Sell This Dividend Blimp Right Now: Requiem For A Philip Morris [View article]
Joe - PM produces about $400 million in free cash flow PER MONTH. It is a superb business. Your thesis hinges not on PM, but on the assumption of other currencies consistently depreciating against the US dollar. The stock has run up considerably, but the dividend will be at $4.00 within 2-3 years, so for me it's a very long term high quality hold.
8.54% And Higher Dividend Yields For My 'Personal Pension Plan' [View article]
Todd - Very interesting. I share your general enthusiasm. However,regarding QRE, thesingle most important number in the financial statements (I've been a CFO, CEO and Chairman so I speak from experience) is Cash Flow from Operations. Cash is what pays vendors, meets payroll, and pays shareholder distributions. In 2011 QRE generated $60 million in cash but paid out $88 million in distributions. Therefore they are dependent on the external capital markets. I would be VERY careful about investing much mobey in a company that is essentially paying distributions by borrowing money and continually selling more stock.
Why Teekay Is Overvalued And Its Dividend Is Not Safe [View article]
1. Lots of interesting data. A key change, however, would be the weighted average cost of capital. TGP's cost of equity is about 9.8 percent (div yield plus div growth rate) but their cost of debt is far less. Look at the BS fortotal debt, and IS for interest expense. Overall TGP is about 2/3 debt and 1/3 equity, so TGP's weighted average cost of capital is much less than the 9.8 percent used, which will materially change a number of the calculations.
2. MLPs are far different structures, and applying corporate analyses to an MLP can at times be misleading.
When Royalty Trusts Cease To Be Royal [View article]
The analysis is shallow and incomplete. It's based on assumed future oilprices of $61-$96 bbl. It fails to account for PBT's $1 Billion cash reserve. It fails to account for the fact that total bbl reserves for BPT have risen a lot each of the last 3 years. At $76 a share, it's a buy!
A Quality Income Portfolio For 2012 [View article]
Good comment. Ultimately, as you know, if you hold a stock long enough, the total return ends up being the original dividend yield + the growth rate of that dividend [often called Gordon's Rule], so your focus on dividend growth is right on!
You Need To Pay Higher Taxes So We Don't Become Greece Or Italy [View article]
I recently added up all the taxes I pay in California, and it came to well over 50% of my paycheck! 35% federal, 10% State, payroll tax, social security tax, etc, etc. And, coming soon, a 3.8% additional Medicare tax, and the possible end to the Bush/Obama 'tax cuts'. Plus overall, 5% of the people are paying as much total income tax as the other 95% combined, and 1/2 don't pay any income taxes at all! Instead of the government helping me succeed, I feel like Big Gov is the biggest single obstacle to success!
So, I did the logical thing...I simply retired. Why do all that work, take all the risks of running a business and creating jobs, when I get to keep well under 1/2 of what I earn?
AT&T And Coca-Cola: More Expensive Than You Think [View article]
Thanks for the analysis. Studying the dividend - which is a cash payment - relative to EPS is not a meaningful effort despite it's popularity in the press. The single most important number in a company's financial statements is cash flow from operations in the Statement of Cash Flows. From that subtract cap ex, and the result tells you how much cash is available for dividend payments. It's often far different than Net Income.
Looking at ATT, for example, for the year ended 12/31/2010 T had cash from operations of $34.99 billion, but spent $19.53 billion on required cap ex leaving $15.46 billion available for dividends. They paid out $9.92 billion in dividends, meaning they had $1.55 in cash available for each $1.00 dividend payment - a safe margin.
Net Income and EPS are accrual numbers, but cash is what meets payroll, pays vendors, and pays dividends.
Are High Dividend Stocks a Good Investment? [View article]
Two points: 1. the long term IRR on a dividend paying stock is equal to the current yield + the dividend growth rate. This formula should always be included in any long term investment; 2. comparing the dividend payout ratio using net income is useless and misleading. Use instead cash flow per share. Net income is NOT cash. The single most important number to look at in any company, public or private, is "cash flow from continuing operations".
Recent Events Make This 8% Yielder Even More Attractive [View article]
I like VNR but one thing an investor should always recognize about these companies,and REITs too, and that is that they are always dependent on the capital markets for their survival. This is different than Intel, for example, which throws off free cash flow in excess of (cash from operations - cap ex - dividends). VNR's cap ex plus dividend amounts exceed cash generated from operations so they constantly have to go back to the markets for debt or equity.
Most of the analysts and pundits are naive and have never run a business so they fail to understand that the single most important number in the financial statements is cash flow from operations!
When Royalty Trusts Cease To Be Royal [View article]
BPT also has a $1 Billion cash reserve that's been ignored. Plus, the total reserves have risen each year; as prices goup, more oil becomes economicallyrecoverable. At $76 BPT is a buy!
The key item is that PM is throwing off several hundred million in free cash flow per month! Comparing it to other major tobacco stocks is like deciding which A student gets to be valedictoran. The one suggestion I would have for PM is to move its legal domicile outside the US to lower the tax rate from the current 31 percent - in Ireland it would only be 12.5 percent, for example.
Interesting thesis about Staples making an acquisition. Having done a lot of M&A as an investment banker, I'll share with you that when all the complex financial modeling is said and done, for the deal to be immediately accretive to EPS the P/E of the target - with an assumed 30% takeover premium - has to be lower than the P/E of the acquiror. Office Depot likely passes this test; OMX does not.
Handling Your Emotions: Using Asset Allocation And Beta [View article]
Thanks for your interest in the article. Defining risk in a finance sense is difficult. A pure definition would tell you that risk is the possibility of loss. A finance professional might say 'risk is the possibility that returns are different from those expected.' Very often we see beta associated with risk - as in the capital asset pricing model - or sometimes used as a proxy for risk when in fact beta is only a measure of volatility relative to the overall market.
Looking at Treasuries, for example, if risk is the possibility of loss then there is no risk if you hold to maturity. On the other hand, Treasury prices can fluctuate greatly during the holding period and if you're forced to sell at an inopportune time then you could lose money, and therefore because there was volatility there was risk involved.
So I look at risk, volatility and standard deviation of returns relative to the specific investment and the planned holding period. If I'm buying a high quality bond and I'm basically certain that I'm going to hold it to maturity and that it will pay off at that time, then I ignore volatility and standard deviation since they're irrelevant to me. But if I'm looking at a very long term commitment then I study carefully the mean returns, standard deviations, Sharpe, beta and alphas when I compare alternatives.
Sell This Dividend Blimp Right Now: Requiem For A Philip Morris [View article]
8.54% And Higher Dividend Yields For My 'Personal Pension Plan' [View article]
Why Teekay Is Overvalued And Its Dividend Is Not Safe [View article]
2. MLPs are far different structures, and applying corporate analyses to an MLP can at times be misleading.
When Royalty Trusts Cease To Be Royal [View article]
A Quality Income Portfolio For 2012 [View article]
You Need To Pay Higher Taxes So We Don't Become Greece Or Italy [View article]
So, I did the logical thing...I simply retired. Why do all that work, take all the risks of running a business and creating jobs, when I get to keep well under 1/2 of what I earn?
AT&T And Coca-Cola: More Expensive Than You Think [View article]
Looking at ATT, for example, for the year ended 12/31/2010 T had cash from operations of $34.99 billion, but spent $19.53 billion on required cap ex leaving $15.46 billion available for dividends. They paid out $9.92 billion in dividends, meaning they had $1.55 in cash available for each $1.00 dividend payment - a safe margin.
Net Income and EPS are accrual numbers, but cash is what meets payroll, pays vendors, and pays dividends.
U.S. Energy Policy Is Responsible for Unrest in Egypt [View article]
Are High Dividend Stocks a Good Investment? [View article]
1. the long term IRR on a dividend paying stock is equal to the current yield + the dividend growth rate. This formula should always be included in any long term investment;
2. comparing the dividend payout ratio using net income is useless and misleading. Use instead cash flow per share. Net income is NOT cash. The single most important number to look at in any company, public or private, is "cash flow from continuing operations".
Recent Events Make This 8% Yielder Even More Attractive [View article]
Most of the analysts and pundits are naive and have never run a business so they fail to understand that the single most important number in the financial statements is cash flow from operations!
When Royalty Trusts Cease To Be Royal [View article]
When Royalty Trusts Cease To Be Royal [View article]
Philip Morris Still Going Strong [View article]
Undervalued Staples Might Acquire Office Depot, Target [View article]
Handling Your Emotions: Using Asset Allocation And Beta [View article]
Looking at Treasuries, for example, if risk is the possibility of loss then there is no risk if you hold to maturity. On the other hand, Treasury prices can fluctuate greatly during the holding period and if you're forced to sell at an inopportune time then you could lose money, and therefore because there was volatility there was risk involved.
So I look at risk, volatility and standard deviation of returns relative to the specific investment and the planned holding period. If I'm buying a high quality bond and I'm basically certain that I'm going to hold it to maturity and that it will pay off at that time, then I ignore volatility and standard deviation since they're irrelevant to me. But if I'm looking at a very long term commitment then I study carefully the mean returns, standard deviations, Sharpe, beta and alphas when I compare alternatives.