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  • Is It Time To Consider Selling Altria? It Depends [View article]
    Be Here Now,

    Excellent comment.

    Most MLPs and REITs pay out a large portion of their earnings as distributions such that their traditional payout ratios (distributions divided by accounting earnings) are significantly above 100%, revealing a dependency on capital markets. This topic is exactly what you've surfaced by mentioning "distributable cash flow."

    "Distributable cash flow," as included in many regulatory filings, only considers maintenance capex of the operations and not growth capex, which is necessary to fuel operating cash increases. If we consider growth capex in the calculation of "distributable cash flow," as in the calculation of free cash flow for a traditional corporate, many MLPs simply cannot cover the distribution.

    This is what is meant when we say MLPs are dependent on future equity or debt issuance. They require outside capital from the markets or from a sponsor, and the very idea that growth capex is not included as a reduction to "distributable cash flow" means that MLPs are capital-market dependent. Their business models allow such representation of the financials but it is why their business models are much riskier.

    Thank you again for the comment and giving me the opportunity to explain this key important difference to investors -- the difference between "distributable cash flow" and "free cash flow." They are not the same.

    Brian
    May 20, 2015. 12:32 PM | Likes Like |Link to Comment
  • Is It Time To Consider Selling Altria? It Depends [View article]
    shaz568,

    Thank you for your thoughts.

    All the best,

    Brian
    May 20, 2015. 12:24 PM | Likes Like |Link to Comment
  • Is It Time To Consider Selling Altria? It Depends [View article]
    gmansour,

    Altria has certainly been one of the best performers in stock market history.

    My best wishes,

    Brian
    May 20, 2015. 12:23 PM | 1 Like Like |Link to Comment
  • Is It Time To Consider Selling Altria? It Depends [View article]
    AdrianCT,

    Thanks for sharing!

    All the best,

    Brian
    May 20, 2015. 12:22 PM | 1 Like Like |Link to Comment
  • Is It Time To Consider Selling Altria? It Depends [View article]
    Arthur_bishop1972,

    Thanks for the comment. The uniqueness and explanation of the valuation of SABMiller within the context of an enterprise free cash flow model may make our note an exception. Hope you find future ones informative, if not this one.

    Most appreciative of the comment,

    Brian
    May 20, 2015. 12:22 PM | 2 Likes Like |Link to Comment
  • Is It Time To Consider Selling Altria? It Depends [View article]
    jbp3,

    Excellent comment. I appreciate your opinion. It sounds like you're doing great!

    Kind regards,

    Brian
    May 20, 2015. 12:21 PM | Likes Like |Link to Comment
  • Is It Time To Consider Selling Altria? It Depends [View article]
    Divvy Investor,

    Thank you for sharing your opinion. Altria has been a great performer over history.

    Kind regards,

    Brian
    May 20, 2015. 12:20 PM | Likes Like |Link to Comment
  • Is It Time To Consider Selling Altria? It Depends [View article]
    Hi Mother Dubby,

    Valuentum offers two newsletter portfolios, in which Altria is a near-top holding in both, one of the best ideas, and one of the greatest generators of alpha in them. We provide full fair value analysis on over 1,000 companies at http://www.valuentum.com, including on PM.

    Thank you for the question.

    Brian
    May 20, 2015. 12:17 PM | Likes Like |Link to Comment
  • Pricing Strength Continues To Be The Main Driver At Philip Morris [View article]
    Dear readers,

    Thank you all for your comments. We can appreciate your skepticism of our fair value estimate.

    We think Philip Morris is a great company, and while readers of Valuentum's Best Ideas portfolio have reaped the outsize gains of peer Altria (our best idea in tobacco), we're not saying that Philip Morris is a bad idea by any stretch of the imagination.

    Importantly, as of the time of the writing, the company is trading within our fair value range, so in many respects the market is suggesting our valuation parameters are not off the mark. Shares are trading at the high end of the fair value range, which in many ways is reinforced by an above-market multiple in a somewhat overheated equity market. Most everything points to shares not being cheap, and somewhat pricey.

    One of the core concepts of intrinsic value changes over time is the movement of cash in and out of the business. The payment of a dividend decreases the value of the business over time, all else equal. Think of it as paying yourself a personal dividend over time (the cash withdrawn from your bank account makes you less wealthy). Earnings in excess of the dividend, as measured by free cash flow, can drive the fair value estimate higher over time as such cash is generated.

    However, our forecast for relatively stagnant share price performance at Philip Morris in coming years is more reflective of its outsize yield than anything else. Most of its return will be in the form of cash dividends to shareholders in coming years, not in capital appreciation. We hope this helps make sense of what our analysis reveals.

    Thanks for reading!

    The Valuentum Team
    info@valuentum.com
    May 15, 2015. 02:47 PM | 1 Like Like |Link to Comment
  • Why Qualcomm Is An Example Of The Importance Of Net Cash In Valuation [View article]
    user158,

    When a company is so powerful that only through antitrust litigation can it be stopped, then you know you've found a company with very sustainable competitive advantages. Warren Buffett would call it an economic moat. Thanks!

    The Valuentum Team
    Apr 3, 2015. 05:55 PM | 2 Likes Like |Link to Comment
  • Why Qualcomm Is An Example Of The Importance Of Net Cash In Valuation [View article]
    awayk,

    We focus on the fair value range, and we think Qualcomm's shares are cheap. Qualcomm's VBI rating is a 6. We're available if you have any questions on how to interpret the numbers.

    Thanks for reading!

    The Valuentum Team
    Apr 3, 2015. 05:54 PM | Likes Like |Link to Comment
  • Why Qualcomm Is An Example Of The Importance Of Net Cash In Valuation [View article]
    Aaron,

    Thanks for the comment! We think Qualcomm's borrowing costs are very low given the strength of its business model and the cash-flow generating capacity of its operations.

    The Valuentum Team
    Apr 3, 2015. 05:51 PM | 4 Likes Like |Link to Comment
  • Why Qualcomm Is An Example Of The Importance Of Net Cash In Valuation [View article]
    Hamdy Sadek,

    Thank you for reading!

    Our best wishes and be sure to visit us.

    The Valuentum Team
    Apr 3, 2015. 05:49 PM | Likes Like |Link to Comment
  • Why Qualcomm Is An Example Of The Importance Of Net Cash In Valuation [View article]
    Dave,

    Thanks for reading!

    Kind regards,

    The Valuentum Team
    Apr 3, 2015. 05:46 PM | Likes Like |Link to Comment
  • We've Soured On Chevron's Dividend... Sorry [View article]
    pappajoe79:

    Thanks so much for the kind comment! We are completely independent so we tend to be objective in our work. This may be different than other writers that may have positions in companies, for example. Wonderful! Please visit us if you'd like.

    The Valuentum Team
    Apr 3, 2015. 05:43 PM | 1 Like Like |Link to Comment
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