Kevin Cooper

Long only, growth at reasonable price, long-term horizon, dividend investing
Kevin Cooper
Long only, growth at reasonable price, long-term horizon, dividend investing
Contributor since: 2012
So you feel good about growing debt needed for share repurchases and growing negative shareholder equity?
I own PM for the income. Here's my concern: What's it going to take to turn around these troubling trends? Certainly strong dollar is a current issue, but what about increasing debt levels, negative and increasingly negative shareholder equity, coming interest rate increases which will make that debt load more expensive? These trends were in place before the currency issues took center stage.
Perhaps sometime you would share your "basket" of stocks earning an average of 4.8% with a long term dividend growth rate of 7% (without overloading the basket with MLPs or mortgage REITS.)
First, regarding one of your positives: •AT&T could divert video traffic from U-Verse to DirecTV's satellite network, freeing up network capacity.
How does that work? Either you are on AT&T's network or you have a DTV satellite receiver.
Also, I see a lot of talk about cross marketing, etc. The $50B DTV purchase would be at about $2,500 per subscriber. I think AT&T could persuade lots of DTV subscribers to jump ship if they had $2,500 to spend in order to entice them.
I too am sitting on what was supposed to be a short term position in CLF. Oh sure, I could have gotten out at close to break even in early Feb prior to the dividend cut disaster. Now it's so far underwater that writing calls is not a very attractive option. It seems to me that this situation is where the covered call strategy breaks down, one in which you experience a dramatic drop in price, even LEAPS offer little hope. I suppose I should be willing to add another position to help nurse it back to life but just can't bring myself to do it.
Good article. You used to hear politicians of all stripes say, "we much reduce our reliance on imported oil, especially from the Middle East." Now we have the opportunity to do just that and we have an administration that is averse to fossil fuels and has a ill conceived approach to "all the above" alternatives. Fortunately we have companies such as LNG that are willing to take the risks to exploit our opportunity. And it's a very important point that there is no global market for natural gas, a little understand differentiation from oil.
Snideybowl: There is no ceiling on qualified dividend income, however, the portion of your income subject to ordinary rates must not exceed $36,250 in order for any portion of your qualified dividend income to meet the test for a 0% tax rate. Hope that helps.
For some reason when I try to download your spreadsheet I'm getting a page with Jane Well's Ugly Sweater. Interesting transition.
As a group the oil royalty trusts have fallen out of favor recently. Concerns about falling oil prices, global recession, fiscal cliff and US taxation of trusts have all conspired to drive down asset prices.
Thank you for your articles. I wanted to close the loop on one of your ideas for this week: APKT. I wouldn't have come up with this one on my own, imagine planning to lose 7.4% on the sale of the shares? I purchased shares at $16.20 and sold the weekly $15 calls for $1.54 each. With earnings to be announced on 10/25/12 who knew which way things would go. Earnings were positively received and today the stock is trading above $17. So after the close my shares will be assigned for $15 and I will happily bank a 2.1% gain for the use of my capital this week. Sure, it could have gone differently but, well, it didn't. Thanks again.
Mr. Inkrot: Thank you for the article. I agree that there is too much mindless "advice" being repeated throughout the financial press. With respect to your "0% rule", I provided a similar perspective in an SA article:
Having said that, William Bernstein is something of a pioneer and did groundbreaking research on asset allocation and the "efficient frontier". It's worthwhile reading for any investor, no matter what your stripes. It would be a shame to dismiss him based upon this article.
Thank you for the detailed and comprehensive response. Good lessons.
I appreciate your articles and your weekly suggestions for buy/write opportunities. On 8/9/2012, I purchased CLF at $44.56 and sold $44 Calls for 8/18/2012 at $1.03. Prior to expiration I captured the $0.625 dividend. Since then CLF has moved steadily downward and all miners are being hit today. At this point selling puts feels like trying to catch the falling knife. I'd appreciate any ideas on how to rehabilitate this losing position. Thank you.
George, Is there a particular "screen" that you use to find attractive opportunities to capture weekly or monthly call premiums? Thanks for your articles.
There's something wrong with your table of targeted distributions. According to the prospectus, distributions for 2012 targeted at $1.88, 2013 targeted at $2.72, etc.
There's too much focus on "reaching your number". Not enough focus on how much do you need? As you show, we need to first look at our expenses. And in that context, what sort of retirement do we expect. It's all about expectations. And once you understand your income needs, where does it come from. My preference is income from my investments not reducing the portfolio by 4% per year. Thanks for the article. Good perspective.
DVK: Thanks for this creative pov helping to organize the precepts of MDT. I'm in the MDT camp but have a comment regarding the line item in your spreadsheet regarding risk/reward tradeoff. In the MPT box you say: "Higher returns can only be achieved by assuming higher risk (i.e., higher volatility)."
My understanding of MPT is that one of the bedrock principles is that by combining various uncorrelated assets you can increase your expected total returns while lowering overall portfolio volatility.
Again, thanks for the article. I look forward to seeing additional refinement to MDT/MIT.
trapper132: Thank you. Once you are relying upon the income from your portfolio for your living expenses it requires that you take a different look at your winners.
Uain53: You have to be ready to take advantage of those dips. There haven't been many so for in 2012. Thanks for the comment.
Mr. Schwartz: It can be tough to sell a clear winner but it may make sense if you can increase your income and still maintain or increase your total capital. Thanks for the comment.
eyetri2: Thanks for your comments. I tried to say that I'm not suggesting that JNJ and LEG are the absolute best available alternatives to MCD. I'm sure we can find someone to make an argument that INTC is not an A+ company. However, only in 5 years will be able to say with certainty which is the superior investment over the next 5 years. I do appreciate your input. I think this issue is a difficult one for DG investors.
jrcarl: Of course, the assumed growth rate for earnings and dividends is critical. I have listed these assumed rates in the key metrics for each of the stocks. I took the 5 year EPS growth rate from the Dividend Champions spreadsheet. And I was trying to be conservative in leaving the PE at the current ratio, assuming no PE expansion. (Nor any contraction.) As I alluded to in an early comment reply, can I rely upon MCD to meet its assumed growth rates going forward. It's not a given. Thank you for your perspective.
LarryMelman: Indeed. I understand your forest and trees concern. Projections and spreadsheets serve to put hard numbers to our decision making. Diversification and tax issues have to be addressed within the context of each investor's strategy and circumstances. Also, for me, I have to ask if MCD can perform for me over the next 8 years close to how it has performed over the past 8. Probably not, but it still has big opportunities in China and other emerging markets. Thanks for your point of view.
richjoy403: I understand your reasoning. I mention in the article that I was taking the extreme point of view of selling the entire position but cashing in half (or some other fraction) would also serve to increase your return on that portion and allow you to still be exposed to MCD. This is the nature of the decision faced by a dividend growth investor. Thank you for your comment.
KSAccountant: Certainly taxes have to be considered. But the point is that for an income investor does it make sense to let winners run forever when you could reallocate some of that profit to increase your revenue for years to come. Thank you for your comment.
Mr. Wells: Thank you for your comment. As I mention in the article, JNJ and LEG may not be your cup of tea for this type of strategy. However, as with most stocks depending upon when you purchased JNJ or LEG in the past 10 years you could be sitting on a decent gain.
Mr. Shulli: SD has filed the registration statement for Mississippian Trust II, to be traded as SDR. Not aware of announced IPO date as of yet.
DT160: Any partnership structure like an MLP or a trust will certainly add some complexity to your tax preparation. As for the sale of shares in SDT, SD retained a number of common units in SDT at the time of the IPO. I can only assume that SD is taking advantage of the substantial run up in the shares of SDT. This has no impact on the payment of distributions. The distributions are purely a matter of the amount of oil and gas recovered from the drilling operations.
cds1212: I agree with your assessment. For the operator it is a relatively low cost way to finance the drilling operations with some upside for them if the recovery rates exceed their projections. It is to their advantage to price the trust units attractively especially when they know they may want to form additional trusts for drilling in the same formation. For the investor, particularly when you can purchase at the IPO or early in the life of the trust, this investment offers a short term opportunity to profit through capital gains as well as a relatively high yield. Thank you for your informed comments.
rdburch: You have to be aware that these types of investments can generate Unrelated Business Income. If your IRA reaches a certain threshold of UBI, then your IRA will be liable for taxes.
Globalx: Interesting. You might want to have them double check that. The prospectus clearly states that the trust is organized as a partnership.
oagfy: The K-1 is not yet available and 2011 was the first year of operation for SDT. Understand that I'm not a tax professional but unless you have significant partnership holdings, you may not meet minimum filing requirements for the other states.