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  • Avoiding Dividend Cuts: Insights From the Number Crunchers [View article]
    Hey, Robert. I don't find much time to post these days (just busy with other stuff) but still drop by to read an article or respond to someone who read/commented on one of my old articles.

    Best wishes, thanks for writing.
    Jun 12, 2012. 01:16 PM | 1 Like Like |Link to Comment
  • Avoiding Dividend Cuts: Insights From the Number Crunchers [View article]
    Thanks for reading and commenting. Diversification of income sources seems wise, I follow that principle too. The research I reviewed showed a high or rising yield was indeed one good sign of a coming dividend cut, when caused by a declining stock price rather than a growing dividend. Looks like ERF definitely qualifies on that.
    Jun 11, 2012. 05:43 PM | 2 Likes Like |Link to Comment
  • Why Dividend Growth Investors Should Not Ignore Stock Prices [View article]
    Thanks for both Part 1 and Part 2 of this series. Good stuff, shows lots of work and clear thinking.

    In an old article I summarized a couple of research studies on dividend cuts. According to one study, a rising yield due to a declining stock price does indeed correlate with a future dividend cut.

    Other good indicators include low ROE/ROA, poor sales growth, high debt and capex, a low cash position, and a couple of others as well. Simply comparing these to the industry average is a workable starting point. (Perhaps surprising, but for some good reasons, payout ratio does not give a reliable correlation.)

    However, as you also point out in Part 2, the correlations are far from perfect, generating both false positive and false negative signals. Some of this noise occurs because dividend cuts can be driven by businesss numbers (such as those discussed above) and also by bad news, which can suddenly trump seemingly good numbers. (Recall when bank regulators nailed HCBK last year.)

    Any interested readers can find details here:
    Oct 14, 2011. 01:48 PM | 4 Likes Like |Link to Comment
  • 10 Commandments For Dividend Growth Investors [View article]
    Congratulations on your first article! Following these principles will serve investors well. I enjoyed the clear-thinking in your content and your creative presentation.
    Sep 18, 2011. 02:34 PM | 8 Likes Like |Link to Comment
  • 10 Dividend Stalwarts Outperforming The S&P 500 Since 2006 [View article]
    Thanks for the hard numbers and clear thinking. Perfect counterpoint to the clutter of nonsense surrounding this topic recently.    

    For more of that, see my articles:

    "Dividend Zealots, Biker Gangs and the Modern Mafia:  How They Rob Us All of Money and Dignity."

    ... and 
    "Revenge of the Dividend Zealots: Our Secret Plan to Outlaw Milk and Cookies."
    Sep 8, 2011. 01:36 PM | 8 Likes Like |Link to Comment
  • Debunking Dividend Agnostic Assumptions: Here's What Really Makes Income Investors Tick [View article]
    Thanks to the author. Quite a discussion.

    Anyone concerned about the dangers of dividend zealotry might check my article:

    "Paradise Gone: 23 Ways Dividend Zealots Undermined World Civilzation Since Ancient Greece."

    It's a follow-up to my tragic tell all:

    "Confessions of a Dividend Zealot: How I Destroyed America's Most Sacred Values and Lost Weight Doing It."
    Sep 2, 2011. 05:16 PM | 10 Likes Like |Link to Comment
  • Simple Dividend Strategy, Part 2: A Research-Based Case for Investing in Dividend Growth Stocks [View article]
    Yep, the Arnott-Asness study used trailing payout ratio, not yield. The authors suggest that mgmnts might keep payout ratios high when they anticipate strong future earnings growth, and low when they are pessimistic.

    A related possibility: high payout ratios occur when cos maintain and/or raise divs during normal econ/business downturns. Then earnings rebound with the econ/business cycle, pushing ratios ever lower as profits climb higher. Then we top out and the process repeats. Cyclicals, like industrials, consumer discretionary, tech/semis, etc., make big eps and ratio moves exactly like this.

    Several studies do look at total return by yield groups, with mixed results. Most likely, yields between about 3% and about 6% make the best bet for total returns, but the research is limited and other data, esp if you go back enough years, can give different results.

    I hate to bombard you with another article link, but it would require many more to link each individual study, so here's another article. Yield vs. total return is covered in the article's final section. Like the other articles, it includes plenty of links and sources.
    Aug 19, 2011. 02:48 PM | 6 Likes Like |Link to Comment
  • Simple Dividend Strategy, Part 2: A Research-Based Case for Investing in Dividend Growth Stocks [View article]
    Thanks for this article and the research links. Over the long haul, dividend stocks, especially those with  growing dividends, outperform the market and absolutely crush non-dividend payers. There's little doubt about it, based on the weight of several different data sources.

    Dividend stocks' total-return dominance has been interrupted by periods like the internet stock boom and big emotional launches off some bear market bottoms.

    Exactly those circumstances drove the Schwab results, from 1990 to 2008, which included the late 90s tech frenzy and the 2003 bull market lift-off. Note that for the nearly overlapping period 1992 to 2010, both the Dow Jones Select Dividend Index and the S&P Div Achievers beat the S&P 500. A couple of years' moves made all the difference.

    Why do dividend payers tend to outperform? Basically because they are better companies, with strong business models, superb cash flows and disciplined managements. It takes a great company to keep paying and raising dividends for decades. Weak businesses can't and don't do that. (Of course, there are strong companies that don't pay, and weak ones that try, but taken as a group div payers  show better metrics, such as the earnings growth you covered here, as well as ROE     for example.)

    I covered several studies (Ned Davis, AllianceBernstein, Miller-Howard, S&P) as well as some other data points on these topics in past articles. Any interested readers can find them here:
    Aug 19, 2011. 01:08 PM | 10 Likes Like |Link to Comment
  • Dividends in Danger? Frontier, CenturyLink, Conoco Phillips, 4 Others in the Crosshairs [View article]
    Correction re: my CTL comment --

    I just found that CTL issued a boatload of new shares last quarter. So based on the new share count, the dividend looks like it's running over $1.7B, which already puts it at 50%+ of mgmnt's $3B+ fcf estimate in their conf call. (On the old share count, the div was about $1B.)

    So while I don't see the cut danger, I don't see much room for an increase either. I'm still watching CTL, their dividend announcement probably comes next week.
    Aug 17, 2011. 12:35 PM | 6 Likes Like |Link to Comment
  • A Simple Dividend Strategy That Will Get You 4%, Lower Volatility and More Sleep Part 1 [View article]
    Thanks for this article. I'm a hard core dividend growth investor for over 10 years now and, at least from my perspective, you nailed several important concepts here. Congratulations on your good work.

    BTW, the Dividend Aristocrats include only S&P 500 components, so miss over half the 25yr club, mostly midcaps & smallcaps. (The Div Arists ETF, ticker SDY, is based on the S&P 1500, which can add to the confusion.) Anyway, stick with Dave Fish's superb compilations of stocks with 25+, 10-24, and 5+ years of dividend growth (linked above). He provides a raft of fundamental data, monthly updates and regular commentary via his SA articles. The best in the business.

    Your stats on dividend cuts are spot on. Outside of crises like the Financial Meltdown and Great Depression, dividend cuts by high quality companies are rare. In normal times, most dividend cuts come from cos with fundamentals so lousy you wouldn't want to invest in them to begin with. Counter-intuitively, payout ratio is not among the best forward predictors of a dividend cut. (The best single predictor is return on equity!)

    For more than you ever wanted to know about div cuts, check my article "Avoiding Dividend Cuts: Insights from the Number Crunchers."

    Last point, re: the comment above about dividend stocks underperforming during bear markets. Over the long run, but not every short sprint, dividend stocks, especially those with growing dividends, outperform the market and clobber non-dividend payers. Generally, these stocks decline less in bear markets, but despite short term setbacks their outperformance record is decades long.

    For details and background, see my article "Dividend Boosts Keep Getting Bigger, But Dividend Stocks Are Snoozing ..."

    Thanks again for your article.
    Aug 14, 2011. 01:53 PM | 4 Likes Like |Link to Comment
  • Dividends in Danger? Frontier, CenturyLink, Conoco Phillips, 4 Others in the Crosshairs [View article]
    Questions/Comments above on CTL:

    The 50% payout ratio that CTL mgmnt estimated is based on free cash flow, a common payout metric for telcos.

    I don’t recall that CTL mentioned their dividend streak in the conference call. Last time they announced hiking the dividend (Feb 2010) they referenced their “long history of increasing dividend payments” – I generally like to see that sort of statement but I've seen stronger ones than that from other d-g cos.

    Without acquisitions, CTL does seem like a slow grower, almost a pure income play. The other CTL metric I don’t like is their ROE, about 5% or so, based on eps. Contrast that with VZ and T, whose ROEs run about 16% to 19% or so.

    Those are big differences because ROE combined with Payout Ratio suggests organic growth potential (i.e. how much does the company retain vs. pay out, and what returns do they get on the portion they retain.) With a such a low ROE, CTL probably can’t grow much except via acquisitions, borrowing, share offerings, etc.

    So CTL makes an intriguing income idea, especially if fcf from recent acquisitions lets them keep hiking the dividend. But their acquisition integration needs to stay on track because there doesn’t seem to be much of a growth engine without that.
    Aug 11, 2011. 08:22 PM | 4 Likes Like |Link to Comment
  • Dividends in Danger? Frontier, CenturyLink, Conoco Phillips, 4 Others in the Crosshairs [View article]
    Thanks for this ongoing series. (And thanks too for linking my article.) A couple of points on CTL and VIVO. 

    Based on CTL's recent earnings conf call, the chance of a cut seems tiny -- an increase by year end seems more likely than a cut. CTL estimated a whopping $3 billion in free cash flow for 2011 and roughly a 50% payout. It looks to me like the current dividend is running about $1B annually so there's of plenty room. I'm watching for more news in their next dividend announcement, which should come within a couple of weeks.

    VIVO takes great pride in their outstanding dividend growth record, but they are slipping. Dividend boosts are based on mgmnt's estimated earnings for each coming fiscal year. They badly overestimated at the beginning of the year so earnings missed, pushing the payout above their 85% policy ceiling. Mgmnt then revised ests downward ... and missed again in the latest quarter, then revised downward again. Oops.

    Although I think it's still too early to say VIVO will cut, I would not be surprised to see a policy change, which could at least end their streak (and maybe prompt a cut). Estimated earnings aren't making it as a policy framework.

    Disc: Long VIVO for several years. CTL on watchlist for near-term Buy. 
    Aug 10, 2011. 01:52 PM | 6 Likes Like |Link to Comment
  • Cato Corp. and Zipcar: Fundamentals Still Matter [View article]
    Thanks for this perspective. I've owned CATO several years and agree its valuation numbers look superb. CATO also raised its dividend 10 consecutive years until freezing it during the 2008-09 meltdown. The company then boosted by a healthy 12% in 2010 and 24% in 2011.

    CATO runs a cyclical business that will surely see some slowing near term, but can likely grow earnings and dividends near double-digits over the long haul. I recently profiled the co as one of two freezers I think disciplined dividend-growth investors might legitimately forgive for 2008-09 frozen dividends. Any interested readers can find the article here:
    Aug 9, 2011. 01:29 PM | 1 Like Like |Link to Comment
  • Illinois Tool Works: Innovation, Growth, Above-Average Yield and Low Valuation [View article]
    Thanks for your superb series on industrials. The sector has been a favorite of mine for some time. I've been especially happy with UTX, which I've owned several years, and also like ITW (on my watchlist), so thanks for your ITW analysis in particular.

    These stocks' exposure to developing global markets is a great growth driver. (Amazing how many high rise elevators UTX installs and maintains in China.) My hesitation on the sector now comes from seeing declines in global economic growth, manufacturing activity and business investment confidence. I'm usually an optimist, and earnings look great, but macro numbers seem surprisingly sluggish. Better bargains ahead in these cyclicals? If that occurs, ITW will be high on my list.

    Thanks again for this series.            
    Aug 5, 2011. 03:15 PM | 5 Likes Like |Link to Comment
  • 5 Dividend Stocks as Bond Substitutes [View article]
    Congratulations on publishing your first article and keeping cool under fire while nasty markets blasted your retirement portfolio. I've long believed that investing in general, and stock picking in particular, are important skills. And like any other skills, we can develop and improve them with effort and discipline. I hope your story provides an example others can learn from and emulate. Congratulations! 
    Aug 4, 2011. 02:32 PM | 9 Likes Like |Link to Comment