Martin Rice

Long only, value, short-term horizon, dividend investing
Martin Rice
Long only, value, short-term horizon, dividend investing
Contributor since: 2013
I went online today to order 2 iPad Pros, the most expensive models. The earliest I'll be able to get them is between Dec. 2nd and 5th. My local Apple store doesn't know when it's going to get any.
I guess Tim decided that the Pro is such a horrible mistake that he had production almost stopped.
This is the first article I've read by Pitti, and it's not a pity that it'll be my last.
The way I read it, he didn't say to sell Apple, he just said in the conclusion that he wouldn't buy it at this price but probably would be interested at $105 and under.
If Ayn(us) Rand wouldn't like something, then that something is the right thing.
Or it would be like waiting for the Republicans to compromise with Obama. Either way it ain't gonna happen anytime soon.
He's dealing with both factors, that is, market cap and price limit -- though he does not state a specific market cap. As he says "In short, small-cap and low-priced stocks can have risks that are way above average." And as he shows, stocks around $10 are almost by definition small cap.
And although they're all small cap, his final 10 range from 0.08 to 2.60 in cap. Clearly in this exercise Brad is focusing on price as a starting point. He considered a lot of factors before arriving at his final 10.
scoots, if I understand you correctly, here's the answer to your question. Look at the first two "comments" from factoids. They're opposites. If you agree with the first one, then click the "Like" button at the bottom of the comment on the right side. If you agree with the second one, click on the "Like" button at the bottom of the second comment on the right hand side.
Thanks, R.Fitz. Been consumed with other things since April. Now things have changed drastically in relation to my investing needs and I'm working on an article about it that I hope to publish in a week to 10 days if SA will have it.
Thanks for asking.
rratty, very interesting comment, at least for me. I hadn't thought of it before when looking at my position sizes. Because I tend to focus on actual dollars rather than yield percentages, then looking at position sizes in terms of dollars -- which is how I understand what you're saying -- makes a lot of sense to me.
I'm going to look at my portfolio with this metric added. Thanks for the idea.
But I have to agree with the comment that people don't buy yield, they buy an income stream. For those of us who are retired and whose income from SS and pensions is bolstered by our investment income stream, dollars are what count, not yield percentages which change almost every day based on changes in price.
Yes, 9%-10% is a nice yield. But if the dividend were cut, regardless of yield, I'd have less money coming in every time the dividend is paid. And the dollars that come in are the reasons I invest.
Long PSEC.
About Mr. Wonderful. Back in 1989 I founded a company that was bought in 1993 by the biggest company in the field (educational software), The Learning Company. I stayed with on with TLC as a ranking executive.
Then, in about 1998, Kevin's company at the time, Softkey International, carried out a successful hostile takeover of our company - the first hostile takeover in the industry ever (and maybe since).
I was made an offer too good to refuse to stay on as a senior VP. Consequently, I spent a year working very closely with Kevin, reporting directly to him. His persona on the show really does make him Mr. Wonderful compared to how he was on the job. He really is a tough guy as you point out in the beginning of the article, but a lot tougher than on the show.
I can't count the times he'd say "Martin, hop on a plane and fly to . . . (places all over the world) and "whack those guys," or "that guy" or "that operation." "Whack" was one of his favorite words.
He might not be Mr. Wonderful, but he's really, really smart. I stayed with him for a year before retiring and actually really enjoyed it.
I own some KO, not a great deal, about 430 shares, and have liked it for many of the reasons you state that make it worthwhile liking and owning.
What I liked most about your article, however, was your description of the considerations concerning stock ownership that are differentiated according to the investor's position as being retired or as being in the accumulation stage of his or her life.
I like to think of myself as a DG investor, but the more I've been thinking about it, the more I'm thinking that I really need to move the balance of my portfolio from DG to DI(ncome) investing.
At 77 and, fortunately comfortable without a penny of debt, beyond staying up with inflation as far as growth goes, what I really need and want from my portfolio is more (relatively safe) income in order to allow us to have more fun during this late stage of our lives.
Consequently, your article has helped bolster my my belief that my current portfolio analysis/re-evaluation with the aim of moving from DG to more of DI, is the right thing for me to be doing now.
Finally, I really like the way you write: being an old language and lit guy, that always means a lot to me.
djsulli, in fact it is global warming that's causing all these cold snaps. To being with, you might read this:
Large atmospheric waves move upward from the troposphere — where most weather occurs — into the stratosphere, which is the layer of air above the troposphere. These waves, which are called Rossby waves, transport energy and momentum from the troposphere to the stratosphere. This energy and momentum transfer generates a circulation in the stratosphere, which features sinking air in the polar latitudes and rising air in the lowest latitudes. As air sinks, it warms. If the stratospheric air warms rapidly in the Arctic, it will throw the circulation off balance. This can cause a major disruption to the polar vortex, stretching it and — sometimes — splitting it apart.
Or, if you want to really understand, read the whole story here:
Martin -- freezing in Chattanooga along with Bob.
I had about 10K in Detroit munis at the time they declared bankruptcy. A few months later I was able to sell them through Fidelity on the open market with no problem. I only took a $400.00 loss.
And major municipal bankruptcies are really, really rare, especially if you're buying highly rated GO bonds.
By the way, this comment wasn't to defend or blast holding munis in one's income portfolio, but only to say that if a municipality goes bankrupt that doesn't mean that you automatically lose what you had it its bonds.
Just curious about the 8.5% dividend growth you mention. For us DGI investors, when looking into the future for planning, as this article does, the rate of DG is extremely important.
Most sites I look at, including the two brokerages I use, usually show percentages of growth for 1, 3, and 5 years.
I was wondering which of those figures DGIs here on SA use when planning and projecting?
Thanks for the clarification, PendragonY. I understand what you're saying.
Pendragon, you ask "But didn't all companies that carry a large amount of debt and or pay large yields take a hit at that time too?" I believe the answer is certainly yes.
However, many investors, including me, are generally very careful about buying stocks with large debt ratios and wary about buying stocks with large yields.
Not having many stocks like that in your portfolio would have helped protect you during that FED trial balloon.
In a way I think this comment by Robert Allan Schwartz says it all about this endless back and forth between dividend (growth) investors and non-DGI investors over so many articles and endless comments.
To a huge degree it's a matter of WHAT MATTERS to the writer. There are loads of reasons that what matters is different for you or for me, things like, just two examples, investing horizon and personal goals.
I really think that there is no right or wrong on this issue. The only thing that matters is what matters to a given individual.
In the hundreds and hundreds of SA articles I've read about dividend investing, I've never seen anyone say that the price doesn't drop when the dividend day arrives.
What people say and what my experience has taught me is that there's no way to tell after that instant, momentaneous drop what the price will do. Sometimes it drops more, sometimes in increases; sometimes these things happen on that day, sometimes it takes a couple of weeks.
All the best DI and DGI investors I know and read state all the time that dividend capture strategies are a fool's game.
And, the fact is, that there are some folks who play the dividend capture game, but they're not what generally on SA are referred to as dividend investors.
Gerry and DJ I decided this was a good time for averaging down so I just increased my position with another 150 shares. Hated to see that dip go to waste.
Thanks for reading and the comment, Gerry. Buying yesterday was a better move than buying when I did (down 5.79%). But I still think it was a good buy and am not worrying at all.
I agree that some degree of sector balancing is important in overall portfolio management. It's part of a portfolio's overall diversification strategy.
At the same time, however, I think the investor's time horizon also bears on the strategy.
Thanks for the information about how you deal with this question, 7491. It makes a lot of sense to me.
Some people think there's a headache, but I, as do others, use a CPA to do my taxes so it's no problem for me.
Thanks, alschroed. I'm approximately those in MLPs and utilities. Light on tobacco. Have a bit of MO, but my wife won't go with more tobacco. Given that I've been smoking a pack a day for 62 years, I like the idea of getting some money back through the stocks appreciation and dividends, but she won't hear of it :-)
Brad, thanks for another great article about REITs. I've been following you for as long as I've been investing -- about 2 years or so -- and have learned a great deal from your articles and have enjoyed some nice income from my REIT investments that are based on your recommendations and articles.
One question that invariably pops into my mind when reading your articles is the percentage of my portfolio I can reasonably invest in solid net lease REITs, the ones, for example, that you recommend?
I realize that there are many different circumstances that individuals have to consider for making a decision like this. In our case, we are retired, 100% invested in stocks, all of which are dividend payers. We use our dividends to supplement our SS and pensions and the dividends are what make the difference between getting by comfortably and getting by very comfortably.
Currently we own 4 net lease REITs that comprise 6.54% of our portfolio (in terms of current value). It seems to me that we could safely increase our REIT sector holdings to 10% - 15% of our portfolio's value assuming that we bought only high-quality REITs with a solid, longer history of dividend payments (and at value or under value).
We'd love to know whether you think that 10%- 15% is a reasonable figure.
Thanks again.
DS, thanks for reading and the kind remarks. Yes, I'm learning more and more that it's never finished. There've already been several more changes that I'll detail in my next piece at the end of this quarter.
I find that many of the changes I'm making are a result of my defining our (my wife's and my) particular position as investors, that is, where we are in our life's spectrum.
I'm learning that one size does not fit all in investing, something I should have realized a lot sooner.
Right on, Gary. It was an unworthy, snide comment. Additionally, hanson's remark,
"I will state that for most people, they would be better off using index funds. It takes a rare individual to build his/her own portfolio. Sometimes we talk on SA like this reading sample is a reflection of the population. Well, our experience should tell us otherwise"
neglects the fact that we contributors to SA are writing precisely for the readers of SA and not a broad, general audience.
Very interesting overview of you holdings and their proportion/relationship to the entire portfolio. Thanks for sharing, Bob. What you're doing makes a lot of sense.
satan, you wrote:
"*btw: If the stock falls 1% due to a dividend (or any other reason for that matter) technically it takes a 1.01% gain to reach it's previous price."
After I posted my response I realized that I should have taken into account what you've said here but I was too lazy to edit. Thanks.
satan, I can't answer for conkjc, but because I, too, feel that the dividend doesn't result in a price loss -- more about that below -- I thought I'd respond to your question, which was:
"If the dividend is 1% and the price drops 1% ex-dividend then recovers: are you implying without the dividend the price wasn't going to rise 1% anyway?"
I'm speaking here from my particular situation, that is not in the accumulation stage but in the stage where I live from my pensions, social security, and dividend income; and from the additional situational circumstance that my horizon is relatively short, perhaps 5 to 10 years -- I'm currently 76.
As an aside, I'd also add that I think that many readers who participate in these comment discussions neglect to state/consider the particular situation that the commenter is writing from.
Anyway, lets say, because I think it's right and agree with you here, that the price -- using your example -- would have risen 1% anyway. From my perspective, I got the 1% dividend and the price value of the dividend-paying stock in a couple of days is the same as it was when the dividend was paid. So for me personally, I got 1% and the value of my stock is the same -- the value of my portfolio hasn't increased.
I do understand that if the dividend wasn't paid and the price didn't drop 1% ex-dividend, and then rose 1% in value, the value of that holding in my portfolio would be 1% higher.
But I don't care about that -- again, from the point of view of my situation. For me what happened is I got 1% in cash and the value of my holding is the same as it was (when the price recovers). And I and others in this particular situation I described are quite satisfied and don't really miss the extra 1% in value that we'd have if we hadn't got the dividend because it's the income we want -- and the recovery leaves us where we were except we also got the cash to buy some groceries.
So if that happened every quarter for let's say 10 more years until I die, the bottom line would be instead of the value of my holding being 40% higher, it would be only 20% higher and I would have bought 20% of the value in groceries over the 10 years. Why would I care? I'm dead now anyway.
It all has to do with perspective.
Great article, Bob, as usual. New investors will learn a lot about how to get started and what taking responsibility means.
Regarding your question about DG in taxable accounts: All the investing I've ever done has been in taxable accounts. Consequently I have to pay taxes on my DG stocks. I don't give it a thought because there's not too much one can do about it (leaving out income from things like MLPs). When I set my income targets from dividends the figure includes taxes.
qualquan, there is COLA for SS to help a little bit.
As far as pensions are concerned, it really differs from pension to pension. For example, one of my two pensions, the way bigger one, fortunately, is with TIAA-CREF.
I have about 70% of it in the stock portion and only 30% in the fixed income portion. It has increased beyond inflation every year for the past 14 years I've been drawing it. I realize that's not the kind of pension everyone has, but it's mine and I guess that is what informed my remark.
Yes, then there's growth. Once again, the bottom line as so often is the case in these discussions, really has to do with the individual's personal situation. I personally at this point in time, that is, personally as a really short-term horizon investor, don't care much about growth at all. I care about relatively safe income.
As it turns out, as of this afternoon, my portfolio has appreciated 15.52 percent since inception, that is, three years ago. I realize that's not particularly great as far as the overall market goes, but that 15.52% is only price appreciation and doesn't include the approximately 75K I've taken in dividends and interest in those three years.
But again, all I'm saying is that for my, that is, my wife's and my particular situation, we're doing great. I'll keep trying to do better, but only in terms of not losing capital and increasing income without sacrificing safety. I'm convinced I can do it -- with the help of the S.A.ers I follow.
Thanks for the response.