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The Investing Engineer

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  • Wells Fargo Isn't What You Think It Is, And Why That's Important [View article]
    Great article. I really enjoyed it.
    Jan 22 09:32 AM | Likes Like |Link to Comment
  • How General Electric's Buyback Leads To 10% Annual Dividend Growth [View article]
    Yeah, there's something I didn't really think about but gives a better explanation why a buyback could be better than just paying out the $2B per quarter. When a company pays out cash, like a dividend or this hypothetical special dividend, the stock price is adjusted downward to reflect the balance sheet. The net affect is no change, but what it essentially would be doing is lowering the price and forcing you to hold on to the stock to make up for the loss associated with the special dividend. Of course if you're planning on holding long term, this doesn't really matter. On the other hand, it does act as a deterrent from just buying the stock before the "ex-special-dividend" and selling the next day because the price would be adjusted downward.
    Jan 14 07:58 AM | Likes Like |Link to Comment
  • How General Electric's Buyback Leads To 10% Annual Dividend Growth [View article]
    But it's a very different benefit. That's why there's no ex-date for buybacks like there is for dividends.
    Jan 13 02:08 PM | 1 Like Like |Link to Comment
  • How General Electric's Buyback Leads To 10% Annual Dividend Growth [View article]
    I don't see how they're the same thing. Could you elaborate?
    Jan 13 12:43 PM | 1 Like Like |Link to Comment
  • How General Electric's Buyback Leads To 10% Annual Dividend Growth [View article]
    The dividend is from that quarter's earnings. You're getting paid quarterly from quarterly earnings.

    Distributing that $2B is different. It doesn't come from quarterly earnings. Most likely it's from a combination of cash, sale of assets, debt, etc. Whatever the source, that money wasn't earned in just one quarter, so it would be unfair to give someone who's only been a shareholder for one quarter the same amount per share from that $2B as someone who's been a shareholder when most of that money was made.
    Jan 13 11:54 AM | 1 Like Like |Link to Comment
  • How General Electric's Buyback Leads To 10% Annual Dividend Growth [View article]
    $2B per quarter, with 10.12B shares outstanding is $0.197 per share per quarter, or $0.79 per share annually.

    You have to consider though that putting $2B per quarter into buybacks is lowering the number of outstanding shares, resulting in a higher EPS and therefore a higher dividend if GE keeps its payout ratio. This is what the article describes. Payout out the shareholder all this money versus a share buyback is a tradeoff between giving the shareholder a one time lump payment or giving the shareholder a higher percentage of ownership.

    In terms of fainess, you really can't just give $2B per quarter extra to each shareholder. Unlike a normal dividend which is based on quarterly earnings, that $2B could be made up of earnings over several years. How do you divide that up among shareholders? If you were a shareholder for several decades then you should be entitled to the full percentage. If you only recently became a shareholder however, why should you deserve a the same amount, when most of it probably wasn't earned while you held the stock? A buyback is a much more fair way to deal with this.
    Jan 13 10:42 AM | 4 Likes Like |Link to Comment
  • Ford, Lincoln, And The Great Revival [View article]
    And I'm sure the vehicles share software and parts suppliers. I still stand by what I said. In my job, when a contractor I'm working with is having issues with a product, they tend to be having similar issues with different products. Welds breaking on one product? Better check the welds on their other products.

    I'm not saying that the MKC will have issues, and I'm not even targeting it because of the shared platform with the Escape. I just mention the risk of recalls as especially important for this vehicle because of the way it's being marketed to revive the brand. Ford doesn't need to offer huge discounts to sell their cars. They're proving this with the Fusion, yet they're pricing the MKC to suggest the opposite. That's because Lincoln isn't Ford, and they know it. If the MKC happens to have 7 recalls, that investment in Lincoln could end up as a large write-off.
    Dec 19 08:31 PM | 1 Like Like |Link to Comment
  • Ford, Lincoln, And The Great Revival [View article]
    Yes,there's still some risk. I'm sure the 1.6L, 2.0L and 2.3L Ecoboost engines share more than one feature or design element. On the other hand, I'm sure that whatever problems the 1.6L is having, are being combed over for the larger engines.
    Dec 19 05:34 PM | Likes Like |Link to Comment
  • Ford, Lincoln, And The Great Revival [View article]
    The report doesn't say why, but my guess would be the 7 recalls. The Ecoboost engines are having lots of problems so that presents a big risk for the MKC, given that it's only available with an Ecoboost engine.
    Dec 18 02:27 PM | 1 Like Like |Link to Comment
  • Ford, Lincoln, And The Great Revival [View article]
    Because 95% of the article was regarding Ford's strategy for reviving Lincoln, with only a blurb at the end regarding price to book value because I know the editors like to see some financial analysis and a pretty chart to approve the article. But yes, I'll admit that I don't know the ins and outs of all the automotive manufacturers.
    Dec 18 10:31 AM | 2 Likes Like |Link to Comment
  • Ford, Lincoln, And The Great Revival [View article]
    I just have one question; why aren't you writing articles?
    Dec 18 08:54 AM | 1 Like Like |Link to Comment
  • Ford, Lincoln, And The Great Revival [View article]
    Actually, a better comparison would be to remove the 15B in operations debt, since that's what isn't showing in GMs price to book value. Doing this has less of an effect on Ford's price to book since the 90B is such a large figure. Recalculating gets 3.03, which is close enough to 3.1
    Dec 18 08:29 AM | Likes Like |Link to Comment
  • Ford, Lincoln, And The Great Revival [View article]
    Thank you for the clarification. I thought all the manufacturers had their financial services as part of the main company.

    Adding that 90B from the financial arm back to the EPS gives a price to book value of 2.51. Either way, 90B is a lot of debt.
    Dec 18 08:25 AM | Likes Like |Link to Comment
  • Ford, Lincoln, And The Great Revival [View article]
    But don't the other automobile manufacturers have the same scenario, where their debt is made up of both lending debt, which is good, and automotive debt, which is bad? That's why I'm comparing Ford to the other manufacturers. Maybe it's best not to expect this to go below Graham's recommended maximum price to book value of 1.5, but you still want to compare this to the competition.

    Without taking the few minutes to look up Toyota's numbers, I'm going to guess that they have more (or at least similar) sales to Ford. The fact that their price to book is lower then indicates a more favorable amount of debt, or at least a more favorable valuation for buying shares.
    Dec 18 08:00 AM | Likes Like |Link to Comment
  • General Electric: A Surprisingly Large Dividend Increase [View article]
    The author does mention that the dividend was at $0.31 per share. It sucks that it dropped, but you have to be realistic about what the company can pay. One of the best indicators of this is EPS, which the author clearly does. Paying out $0.31 now, just for the sake of returning the dividend to what it was pre-crash would hurt the company and ultimately the share value.
    Dec 16 11:36 AM | 3 Likes Like |Link to Comment
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