensus is that the relationship between market price and book value is at least one of the metrics to consider. Going all the way back to Benjamin Graham, if the ratio of book value to price is less than 1, you have a value stock. All or most of the traditional metrics, such as PE, yield, debt ratios, payout ratio, should also be considered. Back to book value (until someone enlightens me otherwise, I consider book value and Net Asset Value (NAV) to be equivalent), keep in mind that many if not most of the assets a BDC holds are not easily valued. The weight you give to how great a bargain a BDC might be based on book value depends on the assets the BDC holds and how they are valued. To get that info, you have to dig a little deeper into the BDC's financials. At the end of the day (I have to stop using that over-used expression), the success or lack thereof of a BDC is dependent upon the expertise of the managers and how they allocate capital and navigate the economic shoals.

    John D. Thomason
    Jan 9 10:03 PM | 2 Likes Like |Link to Comment
  • Optimizing Value In The Pursuit Of Dividend Yield Income: REITs, MLPs And BDCs [View article]
    Good, thought-provoking article. I have owned AINV for a long time. While AINV did cut the payout during the financial crisis, they did not eliminate it. Comparing AINV to ACAS, which eliminated payouts entirely and has yet to restart, I have some admiration for AINV's management. The stock has certainly declined lately, the market recognizes the risk, apparently. My approach to risk management is to avoid having too much of my portfolio invested in any one stock, or even one sector, such as BDCs.
    Dec 28 07:44 PM | 2 Likes Like |Link to Comment
  • REIT Interest-Rate Concerns May Be Overblown [View article]
    I concur with most of the article, except the limitation of REITs to only 3% to 5% of a total portfolio. This seems low, especially for an income investor, and implies that REITs have more risk than I believe is warranted, assuming holdings are limited to large-cap top quality property REITs. My own limit is 15%. If one moved out of these names as valuations soared, which I did, albeit too early, now is a great time to get back in. I sold HCN and O for nice gains at what seemed like over-valued levels, then watched in amazement as they soared from there. Then, as they came back to earth, I slowly, incrementally, bought back in. Other than selling too early and also starting back in a little too early, I think I have gotten it mostly right with these two, and I am happy to be back in at these levels. I will add a bit more if they take another leg down; otherwise, will hold and collect the dividends.

    John D. Thomason
    Dec 6 11:14 AM | 1 Like Like |Link to Comment
  • Don't Fight The Tape: U.S. REITs In Decline [View article]
    Excellent, thought-provoking article. It certainly has generated a lot of discussion. I have re-started or added to positions in O, HCP, HCN, and DLR during the recent swoon, as the yields became compelling. Actually, I had previously sold out of all except DLR (unfortunately) as the prices were getting up to ridiculous levels some months ago. I have gone back in as these names became available at more reasonable levels, cautiously and incrementally, which is a good thing, as the prices have dropped more than I expected. In fact, I'm only going to allow myself one more incremental buy on O, HCP, & HCN, and only upon a substantial decline below today's levels. I'll be ok with it if they never get there. As for DLR, I added at $50 and change, and then put a hold on adding more, too much volatility with that one. I plan to hold all these REITs for a very long time and collect dividends. But I will admit that, per your article, what seemed like tremendous bargains when they first became available don't seem so world-beating now. Live & learn.

    John D. Thomason
    Nov 27 01:44 PM | 1 Like Like |Link to Comment
  • Yield, Value, Safety With Utilities - Redux [View article]
    Hi, 11worth,

    My most recent issue of the Morningstar Dividend Investor has added WEC to the newsletter's "Income Bellwethers" list, which I thought might be of interest to you. The newsletter editor, Josh Peters, is not too excited about the current market price as an entry point, which can be said for just about all stocks these days. He advises not paying more than $28. But if you bought it awhile back, at better levels, it would be a good utility to hold.

    John D. Thomason
    May 29 11:36 AM | 1 Like Like |Link to Comment
  • Yield, Value, Safety With Utilities - Redux [View article]
    Hi, airlarr & chowder,

    My approach is based upon dividends as a foundation. I would not invest in a growth stock for many reasons, let me count the ways -- it is hard to pick winners, growth may or may not occur, I need income now, dividend stocks are back in favor and demographics ensures that the trend will continue, it may be a long wait for "normal" interest rates, and so on. The safety of a given dividend is certainly not assured, but it can be predicted much more confidently that a given growth rate and corresponding share price increase for a company.

    John D. Thomason
    Apr 22 08:46 AM | 1 Like Like |Link to Comment
  • Yield, Value, Safety With Utilities - Redux [View article]
    Hi, Yowwwwie,

    As I confessed to Travel4yields, above, my review was at a high level, and a screen based purely on numbers can miss a good stock. I subjected PPL to my more intense "5 minute" review (more intense than my 30 second review, I suppose), and I see no reason to bail on PPL at this point. The stock, like many in recent days, is bouncing around its 52 week highs, but even at that, it yields an attractive 4.6%, with Payout Ratio a manageable 55%. As I noted, debt is a bit on the high side, with Leverage Ratio 4.2, D/E 1.9, Interest Coverage 3.3, and Total Liabilities at 76% of Total Capitalization. S&P Bond Rating is BBB, just one notch above the lowest investment grade rating, but comparable to other high quality utilities. The stock is rated Neutral by Credit Suisse, 4 Star (Buy) by S&P, with Medium Risk, Earnings Quality B+, and 3 Star (Hold) by Morningstar. It is a recommended holding in Weiss' Income Superstars portfolio. Digesting all of that, PPL is a reasonable utility holding, with debt a little on the high side, even for a utility, but manageable. The keys going forward are regulator relationships and management's business strategy. The numbers are no cause to sell out. If you are comfortable with the management strategy and the intangibles, I would say to hold it & collect the very attractive dividend. I would hold off to add to the position, however, for a more attractive entry level.

    Thanks for commenting. I learn something every time I receive a comment such as yours, suggesting I take another look at a given stock.

    John D. Thomason
    Apr 17 10:29 AM | 1 Like Like |Link to Comment
  • Yield, Value, Safety With Utilities - Redux [View article]
    Thanks, Bob,

    I took a break from writing while I was relocating from Oklahoma to Austin, TX. My fellow Okies have accused me of going over to the "dark side" (of the Red River, I suppose).

    Another factor slowing down my writing is the overbought market and the dearth of attractive buy opportunities on quality stocks. My last article in January, where I cautiously recommended Diebold just as a management shake-up and earnings warning hit was a great lesson in what can happen when you go down the quality scale in an effort to get a reasonable price.

    Thanks again for commenting.

    John D. Thomason


    Mar 27 09:49 AM | 1 Like Like |Link to Comment
  • Yield, Value, Safety With Utilities - Redux [View article]
    Hi, Scooter,

    The list I have from March 2011 shows CenterPoint as a Challenger, 5 to 9 years of dividend increases. The next level is Contenders, 10 to 24 years, then Champions, 25 or more years. So, CNP is at best only a Contender by now.

    John D. Thomason
    Mar 26 09:19 PM | 1 Like Like |Link to Comment
  • Yield, Value, Safety With Utilities - Redux [View article]
    Hi, VTND50,

    No, I only looked at some basic numbers available from a financial website to trim down a list of 36 firms. I did find an article on this move, which said CNP would own 59% of the new MLP. It looks like it might be a positive for CNP shareholders - maybe they will be awarded units in the partnership. CNP has a leverage ratio of 5.3, one of the highest of any of the utilities I looked at, a payout ratio of 83%, and a total liabilities of 81% of total capital, according to the MSN Money website. These are not good numbers, which is why I passed on CNP.

    John D. Thomason
    Mar 26 05:48 PM | 1 Like Like |Link to Comment
  • Yield, Value, Safety With Utilities - Redux [View article]
    Hi, 11worth,

    I believe WEC did not make my initial screen a year ago, which had a yield cutoff of 4%. WEC had a closing price of $34.53 on 3/16/2012, and a quarterly dividend of $.30, which would have resulted in a yield of 3.5%. The few I did look at that yielded less were utilities I knew about that I added to the utilities my screen found. The Redux article, in turn, only looked at the utilities I had looked at a year ago. WEC certainly has gained in price in the past year, and the dividend had a sizable bump to $.34 in February, so WEC would have been a good choice. That is the risk of any screen, you may set the parameters too tight and miss good candidates.

    John D. Thomason
    Mar 26 11:57 AM | 1 Like Like |Link to Comment
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