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  • The ABCs Of Dividend Investing: Divi-Do Or Divi-Don't? [View article]
    The standard deviation of the Dow Jones Industrials price since 1960 is near 15%. Earnings growth standard deviation since that time has been 20%. Dividend growth standard deviation has been only 8%. Dividends don't come from earnings, they come, ultimately, from cash flow. Many investors spend all their time watching earnings. You can see that the volatility of earnings is greater than stocks. With that kind of volatility, you are going to get a lot of false positives and negatives. Dividends are real money, really paid. Dividend growth is not the be all and end all, but it is a far better indicator of value than are earnings. You can debate this all you want, but I can assure you sooner or later that earnings will deceive you. Dividends can do so, as well, but the market doesn't pay as much attention to dividends on an annual basis, thus, dividend trends can be deduced and evaluated much more profitably than can earnings trends.
    Aug 20 12:24 AM | 2 Likes Like |Link to Comment
  • The ABCs Of Dividend Investing: Divi-Do Or Divi-Don't? [View article]
    Currently we use a proprietary service from Bloomberg. It uses 11 different indicators, including historical dividend growth and payout ratios, as well as projected earnings growth. This product. Is not available to public. I have also found that dividend growth for most large companies will closely follow Wall Street 3 to 5 year estimates of earnings growth, which can be found on many financial websites. Finally back to Roberts lumpiness issue, Value-line is know to use a kind of median-average. They look at the last 7 years; they throw out the 2 highest growth rates and the two lowest; they then average the remaking three growth rates for their estimate. Happy hunting. The dividend growth rate is key driver of price in the long run. Thanks for question and thanks to Robert for his contribution.
    Aug 19 09:50 AM | 3 Likes Like |Link to Comment
  • Economic Indicators Point To Slow, Steady Growth In Economy And Stocks [View article]
    Robert, I think you know I believe in free markets, and I am sick to death of the government's intrusion into our lives. I do; however, believe the Federal Reserve plays a vital role in the long-term success of the capital markets. Without them I am convinced that booms and busts of the 2008 type would occur much more frequently and stocks would sell at much lower PE's in anticipation of the next bust. From an economic perspective, the period from 1960 to 2008 had much fewer deep recessions than we had before. I'm not an expert in behavioral finance, but we humans seem hardwired to bounce from greed to fear, with little time in the middle. We need a cop on the beat. I think that is what the Fed does. A lot of how my firm manages our various portfolios is to get in step with what we think the Fed is doing. I have learned this the hard way.
    May 25 07:04 PM | Likes Like |Link to Comment
  • Economic Indicators Point To Slow, Steady Growth In Economy And Stocks [View article]
    Robert, as you know Europe will probably initiate a form of Quatative Easing in June because inflation at .7% is too low. The worry is that if inflation falls to zero or below that a deflationary psychology will take root, where all non essential purchases are delayed because of the belief that prices will only go lower. Greenspan spoke often about the lack of knowlege of how to deal with deflation. We'll soon see if QE can lift prices a bit in Europe. My own belief is that inflation around 2% is good for the economy; any lower and corporate sales and profits are diminished, any higher and the media is full of inflation talk.
    May 23 02:55 PM | Likes Like |Link to Comment
  • Hot News Comes And Goes, But Dividends Are Forever... [View article]
    Robert

    As for Jeffrey Immelt, I'm totally with you. If GE hired Alan Mullaley of Ford tomorrow, the stock would go up at least 10%.
    Mar 28 11:34 AM | 1 Like Like |Link to Comment
  • Hot News Comes And Goes, But Dividends Are Forever... [View article]
    David,

    I'm all for any deal where there is a 186% possibility of success. As I have mentioned before, not only have dividends produced over 40% of the total return of stocks, and there a high coefficient of determination (R^2) between DJIA dividends and prices, but the 55 year average of price growth for the index has been about 5.9% and the long-term average annual dividend growth has been about 5.5%.

    I slept through a lot of my statistics courses but even the professor I had come in a few years ago to test our work was surprised at these relationships. Dividends and prices are not a tit for tat relationship, but dividend growth has been the most accurate indicator of price growth, on a risk adjusted basis. If you think about it, then, at least on a very long-term basis, it should be possible to determine about where the DJIA should be today. That figure, last time I looked, is about 16,600. That means we are neither cheap nor dear, we are at about fair value. Where we go from here price wise, will be highly dependent on dividend growth and changes in interest rates. So far, as i mentioned in the blog, dividend growth has accelerated over a year ago. I have my fingers crossed.
    Mar 26 06:17 PM | Likes Like |Link to Comment
  • Hot News Comes And Goes, But Dividends Are Forever... [View article]
    SDS
    A fellow John Burr Williams follower. You are so correct. Until 1993, DJIA consistently paid out 50% in dividends. The hot markets then made Modern Portfolio believers of most American companies. They believed the theory that money in their vaults was the same as money in their shareholders pockets. On paper it looked the same, but it was exposed in the years to come as untrue. JBW had much to say on this. I'll dig out some old blogs I wrote about JBW.
    Mar 25 11:21 PM | 1 Like Like |Link to Comment
  • Hot News Comes And Goes, But Dividends Are Forever... [View article]
    They lobby because it is a reality of their survival, but few CEOs spend much time on politics. If you ask them, politicians aren't nearly as dangerous as competition. Not trying to be smart Alec, but I listen to hundreds of CEOs speak about their businesses, they hardly ever talk about politics.
    Mar 25 11:12 PM | 1 Like Like |Link to Comment
  • Hot News Comes And Goes, But Dividends Are Forever... [View article]
    Home

    I thought of that, too, but the rates of growth would not indicate this is an issue. In 1st Q 2013, divs grew at 2.9%, v. 3.9% in 2014. 2.9% x 4= 11.6%. That's about what dividends grew for the S&P grew for 2013. 4x 3.9% is a mind boggling number. This could be interesting year for dividend increases. Could be a switch coming from buy backs to dividend increases. Keep tuned. Good question.

    SDS if you got the same kind of relationship with Schiller's numbers as I did with DJIA, that would be good thing. I think you know statistics better than I do. Think about what this means. Does writing your own check sound interesting?

    We own nothing but these high R^2 companies. We get about what we expect in 3 year cycles. Pretty simple but it works. Work it out in your head and send me a note what you think from a pure statistical perspective.
    Mar 24 10:25 PM | 2 Likes Like |Link to Comment
  • How Dividend Payout Ratios Impact Valuation [View article]
    We deal with the matter of earnings growth by not counting a dividend payout ratio of greater than 60% for a non REIT, pipeline, or utility. We know that earnings are important, but we also know that there are at least 8 different versions of earnings. We believe the dividend, because it is cash, is the best indicator of the success of a company. It has been said by many that dividends are most highly correlated to free cash flows. We believe free cash flow is the genesis of the dividend, but even fcf is very volatile and gives many head fakes. Dividends are the best indicator we have found.

    Since we are in the business of selling our investment management services, it is a bit counterproductive to provide a list of companies that look good to us. Having said that these are such confusing times and there are so voices shouting what to buy or sell that if we publish a list of our favorites, we doubt that many would take notice or do anything about it. We'll try to cobble something brief together in the next couple of weeks.
    Mar 2 03:00 PM | 1 Like Like |Link to Comment
  • How Dividend Payout Ratios Impact Valuation [View article]
    This report does not take share buy backs into consideration. Bloomberg has data on that that I could include and will. Many of you know that I use lots of regressions in some of my valuation models. I haven't found much correlation between sharebuy backs and price growth in the large caps in my studies so far. However, Bloomberg's new tool clearly delineates share buybacks and dividends. I will do some work with this new data and see what I find.

    I'm right with all of you who say buybacks should make a difference. So far I just don't see that difference is quantifiable on a tit for tat difference the way dividends are. I'll report back what I find. Please do the same.
    Mar 1 10:44 AM | 3 Likes Like |Link to Comment
  • Eaton Is Heading In The Right Direction [View article]
    Very nice piece. Are you connected with the Blacstone Capital group?
    Feb 4 10:00 AM | Likes Like |Link to Comment
  • The ABCs Of Dividend Investing: Divi-Do Or Divi-Don't? [View article]
    We have always had a paradoxical notion of dividend yield v. dividend growth. We know that dividends result from earnings and free cash flows, but we have found that earnings are not as reliable an indicator of value as are dividends. Having said that, for a normal consumer or industrial company, we do not count any dividend above a payout ratio of 60%. That helps us catch the dividend hogs that are really liquidating the company. For Utilities we limit the payout ratio to 70%; for REITS we limit the dividend to 80% of the funds from operations. We have never figured out a way to confidently how to calculate distributable funds as it related to energy and pipeline companies. If anyone has crack this tomato, I would love to hear about it. It seems to me that almost every company has a different definition and methodology. We have all kinds of cash flow models, but not one that we feel totally confident with.
    Jan 24 04:48 PM | 1 Like Like |Link to Comment
  • The ABCs Of Dividend Investing: Divi-Do Or Divi-Don't? [View article]
    Thank you for the explanation. It is quite creative. I'm going to take a stab at trying to work out a formula for price growth relative to dividend growth using regressions. I use them all the time but I had never thought of using dividend growth as the predictor of price growth in a single year. I do see the long term relationships. I wonder how good they are in the short run. I'll let you know what find.
    Jan 24 08:31 AM | 1 Like Like |Link to Comment
  • The ABCs Of Dividend Investing: Divi-Do Or Divi-Don't? [View article]
    migdu, I am not sure that I understand your use of the formula, but I am fascinated that you came up with it. Could you give me an example of how it would work for a company with a 2% dividend yield growing at 9% per year.
    Jan 22 11:02 AM | Likes Like |Link to Comment
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