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Kurtis Hemmerling

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  • Misguided Popularity Of Dividends: Not Always What They Are Cracked Up To Be [View article]
    But I do agree that Apple should not offer dividends for other reasons. They have a practice of investing in factories following which they get exclusive rights to the technology for a set period of time and a discount thereafter. This is a huge front-run in a competitive market and they are pretty smart with creatively using their cash in other ways than lowering valuation ratios through dividends.
    Jan 16 02:29 PM | 1 Like Like |Link to Comment
  • Misguided Popularity Of Dividends: Not Always What They Are Cracked Up To Be [View article]
    Dividends do have a positive effect. Removal of equity from company is done dollar for dollar on share price. While this alters book value of a company it does not alter earnings reported. If earnings remain the same and your price drops - you have a lower P/E ratio. Lower P/E ratio creates value, the potential for price support, or a higher yield.

    Consider: A company trades at $100 per share. They have $30 per share in cash and a $50 per share book value. Then earn $10 per share annually. Growth rate is 0 just to make this simple. How will you make money on this stock unless they do something? Offer a dividend.

    *$30 in income - you pay tax on it
    *Shares drop to $70
    *P/E falls from 10 to 7
    *If they pay 100% of the net income in dividends(not advised but used so we can compare apples to apples next) - you sit with a 14.28% yield

    You have a fat consistent yield in a very low P/E stock. If they didn't pay dividends what will drive the price up? An increase in book value? Maybe but in 10 years the book value will be go up to $150. You really think this stock will trade at a P/B ratio of 2 sending the price up to $300? You realize the P/E ratio is now 30 and without earnings growth I don't see anyone touching that with a 10 foot pole. Even if that were true, your compound annual growth rate would only be 11.61%.

    Dividends lower share prices while not affecting earnings for a lower P/E (whether it be a one-time special dividend or a smaller regular one). There is very little positive short-term price momentum associated with regular dividend payments. You get a more smoothed-out growth level throughout the year. It has the same effect as buybacks (except buybacks increase earnings which lowers the P/E ratio and prices also jump on buying which leads to short-term momentum) Buybacks are more open to shady company practices though.
    Jan 16 02:24 PM | 1 Like Like |Link to Comment
  • How To Profit From A Netflix Earnings Hit Or Miss [View article]
    If you look at this with weekly bars - it is a great pullback to the 20 week ema - which could lead to explosive downsides following earnings. Will need to watch price action up to and follwing earnings but a lot of recent counter-trend buyers will turn and flee sending this down hard if its not fireworks.
    Jan 16 01:19 PM | Likes Like |Link to Comment
  • Are Dividends Irrelevant, Or Even Harmful? [View article]
    Agreed that historically bonds have delivered with income only investors. However, with low bond yields that are completely consumed (and then some) by inflation that is now around 3.5% - some are looking for higher yielding products. The FEDS commitment to long-term low interest rates will weigh heavy on bonds. Carefully picking sound dividend stocks is one way to create a value-based income product by knocking down the P/E ratio which gives more valuation stability and support than growth stocks - especially since lower P/E means more yield unless prices go up... either way its good.

    But when bond yields start to go up above inflation rates, it'll be time to re-look at which is best based on risk factors.
    Jan 16 10:49 AM | 2 Likes Like |Link to Comment
  • Are Dividend Stocks A Substitute For Bonds? [View article]
    I find this short on actionable advice. You talk about averages but you only invest in the current price and yields. What are you telling investors today? Buy bonds at todays low yields and it will likely spike up to 17% at some future point giving them an average yield of 7.5%? Why not go with dividend stocks with higher yields now and rotate - if and when - the bond yields go up later? Bonds are not like stocks as you like to point out and you will not be missing out on some great captial appreciation price move.

    In fact, tell the zealots and maniacs what happens if you buy a 10 year bond now at a low rate, get really jealous when you see your dividend growth friends raking in 14% total average gains using some simple utility or MLP strategy (this has been the 10 year average - if you can use your 7.5% yield than fair is fair) and sell your bonds when current yields spike up to 7.5%? How much money will your client make in that scenario? If he locks in at a low yield and sells unhappily when everyone is making money when interest rates are high, what happens when he sells early?

    Your article is true if bonds are at 7.5% and dividend yields are at 5%. Is that the case now? Was it necessarily true in the past or were there higher dividend yields when interest rates and bond rates were higher such as in the 80s?

    Hard facts please and actionable advice will turn believers into your camp - otherwise just more anti-dividend rhetoric.
    Jan 13 04:12 PM | 20 Likes Like |Link to Comment
  • Is There A Misplaced Mania Over Dividend-Paying Stocks? [View article]
    Another article I wrote on detailing yield and average share price outperformance of market. Combine both to see how much dividend stocks beat the market on average. When you consider that the market is made up of dividend stocks, the dividend-free universe is even lower.

    This doesn't speak about why dividend companies outperformed - maybe higher quality companies offer dividends, maybe higher gains are linked to value premium, that is open for debate. Bigger people drive bigger cars but that doesn't mean you'll get taller just because you buy a Hummer.
    Jan 12 08:40 AM | 1 Like Like |Link to Comment
  • You Know How to Pick Great Stocks? Prove It [View article]
    No doubt. But it is up a lot from $3 - 4 (split adjusted) in the late 90s. No implication was meant towards future growth - just pointing to the huge jump it has already experienced.
    Jan 12 05:31 AM | Likes Like |Link to Comment
  • Spain Must Address Low Labor Productivity To Resume Economic Growth [View article]
    I liked this article as all too often the 'run of the mill' treatment is to focus fiscal and not social issues. Whether everyone here agrees with you or not I generally prefer the honest viewpoint of someone living and working in the country than some financial advisor living in the US who reads reports and doesn't understand the cultural differences. Keep up the good work.
    Jan 3 07:09 AM | 2 Likes Like |Link to Comment
  • Why I'm Cancelling Netflix, And Why You Should Care [View article]
    $8 isn't much but I get the tv shows I want for free with the listed networks. Do you have the Canadian version of Netflix? One-third the content and not a great line-up either. The point is that I am not addicted to movies and I have lots to do with my time. If I only watch 2 movies a month - I can pay $4 to $5 per show and actually get what I want for the same price.
    Dec 28 10:47 AM | Likes Like |Link to Comment
  • Why I'm Cancelling Netflix, And Why You Should Care [View article]
    I hear you. But in Canada I am having a hard time finding one or two new good movies a month. Once you burn through their light-weight catalogue of so-so movies you pay $8 in the hope of new content that is worth watching. Good value for the first two or three months - not so much after that.
    Dec 28 08:41 AM | Likes Like |Link to Comment
  • Why Healthcare Is Not Defensive [View article]
    Since I wrote that article little over a month ago the stratetgy is up 14.26% which far outstrips the market.

    This is another article trying to get a free ride by flaming contributors who actually did some homework. No, backtesting in itself is not the only consideration. But your vague statement about balance sheets being ridiculous and betting against healthcare just becuase it is defensive is not a well-defined strategy nor is it likely to be profitable. You slam me for offering up backtested proof with robustness, where is your proof that standing in front of a bus is a good idea just because busses usually win and this time you think it'll be different? I can show you backtested proof of contrarian investing if you like - but you will flame it too no doubt.

    It seems like you did not the actual article with cautions and a methods to limit risk. You extracted a portion out of context and offered up nothing in return. Do your due diligence and be honest next time.
    Dec 27 01:33 PM | Likes Like |Link to Comment
  • Dividends Vs. Buybacks: Putting The Debate To Bed, Part II [View article]
    I guess the case could also be made whether you want the government to use quantitative easing to buy back bonds or mail us a check.
    Dec 16 07:39 PM | Likes Like |Link to Comment
  • Dividends And Stock Buybacks: Mutually Exclusive Or Interrelated? [View article]
    Buybacks can add a layer of coverup for excessive company options being handed out. Managers like buybacks since it keeps share prices propped up in the short-term. If a company chose to pay dividends this would negatively impact their company option premiums as they are negatively related to future dividends.

    I think buybacks CAN be okay provided no dilution is going on behind the scenes. But most often you have executives announcing a buyback, watching share prices jump, exercising options and selling into the hype - just to watch prices settle with a similar outstanding share pool a meager gain by long-term shareholders.

    In altrusitic theory it seems good. But I wonder how much extra earnings growth or excess net asset growth per share is really acheived in the real world over the long-term versus not doing it (factoring in the incentives of managers associated with executive options).
    Dec 16 02:51 PM | 2 Likes Like |Link to Comment
  • Dividends Vs. Buybacks: Putting The Debate To Bed, Part II [View article]
    Dividend and share buyback policy is interesting stuff. Some random thoughts:

    * Does dividend policy in itself create higher combined capital growth and income returns over non-dividend companies, or is it becuase higher quality companies decide to pay dividends?

    *Shouldn't the decision to pay dividends or not be based on the return on assets? If you take the dividend, pay tax and re-invest you in theory would do worse than if the ROA was high and they reinvested it.

    *Agree with mailer-daemon. Netflix buying back shares around $300 a piece wasn't too smart now that shares are at $70 and they diluted it. A waste of shareholder equity. Its all about the price you buyback at. As well, if you buyback and you give your employees tons of options - shareholder equity is being leaked out.

    *Difference between fiscal gain and share price gain?

    What I am really interested in is if you had 4 identical companies in every way shape and form. Have combinations of dividends and non dividends - and each of these are branched into buybacks and no buybacks. If all other values and metrics are equal - how would this effect total shareholder gain?
    Dec 16 11:33 AM | Likes Like |Link to Comment
  • S&P 500 Stock Picking Strategy That Beats The Market [View article]
    Insightful - thank you for sharing.
    Dec 13 12:59 PM | Likes Like |Link to Comment