Long only, growth at reasonable price, long-term horizon, dividend investing
Long only, growth at reasonable price, long-term horizon, dividend investing
Contributor since: 2012
Good point but by the same logic, the companies that rode global expansion as a growth strategy for the past 25 years could then choose same store optimization, product/value upgrades and acquisitions as their next decade strategy to bring more revenues and profits. The point is that if the companies knew how to navigate the landscape successfully for over 25 years and deliver consistent earnings and dividend growth, they possibly can do the same in the future by adapting themselves to the best strategy based on prevailing market conditions. DGI is eventually a 'trust-based' strategy that the future, while cannot be the same as past, will not be totally different either, especially for a well-run company in basic demand sectors where many dividend champions operate. Size matters already in many businesses as big companies gobble up smaller competitors. Very few cases of $1 million to $1 billion revenue growth happens with the same company and same shareholders - they are acquired along the way. M&A can alter the landscape of many large companies and give them new avenues to grow, especially for those giants with high cash flow but poor organic growth prospects. MCD can figure out how to deliver value to shareholders in the future, and believing that it will - based on its past track record - is at the heart of DGI strategy.
Good pop from TUP quarterly results just announced. Decent performance considering adverse currency effect. BBB- credit rating is still investment grade that many companies and even countries aspire for. Importantly, S&P gives it A rating for earnings quality showing the diversity and strength of its earnings. We hope Fed doesn't raise rates for much of 2016 giving other currencies a chance to strengthen a bit against USD.
I hope you are right. It's a great company, just not feelin' the love all this year with a big unwarranted decline in its price. But dividend growth is good. Long DFS
Good points Eli. Worth remembering while enduring even stagnant dividends. In TUP's case, even a favorable movement in currencies against USD can provide earnings growth. The recent results show that revenues are growing in local currencies where they operate but translated to dollars, they are lower. This is not something a company that derives most of its revenues abroad can do much about.
Great article Dave. The Myth 17 is what I have wrestled with for quite some time. Market is always forward looking while a dividend paid is by definition backward looking. Your JNJ chart also shows that along with just about every chart except the high yielders where one can see the significant drop in ex dividend date. In some ways, dividends can be a bonus though not exactly 'free' lunch because the market is valuing a company on its future prospects while the investor is simply collecting money quarter being a silent observer to what the market is valuing the source at. If the market truly believes the company should be retaining earnings rather than paying out dividends, a clear sign, I believe, will be in the price action around those div dates. JNJ and many other examples show that it is not the case.
Good article Dave. In volatile times, this real income growth serves as a reassurance of the DGI strategy.
JNJ now has yield over 3%. Does this alone make it a good buy? I think more factors should be considered as well to ensure valuation is at a relative low levels.
Robyn, Good article. Chasing yield is a sin that I have also pursued and got my fingers burnt, I purposely have my burnt finger 'residue' (without selling yet, at a catastrophic loss on that security) as proof so it serves a constant reminder to me not to do yield chasing ever again. I do have a request for you to consider. It would be useful for the entire DGI community, I believe, for SA to list in one of the data columns in the Portfolio section the current dividend yield of each security as a percentage of 5-year average dividend yield. This info, is one of the key valuation metrics many use and is not readily available elsewhere. If SA could add this, it would be great. Thanks.
Good points, bearness. I think this deal smells of poor managerial and Board judgment. In fact, CSG shareholders should receive at least a 10% premium (arguably 30% premium considering synergies) over the last closing price. I don't understand how CSG's board agreed to these terms with Gramercy. Can they spell "fiduciary negligence"?
Good advice gabby. Thanks for your comment.
Thanks Chowder. I am glad you stopped by to comment on this article.
Valid point, RockinU. I use YOC for tracking purpose. Here's the logic I used: While increasing YOC gives you the assurance that your DGI plan is working, I noticed that it doesn't mean that your dividend income is going up optimally. In the case of UVV, the YOC went up after I purchased it due to dividends getting reinvested but the price appreciation was so much more that I wondered (knowing DG of UVV has been modest) whether the present yield (which determines your dividend income in absolute figures) can be improved upon with another good company with better DG that is perhaps a bit out of favor. That's the principle behind the modified chowder rule. Of course, the assumption is that the exchange is between two equally good companies with equally good prospects for the future. Time will tell if this method works or not, but in this case, but exchanging a 3.6% present yield with 4.94%, you get a stepped-up 1.34% increase in dividend income (even assuming the DG growth rate for both companies are the same going forward). As people rightly caution, this is not something to do often but perhaps occasionally may be worthwhile - again, only time will tell. Thanks for your comment.
Thanks uncle. Interesting perspective.
rose, you are an inspiration on DGI. Thanks for validating my exchange purchase :-) Maybe we will see in a year whether I made the right decision.
Thanks for your kind words. Interesting to see how people develop their own DGI way.
Mr. Fish does an amazing service to the DGI community.
Agree. How do you measure quality? For me, the rating on M*/S&P is just one parameter. The industry should have some favorable features and the company's position should be secured by moats, which are again subjective. If you have any specific metrics to measure quality beyond S&P or Jefferson reports, please let me know.
Thanks. Some great insights are in those interviews.
Thanks. I enjoyed reading it recently.
Thanks for your valuable comment Dividend Sleuth. Good to see another VTR believer. I loved Ghost Busters, that movie I am told still has a cult following. Maybe that's the real cult, not DGI :-)
Thanks IP. I absolutely love the blue-and-pink cotton blankets, though I did not take more than the one that my baby was so snugly wrapped with when we took him home from the hospital many years ago.
Good point Timmies, though one can also say that much of the appreciation has already occurred for the 'modified' chowder number to decline so much. Time will tell whether this approach has merit or not.
Thanks. Perfectly reasonable view.
Thanks Darren. Nice to get affirmative view on this approach. This comment thread will hopefully give more insights. To paraphrase Isaac Newton, this is just a case of looking a bit further by standing on the shoulders of DGI giants.
Thanks grisly. You can achieve similar results with other methods as well. I find Chowder rule is a good guideline and when used well, is quite helpful in DGI purchase discipline. I've had the pleasure to interact with him through SA and he is a phenomenal resource like the many DGI stalwarts on this forum.
Thank you Robyn.
I think there is too much hoopla about Fed raising rates. Even if they do, they may raise gradually in 0.25% increments till say, 1%, and then let things be there for a while to see before they touch rates again. Fed may try to 'engineer' a lot of things, but the last thing Fed wants is to engineer is a market crash. Even at 1%, there is a risk of dollar gaining strength so much more compared to other currencies, Fed may decide to stagger this even more with a pause at 0.5%. No matter what Fed does, I think they will give businesses adequate time to adjust their operations and balance sheets to handle the situation - at least the good companies plan it that way.
Thanks Condrado.
Thanks, I agree. I only wish the market did. A superbly-run company with conservative financial management (which is good in this industry) and strong customer orientation. This stock easily deserves to trade at $70.
Thanks Richard for the insightful reply.,
Thanks for an excellent article, Richard. Insights from a seasoned investor on the ground are always superior in analyzing emerging market investments. What are your thoughts about CIG - a brazilian utility in Gerais Minas province? Will they be able to get through this uncertainty and generate growing dividends?
True, but even for younger folks, higher yield reinvested (even if growth is low) compounds quite fast as long as the business continues to remain stable and throws cash flows enough to cover the yields. That's the conclusion from the other articles that I was referring to in my earlier comment. Higher yield should be looked at favorably also by younger folks as long as they reinvest all dividends.