Marc Lichtenfeld

Newsletter provider, long/short equity, dividend investing
Marc Lichtenfeld
Newsletter provider, long/short equity, dividend investing
Contributor since: 2010
Company: Investment U
Thanks for pointing that out. BEN shouldn't be in the database. We have not rated financial companies yet. They should be included very soon.
For free cash flow I use cash flow from operations minus capex.
Since Mattel did not give us a capex number I had to make my best guess. I used the same number from last year which gives us free cash flow of $643 million. Still enough to cover the dividend.
Going forward, Wall Street analysts, who are almost entirely bearish (only 1 out of 14 rates it a buy), project free cash flow to fall to $597 million this year but rise to $807 million next year.
I'm no fan of Wall Street analysts, but if they're even in the ballpark, Mattel should have no problem paying their dividend.
Why would they cut their dividend? Free cash flow still covers the dividend payment.
My company forbids me to write about any stock that I have a position in. So I do not have a position in Synta.
Completely disagree with your point that a dividend raise would be irresponsible and appear desperate. The company still has more than enough free cash flow to cover the dividend. A raise would signal confidence in the future, not desperateness.
Thanks very much
Wow, if you're a recent college graduate and you already grasp this concept, you're setting yourself up very well for later in life. Kids' college tuition and retirement should be easily attainable. Good for you and keep up the good work.
MWinMD,
Interesting info. Thanks for adding that to the discussion.
JCATRI,
Thanks for the comment, but I couldn't disagree more. The S&P is trading at 15x earnings, 14x forward earnings, not expensive at all. And while this quarter's earnings aren't likely to be too exciting, the economy is showing signs of life from homebuilding to retail to autos and the highest level of consumer confidence in 5 years.
Additionally, the only times the market has been down over ten years were the years ending 1936-1940 and 2008 & 2009, all periods tied to the Great Depression and Great Recession.
So to not make money in the market over ten years, you needed epic financial collapse. And keep in mind, not all periods tied to those eras were negative. 1931- 1941 or 2001-2011 for example.
msapp,
Look at the payout ratio. It's the percentage of net income that is paid out in dividends. As a general rule, I don't like to see more than 75% of net income paid out in dividends. More than that and the company could have a tough time increasing the dividend if earnings are weak.
Come to Palm Beach County. There is new construction everywhere.
The return wasn't necessarily low, it was that the market was white hot, so price made up a larger percentage of total return than dividends.
They were also saying the same thing in 1942, 1979, 2008...
I guess SA cut out the link to my new book, Get Rich with Dividends, so I'm going to try to sneak it in here. :) If you're interested in learning more, visit http://amzn.to/OA3TDe
gcmagone,
The strategy works if you need income today. If you invest in Perpetual Dividend Raisers you'll at least stay ahead of inflation. If you're in some stocks paying, let's say 4% and they boost their dividend 8%-10% per year, that will preserve and grow your buying power each year.
Clear,
Thanks for the comment. I prefer DRIP as it is easier for most investors. Once they find a stock(s) they like, they can continue investing in it automatically and usually at no additional cost. Though for investors willing to put in the research, the second strategy that you mentioned also makes sense.
I'm not so sure the mipo safety concern is limited. The drug was rejected once before because of safety issues. Every trial has shown elevated liver enzymes. Even if it is approved, there will likely be a black box warning.
Thanks chk. I used Morningstar for this column.
Jan iss right. That's a typo regarding APA. The number is correct, but it should have said oil and gas company. Sorry for the confusion.
Rookie - hey, now!
Acuity,
Very true. Thanks for pointing that out.
Thanks for all of the great comments everyone.
Rodger, I've been thinking the same thing, particularly now that interest rates are starting to creep up. If we get a significant move higher in bond yields, I wonder if we'll see an exodus from DG stocks, especially if there are some gains to be pocketed in those names.
There's a mistake in the article. I mentioned that you'd receive fewer dollars if the real appreciates and more if it falls in value. It's the other way around. You'd receive a larger payment if the real appreciates and a smaller distribution if it depreciates.
Sorry for the confusion.
It certainly has potential to move the needle, but I don't know if it will be all that much. With baby boomers starting to turn 65, the healthcare sector is expected to grow from about $2.5 trillion to well over $4.7 trillion.
What I love about the sector is that those boomers (and everyone else) will age, take their meds, go for diagnostics, have procedures, etc., no matter who is in the White House, what happens in Europe, Iran, with oil prices, unemployment, etc.
They've become more popular for sure, but you don't see them mentioned often in more mainstream financial media.
I suspect in 2012, you'll hear about them much more as investors have to look harder for income. As they discover MLPs, the prices will go higher, making it a hot sector and generating more media coverage, which will create even more interest...
You could have said the same about Microsoft before they started paying their dividend.
You're right about Sanofi. I know that ISIS' partner is Genzyme but when I wrote it, I was thinking of the Genentech/Roche acquisition. Sorry for the mistake.
The Medicare cuts are old news. I would argue that those cuts and a lot of bad news are already priced into the stock.
Jacob,
As an example, the S&P Dividend Aristocrat Index outperformed the S&P 500 by 395 basis points over the past five years with a dividend yield 77 basis points higher. It also had lower volatility.
What was responsible for the outperformance? Higher demand for perceived better quality? Better earnings, which enable them to pay a higher dividend?
I haven't done a study as to whether earnings or cash flow are of higher quality or growth, but something is driving the prices of these stocks higher than their peers.
Jacob,
Thanks for the comments. I appreciate the debate and being forced to think about my argument in different ways. I mean that.
Even if I agreed with your thesis, I wouldn't necessarily expect the premium will fade due to investor education and sophistication. The market has been around for a long time and though we are always learning, I'd think this would be a concept that would have been discovered and accepted by most already.
Yes, short sellers are sophisticated, but if the reward is worth the risk, they will accept the risk. When someone buys a call with a spread of 0.90/1.00, they are already 11% in the hole, yet traders do this all the time So taking on extra risk of let's say 2% a quarter (for a stock with an 8% annual yield) shouldn't make that much of a difference if they expect a significant drop in the stock price -- particularly if they don't expect to stay short long term.
As far as yield, I do think it's the appropriate term. It goes back to our fundamental disagreement and my belief that the stock price is not ultimately harmed by the dividend payment.
Jacob,
That's an interesting question and in a vacuum you'd be right that the 5% dividend stock would be $19. But the market is not a vacuum. Everything else being equal, I believe the stock with the 5% yield would outperform the one without because of supply and demand.
There would be greater demand for a stock that generates a 5% yield, particularly in today's low interest rate environment.
And yes, I believe shorts have to consider the dividend in their assessment of risk. Again, in a vacuum that might not be the case, but in the real market, the dividend can add to their loss if the stock moves against them.