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As a contributor to the New Low Observer (http://www.newlowobserver.com/about-this-site), we intend to give new insights on a low risk approach to trading in dividend paying stocks for tax deferred accounts. The New Low Observer (http://www.newlowobserver.com/about-this-site) is not intended for... More
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  • Borden: 1927-1937

    The chart below highlights two issues:

    1) How long did it take for a stock to get to breakeven?

    In the case of Borden, the stock did not recover to the 1929 peak of $92 by the end of 1937. In fact, by 1954, Borden got as high as $74. Borden was later acquired in a KKR deal struck in September 1994. Buyers of Borden in 1934 did very well, however, recovery was only achieved in due time through the virtue of total return.

    2) What happened to the dividend during the stock market crash and "Great" Depression?

    The dividend was increased or maintained in 1929, 1930, and 1931. However, in the year of the stock market bottom, Borden pursued a dividend cutting campaign. In 1932 the full year dividend was $2.27. By 1939, the dividend was $1.27. In this case, the dividend cut ended at $1.27 which preceded the final decline in earnings. Earnings finally ascended in 1935. By 1954, the full year dividend was $2.64 This increase in earnings was later reflected in the growth of the dividend.

    Jun 19 12:01 AM | Link | 1 Comment
  • Union Carbide: 1927-1937

    The chart below highlights two issues:

    1) How long did it take for a stock to get to breakeven?

    In the case of Union Carbide, the stock nearly recovered all of its losses by 1937 before the next major stock market decline. The loss of nearly -90% was difficult for anyone to experience so it is assumed that most investors would have sold the stock at or near the depths of the decline in 1932.

    2) What happened to the dividend during the stock market crash and "Great" Depression?

    The dividend tracked earnings with a lag of 9 to 12 months. As earnings bottomed in 1932, so too did the dividend. However, in spite of being in a "Great" Depression, earnings steadily grew for Union Carbide until the 1937 peak. This increase in earnings was reflected in the growth of the dividend.

    (click to enlarge)Union Carbide 1927-1937

    Tags: Dividends
    Jun 14 11:19 AM | Link | 3 Comments
  • Real Estate Investment Trusts: 1971

    This is a review of the Real Estate Investment Trust (REIT) sector from an era that has already passed. These article reviews are intended to highlight the risks of investing in REITs. We're hoping that insight can be gained from these reviews and translated into meaningful investment education.

    This review will cover the beginning of the REIT investment cycle starting in 1971. The review is based on a single New York Times article. Ultimately, we hope to include a series of REIT articles that range from 1971 to 1979.

    1971: In The Beginning

    The first article under review is titled "Personal Finance: Real Estate Investment Trusts Gain New Luster as Money-Making Medium Personal" by Elizabeth M. Fowler published on July 22, 1971. This article was an introduction to the general public about the virtues of investing in REITs. An attempt to find similar introductory material before 1971 was not readily available. Therefore, we relied on this article as a good overall intro to the topic.

    In Fowler's article, it was pointed out that REITs operate like the property management division of large companies like "…American Standard, the Ogden Corporation, Boise Cascade and many others." The article also pointed out that new entrants to the REIT model of property management included "…some of the nation's major insurance companies and banks."

    Some statistical facts about the REIT industry by 1971 were that there was "…80 large REIT's, many of them formed in the last few years…" and that they held more that $3.8 billion in assets. By 1971, approximately 48 REIT's were publicly traded.

    Of the categories of REITs available at the time, there were four categories, long-term mortgage investments, intermediate-term investments, short-term investments and "…then there is a hybrid type or they are sometimes called combination trusts." The general merits of REITs were outlined, however, the closing paragraph pointed out this warning from Standard and Poor's:

    "Most REIT shares have advanced strongly this year and are near records. It may pay to await a period of temporary weakness to make purchases."

    In fact, the temporary weakness did not come for REITs until 1973. However, by 1973, it was too late to warn investors about the risks of investing in REITs as the momentum was too strong on the upside. Below is the link to the NLO website where price and yield comparisons for a select few of the REITs in 1971 and 1974.

    Link: REIT data 1971 and 1974

    Source:

    • Fowler, Elizabeth M. "Personal Finance: Real Estate Investment Trusts Gain New Luster as Money-Making Medium Personal". New York Times. July 22, 1971.
    • New York Stock Exchange Transactions. New York Times. May 16, 1974. page 60
    Tags: REIT
    Jun 14 1:13 AM | Link | Comment!
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